Policy Papers

August 28, 2008

Review of the Fund's Financing Role in Member Countries

Description: This paper raises and discusses issues related to how the Fund provides financial assistance to its members. It is part of the strategic review to ensure the Fund remains relevant and effective. The objective is not to increase Fund lending, but to make sure the Fund has the right instruments and policies to help all of its members—with appropriate protection of Fund resources—as they integrate into a world of growing and increasingly complex cross-border flows. Other institutions (including major central banks and the World Bank) also are retooling their lending instruments and in the process grappling with similar issues. The paper offers a high-level view of the issues and does not make specific policy proposals. Policy proposals will be presented in follow-up papers, some of which are planned for Board discussion later in 2008.

IMF Invites Comments on Review of Fund's Financing Role in Member Countries

August 15, 2008

Review of the Fund's Strategy on Overdue Financial Obligations

Description: This paper reviews progress under the Fund’s strengthened cooperative strategy on overdue financial obligations. Total arrears to the Fund declined by SDR 552 million since the last review, owing largely to the clearance of arrears by Liberia in March 2008. While Sudan’s payments in excess of its new obligations falling due to the Fund also contributed to the decline, arrears by Somalia and Zimbabwe increased further. The majority of the arrears to the Fund (85 percent) were to the General Resources Account (GRA).

July 31, 2008

Report of the Executive Board Working Group on IMF Corporate Governance

Description: On May 21, 2008, the Executive Board discussed the report of the Independent Evaluation Office (IEO) on “Aspects of IMF Corporate Governance – Including the Role of the Executive Board”. The Joint Statement issued by the Executive Board and the Managing Director following the Board discussion noted that many of the issues raised by the IEO were complex and interrelated. Furthermore, the follow-up discussion would require the engagement of all parties at many different levels, involving not only the Executive Board and Management, but also the Fund’s membership and other stakeholders more broadly.
This report presents the recommendations of the Working Group, based on work carried out during June-July 2008. The proposed detailed work plan in Table 1 is an integral part of this report. Section II of the report describes the work streams. Section III discusses issues beyond the IEO report and proposes a monitoring process. Section IV presents the recommendations.

July 25, 2008

Proposed Reforms to the Exogenous Shocks Facility

Description: The review of the ESF is being accelerated in light of experience and worsening global economic conditions, in particular the surge in food and fuel prices. Despite having become effective in 2006, the ESF has yet to be used. Recent discussions with creditors, donors, potential users, and outside observers have highlighted a number of ways to enhance its effectiveness.

July 22, 2008

Policy for Country Contributions for Capacity Building

Description: This paper proposes a strengthened country contributions policy for capacity-building services. It builds on the recent Executive Board discussions on capacity-building reforms, which included proposals for the use of charges (country contributions) to improve the effectiveness and efficiency of the Fund’s capacity-building activities. On the basis of this country contributions policy, management intends to issue a staff guidance note on implementation and to take steps to bring it to the attention of members and other recipients of Fund capacity-building activities.

Policy for Country Contributions for Capacity Building—Supplement

Notes: Reflecting the outcome of the Executive Board discussion, the proposal on the policy for country contributions for capacity building was modified. The supplement reflects the final version of the policy, which will become effective May 1, 2009.

July 14, 2008

Application of Structural Conditionality - 2008 Annual Report

Description: This report provides an update, based on objective indicators, of the application of structural conditionality in Fund-supported programs. Such annual reports on structural conditionality are one element of the management implementation plan (MIP) prepared in response to the Board-endorsed recommendations made in the IEO evaluation of Structural Conditionality in IMF-Supported Programs. This annual report covers Fund arrangements approved during the period 1995–2007 (and their reviews through April 30, 2008), extending therefore the dataset contained in the recent IEO report by about three years (from 2005 to 2007). In addition, this report examines experience with Policy Support Instruments (PSIs), which were introduced in October 2005, and thus not covered in the IEO evaluation.

July 10, 2008

Revisions to the Operational Guidance Note on Conditionality

Description: This note elaborates on the operational implications of the key principles that should guide the Fund in designing and setting conditionality and the 2002 conditionality guidelines. It is not intended as a comprehensive stand-alone guidance note, but rather as an aid to the implementation of the new guidelines. The operational issues covered are grouped into three areas: (i) the process of negotiation and program design; (ii) the design of conditionality; and (iii) the presentation of conditionality in Board papers for the use of Fund resources. The 2008 revisions arise from the Board-endorsed recommendations of the IEO evaluation of structural conditionality; the Board’s preferred way forward is to strengthen efforts to achieve parsimony by emphasizing criticality as well as requiring rigorous justification of conditionality.

July 3, 2008

Guidance Note on Debt Sustainability Analysis for Market Access Countries

Description: Since the endorsement by the Executive Board in June 2002 of the paper on “Assessing Sustainability” (May 28, 2002), the Fund has followed a more systematic approach to assessing public and external debt sustainability in the context of both program design and Article IV surveillance. The framework—further refined in a subsequent paper, “Sustainability Assessments—Review of Application and Methodological Refinements” (June 10, 2003)—attempts to bring a greater degree of consistency and discipline to sustainability analyses, including by laying bare the basis on which baseline projections are made and subjecting them systematically to sensitivity tests. As part of continuing efforts to improve debt sustainability analysis (DSA) and responding to the concerns of some of the shareholders as well the experience with the framework thus far, further modifications were made in July 2005 (Information Note On Modifications To The Fund’s Debt Sustainability Assessment Framework For Market Access Countries, July 1, 2005).

This note provides information on the use of the latest version of the DSA template for market access countries, that is, for countries not included in the low-income (PRGF-eligible) country group.

June 30, 2008

The Balance of Payments Impact of the Food and Fuel Price Shocks on Low-Income African Countries: A Country-by-Country Assessment

Description: This note discusses the implications of the price shocks for the balance of payments of low-income countries in sub-Saharan Africa. The response by bilateral donors and multilateral institutions will, in practice, need to be country-specific. To this end, the note identifies a list of 18 countries in the region that are especially hard-hit and that consequently face a pressing need for additional balance of payments and budget support. The list reflects country circumstances and underlying assumptions as of May, and is subject to change; it is not meant to be definitive.

June 30, 2008

Food and Fuel Prices - Recent Developments, Macroeconomic Impact, and Policy Responses

Description: This report provides a first broad assessment of the impact of the surge in food and fuel prices on the balance of payments, budgets, prices, and poverty of a large sample of countries. It reviews countries’ macroeconomic policy responses to date and also discusses Fund advice for managing the price increases. Policies should (i) ensure that food and finance reaches the most affected countries as quickly as possible, (ii) include targeted and scaled-up social measures, and (iii) avoid high costs in terms of macroeconomic instability or loss in future agricultural production. Collaborating with international partners, the Fund also stands ready to provide balance of payments assistance. As the paper presents an initial assessment of a still-evolving situation, the somewhat tentative nature of the analysis should be borne in mind.