Policy Papers

December 27, 2016

Second Progress Report On Inclusion of Enhanced Contractual Provisions in International Sovereign Bond Contracts

Description:

The IMF Executive Board endorsed in October 2014 the inclusion of key features of enhanced pari passu provisions and collective action clauses (CACs) in new international sovereign bonds. Specifically, the Executive Board endorsed the use of (i) a modified pari passu provision that explicitly excludes the obligation to effect ratable payments, and (ii) an enhanced CAC with a menu of voting procedures, including a “single-limb” aggregated voting procedure that enables bonds to be restructured on the basis of a single vote across all affected instruments, a two-limb aggregated voting procedure, and a series-by-series voting procedure. Directors supported an active role for the IMF in promoting the inclusion of these clauses in international sovereign bonds. The IMFC and the G20 further called on the IMF to promote the use of such clauses and report on their inclusion.

In September 2015, the IMF published a progress report on the inclusion of the enhanced clauses in international sovereign bonds as of end-July 2015. The report found that since the Executive Board’s endorsement, substantial progress had been made in incorporating the enhanced clauses: 41 issuances, representing 60 percent of the nominal principal amount of total issuances, had included the enhanced clauses as of July 31, 2015. The 2015 paper also provided initial observations on the patterns of incorporation, the market impact of inclusion of the enhanced clauses, and an update on the outstanding stock of international sovereign bonds.

This paper provides a further update on the inclusion of the enhanced clauses and on the outstanding stock of international sovereign bonds as of October 31, 2016. Section II reports on the inclusion of these enhanced provisions, finding that uptake of the clauses has continued, with only a small minority of new issuances not including them. Section III provides an update on the outstanding stock, which reveals that while an increasing percentage of the outstanding stock includes enhanced clauses, a significant percentage of the stock still does not. Section IV reports on the use of different bond structures, and Section V describes the staff’s ongoing outreach efforts. Section VI briefly reports on other recent developments relevant to the contractual approach to sovereign debt restructuring and Section VII concludes with next steps.

December 22, 2016

List of IMF Member Countries with Delays in Completion of Article IV Consultations Mandatory Financial Stability Assessments Over 18 Months

Description: In accordance with Executive Board Decision No. 15106-(12/21), the Fund will publish on its external website a list of member countries whose Article IV consultations or mandatory financial stability assessments have been delayed by more than 18 months, as of the date of publication, since the expected deadline for conclusion.

The latest version of this list, as shown in Appendix I, will be published on the Fund’s external website on or after December 28, 2016.

December 21, 2016

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 June 30, 2017. The current deadline is due to expire on December 30, 2016. 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 June 30, 2017.

November 30, 2016

Poverty Reduction and Growth Trust - 2016 Borrowing Agreements with Danmarks Nationalbank, the Norwegian Ministry of Finance Representing the Kingdom of Norway, and the Sveriges Riksbank

Description: The Fund, as Trustee of the Poverty Reduction and Growth Trust (PRGT or Trust),entered into an amendment of the 2010 borrowing agreement with Danmarks Nationalbank, and new borrowing agreements with the Norwegian Ministry of Finance representing the Kingdom of Norway and the Sveriges Riksbank (hereafter Denmark, Norway, and Sweden, respectively), by which the counterparties will provide new resources to the Loan Accounts of the PRGT in the total amount of SDR 1.1 billion (see attachments). The augmentation under the amendment and the two new agreements are the first three loan contributions to be concluded in the context of the current Board-endorsed effort to raise SDR 11 billion in new PRGT loan resources. These amendment and new agreements became effective on November 17, 2016.

November 23, 2016

Macroeconomic Developments and Prospects in Low-Income Developing Countries - 2016

Description: This paper is the third in a series assessing macroeconomic developments and prospects in low-income developing countries (LIDCs). The first of these papers (IMF, 2014a) examined trends during 2000–2014, a period of sustained strong growth across most LIDCs. The second paper (IMF, 2015a) focused on the impact of the drop in global commodity prices since mid-2014 on LIDCs—a story with losers (countries dependent on commodity exports, notably fuel) and winners (countries with a more diverse export base, where growth remained robust).

The overarching theme in this paper’s assessment of the macroeconomic conjuncture among LIDCs is that of incomplete adjustment to the new world of “lower for long” commodity prices, with many commodity exporters still far from a sustainable macroeconomic trajectory (Chapter 1). The analysis of risks and vulnerabilities focuses on financial sector stresses and medium-term fiscal risks, pointing to the actions, including capacity building, needed to manage and contain these challenges over time (Chapter 2). With 2016 the first year of the march towards the 2030 development goals, the paper also looks at how infrastructure investment can be accelerated in LIDCs, given that weaknesses in public infrastructure (such as energy, transportation systems) in LIDCs are widely seen as a key constraint on medium-term growth potential (Chapter 3).

With the sharp adjustment in commodity prices now into its third year, some of the key messages of the paper are familiar: a) many commodity exporters, notably fuel producers, remain under significant economic stress, with sluggish growth, large fiscal imbalances, and weakened foreign reserve positions; b) countries with a more diversified export base are generally doing well, although several have been hit by declines in remittances, conflict/natural disasters, and the contractionary impact of macroeconomic stabilization programs; c) widening fiscal imbalances, in both commodity and diversified exporters, have resulted in rising debt levels, with severe financing stress emerging in some cases; and d) financial sector stresses have emerged in many LIDCs, with expectations that these strains will increase in many commodity exporters over the next 12–18 months. Key messages on financial sector oversight, on medium-term fiscal risks, and on tackling infrastructure gaps are flagged below.

Read Executive Summary in: Arabic; Chinese; French; Spanish

November 7, 2016

Capital Flows - Review of Experience with the Institutional View

Description: Capital flows are an important aspect of the international monetary system. They provide significant benefits, both direct and indirect. At the same time, they also carry risks, and a key challenge for countries is how to harness the benefits while managing the risks. The institutional view on the liberalization and management of capital flows provides the Fund with a basis for consistent advice on policies related to capital flows. This paper reviews countries’ experiences with handling capital flows in the period since the adoption of the IMF’s institutional view in 2012. Based on the experience, it identifies a few areas in which the view would benefit from further clarification or elaboration.

November 7, 2016

Statement by the Managing Director on the Work Program of the Executive Board - Executive Board Meeting - November 16, 2016

Description: This Work Program (WP) translates the policy priorities and strategic directions laid out in the Fall 2016 Global Policy Agenda (GPA) and the International Monetary and Financial Committee (IMFC) Communiqué into an Executive Board agenda for the next six-twelve months. The Managing Director’s GPA called on members to use a balanced mix of all policy tools to revive demand and raise productivity, and ensure that gains from technology and globalization are shared more broadly. The GPA also warned against retreating from multilateralism at a time when cooperation and coordination are critical. It outlined how the Fund would support the membership by helping policymakers identify policy space and enhance resilience; assisting in understanding and tackling the underlying causes of low productivity growth; supporting members to expand economic opportunities—including by ensuring adequate and effective safety nets; and advocating for multilateralism that works for all. Where the work extends beyond traditional areas, the WP will focus on issues with a macro-economic impact that are systemically important or relevant for many and amenable to change through economic policies.

November 7, 2016

Small States' Resilience to Natural Disasters and Climate Change - Role for the IMF

Description: Small developing states are disproportionately vulnerable to natural disasters. On average, the annual cost of disasters for small states is nearly 2 percent of GDP—more than four times that for larger countries. This reflects a higher frequency of disasters, adjusted for land area, as well as greater vulnerability to severe disasters. About 9 percent of disasters in small states involve damage of more than 30 percent of GDP, compared to less than 1 percent for larger states. Greater exposure to disasters has important macroeconomic effects on small states, resulting in lower investment, lower GDP per capita, higher poverty, and a more volatile revenue base. Read more

November 2, 2016

Fifteenth General Review of Quotas - Report of the Executive Board to the Board of Governors

Description: In the report, the Executive Board proposes that the Board of Governors adopt a Resolution: (i) noting the Report of the Executive Board and expressing regret that the timetable for completing the Fifteenth Review established under Resolution No. 71-2 is no longer within reach; (ii) calling on the Executive Board to work on the Fifteenth Review expeditiously in line with existing Executive Board understandings and the guidance provided by the IMFC on October 8, 2016 with the aim of completing the Fifteenth Review by the 2019 Spring Meetings and no later than the 2019 Annual Meetings; (iii) requesting that the Executive Board report on progress on the Fifteenth Review to the Board of Governors semiannually, with a first report by the 2017 Annual Meetings; and (iv) urging the remaining members who have not yet consented to their quota increases under the Fourteenth General Review of Quotas to do so without further delay and urging the members who have consented to their quota increases to make their quota payments in a timely manner.

October 27, 2016

Implementation Plan in Response to the Board-Endorsed Recommendations for the IEO Report “Behind the Scenes with Data at the IMF: An IEO Evaluation”

Description: This paper sets out Management’s response to the Independent Evaluation Office’s (IEO) report entitled Behind the Scenes with Data at the IMF: An IEO Evaluation. 

The implementation plan proposes specific actions to address the recommendations of the IEO that were endorsed by the Board in its March 17, 2016 discussion of the IEO’s report, namely: (i) develop a long-term strategy for data and statistics at the Fund; 
(ii) define and prioritize the Fund’s data needs and support data provision by member countries accordingly; (iii) reconsider the role and mandate of the Statistics Department; (iv) reexamine the staff’s structure of incentives in the area of data management; 
(v) make clear the limits of IMF responsibility regarding the quality of disseminated data, and clarify the distinction between “IMF data” and “official data.”

The implementation of some of these proposed actions is already underway. The paper also explains how implementation will be monitored.