Policy Papers
2017
July 28, 2017
The Medium-Term Debt Management Strategy: An Assessment of Recent Capacity Building -- Annexes
July 28, 2017
The Medium-Term Debt Management Strategy: An Assessment of Recent Capacity Building
Description:
This report to the Boards of the International Monetary Fund (IMF) and the
World Bank (WB) is the third in a series regarding the evolution of the
Medium-Term Debt Management Strategy (MTDS) framework and the associated
capacity building efforts. In 2007 the two Boards endorsed the development
of the MTDS and ancillary tools, and mandated a program of technical
assistance to help countries build capacity in this area. This endorsement
and mandate reflect a recognition that sound debt management is critical
both to macroeconomic stability and to the development and functioning of
the financial sector.
The IMF and the WB have collaborated to deliver a large volume of
MTDS-based technical assistance to numerous, diverse countries, with a
focus on middle- and lower-income countries. Donors have recognized the
importance of this work and have been generous in their support. The
assistance has taken many forms, including country visits by staff and
experts, the delivery of regional training events, and the organization of
forums. As documented here, modes of delivery have evolved, with greater
emphasis
on tailoring to country circumstances, ownership, and coordination within
and across agencies in the recipient countries.
The report and accompanying annexes describe how capacity building on MTDS
has been adapted to keep abreast of country needs. An increasing number of
countries have market access (such as through the issuance of Eurobonds or
local currency bonds), and face the potential realization of contingent
claims, which requires that the MTDS framework consider additional risk
factors; more diverse scenarios and
market risk metrics; and a wider range of strategies. In many countries,
effective capacity building in MTDS was complemented by efforts to
strengthen institutions and governance arrangements; debt recording; and
government cash management. Linkages with the formulation of annual
borrowing plans (ABP) and debt sustainability analysis (DSA) have been
strengthened, but more work is needed. Providing a sustained stream of
support, rather than one-off missions, often produced better results.
Country ownership, often reflected in commitments under IMF- or
WB-supported programs, has proven critical to the sustained enhancement of
debt management capacity.
The value and effectiveness of these capacity building efforts are
documented in the report using qualitative and quantitative metrics. The
responses from national authorities to a questionnaire on their experience
with MTDS technical assistance and the evolution of various quantitative
indicators suggest that there were benefits and these were generally
sustained. In particular, the majority of countries that had received
technical assistance indicated that it helped them to introduce a
structured and
coherent approach to designing a debt management strategy (DMS) and raise
awareness of risks among senior officials and broader stakeholders.
Countries also appreciated advice on institutional and governance reforms
and integrating debt management into macroeconomic policy formulation and
implementation. The observations are supported by case studies detailing
how technical assistance was
successfully tailored to country needs. It is shown that many recipient
countries are now better able to integrate debt management into overall
economic policy formulation and adapt their debt management strategies to
changing countries’ circumstances. For some, risk exposure indicators have
improved even as debt levels have increased.
Looking forward, the report suggests that the MTDS framework and modes of
delivery should continue to be updated and refined, while maintaining core
functions. Some countries will need more sophisticated techniques both to
analyze cost-risk trade-offs and to implement their chosen strategy. Others
are still in the process of building a solid foundation for debt
management. In addition to hands-on trainings, greater use of on-line
learning may further enhance effectiveness and efficiency. Building
institutional capacity in debt management is a long-term endeavor, often
times requiring a more “programmatic” approach, and sustained client
ownership. Such an approach would involve diagnosis followed by an
actionable reform plan supported by tailored technical assistance.
The Boards are asked for their views on priorities in a strategy for future
development of capacity building in this area, and how best to ensure that
improvements in debt management are sustained.
July 28, 2017
2017 External Sector Report
Description:
Global current account imbalances were broadly unchanged in 2016, with minor shifts adding to the reconfiguration under way since 2013. The fall in commodity prices, uneven cyclical recoveries in systemic economies, and differences in policy responses contributed to the rotation of imbalances. Current account surpluses of oil-exporting economies, as a group, shifted from large surpluses to small deficits, while deficits in emerging and developing economies narrowed markedly. At the same time, surpluses and deficits in key advanced economies widened. These trends were generally supported by real exchange rate movements.
Overall excess current account imbalances (i.e., deficits or surpluses that deviate from desirable levels) represented about one-third of total global imbalances in 2016, remaining broadly unchanged since 2013, although increasingly concentrated in advanced economies. In particular, excess imbalances narrowed in emerging and developing economies, led by a smaller excess surplus in China and smaller excess deficits in others (Brazil, Indonesia, South Africa, Turkey). This narrowing, however, was accompanied by a widening of excess imbalances in some advanced economies. The persistence of large excess surpluses in several advanced economies (e.g. Germany, Korea, the Netherlands, Singapore, Sweden) remains a distinguishing feature of the constellation of imbalances, an issue that is explored in greater detail in this year’s report.
Persistent global excess imbalances suggest that automatic adjustment mechanisms are weak. While the rotation of excess imbalances toward advanced economies—with deficits increasingly concentrated in the United States and United Kingdom—likely entails lower deficit-financing risks in the near term, the increased concentration of deficits in a few economies carries greater risks of disruptive trade policy actions. Diverging stock positions coupled with continued overreliance on demand from debtor countries could also pose risks to global growth and raise the likelihood of disruptive adjustments down the road.
With nearly-closed output gaps in most systemic economies, addressing external imbalances in a growth-friendly fashion requires a recalibration of the policy mix in deficit and surplus economies alike. Excess deficit countries should move forward with fiscal consolidation, while gradually normalizing monetary policy in tandem with inflation developments. Excess surplus economies with fiscal space should reduce their reliance on easy monetary policy and allow for greater fiscal stimulus. Where monetary policy is constrained from playing a role, as in individual euro area members, fiscal and structural policies to facilitate relative price adjustments should take priority. Meanwhile, structural policies in excess surplus countries should focus on lifting distortions that constrain domestic demand or limit trade competition; while in excess deficit economies, policies should be directed to improving external competitiveness and overall saving. Protectionist and mercantilist policies should be avoided as they are detrimental to global growth.
July 28, 2017
2017 External Sector Report Individual Economy Assessments
Description:
The external sector assessments use a wide range of methods, including the External Balance Assessment (EBA) developed by the IMF’s Research Department to estimate desired current account balances and real exchange rates (see IMF Working Paper WP/13/272 for a complete description of the EBA methodology and Annex I of the 2015 External Sector Report for a discussion of more recent refinements). In all cases, the overall assessment is based on the judgment of IMF staff drawing on the inputs provided by these model estimates and other analysis. Since estimates are subject to uncertainty, overall assessments are presented in ranges. The external sector assessments are based on data and IMF staff projections as of June 15th, 2017.
The external assessments discuss a broad range of external indicators: the current account, the real effective exchange rate, capital and financial accounts flows and measures, FX intervention and reserves and the foreign asset or liability position.[1] The individual economy assessments are discussed with the respective authorities as a part of bilateral surveillance.
July 26, 2017
Adequacy of the Global Financial Safety Net--Proposal for a New Policy Coordination Instrument
Description:
The global financial safety net (GFSN) has become larger and more
decentralized, creating a need for greater coordination. The expanded GFSN
has created multiple sources of official financing for countries in need of
support to address balance of payments shocks. Enhanced coordination among
these layers would facilitate a more efficient use of global resources and
provide better incentives for implementing sound policies.
A new non-financing Policy Coordination Instrument (PCI) would address gaps
in the GFSN and the Fund’s toolkit. The new Policy Coordination Instrument
is designed for countries that are seeking to unlock financing from
multiple sources and/or to demonstrate a commitment to a reform agenda. It
would enable a closer policy dialogue between the Fund and countries, more
regular monitoring of economic developments and policies, as well as Board
endorsement of those policies. It would be available for all member
countries. The key design features draw on Fund financing arrangements and
the Policy Support Instrument (PSI), with some important differences. These
include no qualification criteria, a review-based approach for monitoring
of conditionality, and a more flexible review schedule.
The PCI is part of a broader set of Fund policy proposals to improve
coordination with RFAs, enhance liquidity provision for members, and ensure
the cohesion of the Fund’s toolkit. The IMFC and the G20 called for further
work to strengthen the GFSN and to improve cooperation between the Fund and
regional financing arrangements (RFAs). In response, the Fund has produced
a diagnostic of the GFSN and the Fund’s toolkit and identified important
gaps. Introduction of the PCI, when considered together with the other
proposals, will help to move towards a GFSN with improved coverage, more
reliable support, and better coordination between the various layers.
July 24, 2017
Statement by the Managing Director on the Independent Evaluation Office's Report on the IMF and Social Protection
Description: I welcome the report of the Independent Evaluation Office (IEO) on the IMF and Social Protection. This is an area in which the Fund has broadened its engagement in recent years, responding to the needs of the membership. The conclusion that I draw from the report—that the Fund has made strong progress—is therefore an encouraging one, even as I recognize that there is scope to do better. The IEO’s analysis and findings have much in common with recent work by Fund staff, while providing a broader perspective that is very valuable. Overall, I find the IEO’s recommendations for refining the Fund’s approach to social protection to be well-judged, and the proposals have my support.
July 20, 2017
Use of Supervisory Standards in the Financial Sector Assessment Program—Understandings with Standard Setting Bodies
Description:
This paper informs the Executive Board of the staff-level understandings reached with global Standard Setting Bodies (SSBs) on the use of the three financial sector supervisory standards in FSAPs:
As graded assessments of compliance with supervisory standards are voluntary, FSAPs have adopted a flexible approach to the use of supervisory standards. A standard is either assessed in full, resulting in grades, or used as the basis for a deeper analysis of selected elements of the oversight framework in a focused review, without grades. The
SSBs and Fund staff have reached understandings on a refinement of the existing flexible approach, with sets of “base principles” serving as the starting points for focused reviews.
July 20, 2017
Statement by the Managing Director on the Work Program of the Executive Board - Executive Board Meeting - June 19, 2017
Description: This Work Program (WP) translates the policy priorities and strategic directions laid out in the Spring 2017 Global Policy Agenda (GPA) and the International Monetary and Financial Committee (IMFC) Communiqué into an Executive Board agenda for the next twelve months. The Managing Director’s GPA, welcomed by the IMFC, called on members to continue using supportive policies based on a three-pronged approach to sustain the recovery, to work together within the multilateral framework toward strong and more balanced growth, and to provide economic opportunities for all. It outlined how the Fund would support the membership by promoting efforts to sustain the recovery, lift productivity and increase resilience, and by promoting sustainable policies toward a more inclusive global economy, while facilitating multilateral solutions to global challenges. Where the work extends beyond traditional areas, the WP will focus on macro-relevant issues that are systemically important or relevant for many countries and amenable to change through economic policies.
July 7, 2017
List of IMF Member Countries with Delays in Completion of Article IV Consultations or Mandatory Financial Stability Assessments over 18 Months
Description: In line with a framework introduced in 2012 for addressing excessive delays in the completion of Article IV consultations, this report lists the IMF members for which the Article IV consultation has been delayed by more than 18 months at end-May, 2017. The delay is counted past the stipulated date for the consultation plus any applicable grace period. There are no countries for which the mandatory financial stability assessments are delayed by more than 18 months at end-May, 2017.
July 7, 2017
Extension of the Periods for Consent to and Payment of Quota Increases
Description:
This paper proposes a further six-month extension of the period for members to consent to an increase in their quotas under the Fourteenth General Review of Quotas (“Fourteenth Review”) through December 29, 2017. The current deadline is due to expire on June 30, 2017. However, Board of Governors Resolution No. 66-2 provides that the Executive Board may extend the period for consent as it may determine. An extension under Resolution No. 66-2 will also extend the periods of consent for quota increases under the 2008 Reform of Quota and Voice (Resolution No. 63-2) and the Eleventh General Review of Quotas (Resolution No. 53-2).
This paper also proposes a further six-month extension of the period for payment of quota increases under the Fourteenth Review, and an extension for the payment of the quota increases under the 2008 Reform, through December 29, 2017.