Fabric of Reform Glossary

 

Balance of payments	A record of the economic transactions of a country’s residents with the rest of the world. The current account — which records international trade in goods, services, and transfer payments — and the capital account — which records international purchases and sales of assets such as stocks, bonds, and land — are the two main accounts in the balance of payments.
Bilateral assistance	Assistance (in the form of loans, grants, supplies, or technical expertise) that one country provides directly to another.
Devaluation	Reduction of the value of a country's currency in terms of foreign currencies. Usually refers to adjustment of pegged exchange rates; with floating exchange rates, a decline in the exchange value of a currency is referred to as depreciation.
Enhanced Structural Adjustment Facility (ESAF)/ Poverty Reduction and Growth Facility (PRGF)	The IMF's concessional lending facility that helps low-income member countries undertaking economic adjustment and reform to improve their balance of payments and economic growth prospects. The ESAF began operating in 1987, replacing the Structural Adjust Facility (SAF), which had been operating since 1986. As part of its contribution to an enhanced global poverty-reduction effort, in November 1999 the IMF transformed the ESAF into the Poverty Reduction and Growth Facility (PRGF—see below). The cost, maximum loan amount, maturity, and grace period for PRGF loans are identical to those of ESAF loans: interest rates are very low (0.5 percent a year), with repayments made semiannually, beginning 5½ years and ending 10 years after disbursement.
Convertible Currency	A country’s currency is convertible if it may be freely used in international transactions by citizens of any country. The IMF was established partly to promote currency convertibility for current account transactions, with the elimination of foreign exchange restrictions which hamper the expansion of world trade—an important driving force of economic growth and rising living standards.
Exchange Rate	The price of one country’s currency in terms of another country’s currency.
Good governance	Administration (of government, or corporations or other private sector entities) that is efficient, fair, open, and impartial.
Gross domestic product (GDP)	The total value of final goods and services produced within a country. GDP is the most commonly used single measure of a country's overall economic activity.
Market forces	refer to supply and demand, which determine the allocation of resources and the relative prices of goods, services, and assets in a market economy.
Multilateral assistance	Assistance (in the form of loans, grants, supplies or technical expertise) provided to a country by international organizations or by several countries in cooperation.
Poverty Reduction and Growth Facility (PRGF).	The IMF's concessional (low-cost) lending facility for low-income member countries. The PRGF replaced the Enhanced Structural Adjustment Facility (ESAF—see above) in November 1999. The PRGF makes poverty reduction explicitly the central objective of the IMF's assistance strategy for low-income countries; emphasizes the need for countries to embrace macroeconomic, structural, and social policies that complement one another; and makes national policies and targets subject to open debate by the relevant national actors — civil society as well as the national government.
Price controls.	Price controls are limits imposed on the amounts that can be charged for certain goods or services. Placing an upper limit on the price of a good (i.e., a price ceiling) tends to increase demand for the good but to reduce incentives for supplying the good; since market forces are not allowed to balance supply and demand, quantitative rationing of the available amount then becomes necessary.
Privatization	The sale of a state-owned enterprise to the private sector.
Structural adjustment	Adjustment policies accompanied by economic reforms, which aim to achieve sustainable improvements in a country’s external payments position and to increase the economy’s supply capacity by eliminating structural imbalances and rigidities. Reforms associated with structural adjustment can include liberalization of trade and investment policies and anti-competitive agricultural policies; removal of exchange and price controls; and reform of tax policies.
Trade liberalization	The easing or elimination of policies that restrict or distort international trade, including tariffs, import quotas, export subsidies, and restrictive licensing regulations and practices.
Transparency	Openness, honesty, and accountability in public and private transactions.
Wage controls	Wage controls are limits imposed on the levels of, or changes in, wages and salaries paid to some or all workers in an economy. Governments sometimes impose ceilings on the wages paid to public-sector workers as a way of cutting government spending.