Policy Papers

November 29, 2018

Statement by the Managing Director on the Work Program of the Executive Board

Description: This Work Program (WP) translates the strategic directions and policy priorities laid out in the 
Fall 2018 Global Policy Agenda and the International Monetary and Financial Committee Communiqué into an Executive Board agenda for the next twelve months. Its main policy priorities and deliverables are as follows:

• Advise member countries to rebuild buffers, enhance resilience, and advance structural reforms for the benefit of all to respond to mounting vulnerabilities. The Spring 2019 World Economic Outlook (WEO) will analyze the macroeconomic implications of increased corporate market power. The Global Financial Stability Report (GFSR) will discuss global financial risks in light of tightening financial conditions, while the Fiscal Monitor (FM) will study how improved governance in fiscal frameworks and institutions can reduce corruption vulnerabilities and improve policy outcomes. 
• Promote cooperation to modernize the multilateral trade system and address other challenges that transcend borders. The spillover chapter of the Spring 2019 WEO will examine the determinants of trade imbalances and spillovers from different trade policies. Building on the “Bali Fintech Agenda," staff will provide a stock-take of fintech developments and study the implications for cross-border flows, financial integrity, and global monetary and financial stability in Fintech: The Experience So Far. To support Japan’s G-20 Presidency, staff will prepare a note on Macroeconomic and Fiscal Implications of Aging.
• Adapt the Fund’s policy toolkits to further enhance its surveillance, lending, and capacity development. Scoping notes for the Surveillance Review and the Financial Sector Assessment Program (FSAP) Review will establish priorities. The Review of Conditionality and the Design of Fund Supported Programs will assess the effectiveness of Fund program design and conditionality. Building on an earlier paper, the Review of Facilities for Low-Income Countries-Reform Proposals will offer proposals on adjusting these facilities to better meet evolving membership needs. The Fund will implement a multipronged approach to enhance debt transparency and sustainable financing practices. Staff will also strengthen debt sustainability analysis by reviewing the Debt Sustainability Framework for Market Access Countries and the Fund’s Debt Limits Policy. The Revised IMF Policies and Practices on Capacity Development will reflect on suggestions made in recent discussions. 
• Improve governance of the Fund and modernize its operations. Work on the 15thGeneral Review of Quotas will continue with a view to completing it by the Spring Meetings, and no later than the Annual Meetings, of 2019. The Board will receive a briefing on Modernizing HR Policies and Practices: A Progress Report on Key Initiatives and continue the discussions on the Comprehensive Compensation and Benefits Review. 

November 20, 2018

2018 Review of the Fund's Capacity Development Strategy

Description: Capacity development (CD) is one of the Fund’s three core activities and has grown in importance in recent years. It supports member countries’ efforts to build the institutions and capacity necessary to formulate and implement sound economic policies, thereby complementing the Fund’s surveillance and lending mandates. Member countries, partners, and external commentators give the Fund high marks for the quality of its CD. At the same time, efforts need to continue to strengthen Fund CD to serve members’ current and evolving needs. 
The 2018 CD Strategy Review examines progress under the Fund’s 2013 CD Strategy and proposes a CD strategy for the next five years.  

It notes substantial progress in addressing the 2013 recommendations, which included strengthening the CD governance structure, enhancing the prioritization processes, clarifying the funding model, strengthening monitoring and evaluation, promoting greater integration of TA and training, exploiting new technologies for delivery, and leveraging CD as outreach. However, background work for this review also pointed to the need to strengthen the CD framework further.

The review builds upon the existing CD strategy, focusing on two mutually reinforcing objectives. First, the impact of Fund CD needs to be increased by further strengthening integration with the Fund’s policy advice and lending operations, while continuing to make progress in framing CD through comprehensive strategies tailored to each member’s needs, capacity, and conditions, focusing on implementation and outcomes. Stronger coordination between CD and the Fund’s other core functions will better connect CD with countries’ risks and vulnerabilities and ensure surveillance and lending integrate lessons from CD more effectively. Second, the efficiency of CD needs to be increased by improving CD processes and systems. This will enhance transparency and strengthen the basis for strategic decision making.

Five specific areas of recommendations support the strategy. Likewise, they mitigate institutional risks stemming from the Fund’s CD activities. They include clearer roles and responsibilities for key internal and external stakeholders in the CD process; continued strengthening of prioritization and monitoring; better tailoring and modernization of CD delivery with a focus on implementation of TA recommendations; greater internal consultation and sharing of CD information; and further progress in external coordination, communication, and dissemination of information (Annex I).

November 8, 2018

ASEAN Progress Towards Sustainable Development Goals and The Role of the IMF

Description: Attainment of the Sustainable Development Goals (SDGs) will require that the Association of Southeast Asian Nations (ASEAN) countries continue their considerable past achievements. The Millennium Development Goals—which were to have been met by 2015—helped focus attention on achieving progress towards poverty reduction, better health outcomes, and improvements in education in the ASEAN developing countries. The 17 SDGs—adopted in 2015 and to be met by 2030—cover a wider set of interlinked development objectives, such as inclusion and environmental sustainability, which are important for all countries, including all ASEAN member countries.   

ASEAN countries have made significant progress in improving incomes and economic opportunities, including for women, and reducing poverty since 2000. Reflecting the economic dynamism of the region, strong income growth, structural transformation, and infrastructure improvements continue to support sustainable development in ASEAN. With continued income growth and strong policy efforts, most ASEAN countries are on track to eradicate absolute poverty by 2030, a major milestone. Also, several ASEAN countries already do relatively well in terms of gender equality. As a result, given support from continued income gains, economic welfare in ASEAN countries is expected to continue converging towards advanced Asia levels. 

Ensuring more inclusive and environmentally sustainable growth presents a key challenge for ASEAN. Despite some progress, income inequality remains relatively high in several countries and the shift towards manufacturing strains environmental sustainability. These challenges hamper ASEAN welfare convergence relative to advanced Asia. Policies to close these gaps in sustainable development can lead to significant gains. For the lower-middle-income ASEAN countries, in particular, more determined policy efforts are needed to improve infrastructure, as well as health and education outcomes. Remaining sustainable development challenges call for comprehensive, country-specific SDG strategies formulated in the context of national development plans and close monitoring through the voluntary review process.  

Pursuing sustainable development entails sizeable spending needs. Estimates for Indonesia and Vietnam, the two cases studies considered in this paper, show that reaching the level of best performers in their income group in infrastructure, health, and education by 2030 could entail an additional cost of 5½–6½ percent of GDP per year. While development needs vary across countries, estimates suggest large spending needs for most ASEAN countries. Meeting them will require efforts on multiple fronts, including improvements in spending efficiency, tax capacity, and support from the private sector. For developing ASEAN countries, concessional financing from development partners will be required. 

The IMF continues to engage ASEAN countries in key areas as they pursue their SDGs. As called for in their mandates, ASEAN and the IMF both strive for economic growth and sustainable development through economic integration and collaboration among their member countries. The IMF has increased its engagement with ASEAN countries to support their policy efforts through its policy diagnostics, advice, and capacity development. ASEAN countries have also received support through IMF initiatives in strengthening revenue mobilization, building state capacity for infrastructure provision, pursuing economic and financial inclusion, addressing the challenges of climate change, strengthening economic institutions for good governance, and building statistical capacity. While fundamental reforms to improve sustainable development take time to bear fruit, there is evidence that efforts have started to pay off. 

October 26, 2018

Ninth Periodic Monitoring Report on the Status of Implementation Plans in Response to Board-Endorsed IEO Recommendations

Description:

The Ninth Periodic Monitoring Report (PMR) on the Status of Management Implementation Plans (MIPs) in Response to Board-Endorsed Independent Evaluation Office (IEO) Recommendations assesses the progress made over the last year on actions contained in two “new” MIPs arising from recent IEO evaluations, and another seven for which individual management actions were classified as “open” in the Eighth PMR. Overall, 42 of the 96 actions included in the Ninth PMR remain open, representing roughly the same proportion as the previous PMR. A 25 percent net increase in open management actions over the past year is accounted for by 24 new actions from two MIPs, and 16 actions that have been implemented over the period. 

There is positive traction on the last four MIPs, but older actions appear challenging to implement. Better progress has been made with the implementation of the actions contained in recent MIPs. Fourteen of the actions implemented since the Eighth PMR relate to MIPs approved after October 2015, while only two actions (out of 24) from earlier MIPs were implemented.

Improvements in the follow-up process approved by the Board in October 2015 have contributed to speedier implementation of recent actions, but some challenges remain. There are lingering challenges with defining measures of success for numerous actions, but accountabilities are now clearer and many actions are at advanced stages at the time of the Board’s discussion of the MIPs. This PMR introduces indicators to support the process for resolving challenges with long-standing actions. 

Despite the slower progress with the older actions, significant advances have been made over the past year in several key areas. These include: protocols for engaging the IEO; risk management and analysis; the mainstreaming of macrofinancial surveillance; an overarching strategy on data and statistics; guidance on cooperation with other organizations, including Regional Financing Arrangements (RFAs); improvements in External Stability Assessments; and ongoing analytical work on surveillance and program, including macrostructural issues, emerging topics, and debt sustainability analysis. On the other hand, progress has been slower on macro forecasting, outward spillovers, and cross-country knowledge sharing.

October 19, 2018

Fund's Income Position for FY 2018 Actual Outcome

Description: This paper reports the Fund’s income position for FY 2018 following the closing of the Fund’s accounts for the financial year and completion of the external audit. Total FY 2018 net income, including income from surcharges, amounted to SDR 0.78 billion or SDR 94 million higher than estimated in April, reflecting mainly a larger than anticipated gain reported under IAS 19 (the accounting standard for employee benefits).

GRA net income for FY 2018 was about SDR 0.76 billion and has been placed to the Fund’s reserves. In accordance with decisions taken in April 2018, a net transfer of currencies amounting to SDR 0.67 billion was made in early August 2018 from the GRA to the Investment Account. The placement of the net income to the Fund’s reserves has further strengthened the Fund’s precautionary balances, which reached SDR 17.5 billion at the end of FY 2018.

October 13, 2018

Progress Report to the IMFC on the Activities of the Independent Evaluation Office of the IMF

Description: Over the past six months, a key theme has been ensuring strong follow-up to IEO evaluations, a priority stressed by the recently competed External Evaluation of the IEO. Of particular note, the Managing Director has issued a statement highlighting actions planned to strengthen the IMF’s engagement with fragile states following our recent evaluation, and this statement is being presented to the IMFC for endorsement. In addition, the IEO has completed two updates of past evaluations, advanced work on two ongoing evaluations (on IMF financial surveillance and on IMF advice related to unconventional monetary policies), and is now considering its future work program in light of the External Evaluation.

October 11, 2018

The Bali Fintech Agenda

Description: Rapid advances in financial technology are transforming the economic and financial landscape, offering wide-ranging opportunities while raising potential risks. Fintech can support potential growth and poverty reduction by strengthening financial development, inclusion, and efficiency—but it may pose risks to consumers and investors and, more broadly, to financial stability and integrity.

National authorities are keen to foster fintech’s potential benefits and to mitigate its possible risks. Many international and regional groupings are now examining various aspects of fintech, in line with their respective mandates. There have been calls for greater international cooperation and guidance about how to address emerging issues, with some also cautioning against premature policy responses.

In response to these calls from member countries, the IMF and the World Bank staff have developed the Bali Fintech Agenda, summarized in Annex I of this paper. The Agenda brings together and advances key issues for policymakers and the international community to consider as individual countries formulate their policy approaches. It distills these considerations into 12 elements arising from the experiences of member countries.

The Agenda offers a framework for the consideration of high-level issues by individual member countries, including in their own domestic policy discussions. It does not represent the work program of the IMF or the World Bank, nor does it aim to provide specific guidance or policy advice. The Agenda will help guide the focus of IMF and World Bank staff in their work on fintech issues within their expertise and mandate, inform their dialogue with national authorities, and help shape their contributions to the work of the standard-setting bodies and other relevant international institutions on fintech issues. Implications for the work programs of the IMF and World Bank will be developed and presented to their respective Executive Boards for guidance as the nature and scope of the membership’s needs––in response to the Bali Fintech Agenda—become clearer.

October 10, 2018

The Managing Director's Global Policy Agenda: Rising Risks: A Call for Policy Cooperation

Description: Global growth remains strong. The recovery has created jobs and increased incomes. But growth momentum is moderating. Previously identified risks have partly materialized or have become more pronounced. A rapid reversal in financial market conditions, ten years after the global financial crisis, could again expose debt vulnerabilities at a time when many countries have more limited policy space. The window of opportunity to guard against risks and raise medium-term growth prospects is narrowing. Now is the time for policymakers to act to rebuild policy space, strengthen resilience, and implement structural reforms for the benefit of all. Waning support for multilateralism is fueling policy uncertainty. However, improved global cooperation is precisely what is needed to boost inclusive growth by modernizing the trade system, reducing excess global imbalances, improving debt dynamics, and leveraging technology. We will continue to review our policies and strategies to enhance Fund advice and support multilateralism. This includes surveillance, program conditionality, capacity development, debt limits, and anti-money laundering and the combatting of terrorism financing.

October 9, 2018

Provisional Agenda for the Thirty-Eighth Meeting of the International Monetary and Financial Committee

October 4, 2018

Implementation Plan in Response to the Board-Endorsed Recommendations for the IEO Evaluation Report—"The IMF and Fragile States"

Description: This management implementation plan (MIP) proposes actions to advance the Board-endorsed recommendations of the IEO evaluation “The IMF and Fragile States.” The actions outlined below would have resource implications. While some can be covered by reallocating resources or are already in the Work Program, others may require temporary funding; a review of staffing allocations to countries in fragile and conflict situations (FCS) might call for new permanent resources. The actions are broad in scope and self-reinforcing in effect if adopted as a package. They include:
- Message of high-level commitment: Reflecting the actions of this MIP, a Management statement underscoring a strengthened institutional commitment to support FCS accompanies the MIP for Executive Board and IMFC endorsement.
- An effective institutional mechanism: A high-level interdepartmental FCS Committee that reports to and seeks guidance in a formal meeting with management twice a year, will be established. The Committee will be tasked to analyze internal and external coordination issues in FCS and propose new ways tostrengthen engagement. An interdepartmental Technical Taskforce will support the Committee and report on progress in implementing this MIP, including through a Board paper on Review of FCS Engagement at end-2020.
- Country engagement strategies: FCS teams will develop country engagement strategies that, drawing on relevant external expertise, will explicitly allow for thesocial and political context and the factors underpinning fragility; and lay the basis for full integration of capacity development (CD) with surveillance and lending.
- Providing more sustained financial support: Staff is reviewing the lending toolkit for low-income countries to provide more tailored and flexible support, including for FCS, while ensuring uniformity of treatment. Staff will report on efforts to support FCS with protracted arrears to the Fund in the upcoming reviews of overdue financial obligations.
- Practical steps to increase the impact of its CD support: Measures already in train will be complemented by the forthcoming Capacity Development (CD) Strategy Review’s assessment of initiatives to better integrate CD and Surveillance, including in FCS. Staff will also review the experience with provision of statistical and financial CD in FCS. And consideration will be given to establishing a FCS multi-donor trust fund or another suitable financing vehicle to address unmet needs for long-term experts.
- Human Resources (HR) issues: The forthcoming phase of the HR Strategy will look into strategic workforce and career planning, including recruitment, and will consider actions to ensure that the Fund has appropriate staff expertise and experience to work effectively in fragile states. This will include the introduction of a “career” playbook that provides incentives for staff to be more responsive to the needs of the Fund in FCS. Adequacy of staffing allocations to FCS missions will be reviewed to ensure evenhanded treatment of the membership. Staff training on FCS will also be stepped up.