Policy Papers
2018
April 17, 2018
2018 Interim Surveillance Review
Description:
Fund surveillance has become better adapted to the global conjuncture, and more integrated and risk-based. The recommendations of the 2014 Triennial Surveillance Review (TSR) focused on helping members navigate the post crisis challenges. Bilateral and multilateral surveillance discussions are underpinned by a shared and deeper understanding of global interconnectedness and linkages across sectors. There has also been progress in core areas such as risk work, fiscal and external sector analysis, and in integration of macrofinancial analysis and of macrostructural policy work that aims to reinvigorate productivity and growth, and promote inclusiveness. The ongoing efforts to align surveillance inputs with risks is also enhancing the Fund’s ability to support members more effectively. Continuing efforts along several dimensions will be needed to further advance surveillance ahead of the 2019 Comprehensive Surveillance Review (CSR). These include planned refinements to external sector assessments, sustaining progress on macrofinancial surveillance, addressing data gaps, and incorporating lessons from pilot efforts including on macrofinancial, macrostructural and emerging issues. Efforts to meet surveillance challenges in low income countries also will continue. Outward spillover work, particularly from the largest economies, should receive greater prominence in Article IV reports. Further work is also needed to make policy advice more persuasive by better leveraging cross-country policy experiences and integrating technical assistance. Lessons from implementing the TSR recommendations should help ensure further progress. A major investment has been made to deepen the analysis that supports surveillance. With a dramatic increase in the range of analytical approaches and tools available, selectivity and tailoring are ever more crucial. The Fund’s internal processes have proven flexible enough to deliver on key areas, but will require continual adaptation to keep pace with evolving challenges. Strategies for human resources, capacity development, knowledge management, and data and statistics should further reinforce surveillance priorities. Looking ahead, the 2019 CSR will further anchor the Fund’s surveillance in a world of rapid technological change. The increased pace of technological progress could have far-reaching implications for the global economy, finance, and policy making, possibly fundamentally altering the surveillance landscape. Coupled with rising inequality and possible adoption of inward-looking policies, the impact on the membership could be profound. Engagement with members, stakeholders, and experts will be central in determining how the 2019 CSR will address these challenges.
April 11, 2018
Considerations on the Role of the SDR
Description:
This paper explores whether a broader role for the SDR could contribute to the smooth functioning and stability of the international monetary system (IMS). Recent staff assessments highlighted that the IMS has displayed considerable resilience. But episodes of stress point also to some weaknesses, including in external adjustment mechanisms; limitations of official liquidity provisions through the Global Financial Safety Net (GFSN); and large-scale reserve accumulation—with systemic side effects. Those weaknesses, together with the expansion of the SDR basket, have renewed interest in the SDR and motivated a discussion of whether there is an economic rationale for a broader SDR role. The paper looks into how those weaknesses can be mitigated by three concepts of the SDR: the official SDR, the reserve asset administered by the IMF (O-SDR); SDR-denominated financial instruments, or “market SDRs” (M-SDR); and the SDR as a unit of account (U-SDR). However, the paper does not propose specific reform options.
April 5, 2018
Measuring the Digital Economy
Description:
Digitalization encompasses a wide range of new applications of information technology in business models and products that are transforming the economy and social interactions. Digitalization is both an enabler and a disruptor of businesses.
The lack of a generally agreed definition of the “digital economy” or “digital sector” and the lack of industry and product classification for Internet platforms and associated services are hurdles to measuring the digital economy. This paper distinguishes between the “digital sector” and the increasingly digitalized modern economy, often called the “digital economy,” and focuses on the measurement of the digital sector. The digital sector covers the core activities of digitalization, ICT goods and services, online platforms, and platform-enabled activities such as the sharing economy.
April 3, 2018
Statement by the Managing Director on the Independent Evaluation Office Report on the IMF and Fragile States
Description: I welcome the report of the Independent Evaluation Office (IEO) on the IMF and Fragile States. The report recognizes that the Fund has made important contributions in restoring macroeconomic stability, building core institutions, and catalyzing donor support across a diverse range of countries in fragile and conflict situations. The IEO’s analysis and findings provide a thorough stock-taking and resonate with staff. Accordingly, I broadly support the IEO’s recommendations to make the Fund’s engagement with countries in fragile and conflict situations more impactful.
March 28, 2018
Rules and Regulations for the Investment Account
Description: The objective of the Investment Account (IA) is to provide a vehicle for the investment of a part of the Fund’s assets so as to generate income that may be used to meet the expenses of conducting the business of the Fund. Achieving this objective would help diversify the sources and increase the level of the Fund’s income, thereby strengthening its finances over time.
March 22, 2018
Macroeconomic Developments and Prospects in Low-Income Developing Countries
Description:
This paper is the fourth in a series that examines macroeconomic developments and prospects in Low Income Developing Countries (LIDCs). LIDCs are Fund member countries where gross national income (GNI) per capita lies below a threshold level and where external financial linkages and socioeconomic indicators have not lifted them into emerging market status. There are 59 countries in the LIDC grouping, accounting for about one-fifth of the world’s population and 4 percent of global output. The paper examines macroeconomic trends across LIDCs in recent years, contrasting key features of the current situation with the period prior to the 2014 decline in commodity prices. Particular attention is given to the evolution of fiscal positions and public debt levels, including detailed analysis of the drivers of debt accumulation and the current severity of debt vulnerabilities. The analysis is grounded in, and draws on, the analysis and databases used to compile the World Economic Outlook: this report drills down into the WEO database to look in detail at the experience of LIDCs.
March 20, 2018
Overarching Strategy on Data and Statistics at the Fund in the Digital Age
Description:
The first data and statistics strategy for the Fund comes at a critical time. A fast-changing data landscape, new data needs for evolving surveillance priorities, and persisting data weaknesses across the membership pose challenges and opportunities for the Fund and its members. The challenges emerging from the digital revolution include an unprecedented amount of new data and measurement questions on growth, productivity, inflation, and welfare. Newly available granular and high-frequency (big) data offer the potential for more timely detection of vulnerabilities. In the wake of the crisis, Fund surveillance requires greater cross-country data comparability; staff and authorities face the complexity of integrating new data sources and closing data gaps, while working to address the weaknesses noted by the IEO Report (Behind the Scenes with Data at the IMF) in 2016.
The overarching strategy is to move toward an ecosystem of data and statistics that enables the Fund and its members to better meet the evolving data needs in a digital world. It integrates Fund-wide work streams on data provision to the Fund for surveillance purposes, international statistical standards, capacity development, and data management under a common institutional objective. It seeks seamless access and sharing of data within the Fund, enabling cloud-based data dissemination to support data provision by member countries (e.g., the “global data commons”), closing data gaps with new sources including Big Data, and improving assessments of data adequacy for surveillance to help better prioritize capacity development. The Fund also will work with policymakers to understand the implications of the digital economy and digital data for the macroeconomic statistics, including new measures of welfare beyond GDP.
March 16, 2018
Program Design in Currency Unions
Description:
Despite a long history of program engagement, the Fund has not developed guidance on program design in members of currency unions. The Fund has engaged with members of the four currency unions—the Central African Economic and Monetary Community, the Eastern Caribbean Currency Union, the European Monetary Union, and the West African Economic and Monetary Union—under Fund-supported programs. In some cases, union-wide institutions supported their members in undertaking adjustment under Fund-supported programs. As such, several programs incorporated—on an ad hoc basis—critical policy actions that union members had delegated. Providing general guidance on program design for members in a currency union context would fill a gap in Fund policy and help ensure consistent, transparent, and evenhanded treatment across Fund-supported programs. This paper considers two options on when and how the Fund should seek policy assurances from union-level institutions in programs of currency union members. Option 1 would involve amending the Conditionality Guidelines, which would allow the use of standard conditionality tools with respect to actions by union-level institutions. Option 2—which staff prefers—proposes formalizing current practices and providing general guidance regarding principles and modalities on policy assurances from union-level institutions in support of members’ adjustment programs. Neither option would infringe upon the independence (or legally-provided autonomy) of union-level institutions, since the institutions would decide what measures or policy actions to take—just as any independent central bank or monetary authority does, for example, in non-CU members.
February 21, 2018
Poverty Reduction and Growth Trust - 2018 Borrowing Agreement with the Banque de France
Description:
The Fund, as Trustee of the Poverty Reduction and Growth Trust (PRGT or Trust), has entered into a new borrowing agreement (the “Agreement”) with the Banque de France (hereafter France), effective on February 1, 2018. This new borrowing agreement with France provides new resources to the Extended Credit Facility Loan Account of the PRGT in the total amount of up to SDR 2 billion.
Pursuant to Section III, paragraph 2 of the Instrument to establish the PRGT, the Managing Director is authorized to enter into borrowing agreements and agree to their terms and conditions with lenders to the Loan Accounts of the Trust. This paper presents the new Agreement with France to the Executive Board for information.
Including this Agreement with France, the Fund has concluded fifteen new PRGT loan agreements providing total resources of SDR 11.4 billion in the context of the 2014 Board endorsed PRGT fundraising with a goal of SDR 11 billion. To accommodate the better-than-expected outcome, and following consultations with PRGT creditors, the IMF Board increased the PRGT’s cumulative borrowing limit on January 8, 2018.
This is the sixth borrowing agreement between France and the Fund as Trustee of the PRGT. The Agreement incorporates the extensions of the commitments and drawdown period for PRGT loans to end-2020 and end-2024, respectively, consistent with the Fund’s framework for concessional lending to low income countries adopted in other PRGT borrowing agreements.
February 14, 2018
Guidance Note on the Bank-Fund Debt Sustainability Framework for Low Income Countries
Description: Low-income countries (LICs) face significant challenges in meeting their Sustainable Development Goals (SDGs) while at the same time ensuring that their external debt remains sustainable. In April 2005, the Executive Boards of the International Monetary Fund (IMF) and the International Development Association (IDA) approved the introduction of the Debt Sustainability Framework (DSF), a tool developed jointly by IMF and World Bank staff to conduct public and external debt sustainability analysis in low-income countries. The DSF has since been serving to help guide the borrowing decisions of LICs, provide guidance for creditors’ lending and grant allocation decisions, and improve World Bank and IMF assessments and policy advice. The latest review of the framework was approved by the Executive Boards in September 2017. This introduced reforms to ensure that the DSF remains appropriate for the rapidly changing financing landscape facing LICs and to further improve insights into debt vulnerabilities. This note provides operational and technical guidance on the implementation of the reformed framework.