News Brief No. 00/102

News Brief: Work Program of the IMF's Executive Board

November 20, 2000

The Board of Executive Directors of the International Monetary Fund (IMF) has adopted a work program that broadly defines the Board’s agenda leading up to the spring meetings of the International Monetary and Financial Committee (IMFC) on April 29, 2001. The work program has been designed to implement the vision of the future role and activities of the Fund set out at the IMF/World Bank Annual Meetings in Prague in late September 2000. The work program is summarized in the accompanying Tables A-H.

THE CONTEXT OF THE WORK PROGRAM

In Prague, Ministers from the 182 IMF member countries strongly supported the Managing Director Horst Köhler’s vision for the IMF of the future. They, and the IMFC, showed that they want a strong IMF and a reformed IMF. It would be a Fund that:

• strives to promote sustained non-inflationary economic growth that benefits all people of the world;

• is the center of competence for the stability of the international financial system;

• focuses on its core macroeconomic and financial areas of responsibility, working in a complementary fashion with other institutions established to safeguard global public goods; and

• is an open institution, learning from experience and dialogue, and adapting continuously to changing circumstances.

The IMFC and Annual Meetings gave new momentum to the effort to develop answers to critical questions about globalization and the fight against poverty, as the Fund’s members contributed their views on the Fund’s efforts to strengthen the international financial system. The membership of the IMF wants, first and foremost, to put crisis prevention at the heart of Fund surveillance. Therefore, the Fund’s surveillance has to be conducted with an increasing emphasis on identifying sources of vulnerability and on financial sector and financial market issues. At the same time, the membership wants the Fund to stay strongly engaged with its poorest member countries. Priorities in the work program for the coming months therefore include:

• Finding ways to help countries exploit the opportunities of the global economy while containing the risks;
• working to make a success of the Initiative for Heavily-Indebted Poor Countries;
• considering the best ways to streamline conditionality and improve country ownership of IMF-supported programs;
• reaching formal decisions on the review of IMF lending facilities; and
• considering ways that the Fund’s technical assistance can provide stronger support for institution-building and the implementation of measures to reduce the risk of financial crises.

In the coming period, the Board’s activities are likely to be distributed as follows:

• Well over half of the Board’s time would be spent on country operational matters, and the Board’s work on country items will remain heavy in the months ahead.

• About a quarter of the Board’s time would be in discussion on policy items, concentrated in several areas, as set out in the semi-annual work program.

• The remainder would be devoted to the World Economic Outlook and other key operational matters, such as the Fund’s finances and administration.

In addition, there will be opportunities for the Board and management to review other issues such as the work of the Financial Sector Review Group—expected to be concluded by year-end—which will inform the evolution of the Fund’s work on financial market issues (see News Brief No. 00/93). Matters not requiring formal Board decisions include ways to further the dialogue with civil society; cooperation with fora such as the Financial Stability Forum; and interaction with the United Nations. Indeed, the preparations for the UN’s Financing for Development summit, with which the Fund will be closely cooperating, represent an important example of collaboration toward shared objectives.

In the coming months, the Board will review the pilot of the IMF/World Bank Financial Sector Assessment Program (FSAP); discuss issues relating to the involvement of the private sector in the prevention and resolution of crises; and discuss the continuing staff work on issues such as exchange arrangements, regional integration, and regional payments arrangements.

A key step in helping the Fund to learn from experience and adapt to change was the decision to establish the independent Evaluation Office (EVO) to provide outside assessments of the Fund’s work (See Press Releases No. 00/49 and 00/53). Following the Executive Board discussion on October 30, the agreed process for recruitment of a Director of the EVO is being launched. Management will continue to work with the Board on other steps aimed at making the EVO operational before the 2001 Spring meetings.

In proposing the work program to the Board, the Managing Director also called on Executive Directors to think about the directions for further reform of the IMF.

THE WORK PROGRAM

IMF LENDING: CONDITIONALITY, LOAN FACILITIES, AND DEBT RELIEF

An immediate priority is to bring up to 20 heavily-indebted poor countries (HIPCs) to the decision point for debt relief under the HIPC Initiative by the end of the year. As part of their efforts to reduce global poverty, the Managing Director and World Bank President James Wolfensohn have committed their two institutions to work very closely together to this end (See News Brief 00/79). To do so, nine additional HIPC cases will need to be considered by the Executive Board by December.

The Work Program includes several other policy issues related to assistance to poor countries for Executive Board discussion, principally aimed at ensuring that debt relief does indeed go to reduce poverty. These include the tracking of countries’ poverty-related expenditures, and the level of indebtedness that poor countries are able to service on a sustainable basis. (Table B summarizes the agenda on poor countries.)

The Board will also continue to monitor the lending arrangements now in place with 55 member countries, as well as any new ones on which understandings may be reached.

The Board has just completed changes to the Fund’s lending facilities to make them more effective at preventing crises and to discourage unduly long or unduly high use of Fund resources by individual countries. The Executive Board made the basic decisions on the changes to be made to the Fund’s facilities in September, and it is time to put these changes into effect (See PIN No. 00/79). Proposed legal decisions to formally amend Fund facilities were considered by the Board on November 17.

The IMFC in Prague encouraged the Fund to streamline and focus conditionality in order to improve the quality of Fund programs and enhance program ownership. A discussion of conditionality and of structural reforms under Fund-supported programs is currently planned for January, building on an informal briefing in December. By the Spring meetings, substantial agreement among Executive Directors on major issues of conditionality and ownership is expected. (Table A summarizes the agenda on conditionality and lending facilities.)

STRENGTHENING COUNTRIES AGAINST THE RISK OF FINANCIAL CRISIS

Financial sector issues

As part of the effort to improve our financial sector surveillance and help members to strengthen their financial systems, the Board will need to consider the next steps in the Joint IMF-World Bank Financial Sector Assessment Program (FSAP) and Financial Sector Stability Assessments (FSSAs). A review of the FSAP pilot project is scheduled for December. The staff paper will draw on feedback from national authorities and will address the long-term strategy for the FSAP/FSSA process, the links between FSSAs and the Fund’s surveillance, the policy governing publication, and the implications for the Fund’s technical assistance. Progress in incorporating the FSAP/FSSA process and other analytical tools, such as vulnerability indicators, into the Fund’s regular operations will be critical to its effectiveness in helping member countries to prevent financial crises.

In Prague, the IMFC asked the Fund to explore how to incorporate work on financial abuse, particularly money laundering, into its activities. This is a complex area. The staffs of the Fund and the World Bank will jointly prepare material for a Board discussion in March, possibly preceded by an informal session with the Fund’s Executive Directors as early as January.

The draft guidelines on public debt management are being revised following a recent Board discussion and extensive discussions with member countries. The revised guidelines will be proposed for adoption by the Board before the Spring 2001 meetings. A background paper on the guidelines on foreign exchange reserve management will also be available for that discussion. The Board will have an opportunity to discuss capital account liberalization and financial stability, based on lessons drawn from country experience, at a seminar in March 2001. (Table C summarizes the agenda on financial sector issues.)

International Standards and Codes of Good Practice

A key item for crisis prevention will be the Board review of reporting on member countries’ implementation of international standards in financial affairs, including December’s discussion of Reports on the Observance of Standards and Codes (ROSCs). The background paper, which will be prepared jointly by Fund and World Bank staff, will draw on feedback provided by participants in the ROSC process and the private sector. The review will encompass the long-term strategy for that process; the links among ROSCs, surveillance and technical assistance; the modalities for working with other international institutions; and the resource implications of this endeavor for the Fund. (Table D summarizes the agenda on standards and codes.)

Involving the Private Sector

The task of refining and operationalizing the framework for the involvement of the private sector in the prevention and resolution of crises will need to move along several fronts (See PIN No. 00/80). In December, the Board will conduct a seminar on corporate workouts, and a discussion on restructuring international sovereign bonds. In January, a preliminary discussion is planned on the complex issues relating to the comparability of treatment between official bilateral and private creditors; further discussions will likely be needed. In February, the Board will consider the prospects for market access by countries emerging from crises. This should enable the Board to make further substantial progress by the next IMFC meeting in establishing an operational framework for private sector involvement. (Table G summarizes the agenda on private sector issues.)

Technical assistance

The Fund’s emphasis on crisis prevention has led to increased requests for technical assistance to help countries put in place the necessary defenses. There is an urgent need to consider the Fund’s overall technical assistance strategy, including prioritization of technical assistance, coordination with technical assistance provided by other agencies, and country contributions to Fund technical assistance. The Board will have an opportunity to take this up in January. (Table F summarizes the agenda on technical assistance.)

ADDITIONAL POLICY PRIORITIES

Surveillance and related issues

Bilateral surveillance—consultations with individual member countries—will continue to occupy a substantial portion of the Board’s time. It will consider reports on the annual policy consultations with approximately 100 members during the six months ending in April 2001.

The Board will continue its multilateral surveillance through the semi-annual World Economic Outlook discussions in early April, building on its periodic discussions of the latest developments. A paper on oil market developments and their implications for the global economy will be readied for the Board in the coming weeks.

The Board will have opportunities to consider several specific issues related to surveillance in early 2001. These include a review of the Fund’s experience on governance since guidelines were established in 1997; the application of the clause in the Fund’s Articles of Agreement (Article VIII, Section 5) relating to the provision of information to the Fund; and debt sustainability of the poorest CIS countries. In addition, two transparency issues will be discussed: members’ rights to request specific deletions from IMF documents pertaining to them prior to publication, and the policy on publication of the Fund’s internal policy-related papers.

In line with the Managing Director’s call in Prague, the Fund, together with the World Bank, is supporting improved market access for the exports of developing countries. The Executive Board will have the opportunity to consider the policy issues related to market access for developing countries’ exports next spring on the basis of a short paper drawing on the findings of a joint study by the two staffs. (Table E summarizes the agenda on surveillance.)

Representation in the Fund

National shareholdings in the Fund ("Quotas") and the related issue of representation are central for the internal governance and institutional strength of the Fund. The IMFC meeting in Prague noted that quotas should reflect developments in the international economy. It also took note of the work of the Quota and Formula Review Group (QFRG), which was discussed at an Executive Board Seminar in August (see News Brief No. 00/90). In accordance with the IMFC’s wish to see the Executive Board continue its work on this issue, staff will work on quota formulas based on the results of the seminar discussion. This will involve compiling the data on countries’ positions in the world economy and exploring various quota formulas. The quantification of the QFRG formula will be issued as soon as possible for the information of the Board; a Board seminar on alternative quota formulas is envisaged for Summer 2001. This seminar should provide further direction to the work on quotas, possibly including proposals for selective adjustments of the quotas for a few members whose quotas are most out of line with their respective positions in the world economy. At the same time, informal discussions will proceed in search of other ways to improve countries’ representation in the Fund.

The Executive Board will shortly consider China’s request for an ad hoc increase in its quota following the return of Hong Kong to Chinese sovereignty. If basic understandings on the action to be taken are reached, it should be feasible to put a proposal to the Board of Governors late this year or early in 2001.

Administrative and financial issues

In preparation for the annual Board discussion on the Administrative and Capital Budgets in April, the Budget Committee will consider the budget framework in January. In addition, the relevant committees will examine proposals for Board consideration on staff benefits, including a review of aspects of the Staff Retirement Plan; proposals affecting the Medical Benefits Plan; and domestic partner benefits. The ongoing work of the Review Team on Evaluation of Fund Budgetary Practices, expected to be completed in February/March 2001, will be discussed informally with Executive Directors and can be expected to lead to changes in budgetary practices beginning with the fiscal year starting May 1, 2002.

The periodic reviews of the Fund’s income position will take place in late 2000 and in Spring 2001. In the coming several months, the Board will consider papers on each of the countries with longstanding overdue financial obligations to the Fund. A paper on the Review of the Strategy on Overdue Financial Obligations to the Fund will be considered in June 2001. Table H summarizes the agenda on administrative and financial topics.

* * * *

The Executive Board consists of the 24 officials appointed or elected by the IMF’s 182 member countries with the Managing Director as Chairman. The Board meets regularly to assess developments at the national, regional, and global levels; to discuss and decide on the IMF’s loans to member countries; and to consider broad policy issues concerning the international financial system.

Summaries of the work program have previously been released to the public on four occasions, most recently as News Brief No. 00/32.

Attachment: Tables A-H