Policy Papers

August 15, 2011

2011 Triennial Surveillance Review - External Commentary - Surveillance by the International Monetary Fund

Description: Commentary prepared by Martin Wolf, Associate Editor & Chief Economics Commentator, Financial Times, London:

"With countries naturally reluctant to cede any control over their own monetary and fiscal policies, it is likely that the IMF will have as instruments only the powers of analysis, persuasion, and, in Keynes" own favourite words, "ruthless truth-telling". That phrase does not conjure up many memories of any of the many international meetings I have attended. But unless the IMF has the self-confidence to play that role, its deliberations and statements will carry little weight. The Fund requires an independent, respected and clear voice." Mervyn King, 2006.

Notes: This paper represents the views of the author and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management.

August 5, 2011

Use of Windfall Gold Sale Profits—Further Considerations

Description: In April 2011, Executive Directors held a preliminary discussion on the use of the profits of SDR 6.85 billion from the Fund’s limited gold sale. They noted their expectation that at least SDR 4.4 billion of the profits would be placed in an endowment within the Investment Account, and affirmed their support for the 2009 financing package for low-income countries (LICs), including the distribution to the Fund’s membership of up to SDR 0.7 billion from the profits linked to gold sales, with the expectation that most members will return equivalent funds to the Poverty Reduction and Growth Trust (PRGT). There was a wide range of views among Directors on the three main options presented for the windfall of SDR 1.75 billion, but no consensus favoring a single option. The main options presented included use of resources linked to the windfall to boost the capacity of the PRGT, counting the windfall towards precautionary balances, or investing the windfall profits as part of the Investment Account’s endowment. Many Directors indicated that they could support a combination of two or more of the main options.

August 5, 2011

Modernizing the Framework for Fiscal Policy and Public Debt Sustainability Analysis

Description: Modernizing the framework for fiscal policy and public debt sustainability analysis (DSA) has become necessary, particularly in light of the recent crisis and rising sustainability concerns in some advanced economies. While recognizing the inherently challenging nature of such analysis, this paper highlights areas where improvements are needed and makes both general and specific proposals on how this could be achieved. It also proposes to move to a risk-based approach to DSAs for all market-access countries, where the depth and extent of analysis would be commensurate with concerns regarding sustainability, while a reasonable level of standardization would be maintained.

July 29, 2011

Fourth Periodic Monitoring Report on the Status of Implementation Plans in Response to Board-Endorsed IEO Recommendations - Assessment by the Evaluation Committee to the Executive Board

Description: The Executive Board agreed in January 2008 to refer future Periodic Monitoring Reports (PMRs) to the Evaluation Committee (EVC) for initial consideration and review before reporting to the full Board. It was expected that, although a Board discussion could not be ruled out, in most cases the EVC discussion would replace a Board discussion. This procedure, which was intended to make better use of Board Committees and more efficient use of Board time, was applied to the consideration of the previous PMRs and has been followed for the Fourth PMR.

July 25, 2011

2011 Triennial Surveillance Review - External Study - IMF and Global Financial Stability

Description: External study prepared by John Palmer, Chair, Toronto Leadership Centre, former Superintendent, Office of the Superintendent of Financial Institutions, Canada, former Deputy Managing Director Monetary Authority of Singapore, former Canadian Managing Partner of KPMG and Yoke Wang Tok, Former Senior Advisor to the IMF Executive Director representing ASEAN, Nepal, Fiji and Tonga and former Principal Economist, Monetary Authority of Singapore:

This report aims to provide an independent view of how the Fund is discharging its multilateral surveillance responsibilities, in particular its contribution to global financial stability and crisis prevention, working in coordination with other relevant international groupings/institutions such as the FSB and BIS. As we emerge from the global financial crisis (GFC), the Fund has regained much of its credibility and relevance. The GFC caught many, including the IMF, by surprise. Since then, the Fund has done considerable self-analysis and taken active steps to strengthen its surveillance and policy advice and to improve traction with policy makers. The IEO report on the Fund’s performance in the run-up to the financial and economic crisis identified various shortcomings that needed to be addressed. One of its key findings was the inability of the Fund to connect-the dots, to deliver hard-hitting messages and the difficulty experienced by the Fund in thinking beyond mainstream/official views. Many of the IEO’s findings have relevance to this review.

Notes: This paper represents the views of the author and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management.

July 22, 2011

2011 Triennial Surveillance Review - External Commentary - A Short Note on Surveillance and How Reforms in Surveillance Can Help the IMF to Promote Global Financial Stability

Description: Commentary prepared by Joseph E. Stiglitz, University Professor, Columbia University:

Surveillance has widely been viewed as a key instrument by which the IMF ensures member states adhere to the kinds of policies which promote global economic stability and through which the global macroeconomic coordination necessary for economic stability is achieved. Indeed, as Ocampo (2011) notes, "...the first objective of this institution is to provide 'the machinery for consultation and collaboration on international monetary problems.'" But there is also widespread agreement that there are major shortfalls in the achievement of these lofty objectives. Part of the problem has been in the view that countries—particularly those not borrowing from the fund—lack incentives to comply with the advice that would achieve such stability. Since those countries include virtually all of the systemically significant countries, if surveillance has an impact on global stability (as opposed to the well-being of particular countries) it is only the result of (i) a process of consensus building in which actions which they might previously have thought to not be in their interest were in fact in their national interest; or (ii) enough small countries, each of which is systemically insignificant, are affected in a meaningful enough way so as to have systemically significant effects.

Notes: This paper represents the views of the author and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management.

July 20, 2011

2011 Triennial Surveillance Review - External Study - IMF Surveillance: Coverage, Consistency and Coherence

Description: External study prepared by Stephen Pickford, former IMF/World Bank Executive Director for the United Kingdom and former Managing Director of International and Europe at H.M. Treasury and G-20 Finance Deputy, United Kingdom:

Surveillance (both bilateral and multilateral) is a key instrument for the Fund’s crisis prevention role, analyzing economic developments and policies at national, regional and global levels. It also identifies risks and vulnerabilities, and forms the main basis for the Fund‘s discussions with policy-makers.

Notes: This paper represents the views of the author and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management.

July 19, 2011

2011 Triennial Surveillance Review - External Study - An Evaluation of IMF Surveillance of the Euro Area

Description: External Study prepared by Jean Pisani-Ferry, André Sapir, and Guntram B. Wolff:

This report provides an independent evaluation of recent IMF surveillance in the euro area (EA). It focuses on the euro area as a whole and on four countries severely hit by the recent economic and financial crisis, namely Greece, Ireland, Portugal and Spain.

Notes: This paper represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management.

July 11, 2011

Consolidated Spillover Report - Implications from the Analysis of the Systemic-5

Description: Spillover reports explore the external effects of policies in five systemic economies based on the issues identified by partners. Without reprising all the results and nuances, this paper draws some overarching lessons from the exercise for the global policy debate.

July 6, 2011

Key Trends in Implementation of the Fund's Transparency Policy

Description: At the time of the 2005 review of the Fund’s transparency policy, it was agreed that information on key trends in implementation of the transparency policy would be circulated to the Board regularly, along with lists indicating the publication status of reports discussed by the Board. The set of tables provided in this report updates the last Key Trends with information on documents issued through December 2010.