Policy Papers

May 12, 2017

FY2018–FY2020 Medium-Term Budget

Description: The Fund has been operating under a flat real resource envelope for the past six years. With continued efforts to maximize the use of available resources, spending in FY 17 is projected to reach 99 percent of the net administrative budget, and a low vacancy rate has helped stabilize overtime at 11 percent. Internal savings and reallocations have allowed the Fund to dedicate more resources to country work, including capacity development, without requiring an increase in the approved budget—apart from $6 million provided in FY 17 to cover rising security costs.  

An unchanged real net administrative budget in FY 18, despite deeper Fund engagement in a number of areas, as well as increased costs for corporate modernization. Accordingly, the budget proposal incorporates significant savings from reallocations and efficiency gains to fund new demands, as well as a further increase in the upfront allocation of carry-forward funds by about $10 million. The broad themes of the proposal are: (i) more intensive country work with a shift from surveillance to programs, but net savings in field offices; (ii) significant policy and analytical work on the financial sector and the role of the Fund (global safety net, facilities, and quotas), albeit less than in FY 17, with more work on structural issues and new challenges; (iii) funding for transforming IT and HR services, offset by central savings; and (iv) enhanced risk mitigation and knowledge management (KM), with the establishment of a KM unit to support cross-country analysis and knowledge transfer.
  
At this stage, a flat resource envelope is assumed also for the medium term, contingent on continued reprioritization and a broadly unchanged global economic environment. Upward pressure on resources will arise from growing capacity development activities and certain revenue losses. Savings are expected from the TransformIT initiative and internal efficiency gains. But for the budget to remain flat, the Fund will need to continuously reprioritize and adjust its activities to make room for new demands. Even then, a more challenging global environment, with a further ramping up of Fund lending, or significant demands for deeper engagement in other areas, would put significant strains on resources over the medium term. 

The proposed capital budget envelope for FY 18–20 remains broadly unchanged from current levels. Some frontloading, however, is planned for the first two years, due to the cyclical nature of these investments and to accommodate strategic IT projects.

May 9, 2017

Poverty Reduction and Growth Trust - 2017 Borrowing Agreements with the Bank of Spain, the Government of Japan and the People's Bank of China

Description:

The Fund, as Trustee of the Poverty Reduction and Growth Trust (PRGT or Trust), has entered into a new borrowing agreement with the Bank of Spain (Spain), amendments to the 2010 NPA with the Government of Japan (Japan), and a new note purchase agreement (NPA) with the People’s Bank of China (China). The new borrowing agreement with Spain, the amendments to the NPA with Japan, and the new NPA with China provide new resources of SDR 450 million, SDR 1.8 billion and SDR 800 million, respectively, to the General Loan Account of the PRGT for a total amount of SDR 3.05 billion in new PRGT lending resources.

The new borrowing agreement, the augmentation under the amended NPA and the new NPA are among the first ten loan contributions concluded in the context of the current Board endorsed effort to raise SDR 11 billion in new PRGT loan resources.  These became effective on February 22, 2017, for Spain; April 20, 2017, for Japan; and April 21, 2017, for China.

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 to the Executive Board for information the new borrowing agreement with Spain, the amendments to augment the existing agreement with Japan, and the new NPA with China.

The new borrowing agreement with Spain and NPA with China incorporate the following recent changes to the Fund’s framework for concessional lending to low income countries, which have also been adopted, as applicable, in prior amendments to the agreement with Japan: (i) the extensions of the commitments and drawdown period for PRGT loans to end-2020 and end-2024, respectively; (ii) the incorporation of the Chinese Renminbi (RMB) interest rate instrument of six month maturity for borrowing agreements in currencies; and (iii) the provision that, if the derived six-month SDR interest rate formula results in a negative rate, the applicable interest rate shall be zero percent.   

With respect to the amendment of the NPA with Japan, in addition to increasing the principal amount of notes that can be issued under the NPA, Japan’s agreement was also modified to: (i) provide more flexibility in the media of payment for purchases under the NPA; (ii) set up a maximum amount for monthly purchases under the NPA; and (iii) to establish a preferred media for payments of interest and principal amount of the notes issued under the NPA. Except for these changes, all other elements of the NPA with Japan remain unchanged.

April 27, 2017

New Common Evaluation Framework for IMF Capacity Development

Description:

This document outlines a new common evaluation framework for the Fund’s capacity development (CD) activities. The new common evaluation framework is intended to streamline current practices and increase comparability and use of results by adopting for all CD evaluations a common four-step process that includes use of the OECD Development Assistance Committee (DAC) evaluation criteria. Around this common approach, there is flexibility to adapt evaluations to reflect the wide range of CD activities. Key elements of the framework are grouped around the objectives of: producing shorter, more focused, and more comparable evaluations; improving the information supporting evaluations;spending the same level of resources on evaluations while allocating these scarce resources more efficiently; and using the information from evaluations to alter practices or shift the targeting of CD resources.

April 21, 2017

Recent Trends in Correspondent Banking Relationships: Further Considerations

Description: Correspondent banking relationships (CBRs), which facilitate global trade and economic activity, have been under pressure in several countries. So far, cross-border payments have remained stable and economic activity has been largely unaffected, despite a recent slight decrease in the number of CBRs. However, in a limited number of countries, financial fragilities have been accentuated as their cross-border flows are concentrated through fewer CBRs or maintained through alternative arrangements. These fragilities could undermine affected countries’ long-run growth and financial inclusion prospects by increasing costs of financial services and negatively affecting bank ratings.

April 20, 2017

The Managing Director’s Global Policy Agenda: A More Inclusive and Resilient Global Economy April 2017

Description: The global economy is gaining momentum, but further progress hinges on policies to support the recovery, lift productivity growth, and enhance resilience. Against the background of rapid technological progress, a cooperative multilateral framework for trade and financial integration has served countries well, producing large economic benefits. However, some groups have not been able to share in these benefits, a trend exposed by a too-slow post-crisis recovery, which limited the room for all segments of society to experience income gains. Working within the multilateral framework, countries should strive for strong and more balanced growth and to provide economic opportunities for all. To this end, they should anticipate the effects of technological progress and economic integration, equip their populations with tools to reap the benefits, and put in place domestic policies to share them more broadly. The Fund will assist members through carefully tailored policy advice, lending to smooth adjustment, and capacity development.

April 19, 2017

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

April 17, 2017

Update on the Financing of the Fund’s Concessional Assistance and Debt Relief to Low-Income Countries

Description: PRGT-related policies following the 2015 enhancement of the financial safety net for LICs, while options to better assist countries confronting sudden balance of payments needs due to large natural disasters are under consideration. 

Demand for PRGT resources has increased. Demand for concessional resources has exceeded historical averages in recent years, mainly in response to sustained low commodity prices and deteriorated global financial market conditions. Demand is expected to reach new highs in 2017 and longer-term estimates have been raised somewhat.

April 14, 2017

Progress Report to the International Monetary and Financial Committee on the Activities of the Independent Evaluation Office of the IMF

Description: This report describes recent follow-up on past Independent Evaluation Office (IEO) evaluations, summarizes the update of the 2006 evaluation of multilateral surveillance, and outlines the ongoing evaluations. It raises the concern that progress in implementing Board-endorsed IEO recommendations has been quite mixed, suggesting the need for further consideration to reinforcing the follow-up process. 

April 10, 2017

Making Trade an Engine of Growth for All: The Case for Trade and for Policies to Facilitate Adjustment

Description: The role of trade in the global economy is at a critical juncture. Increased trade integration helped to drive economic growth in advanced and developing economies in the latter part of the 20th century. Since the early 2000’s, however, a slowdown in the pace of trade reform, a post-crisis uptick in protectionism, and risk of further reversals have been a drag on trade, productivity, and income growth. At the same time, trade is leaving too many individuals and communities behind, notably also in advanced economies. To be sure, job losses in certain sectors or regions in advanced economies have resulted to a large extent from technological changes rather than from trade. But adjustment to trade can bring a human and economic downside that is frequently concentrated, sometimes harsh, and has too often become prolonged. It need not be that way. With the right policies, countries can benefit from the great opportunities that trade brings and lift up those who have been left behind. Those polices ease adjustment to trade, as well as strengthen overall economic flexibility and performance.

Notes: Prepared by Staff of the IMF, the World Bank Group, and the World Trade Organization

April 6, 2017

Update on the Standard Template to Collect Data on Government Revenues from Natural Resources

Description: The paper presents an update on the status of the standard template to collect data on government revenues from natural resources, originally presented to the Executive Board in January 2014. The paper discusses: (i) the field-testing of the standard template in six countries, which confirmed the feasibility of applying it more broadly; (ii) the final version of the template based on outcomes of consultation with the international community and the field-testing visits; and (iii) the adoption of the template by the Extractive Industries Transparency Initiative (EITI) International Secretariat as a mandatory reporting requirement for its member countries. The standard template serves as a companion to the Guide to Analyze Natural Resources in the National Accounts.

The standard template was developed to support fiscal policy formulation and analysis in resource-rich economies, which constitute about one third of the Fund’s membership. The standard template is based on the revenue classification of the Government Finance Statistics Manual 2014, thereby facilitating the collection of resource revenue data in methodologically sound, analytically relevant, and cross-country comparable format.