Front Matter

Author(s):
Malcolm Knight
Published Date:
February 1998
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    © 1997 International Monetary Fund

    Library of Congress Cataloging-in-Publication Data

    Central bank reforms in the Baltics, Russia, and the other countries of the former Soviet Union / by a staff team led by Malcolm Knight… [et al.]. p. cm. — (Occasional paper, ISSN 0251–6365 ; 157)

    ISBN 1-55775-698-8

    1. Banks and banking, Central—Former Soviet republics.

    I. Knight, Malcolm D. (Malcolm Donald), 1944-. II. Series: Occasional paper (International Monetary Fund) ; no. 157.

    HG3126.C465 1997

    332.1’1’0947—dc21

    97-47496

    CIP

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    Contents

    The following symbols have been used throughout this paper:

    • … to indicate that data are not available;

    • — to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

    • –between years or months (e.g., 1994–95 or January-June) to indicate the years or months covered, including the beginning and ending years or months;

    • / between years (e.g., 1994/95) to indicate a crop or fiscal (financial) year.

    “Billion” means a thousand million.

    Minor discrepancies between constituent figures and totals are due to rounding.

    Preface

    Under a mandate given to the IMF by the Group of Seven central banks in 1991, 23 central banks have been cooperating with the IMF in an intensive multilateral program for providing technical assistance to the central banks of the Baltics, Russia, and the other countries of the former Soviet Union. The cooperating central banks are those of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Iceland, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States. The central banks receiving the technical assistance are those of the Baltic states of Estonia, Latvia, and Lithuania, together with Russia and the other countries of the former Soviet Union: Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Moldova, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan.

    The 15 countries covered in this report have adopted the broad goal of transforming their economic and financial systems over the medium term as one element of their full integration into the global economy. They are pursuing this objective by implementing measures designed to achieve market-clearing interest rates and exchange rates, liberalizing external payments, conducting monetary policy through market-based instruments, and undertaking a number of supporting reforms that are intended to establish the conditions for sound banking and the orderly development of financial intermediation. Such measures have frequently been included in macroeconomic adjustment and structural reform programs that are being implemented with the financial support of the IMF.

    The Monetary and Exchange Affairs Department (MAE) of the IMF coordinates the work of the cooperating central banks in providing technical assistance to the Baltic countries, Russia, and the other countries of the former Soviet Union to design and implement the specific measures needed to attain the broad goals outlined above. The program of technical assistance, initiated at the end of 1991, has involved a number of elements, including regular MAE technical assistance missions to most of the countries concerned, with participation by experts from the cooperating central banks; targeted follow-up visits; the placement of long-term resident advisors, including, chiefly, experts from the cooperating central banks; workshops on specific topics, with the participation of cooperating central bank experts; and training activities for the staffs of the respective central banks. In addition, several central banks of the Baltics, Russia, and the other countries of the former Soviet Union have recently intensified their bilateral relations with individual cooperating central banks. These trends are expected to permit the present multilateral technical assistance program to be phased out over time.

    In view of the complexities and complementarities of the financial system reform taking place in these 15 countries and of the substantial staff resources that the cooperating central banks have committed to the multilateral technical assistance program, the cooperating central banks and the IMF have found it useful to assess the status of the reforms and the effectiveness of technical assistance at regular intervals. This Occasional Paper was originally prepared by the IMF staff as one of the background reports for discussion at the tenth coordination meeting of cooperating central banks and international institutions that provide technical assistance to the central banks of the Baltics, Russia, and the other countries of the former Soviet Union.1 The meeting, which took place on May 12, 1997 at the Bank for International Settlements in Basle, was chaired by Stanley Fischer, First Deputy Managing Director of the IMF. The comments received from participants at the meeting and those of the central banks covered by the survey have been incorporated in the paper.

    This Occasional Paper analyzes the progress of reforms in each of the key central banking areas: monetary operations and government securities markets; foreign exchange operations and markets, and official international reserve management; banking supervision; bank restructuring; payments systems; and central bank accounting and internal audit. To assess the technical assistance effort and assist countries in determining the appropriate sequencing of further reforms, as well as to assist both recipient and donor central banks and institutions in identifying priorities for further technical assistance, the staff has also attempted to rank the countries’ progress thus far in the key areas as well as the financial system as a whole, based on a peer group approach. The discussion in this paper focuses on developments up to early May 1997.

    Participants at the May 1997 coordination meeting commended the substantial progress that a number of countries had achieved in moving to market-based financial systems since 1991. At the same time, they cautioned that even those central banks that had obtained rankings of “substantial progress” in their implementation of financial system reforms still had further work to do to achieve international best practices. The central banks under review, in their comments on the original draft of this paper, broadly concurred with the rankings it contains.

    The main sections of this paper were prepared by the following MAE staff members: Susana Almuiña (Monetary Operations and Government Securities Markets), John Dalton (Central Bank Accounting and Internal Audit), Inci Otker (Foreign Exchange Markets and Official International Reserve Management), Nicholas M. Roberts (Central Bank Policies in Support of Payments System Development), Gabriel Sensenbrenner (Preface and Overview), and Jan Willem van der Vossen, with input from Ceyla Pazarbaşioğlu (Banking Supervision and Bank Restructuring). The paper has also benefited from substantial input by the European II Department of the IMF. Arne B. Petersen, Peter J. Quirk, and Gabriel Sensenbrenner were instrumental in revising earlier versions of the draft paper and in coordinating its preparation. The contributions of Natalie Baumer in the editing of the manuscript and of Charmion O’Connor and Nadia Malikyar in typing it are gratefully acknowledged. Elisa Diehl of the External Relations Department edited the final version of the paper and coordinated its production.

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