Policy Papers

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2005

November 16, 2005

Multilateral Debt Relief Initiative and Exogenous Shocks Facility - Proposed Decisions

Description: This paper puts forward a package of proposed decisions to implement the Multilateral Debt Relief Initiative (“MDRI”) and establish the Exogenous Shocks Facility within the PRGF Trust; it also provides a Commentary on key aspects of the decisions. The proposed decisions generally reflect the overall structure and modalities that have been identified by the staff and endorsed by Executive Directors in the several meetings held to date concerning the G-8 debt relief proposal/MDRI and ESF.

Notes: The Board approved the requisite decisions to implement the MDRI on November 23, 2005.

November 9, 2005

Are Fund Staff Projections of Debt More Optimistic Under Program Contexts?

Description: This note examines whether projections made in the context of a Fund-supported program are systematically more optimistic than those done for surveillance cases. Of particular interest in this regard is the assessment of external debt sustainability, as this underlies the "capacity to repay the Fund" analysis. Accordingly, this note examines debt projections over the period 1990-2004, with data for transition countries beginning in 1995.

November 1, 2005

The Multilateral Debt Relief Initiative (G-8 Proposal) and Its Implications for the Fund - Further Considerations - Supplemental Information

Description: The Executive Board held an informal seminar on September 21, 2005 to discuss possible implementation modalities for the G-8 debt relief proposal. On September 24, 2005, the International Monetary and Financial Committee supported providing 100 percent cancellation of debt owed by HIPCs to the Fund, and considered that this would provide significant additional resources for countries’ efforts to reach the Millennium Development Goals and reinforce long-term debt sustainability.

November 1, 2005

The Multilateral Debt Relief Initiative (G-8 Proposal) and Its Implications for the Fund - Further Considerations - Supplement on Financing Arrangements

Description: This supplement discusses the financial structure for the implementation of the G-8 debt relief proposal or Multilateral Debt Relief Initiative (MDRI). Implementation of the MDRI will require action by the Executive Board and by contributions to the Subsidy Account of the PRGF Trust. To be in a position to deliver debt relief under the MDRI by the beginning of 2006 will require the early adoption by the Board of a number of decisions. It will also require the timely consent by all contributors to the Subsidy Account of the PRGF Trust to an amendment of the PRGF Trust Instrument that would allow the transfer of a portion of their resources to a new administered account for use in providing MDRI debt relief to HIPCs with incomes above the MDRI threshold.

November 1, 2005

Doha Development Agenda and Aid for Trade -- Supplement

Description: At their 2005 Spring meetings, the Development Committee and IMFC called on the Bank and Fund to work with others to develop more detailed proposals, for consideration at the Annual Meetings, to help developing countries adjust to and take advantage of the Doha Round. In response, Bank and Fund staff prepared a paper on “The Doha Development Agenda and Aid for Trade” following a consultation process with donors and least developed countries (LDCs) during the summer. This is a Supplement to the main paper.

October 28, 2005

Review of the Method of Valuation of the SDR

Description: This paper sets out the main issues for the 2005 review of the SDR currency basket and interest rate basket. It provides the basis for the quinquennial review by the Executive Board of the method of valuation of the SDR, in accordance with the Executive Board decision on the calculation of currency amounts for the SDR valuation basket adopted in the context of the 2000 review. The new valuation and interest rate baskets will come into effect on January 1, 2006, unless the Executive Board decides otherwise.

October 27, 2005

Evaluating the Effectiveness of Trade Conditions in Fund-Supported Programs

Description: Approximately half of the countries that had IMF-supported programs during 1993-2003 also had trade-related conditions. A large literature has shown that trade openness is an essential part of the environment in which economic growth and poverty reduction take place.

Notes: This paper was discussed in an informal Board seminar.

October 25, 2005

Using the Government Finance Statistics Manual 2001 (GFSM 2001) Statistical Framework to Strengthen Fiscal Analysis in the Fund

Description: This paper responds to the Board’s call for greater consistency in fiscal reporting in line with GFSM 2001. In this context, the paper summarizes the framework, reviews the implementation process of the GFSM 2001 framework by member countries and Fund staff, and proposes pilot studies. It seeks the support of the Board for gradual adoption of the framework as the basis for fiscal analysis in Fund staff reports.

October 20, 2005

Implementation of Basel II - Implications for the World Bank and the IMF - Factual Update

Description: This note provides factual updates on material recent developments with respect to the implementation of Basel II in member countries since the circulation of the paper prepared by Fund and World Bank staff on "Implementation of Basel II--implications for the World Bank and the IMF.

October 4, 2005

Establishment of an Exogenous Shocks Facility Under the Poverty Reduction and Growth Facility Trust

Description: At the recent Board discussion on strengthening the Fund's assistance to low-income countries dealing with sudden and exogenous shocks, most Directors supported the establishment of an Exogenous Shocks Facility within the Poverty Reduction and Growth Facility Trust. In an earlier discussion, Directors noted that exogenous shocks could have significant negative impacts on developing countries' growth, macroeconomic stability, debt sustainability, and poverty, and that low-income countries are particularly vulnerable to shocks due to lack of diversification, limited capacity to build up reserves, and prohibitively expensive or unavailable market insurance. The international community can supplement national efforts for reducing vulnerability to shocks. Recent research shows that foreign assistance can be unusually effective in the aftermath of a shock. Such assistance needs to be available quickly, and it needs to be associated with sound adjustment policies and measures to reduce vulnerability to future shocks.

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