Policy Papers
2019
March 21, 2019
Fourth Progress Report on Inclusion of Enhanced Contractual Provisions in International Sovereign Bond Contract
Description: This paper reports on progress in inclusion of enhanced collective action clauses and modified pari passu clauses as of end-October 2018. The report finds that enhanced CACs have now become the market standard, with only a few issuers standing out from the market trend. Around 88 percent of international sovereign bonds (in aggregate principal amount) issued since October 2014 in the main jurisdictions of New York and England include such clauses. The modified pari passu clause continues to be incorporated as a package with the enhanced CACs, with few exceptions. In line with findings in previous reports, the inclusion of enhanced CACs does not seem to have an observable pricing effect, according to either primary or secondary market data. The outstanding stock of international sovereign bonds without enhanced CACs remains high, with about 39 percent of the outstanding stock including enhanced CACs.
March 10, 2019
Corporate Taxation in the Global Economy
Description: The policy paper Corporate Taxation in the Global Economy stresses the need to maintain and build on the progress in international cooperation on tax matters that has been achieved in recent years, and in some respects now appears under stress. With special attention to the circumstances of developing countries, the paper identifies and discusses various options currently under discussion for the international tax system to ensure that countries, and in particular low-income countries, can continue to collect corporate tax revenues from multinational activities.
February 25, 2019
Key Trends in Implementing the Fund's Transparency Policy
Description: At the time of the 2005 Review of the Fund’s Transparency Policy, it was agreed that information on key trends in implementation of the transparency policy would be circulated to the Executive Board regularly, along with lists indicating the publication status of reports. The tables in this report contain information on documents considered by the Board in 2017, and update the previous annual report on Key Trends.
February 4, 2019
Review of the Fund’s Strategy on Anti-Money Laundering and Combating the Financing of Terrorism
Description:
Safeguarding financial integrity is a priority for the international community, including the Fund. Money laundering (ML), related predicate crimes, terrorist financing (TF), and the financing of the proliferation of weapons of mass destruction (PF) pose serious threats to the integrity and stability of some countries' financial sector or to external stability and can also threaten the international financial system. It is increasingly recognized that effective anti-money laundering and combating the financing of terrorism (AML/CFT) frameworks, and financial integrity more broadly, are key to financial stability, and that efforts to this effect should be pursued. Strong AML/CFT policies and measures are therefore crucial to mitigate the attendant threats.
January 29, 2019
Fiscal Transparency Initiative: Integration of Natural Resource Management Issues
Description:
This paper integrates into the IMF Fiscal Transparency Code (FTC) a new fourth pillar (Pillar IV) on natural resource revenue management.
The newly completed FTC integrates transparency principles for natural resource revenue management in a unified four-pillar framework. Pillar IV addresses issues specific to resource-rich countries across the entire resource revenue management chain, from the ownership and allocation of resource rights, to resource revenue mobilization, its budgeting and utilization. This structure complements Pillars I-III, which were published in 2014, focusing more generally on fiscal reporting, fiscal forecasting and budgeting, and fiscal risk analysis and management.
Pillar IV aims to reflect both established transparency practices in the extractive industries, as well as emerging norms such as the publication of resource payments and contracts, and the disclosure of beneficial owners of resource rights. It also reflects the lessons learned from pilot fiscal transparency evaluations in Peru, Tanzania, United Kingdom, Mexico, and Trinidad and Tobago, and extensive stakeholder feedback on earlier drafts of Pillar IV released for public consultation in 2015 and 2016.
Going forward, the four-pillar FTC will underpin Fiscal Transparency Evaluations for resource-rich countries. Pillar IV will also inform a second volume of the Fiscal Transparency Handbook (forming an update to the 2007 Guide on Resource Revenue Transparency).
January 29, 2019
Statement by the Managing Director on the Independent Evaluation Office Report on the IMF Financial Surveillance
Description: The IEO report provides a welcome opportunity to reflect on the IMF’s initiatives to expand and deepen its financial surveillance work in response to the Global Financial Crisis, which were made explicit in the 2012 Integrated Surveillance Decision and the 2012 Financial Surveillance Strategy. Reflecting its macroeconomic and financial expertise, global membership and governance, the IMF is well placed to make members aware of global financial stability risks while advising them on policies tailored to their circumstances.
January 17, 2019
List of IMF Member Countries with Delays in Completion of Article IV Consultations or 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 December 15, 2018, since the expected deadline for conclusion.
January 10, 2019
Extension of the Periods for Consent to and Payment of Quota Increases
Description:
On December 27, 2018, the IMF’s Executive Board approved 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 28, 2019. The deadline was due to expire on December 28, 2018. 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 also extends 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).
The Executive Board also approved 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 28, 2019.
2018
December 6, 2018
Gulf Cooperation Council: Trade and Foreign Investment—Keys to Diversification and Growth in the GCC
Description:
Diversification of the GCC economies, supported by greater openness to trade and higher foreign investment, can have a large impact on growth. Such measures can support higher, sustained, and more inclusive growth by improving the allocation of resources across sectors and producers, creating jobs, triggering technology spillovers, promoting knowledge, creating a more competitive business environment, and enhancing productivity.
The GCC countries are open to trade, but much less so to foreign direct investment (FDI). GCC foreign trade has been expanding robustly, but FDI inflows have stalled in recent years despite policy efforts taken to reduce administrative barriers and provide incentives to attract FDI. Tariffs are relatively low; however, a number of non-tariff barriers to trade persist and there are substantial restrictions on foreign ownership of businesses and real estate.
The growth impact of closing export and FDI gaps could be significant. In most countries, the biggest boost to growth would come from closing the FDI gap—up to one percentage point increase in real non-oil per capita GDP growth. Closing export gaps could provide an additional growth dividend in the range of 0.2-0.5 percentage point.
Boosting non-oil exports and attracting more FDI requires a supportive policy environment. Policy priorities are to upgrade human capital, increase productivity and competitiveness, improve the business climate, and reduce remaining barriers to foreign trade and investment. Specifically, continued reforms in the following areas will be important:
• Human capital development: continue with investments made to raise educational quality to provide knowledge and skills upgrade.
• Labor market reforms: aim to improve productivity and boost competitiveness of the non-oil economy.
• Legal frameworks: ensure predictability and protection; efforts should include enhancing minority investor protection and dispute resolution; implementing anti-bribery and integrity measures.
• Business climate reforms: focus on further liberalizing foreign ownership regulations and strengthening corporate governance; and on further reducing non-tariff trade barriers by streamlining and automating border procedures and streamlining administrative processes for issuing permits.
December 6, 2018
Gulf Cooperation Council: How Developed and Inclusive are Financial Systems in the GCC?
Description:
Financial systems in the GCC have developed significantly over the last couple of decades, but there appears to be further room for progress. The development of bank and equity markets has been supported by a combination of buoyant economic activity, a booming Islamic finance sector, and financial sector reforms. As a result, financial systems have deepened and, overall, the level of financial development compares well with emerging markets. However, it still lags advanced economies and, other than for Saudi Arabia, appears to be lower than would be expected given economic fundamentals, such as income levels.
Financial development in the GCC has relied to a large extent on banks, while debt markets and nonbank financial institutions are less developed and access to equity markets is narrow. The non-bank financial institutions—pension funds, asset management and finance companies, and insurance—remain small. Domestic debt markets are underdeveloped. While equity markets appear to be well developed by market size, they are dominated by a few large (and often public-sector) companies.
GCC countries have made progress on financial inclusion, but gaps remain in some important areas. Access to finance for SMEs, women, and youth, in particular, appears relatively low. This may partly reflect social norms, low levels of participation of women in the labor market and private sector activity, and the high level of youth unemployment.
Further financial development and inclusion is likely to be associated with stronger economic growth in the GCC countries. While there is uncertainty surrounding the empirical estimates in the paper, further progress with financial development and/or inclusion is likely to go hand-in-hand with stronger growth. The growth benefits, however, are likely to vary across countries depending on the current level of financial development and inclusion.
To realize these growth benefits, reforms to strengthen access to finance for SMEs, women, and youth are needed. Addressing institutional weaknesses and promoting financial sector competition would help boost access to finance for SMEs. Reforms to enhance financial literacy and improve SME governance structures and insolvency frameworks are critical. Other reforms encouraging female and youth employment and the use of emerging technologies in finance also appear promising.
Additional reforms to foster financial development should focus on developing debt markets and making stock markets more accessible to a larger pool of companies and investors. To grow domestic debt markets, the authorities should develop a government yield curve, seek to increase market liquidity through secondary market trading, and ensure requirements for private issuance are not onerous. Stock market reforms should focus on enhancing corporate governance and investor protection, removing restrictions on foreign ownership, and encouraging financial market competition. The latter would also help the development of non-bank financial institutions.