Policy Papers
2013
April 30, 2013
The Consolidated Medium-Term Income and Expenditure Framework
Description:
The medium-term projections of Fund income and precautionary balances accumulation have been updated since the April 2012 projections. The overall income outlook remains positive with continued high lending income expected in the medium-term. The projections indicate a downward shift in the income path primarily due to lower non-lending income as a result of the low global interest rates and the agreement to phase in investments under the new gold-sales funded endowment. The updated expenditure path has not changed significantly. The projections also illustrate a broad balance between income and expenditures when lending returns to pre-crisis levels.
The accumulation of precautionary balances remains strong in the medium-term. The indicative medium-term target of SDR 20 billion is now expected to be reached by FY18–FY19.
April 30, 2013
Review of the Fund’s Income Position for FY 2013 and FY 2014
Description:
This paper reviews the Fund’s income position for FY 2013 and FY 2014. The paper updates projections provided at the FY 2013 midyear review and proposes decisions for the current and next financial year. The paper includes a comprehensive review of the Fund’s income position as required under the new Rule I-6(4) adopted in December 2011 (see Box 1). Based on this review, no change in the margin for the rate of charge is proposed.
The paper is structured as follows: The first section reviews the FY 2013 income position and the main changes from the midyear projections; the second section makes proposals on the disposition of FY 2013 net income, and placement to reserves; the third section discusses the margin on the rate of charge for FY 2014, updates the income projections, and reviews the projected burden sharing adjustments; and the last section reviews special charges.
April 29, 2013
Summary of Informal Discussions with Central Bankers and Other Officials on Unconventional Monetary Policies
Description: A series of conference calls was held in March 2013 with selected representatives of central banks and other official agencies in advanced and emerging market economies to seek views on unconventional monetary policies (UMP). The key points raised during the discussions are summarized below. No views have been attributed to individual participants, and Fund staff is ultimately responsible for the contents of this summary.
April 26, 2013
Sovereign Debt Restructuring - Recent Developments and Implications for the Fund's Legal and Policy Framework
Description:
This paper reviews the recent application of the Fund’s policies and practices on sovereign debt restructuring.
Specifically, the paper:
• recaps in a holistic manner the various policies and practices that underpin the Fund's legal and policy framework for sovereign debt restructuring, including on debt sustainability, market access, financing assurances, arrears, private sector involvement (PSI), official sector involvement (OSI), and the use of legal instruments;
• reviews how this framework has been applied in the context of Fund-supported programs and highlights the issues that have emerged in light of recent experience with debt restructuring; and
• describes recent initiatives in various fora aimed at promoting orderly sovereign debt restructuring, highlighting differences with the Fund’s existing framework.
Based on this stocktaking, the paper identifies issues that could be considered in further depth in follow-up work by staff to assess whether the Fund’s framework for debt restructuring should be adapted:
• first, debt restructurings have often been too little and too late, thus failing to re-establish debt sustainability and market access in a durable way. Overcoming these problems likely requires action on several fronts, including (i) increased rigor and transparency of debt sustainability and market access assessments, (ii) exploring ways to prevent the use of Fund resources to simply bail out private creditors, and (iii) measures to alleviate the costs associated with restructurings;
• second, while creditor participation has been adequate in recent restructurings, the current contractual, market-based approach to debt restructuring is becoming less potent in overcoming collective action problems, especially in pre-default cases. In response, consideration could be given to making the contractual framework more effective, including through the introduction of more robust aggregation clauses into international sovereign bonds bearing in mind the inter-creditor equity issues that such an approach may raise.
The Fund may also consider ways to condition use of its financing more tightly to the resolution of collective action problems;
• third, the growing role and changing composition of official lending call for a clearer framework for official sector involvement, especially with regard to non-Paris Club creditors, for which the modality for securing program financing commitments could be tightened; and
• fourth, although the collaborative, good-faith approach to resolving external private arrears embedded in the lending into arrears (LIA) policy remains the most promising way to regain market access post-default, a review of the effectiveness of the LIA policy is in order in light of recent experience and the increased complexity of the creditor base. Consideration could also be given to extending the LIA policy to official arrears.
April 25, 2013
Guidance Note for the Liberalization and Management of Capital Flows
Description: This note provides operational guidance to staff for how to use the Fund’s institutional view on the liberalization and management of capital flows. The institutional view is a consistent basis for providing policy advice on capital flows and policies related to them and assessments when required for surveillance. In the absence of an institutional view, country teams risk providing inconsistent advice to countries in similar circumstances (IEO, 2005). The view does not have mandatory implications for Fund-supported programs or technical assistance. It does not alter members’ rights and obligations under the Fund’s Articles of Agreement or under any other international agreements. The institutional view and guidance will evolve over time to reflect new experience, emerging views of authorities and staff, and research. Staff teams are encouraged to reflect useful lessons from authorities’ experiences with capital flow liberalization and management in Fund reports so that these experiences can continue to influence the Fund’s approach to these issues.
April 22, 2013
Framework Administered Account for Selected Fund Activities: Africa Training Institute Subaccount for Selected Fund Activities
Description: In March 2009, the Fund established a new Framework Administered Account to administer external financial resources for selected Fund activities (the “SFA Instrument”).1 The financing of activities under the terms of the SFA Instrument is implemented through the establishment and operation of a subaccount within the SFA. This paper requests Executive Board approval to establish the Africa Training Institute Subaccount for Selected Fund Activities (the “Subaccount”) under the terms of the SFA Instrument.
April 20, 2013
Managing Director's Global Policy Agenda
Description: The global economy has avoided the worst, but it is by no means out of the woods, and prospects may be diverging. A three-speed global recovery is emerging. Sentiment has improved, but growth and jobs are still lagging in many places, some old risks remain and could rekindle tail risks, and new risks are arising. Policymakers must, to varying degrees, continue to nurse the recovery, repair systems damaged by the crisis, strengthen defenses against a recurrence, and anticipate new challenges from stronger expansion. In a world of interconnections, lagging policy momentum in some corners will soon affect all.
April 19, 2013
Arab Countries in Transition - Economic Outlook and Key Challenges - Deauville Partnership Ministerial Meeting
Description: Arab Countries in Transition (ACTs) continue to face high political uncertainty and social pressures. The uprisings and protests have generated the promise of a better life for 300 million people, but forthcoming elections and constitutional reform, as well as populations anxious for jobs and higher incomes, complicate policymaking for many governments. At the same time, fiscal and reserves buffers have diminished sharply, underscoring the urgent need to maintain macroeconomic stability in an environment of sluggish global growth, high commodity prices, and still impaired domestic confidence. Resolute policy action and support from the international community are required; particularly as last year’s subdued growth in the ACTs (except Libya) is expected to improve only slightly in 2013 and is overshadowed by persistent external and regional risks. It will be equally important for policymakers to move quickly on designing and implementing effective structural reforms to build dynamic and inclusive economies that generate (many) more jobs than are available today. Promoting private-sector growth and international trade, as well as attracting foreign direct investment inflows, will be key components of success. Financial assistance and technical expertise from external partners, including Transition Fund projects, can make a big difference in this endeavor.
April 18, 2013
Unconventional Monetary Policies - Recent Experiences and Prospects - Background Paper
Description: This paper provides background information to the main Board paper, “The Role and Limits of Unconventional Monetary Policy.” This paper is divided in five distinct sections, each focused on a different topic covered in the main paper, though most relate to bond purchase programs. As a result, this paper centers on the experience of the United States Federal Reserve (Fed), the Bank of England (BOE) and the Bank of Japan (BOJ), mostly leaving the European Central Bank (ECB) aside given its focus on restoring the functioning of financial markets and intermediation. Section A explores whether bond purchase programs were effective at decreasing bond yields and, if so, through which channels. Section B goes one step further in evaluating whether bond purchase programs had—or can be expected to have—significant effects on real growth and inflation. Section C studies the spillover effects of bond purchases on both advanced and emerging market economies, using very similar methods as introduced in the first section. Section D breaks from the immediate focus on bond purchases to discuss how inflation might decrease the debt burden in advanced economies, in light of possible pressures that could fall (or be perceived to fall) on central banks. Finally, Section E discusses the possible risks of exiting given the very large central bank balance sheets.
April 18, 2013
Unconventional Monetary Policies - Recent Experiences and Prospects
Description: This paper addresses three questions about unconventional monetary policies. First, what policies were tried, and with what objectives? Second, were policies effective? And third, what role might these policies continue to play in the future?