Villagers in Mali: New IMF work program features research for the post-2015 development agenda and other global issues (photo: Mauricio Abreu/Corbis)
IMF Work Program
The work program—which is produced twice a year and discussed by the IMF’s Executive Board—builds on the policy priorities identified in the Global Policy Agenda that was presented by IMF Managing Director Christine Lagarde at the Spring Meetings in April. Several multilateral issues are in the spotlight, including the post-2015 global development agenda and possible ways to strengthen the international monetary system.
Siddharth Tiwari, Director of the IMF’s Strategy, Policy, and Review Department, discusses the IMF’s main priorities over the coming months.
IMF Survey: The IMF has stressed the importance of lifting global growth. How will the institution build on efforts to help countries develop fiscal policies that support growth?
Tiwari: Global growth is uneven and still not strong enough to generate employment for the more than 200 million people who are still unemployed seven years after the global financial crisis. We need growth-friendly fiscal policies—within a credible policy framework—to help support a durable recovery, while also taking steps to ensure the medium-term sustainability of public finances.
To help achieve this, the IMF will assist its members in developing fiscal policies to support both short- and long-term growth by using a combination of policy advice, technical assistance, and training.
Examples include a forthcoming study on Fiscal Policy and Long-Term Growth, which explores links between expenditure, revenue reforms and long-term growth, and the just-released paper Making Public Investment More Efficient, which examines ways to reform public investment frameworks to maximize the growth impact of investment while ensuring an efficient use of public resources.
We plan to issue a joint report in October with the Organization for Economic Cooperation and Development, the United Nations, and the World Bank on the effective use of investment tax incentives in low-income countries. Next year, we will also evaluate trends and draw policy lessons on public spending on employee compensation and employment and take a closer look at fiscal anchors and fiscal policy frameworks.
IMF Survey: What further work is planned to help countries carry out critical structural reforms?
Tiwari: The importance of structural reforms—changes in policies or institutions that affect how well an economy functions—is a common theme we’re hearing from many countries. Some need to get growth back on track after the crisis. Others are focused on avoiding declines in potential output. In short, everyone wants to avoid the “new mediocre.”
To better help our member countries, we’ve beefed up our analysis of structural issues and plan to do more to integrate it into our country engagement. Our paper Structural Reforms Across the Membership, due out in September, will explore ways to deepen the IMF’s work in this area.
Some work will be region-specific. An upcoming paper will examine policies to strengthen potential growth in the Middle East and Central Asia, while other research will concentrate on the European Union’s structural reform governance framework.
We will also focus on particular types of reform—for instance, the impact of trade and foreign direct investment liberalization on growth, or the links between financial inclusion and economic growth.
Additionally, we are working to better understand inequality, gender, energy pricing, and climate change, and will tackle these topics where relevant for our annual assessments of member countries’ economies.
IMF Survey: Risks to financial stability have risen in recent months. How does the work program address this issue?
Tiwari: A challenge for many of our member countries is managing financial deepening—that is, the expansion of bank credit and financial markets—which is obviously good for growth, but could entail financial stability risks. Helping countries do this successfully is a high priority. We plan to deepen our analysis of the linkages between the financial sector and the broader economy, improve our understanding of financial deepening and inclusion, and sharpen our policy advice. These efforts have started finding their way into the regular health checks of our member countries’ economies.
Providing macroprudential policy advice—that is, guidance on financial regulation aimed to mitigate risks of the financial system—also remains a priority across the membership.
IMF Survey: How will the IMF strengthen the framework for helping countries with high debt levels?
Tiwari: Maintaining sound fiscal positions—including manageable levels of public debt—is essential to ensure macroeconomic stability and provide room for policy maneuver over the economic cycle. Several items are planned both to evaluate debt sustainability and to address debt distress. The paper Debt Vulnerabilities in Low-Income Countries—The Evolving Landscape will review developments in the debt of low-income countries and attempt to identify vulnerabilities that pose risks to the sustainability of their debt.
In terms of our ongoing work on sovereign debt restructuring, we have prepared a paper proposing modifications to our framework for exceptional access lending—that is, when we lend to countries above our normal limits. This paper will be discussed by the IMF’s Executive Board later in the year. In the next few months, we will take stock of progress made on including enhanced contractual provisions in international sovereign bonds.
We are also planning to evaluate the effectiveness of our policy on lending into arrears—that is, when a country is not making payments on its debt to other creditors—in light of recent experience and the increased diversity of the official creditor base.
IMF Survey: How do you see the IMF’s role in shaping the post-2015 development agenda?
Tiwari: This year is an unprecedented opportunity for the global community to shape the global development agenda for the future. The IMF will contribute within the areas of its mandate and will be represented in the three U.N. conferences by the Managing Director.
Our Executive Board will discuss in July a paper titled Revisiting the Monterrey Consensus, which will present the IMF’s position on policy issues central to developing a sustainable financing framework to meet countries’ development goals. The paper will also identify areas where we can strengthen our engagement with developing countries.
We will also issue a paper on Enhancing the Financial Safety Net for Developing Countries, which proposes ways to expand access to concessional financing for our poorest members within the current fiscal envelope of the Poverty Reduction and Growth Trust, and to enhance support to countries affected by natural disasters or conflict.
IMF Survey: What work is planned on enhancing the international monetary system?
Tiwari: The international monetary system is in transition, and more remains to be done to adapt it to today’s challenges. Despite progress since the global crisis, questions remain about the system’s resilience. For this reason, we are undertaking a study titled Strengthening the International Monetary System: Taking Stock and Looking Ahead, due out in October 2015, which will identify possible areas for further work.
In November, we will also conduct the Review of Valuation of the Special Drawing Right (SDR), which is the IMF’s unit of account and a reserve asset held by our membership. The review—which takes place every five years—will assess the currency composition of the SDR basket (which now includes the euro, Japanese yen, pound sterling, and U.S. dollar). This review is particularly relevant because it will consider whether the Chinese renminbi meets the criteria to be included in the SDR basket.
