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Responses to Questions About IMF Policies and Country Operations
IMF lending
Last Updated: September 15, 2006| Question: Regarding the new financial facility, which countries are the most likely to be included in this facility? |
| Answer:
Crisis prevention is a very important element of our work. The best crisis prevention mechanism is certainly domestic policies. There are some emerging economies that clearly have increased their resilience in recent years, and I think that is one of the best news in the world economy, which is to what extent we live in a world in which emerging economies are not only playing a role, but are also on a much stronger footing than before. Nevertheless, vulnerabilities exist and the vulnerabilities can be more dangerous in a more tight financial scenario if the world economy evolves in that direction. I think the international community has to be ready to respond to that type of crisis. It is probably shrewd to think that the types of crisis we knew 10 or 20 years ago are not going to be the same in the future, in terms of size, in terms of the need of quick response, in terms of signaling markets, and that is the issue we have to respond to. And we are working on responding to those questions. Once we arrive at a conclusion, we will ask whether we need new instruments and if we need them, we will have them so that countries can use them when it is necessary. The question is not to make a list right now of countries, but to ask ourselves some questions regarding crisis prevention.
September 15, 2006 Press Briefing by Rodrigo de Rato, Managing Director, IMF |
| Question: Regarding the new financial facility, which countries are the most likely to be included in this facility? |
| Answer:
Crisis prevention is a very important element of our work. The best crisis prevention mechanism is certainly domestic policies. There are some emerging economies that clearly have increased their resilience in recent years, and I think that is one of the best news in the world economy, which is to what extent we live in a world in which emerging economies are not only playing a role, but are also on a much stronger footing than before. Nevertheless, vulnerabilities exist and the vulnerabilities can be more dangerous in a more tight financial scenario if the world economy evolves in that direction. I think the international community has to be ready to respond to that type of crisis. It is probably shrewd to think that the types of crisis we knew 10 or 20 years ago are not going to be the same in the future, in terms of size, in terms of the need of quick response, in terms of signaling markets, and that is the issue we have to respond to. And we are working on responding to those questions. Once we arrive at a conclusion, we will ask whether we need new instruments and if we need them, we will have them so that countries can use them when it is necessary. The question is not to make a list right now of countries, but to ask ourselves some questions regarding crisis prevention.
September 15, 2006 Press Briefing by Rodrigo de Rato, Managing Director, IMF |
| Question: Argentina and Brazil have paid all their debts outstanding to the IMF. Will these payments have any impact on Fund finances? Is the Fund considering alternatives to generate income? |
| Answer:
In the Managing Director's report on the Fund's Medium-Term Strategy, published last fall, it was noted that the Fund would be needing to take a look at its finances in the context of a period of relatively low demand for Fund resources. That period of low demand has now become more evident, somewhat earlier than previously anticipated. And indeed the Fund is taking a look at those implications. Two days ago we released the mid-year review of the Fund's income position, with a press release, that touches on a number of those issues. The next phase of work under the strategic review of the Managing Director is underway now, and by the Spring Meetings there will be additional reports in which the issue of Fund financing will be examined in a bit more detail. The current state of play is that the Fund's income position and reserve position is adequate for us to continue as we are doing now, and then take a look at the medium-term implications, whether it is in terms of broadening the revenue base, e.g. charging for various forms of assistance, or other forms of work. One issue is investment of Fund reserves, which has been an issue that has come up in the past. So those options are under consideration and review, and you will be seeing on a continuing basis more in that regard. It is not something that is urgent in the sense of requiring any sort of immediate actions. But we are a prudent and a cautious and a conservative institution financially, and it is incumbent on us to do that. We are doing it, and it was anticipated. January 26, 2006 Press Briefing by Thomas Dawson, Director of External Relations, IMF |
| Question: With Argentina's and Brazil's debts being paid off, are there any plans for a new direction for the IMF, having $25 billion more in the bank that you didn't anticipate having this time last year? Or are you just planning on holding onto that and waiting for a rainy day? |
| Answer:
The way the financial structure works at the Fund is we don't hold onto it. It goes back to our member countries. We are like a credit union, and when money is repaid, it's credited to the members' accounts. So the IMF's Treasurer's Department, which used to worry about being repaid, is now making sure that we repay the countries that we got the money from to begin with. Indeed, our liquidity ratio is at a high basically not seen since 1990 in terms of the ratios, adjusted for the size of the institution. There's a certain cyclical element to this. If you have a global economy that has been growing rather strongly for a number of years, you would hope that Fund exposure declines. We are supposed to be an institution that lends money to countries when they enter into difficulties, often because of a difficult situation in the global economy generally. And when the economy improves, it certainly is our desire to be repaid. We are not in that sense a development institution whose raison d'etre is to have a portfolio of projects that in one way or another may even always be growing. That is not the way the Fund is. We are a revolving credit institution, and that our loan exposure may decline from year to year is unambiguously a good thing, not a bad thing. January 12, 2006 Press Briefing by Thomas Dawson, Director of External Relations, IMF |
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