Back Matter

Back Matter

Author(s):
Jean-Pierre Briffaut, George Iden, Peter Hayward, Tonny Lybek, Hassanali Mehran, Piero Ugolini, and Stephen Swaray
Published Date:
October 1998
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    Appendix I Statistical Tables
    Table A1.Indicators of De Jure Central Bank Autonomy and Accountability in Selected Sub-Saharan
    Country/Year of Most Recent Amendment of Central Bank LawEconomic Autonomy
    PolicyPolitical AutonomyPolitical AutonomyCredit to Government
    colspan="2">ObjectiveMonetaryForeign exchangeCoordinationResolutionGovernorBoardLimitInterest rateSecuritizationQuasifiscalInstrumentsSolvencyAccountability
    EconomicFinancialTermAppointerDismissalGov. rep.TermAppointerDismissalPublicationAuditingIndex (Total = 21)
    Angola, 1991*1¾1M¼M½11¾12½½¾¾1¾¾11¼
    BECAO, I97331¾¼M41M5½4¼4116½716¼1¾½¾11⅛
    BEAC, I98581¾½M81M½8½8¾16¼9½716¼¾¾¼½111¼
    Botswana, 1996¾¾1F¼M½1¼1½1¾½¾¾¾¾112¼
    Ethiopia, 1994¾¾1F¼M10¼¼½11¼¾118124
    Ghana, 1992¼¾1F¼M½½¾¼½2½½2¼½¾¾¾9512
    Kenya, 19971¾1F1F11½1112¾½13¾11111117⅛
    Lesotho, 1984*¼¾1F¼M½¼¼111½14¾¼1¾1¾¾12
    Madagascar, 199411151F1F¾½½¼¾1½11½16¼1¾1¾11715½
    Malawi, 1989¼¾1M¼M¼¾¼¾¼¾1¾1
    Mauritius, 1974*¾¾¾F¼M½¼½181¼19¼½18¼¾¾½¾1
    Mozambique, 19921¾1F1F¾½¾20121¾20¼2222¼¼½10124
    Namibia, 1990*¼¾1M1M½¾¾1¾1¾¼231231½1131924
    Rwanda, 1981*¾¾1M¼M½1¼1¼24½2524½¾110124
    South Africa, 19961¾1F1F1126¾11111½27¼28¾1¾29¾115⅜
    Swaziland, 1986¼¾1M¼M¾¾30¼1113111¼32¾32¾¾19⅙
    Tanzania, 19951¾1F1F1¾33¾11¼¼½½11112¼
    Uganda, 1993½¾¾F¾F¾1¾11131¾11¾¾34¾¾11711⅔
    Zambia, 1996¾¾1F¾M½35¼131½36¼36111110⅜
    Zimbabwe, 1984*1F1F35¾½¾1½¾¼¼1371
    Note: See accompanying notes for definitions of the weights that are associated with the various indicators.

    Law is under review.

    Provisions in legislation on labor contracts not inconsistent with the central bank law may provide some guarantees against arbitrary dismissal.

    Dismissals for breach of qualifications and misconduct are explicit, but it is not made explicit that these are the only reasons for dismissal.

    The West African Monetary Union and the BCEAO were established in November 1973, but were supplemented by the WAEMU treaty, which was ratified in August 1994. Benin, Burkina Faso, Côte d'lvoire, Mali, Niger, Senegal, and Togo are members.

    The council of ministers can overrule the board, while the board can overrule the national committees, which may have some authority over direct monetary instruments. These committees include government representatives. However, while there are sound provisions for sharing information between the governments and the central bank, it is not explicitly stated that the council of ministers shall publish its decisions and forward them to the legislature, and neither is it stated—as, for instance, in the statutes of the European Central Bank—that the board shall not take instructions from national governments.

    Should external liquid assets be exhausted, the BCEAO shall require that external liquid assets held by the states of the WAMU be surrendered for the benefit of the BCEAO in return for currency issued by it (Article 20 of the Treaty Establishing the West African Monetary Union).

    The council of ministers, with a representative from each country, appoints the governor, while the government of each country appoints executive directors, thus ensuring a balanced view.

    The national monetary committees, with representatives from the respective ministries of finance, may influence the board. WAMU's council of ministers ultimately determines the monetary and credit policy.

    The Central African Monetary Area and the BEAC were established in November 1972 and consist of Cameroon, the Central African Republic, Chad, the Republic of Congo, Equatorial Guinea, and Gabon. The CAEMC was established in March 1994, but the customs union has not yet been ratified. The national monetary committees, with representatives from the respective ministries of finance, have some authority, but can be overruled by the board, which appears to have more authority than the board of the BCEAO, where this authority is split with the council of ministers.

    A three-fourths majority vote is needed t o dismiss the governor (Article 43).

    When international reserves have declined and the situation persists, the governor may decline to issue further foreign exchange permits (Article 50.3).

    Only duly audited annual profit and loss statements shall be published (Article 14); there is no explicit requirement to publish a more frequent summary balance sheet.

    The permanent secretary to the treasury participates in the board meetings, but without the right to vote (Article II.c). However, the president may waive disqualification requirements; that is, the president can allow government representatives to become members of the board (Article I4.c.ii).

    The president can appoint executive directors exempted from qualification requirements and later dismiss them (Article 14).

    Advances to the government are limited to 5 percent of the budgeted revenue of the current fiscal year. The central bank may apparently underwrite government securities in the primary market (Article 46).

    Banking supervision is handled by an agency separate from the central bank.

    In exceptional cases, the 15 percent ceiling may be increased by legislation to 20 percent for a maximum period of six months (Article 28).

    The central bank law only requires account statements to be published every three months.

    The governor-general defines misconduct (Article 6.12).

    Terms are apparently staggered.

    Dismissals only for “a just cause” (Article 45).

    Implicit in Article 51 that board members cannot at the same time work for or represent the government.

    It is ambiguous if the limit for overdrafts (Article 18) includes or excludes loans for the government (Article 19).

    Advances and the central bank's holding of government securities shall not exceed 25 percent of the average annual revenue of the three fiscal years immediately preceding (Article 47).

    Advances and the central bank's holding of government securities, including government securities used as collateral, shall not exceed II percent of the annual average of ordinary revenue recorded the preceding three fiscal years (Article 58).

    Higher interest rates, explicitly stipulated in the law, the more the government uses its overdraft facility (Article 54).

    If the minister of finance is of the opinion that the central bank does not comply with the act, he or she may ask the board to remedy the situation within a specified time. If the board fails to comply, the minister of finance may apply to the supreme court (Article 37).

    No explicit provision for dismissal; however, the fact that the shareholders elect half the board provides some guarantee against arbitrary dismissals.

    The clearly defined objective of price stability, entrenched in the constitution, implicitly limits direct credit to the government.

    No explicit requirement for the government to ensure the solvency of the central bank, but international reserves are traded for the profit and loss of the government (Articles 25–28).

    The minister of finance may recommend that the prime minister instruct the central bank, provided the government accepts the responsibility, but such directives are not explicitly required to be published (Article 54).

    Directors of the board are not explicitly prevented from being government representatives.

    Advances and the central bank's holding of government securities, including government securities used as collateral, shall not exceed 20 percent of the annual average of ordinary revenue recorded in the preceding three fiscal years (Article 47.2).

    However, such instructions are not to be laid before the legislature (Article 10).

    The board may determine that the interest rate shall be different from the market rate (Article 34).

    The central bank shall implement and give effect to government policies the minister of finance may convey to the governor, but it is not explicit that such instructions shall be published or subject to discussions by the legislature.

    The central bank shall not advance funds to the government, except in special circumstances (Article 49). Such advances, purchases of government securities in the primary market, or any other form for extension of credit to the government shall not exceed 15 percent of ordinary revenue of the previous financial year (Article 50).

    Although the current law is not explicit on publication of policy statements, the central bank currently publishes policy statements twice a year.

    Notes:

    This index is based on components from the index on central bank independence by Grilli, Masciandaro, and Tabellini (1991) and Cukierman (1992) and from the index on accountability by Briault, Haldane, and King (1996). For an overview of legal indexes for central bank autonomy, see, for example, Eijffinger and de Haan (1996). Practice may have developed differently from the formal legislation. For instance, the central bank may primarily use indirect monetary instruments, or it may publish monetary policy statements twice a year, although it is not obligated to do so under the current law. In some countries, unofficial translations of the central bank law have been used.

    This legal index gives only a rough indication of the extent to which the existing central bank law formally supports central bank autonomy and accountability, but does not describe the central bank's de facto autonomy. The relevant indicators are subjectively weighted to achieve a maximum weight of 21. The weighting (¼, ½ ¾ or 1) is subject to discussion, and so are the elements included in the index and their interpretation. The definitions of the weights associated with the various indicators are as follows:

    Objectives

    Economic policy

    1Price stability, stability of the internal and external value of the currency, or the protection of the value of the currency conducive to sustainable real growth is the sole or primary objective.
    ¾Monetary stability is given explicit priority (in contrast to price stability, monetary stability may emphasize financial sector stability over price stability), or there is no clear priority between price stability and the safety and soundness of the financial system.
    ½Economic stability is the ultimate objective and the central bank may interpret this as price stability.
    ¼Price stability, monetary stability, or stability of the currency is explicitly mentioned as one of several objectives.

    Financial system

    IBanking supervision is delegated to an autonomous government agency so that it will not impinge on monetary policy, or the central bank supervises banks and the payment system and has sufficient authority to address financial sector weaknesses without endangering monetary policy. That is, the central bank has authority to issue prudential regulations after appropriate hearings; issue licenses according to objective criteria; conduct off-site inspections; conduct on-site inspections; conduct consolidated supervision; collaborate with foreign supervisors; impose sanctions, including withdrawal of licenses according to objective criteria; and supervise, or oversee, at a minimum, the large-value payments system, without improper interference from or approval of the government.
    ¾There is a general statement that the central bank shall supervise financial institutions and a clear reference to the banking act regarding the central bank's authority to conduct banking supervision. The ranking simply reflects the central bank legislation is appropriate, while detailed provisions on these issues can be found in commercial bank legislation.

    Policy

    Monetary policy

    IThe central bank has objective or target autonomy; that is, it can explicitly formulate and determine (F) monetary policy; or the central bank implements (M) monetary policy according to a target, including a pegged exchange rate, or a monetary program determined by the cabinet or the legislature in consultation with the central bank, and the central bank can do so without prior approval of the government (that is, instrument autonomy).
    ¾The government needs to approve certain indirect monetary instruments, or the central bank's authority is not clearly defined.
    ¼The government determines monetary policy, and the central bank has only partial authority to implement monetary policy.

    Foreign exchange

    IThe central bank can formulate and determine the exchange rate (F) consistent with its monetary policy (for instance, a de jure requirement to float the exchange rate regime); or the central bank implements (M) foreign exchange policy according to the government's instructions, but when foreign exchange reserves have reached a critical threshold, as defined by the central bank, it shall report to the government and suggest measures. If the government does not react and a conflict remains, the central bank should have the right to temporarily abandon its responsibility for price stability according to the provisions for conflict resolution.
    ¾As above in the case of implementation, but the central bank cannot formally temporarily abandon its primary objective, but continues to report and suggest measures to the government. The central bank regularly publishes information about macroeconomic developments.
    ½It is explicitly stated that the currency shall be convertible consistent with monetary regulation.
    ¼The central bank recommends measures to alleviate a situation only when foreign exchange reserves deviate from a threshold determined by the central bank, or the central bank formally participates in formulating the exchange rate policy, but otherwise has no formal leverage to change the exchange rate policy.

    Coordination

    IThe central bank and the government consult one another, but the government cannot instruct the central bank unless these instructions are published and laid before the legislature.
    ¾The central bank and the government inform one another, and the central bank is also independent in its area of authority.
    ½Representatives of the cabinet can participate in board meetings without right to vote, perhaps with the right to temporarily postpone decisions, and a representative of the central bank can participate in cabinet meetings without the right to vote; or the central bank may render advice if, in its opinion, the decision will affect the objective(s) and functions of the central bank.
    ¼The central bank explicitly comments on the budget and forwards its comments to the legislature and/or advises the government.

    Conflict resolution

    IIn case of a conflict that in the opinion of the central bank or the government may endanger price stability and the government instructs the central bank to pursue a specific policy, both parties make statements, which are laid before the legislature and published, and the government takes the responsibility for the directed policy.
    ¾It is explicitly stated that the government must not instruct the governing bodies of the central bank or it is very strongly stated that the bank shall be independent of the government. (This approach is only as strong as the above approach when it is difficult to amend the central bank law and is thus ranked lower.) O r when the minister of finance may instruct the central bank, but such instructions can be challenged in court or are published, and so the legislature can initiate debates.
    ½The monetary program does not need government approval (for example, if it is submitted to the legislature for information), and it is stipulated that the central bank is formally independent within its authority or that the central bank shall not follow policies contradictory to its objective, but there is nothing on how to resolve and publish if the government instructions conflict with the central bank's objective.
    ¼It is stipulated that the central bank is formally independent within its authority, but nothing on how to resolve and publish government instructions if they conflict with the central bank's objective.

    Political autonomy

    Term of governor

    ITerm is longer than five years.
    ¾Term is five years.
    ½Term is four–five years.
    ¼Term can exceed four years.

    Appointment of governor

    IA “double veto arrangement” exists; that is, two arms of government that truly balance one another respectively nominate and appoint the governor. For example, the head of state or the legislature appoints after another party nominates, for example, the board, or the minister of finance.
    ¾The two arms of government are more closely linked, but not within the cabinet. For example, the chairman of the legislature nominates and the legislature appoints the governor.
    ½One body, for instance, the head of state, appoints, but after “consultations” with another body, for example, the board.
    ¼Both nomination and appointment are within the government; say, the minister of finance nominates and the council of ministers appoints the governor.

    Dismissal of governor

    IDismissal can take place only in case of breach of qualifications, misconduct, or poor performance, and these can be clearly defined and ruled upon in court or by an independent tribunal, or approved by the legislature or the majority of the board.
    ¾Dismissal can take place only in case of breach of qualifications, misconduct, or poor performance and these can be clearly defined; otherwise, both the nominator and appointer approves the dismissal.
    ½Dismissal can take place only in case of breach of qualifications, misconduct, or poor performance, but there is no clear description of how and who defines poor performance.
    ¼Both the nominator and the appointer approve the dismissal.

    Government representation on board

    IThe government has no direct representatives with voting rights on the board.
    ¾Government representative can temporarily postpone a decision but can be superseded by a unanimous decision of the board.
    ½Direct government representatives together with the governor and deputy governors cannot constitute a quorum (¼) or a majority (¼).

    Term of board members, excluding ex officio members

    ITerm longer than five years and staggered.
    ¾Term is four–five years and staggered.
    ½Term is four–five years.
    ¼Term is three years or longer and staggered.

    Appointment of board members

    IA “double veto” arrangement exists—that is, one party of, for example, the head of state, the legislature, or the cabinet appoints after another party nominates, for example, the governor or chairman of the legislature, but neither the nominator nor the appointer is a member of the cabinet.
    ¼Both nomination and appointment are within the government, but handled by separate individuals—say, the minister of finance nominates the members and the council of ministers appoints them.

    Dismissal of board members

    IDismissal can take place only in case of breach of qualifications and misconduct, which should be ruled upon by the supreme court or by an independent tribunal, with the other board members' or the governor's prior consent, or approval is needed by the legislature.
    ¾Dismissal can take place only in case of breach of qualifications and misconduct; board approval is required.
    ½Dismissal can take place only in case of breach of qualifications and misconduct.
    ¼The governor, with the approval of the legislature, can dismiss a board member, and the governor is formally protected from arbitrary dismissal, or both appointer and nominator approve the dismissal. (Although there may not be specific reasons, it gives the legislature the possibility to initiate a debate.)

    Economic autonomy

    Limits

    IDirect credit to government (should not include securities resulting from open market operations) and participation in primary auctions of government securities (with the exception of noncompetitive bids, but to be included within the limit for credit to government) are prohibited.
    ¾Direct credit to the government is explicitly limited to 5 percent or less of average recurrent revenue of previous three fiscal years.
    ½Direct credit to the government is explicitly limited to 15 percent or less of recurrent revenue.
    ¼Direct credit to the government is limited or to be limited by other legislation, or the bank's board approves direct credit to the government. (The latter is a strong concept only if the board is truly independent of the government, and then an explicit limit could just as well have been established in the central bank law.)

    Interest rates

    IThe interest rate on credit to government is related to a market-determined interest rate.
    ¾The central bank alone can determine the interest rate.
    ½The central bank determines the interest rate after consultation with the ministry of finance.
    ¼The interest rate is agreed upon by the central bank and the ministry of finance.

    Securitization

    ICredit to the government is securitized by negotiable government securities.
    ½Advances are securitized, at a minimum, at the end of the year by negotiable government securities.
    ¼The central bank can require securitization or government guarantees.

    Quasi-fiscal activities

    IQuasi-fiscal activities are explicitly prohibited.
    ¾Quasi-fiscal activities are explicitly prohibited, but the central bank may function as bank for publicly owned commercial entities.
    ½Quasi-fiscal activities are explicitly prohibited, but the central bank may issue guarantees for development of special projects, or it may own shares in companies operating for the general good, but such shares shall be transferred to the government within one year, etc.
    ¼Central bank law prohibits quasi-fiscal activities.

    Monetary instruments

    IThe central bank can set its key interest rates on its own transactions without interference from the government (¼); the central bank can freely conduct open market operations (¼); the central bank uses direct monetary instruments only in extreme situations (¼); direct monetary instruments are primarily used to ensure fair competition and consumer protection, or direct monetary instruments are not explicitly mentioned (⅛); reserve requirements are limited to a maximum that can be increased only with the consent of qualified majority of the board, perhaps with the consent of the government (⅛); and the central bank can, at its discretion, remunerate required reserves (⅛).

    Solvency

    IThe central bank is not subject to the government's appropriation (¼); only realized profits can be allocated to the government (⅛) after prudent provisions to general reserves (⅛); and (½) the government is obliged to recapitalize the central bank in case the value of its assets is less than the value of its liabilities and capital, including any evaluation losses, by transferring either cash or securities (⅙) that are interest bearing (⅙) and negotiable (⅙).
    ¼The government is obligated either to recapitalize only the authorized capital or to cover revaluation losses to be financed by the central banks' future profits, or it is stated the central bank shall be economically independent.

    Accountability

    Publication of statements

    IThe central bank publishes more than one annual statement on its monetary policy operations or an annual statement or when the central bank finds it necessary; publications are not subject to the approval of the government, and the central bank can appear before the legislature.
    ¾The central bank publishes one annual statement on its monetary policy operations that is not approved by the government or president before publication.
    ½The central bank publishes information about the economy and its operations to be approved by the government.
    ¼The central bank publishes general information about the economy and its operations, or the central bank is just expected to report to the government.

    Audit

    IIndependent external auditors or an audit committee, in addition to the auditor general, shall audit the annual financial statement, preferably to be in conformity with international accounting standards and to be published together with monthly or more frequent summary balance sheets.
    ¾Only the auditor general of government or an audit committee appointed by the minister of finance shall audit the annual statement to be published together with more frequent summary balance sheets. (Without prudent governance, the auditor general could represent the government's interests.)
    ½Only the auditor general of government shall audit the annual statement or a general statement about being audited not less than once a year, but without an explicit requirement for publication.
    ¼Annual statements are submitted to the supervisor of the central bank, but without a formal requirement for auditing or publication.

    Table A2.Structure of the Banking System in Selected Sub-Saharan African Countries, 1997
    AngolaBCEAO1BEAC1BotswanaEthiopiaGhanaKenyaLesothoMadagascarMalawiMauritiusMozambiqueNamibiaRwandaSouth AfricaSwazilandTanzaniaUgandaZambiaZimbabwe
    Number of licensed banks, of which6533052617544541085551841820217
    Branches of foreign banks152Not permitted0518Not permitted09
    Subsidiaries of foreign banks2275Not permitted28234111310113
    Total assets (percent GDP)28.428.815.125312.626.563440.4522.5520.49120.6756.61017.3801334.41020.31114.920.51255.6
    Total loans (percent GDP)319.312.810.225.99.13120.310.64.24923.4342.576714.53.35.26.919.8
    Total deposits (percent of GDP), of which9.3221219.829.618.24035.716.413.57328.5549.212.35726.116.67.913.221.7
    Central governmentn.a.18.71.81.4271.51.47.210.30.22.41.221.67.36.33.713.415.51.6
    Noninterest expenses (percent of total income)n.a.49n.a.4.31339.733145.9 (all govt. banks), 25.8 (private banks)53.5 (all banks) 36.9 (private banks)n.a.233n.a.28.6n.a.611371.347.451.5651.6
    Return on equity (percent)>208.3From losses to 2027.4n.a.46.733Negative for all govt. banks, 14.4 (private banks)82.3 (private banks)n.a16.9n.a.25.6High18.53.27.5 (nonbank financial institutions)2.6315.5n.a.
    Return on assets (percent)In the 10 range2.3From losses to 32.9n.a.8.943.33 (all govt. banks), 1.67 (private banks)1.83 total, 6 (private banks), negative (public banks)n.a.2.2n.a.2.2High1.32.42.5 (banks), 1.8 (nonbank financial institutions)0.171.82n.a.
    Group of deposit-taking institutions with more than 5 percent of total banking assetsn.a.n.a.Yes, Savings BankYes, Botswana Savings BankYes, most of the assets are concentrated in the (state-owned) Commercial Bank of EthiopiaNoYes6NoNon.a.Yesn.a.YesYesn.a.14Yes, only licensed banksNoNoNoYes, 8 merchant banks
    Group of nonbank financial institutions with more than 5 percent of total banking assetsNoNoNoYes (insurance companies)NoNoYes7Yes (insurance companies, licensed and supervised also by central bank)NoYes (insurance companies)Non.a.YesNoYes, licensed and supervised by the Financial Services Boardn.a.NoNo, constitute 4.4Yes, a statutory corporation reporting directly to parliamentYes (insurance companies)
    Ownership a s proportion of total assets for banks with more than 50 percent
    Government owned80n.a.n.a.09644.63469452 banksn.a.Nonen.a.45None1558.2 (two banks)27.523.915
    Foreign owned10100Not permitted26.536315561n.a.86.3304.68532.815.454.570
    Reduction in government control occurred in last five yearsNoNo, but under wayNo, but privatization plannedn.a.Yes (under consideration)Yes (significant)YesNoNo, but under wayNoYesYesNoNon.a.NoYesYesNoYes, under way
    Mergers and acquisitions in last five yearsNoYesYesYesNoYesYesYesYesNoYesYesYesNoYesYesNoNoNoYes
    Nonperforming loans (percent of total loans)46.264.3n.a.2020.5n.a.37.87.78.7154.6192.319.77.938.23214.8
    Provisions for loan losses and doubtful debts
    Total general provisions (percent of total loans and advances)n.a.n.a.n.a.0.711.5n.a.121n.a.1.10.9142.70n.a.0.40.5No general reservesAt least one, but not required71.4
    Total specific provisions (percent of nonperforming loans)n.a.19.6n.a.39n.a.n.a.48.476.7n.a.2.256.2446n.a.62.254.947.6027.6

    Banking Supervision Agency 1996 Annual Report. BCEAO: Burkina Faso, Côte d'lvoire, Mali, Senegal, Togo, Benin, Niger (and Guinea-Bissau as of 1997). BEAC: Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea, Gabon (6 countries).

    All of the five financial institutions licensed to do banking business in Botswana are majority or 100 percent owned subsidiaries of well-established, major international banking institutions.

    As of the end of June 1997.

    As of the end of March 1997.

    As of the end of 1996.

    Most of the assets continue to be concentrated in a few banks with the top 11 out of 50 commercial banks commanding 75 percent of total assets.

    The distribution of assets is skewed as four of the leading non-deposit-taking institutions controlled 57 percent of the non-deposit-taking institutions' total assets in December 1996.

    In addition, there are five mutual (community) banks.

    The Zambian Companies Act requires all foreign companies to create subsidiaries for local operations.

    As of December 1996.

    As of June 30, 1997.

    As of July 3l, 1997.

    As of August 31, 1997.

    The Banks Act of 1990 eliminated the statutory institutional categorization of banks.

    Table A3.Selected Indicators for Financial Intermediation in Selected Sub-Saharan African Countries
    1990199119921993199419951996
    Base money in percent of GDP
    Twenty-three selected sub-Saharan countries10.010.610.810.510.410.110.2
    OECD countries18.48.28.28.57.98.68.3
    Currency in percent of GDP2
    Twenty-three selected sub-Saharan countries6.06.06.46.16.56.36.0
    OECD countries15.05.04.95.05.05.15.0
    Currency in percent of M22
    Twenty-three selected sub-Saharan countries22.622.423.923.623.623.819.1
    OECD countries18.07.87.57.47.67.57.6
    Reserves (excluding currency) in percent of GDP
    Twenty-three selected sub-Saharan countries4.65.34.84.74.34.14.5
    OECD countries13.43.23.23.42.93.53.3
    Reserves (excluding currency) in percent of M2 (excluding currency)
    Twenty-three selected sub-Saharan countries19.624.022.822.018.919.622.9
    OECD countries16.76.15.96.15.76.26.0
    Broad money in percent of GDP3
    Twenty-three selected sub-Saharan countries27.028.229.529.831.029.934.8
    OECD countries165.265.567.469.967.569.169.3
    Banks' claims on private sector in percent of GDP
    Twenty-three selected sub-Saharan countries17.817.418.718.818.218.119.2
    OECD countries168.468.270.469.767.568.170.0
    Banks' demand and time deposits in percent of GDP
    Twenty-three selected sub-Saharan countries21.021.423.523.624.323.524.8
    OECD countries157.958.460.663.060.661.962.6
    Banks' demand and time deposits in percent of banks' claims on private sector
    Twenty-three selected sub-Saharan countries143.7149.5147.7143.8151.3151.0168.9
    OECD countries194.897.395.599.698.598.4102.1
    Real interest rate4
    Twenty-three selected sub-Saharan countries-1.41.72.1-0.2-3.8-3.5
    OECD countries14.45.36.54.25.13.02.5
    Spread between lending and deposit rates
    Twenty-three selected sub-Saharan countries5.95.45.26.76.79.610.6
    OECD countries15.05.15.24.94.34.54.3
    Source: International Monetary Fund, various issues.

    Hungary, Korea, and Poland are included in the OECD average in 1996 (only after joining the OECD); the Czech Republic is included from 1995; and Mexico is included from 1994.

    Currency outside deposit money banks (line 14a in International Financial Statistics).

    Broad money is equal to base money and quasi-money (line 34 and 35 in International Financial Statistics).

    Money market rate, treasury rate, or discount rate minus inflation (consumer price index) for the past year.

    Table A4.Banking Supervision Issues in Selected Sub-Saharan African Countries, 1997
    AngolaBCEAO1BEAC1BotswanaEthiopiaGhanaKenyaLesothoMadagascarMalawi
    I. Supervisory framework
    Banking lawDraft completedUnified Banking Law, 19901Unified Banking Law, 1992Banking Act, 1995Monetary and Banking Proclamation No. 83/1994, Licensing and Supervision of Banking Business Proclamation No. 84/1994Banking Law, 1989Banking Act, 1991Financial Institutions Act, 1973Banking Act 1996Banking Act, 1989
    Amendments since 1990YesYesYesYesYesYesYesNoYesNo
    Revisions plannedYesNoNoNoNoYesYesYes (revision is under way)NoNo
    Supervisory authorityCentral bankRegional banking supervision agency (linked to central bank)Regional banking supervision agency (linked to central bank)Bank of Botswana (Financial Institutions Department)National Bank of EthiopiaBank of GhanaCentral Bank of KenyaCentral Bank of LesothoBanking supervision agency (linked to central bank)Reserve Bank of Malawi
    Supervises nonbank institutionsn.a.Yes (not all)Yes (not all)YesYesYesYesYesYesYes
    Licenses banksYes, with minister of financeNo, but gives adviceNo, but gives adviceYesYesYesYesYesYesYes
    Ratio of banking supervision staff (percent of banks)333132167106036062422150200375
    Average years of experience of supervisory staff243.5n.a.2n.a.35.532–4
    AutonomyLimitedAverageAverageFullLimitedAveragePartialLowFullAverage
    Appeal procedure existsn.a.YesYesYesYesn.a.YesYesYesYes
    Appeal procedure existsn.a.YesYesYesYesn.a.YesYesYesYes
    Possibility of government overruleLikelyLikelyLikelyLikelyLikelyn.a.LikelyLikelyLikelyLikely
    Manuals available for Licensingn.a.Detailed regulations (no manuals strictly speaking)Detailed regulations (no manuals strictly speaking)YesYesYesYesNoDetailed regulations (no manuals strictly speaking)Yes (but not actively utilized)
    On-site examinationsn.a.YesYesYesYesYes
    Off-site examinationsn.a.YesYesYesYesNo
    I.A. Prudential regulations
    Capital adequacy assessmentBasle-basedBasle-based, 4 (to be increased)Basle-basedBasle-based, 8; IMF recommendation 158, slightly higher than Basle'sBasle-based, 68In the process of complying with Basle definitionsBasle-based, 8Basle-based
    Capital ratioFrom negative to very high (above 20)n.a.n.a.19.824.514.7185n.a.36.2
    Startup capitalUS$4 millionUS$1.9 millionUS$1.9 millionUS$1.4 million or 8% (whichevei is greater)US$1.5 millionUS$ 0.1 million (local banks), US$0.25 million (foreign banks)US$3.3 millionUS$21,300 (foreign subsidiaries)US$0.3 millionUS$2 million
    Limits on Connected borrowerYesYesYesYesYes, 10% individually and 30% in the aggregate of total capitalYes, 2%Yes, 25%Yes, for unsecured loans: greater than US$639 or 1% of unimpaired paidup capital and reserve accountYesYes
    Single borrowerYes, 10%YesYesYesYes, 15%, to be raised to 20%Yes, 10% unsecured loan, 25% secured loanYes,25%3Yes, for total loans: 10%YesYes, 25%
    Classification and provisioning rulesUnder developmentYesYesYesYesYesYesYes (general guidelines)YesNo
    Provisioning requirements General provisionsYesn.a.n.a.Yes, 1.25%YesYes1%Yes (general guidelines)There is one in place that follows a different approach of case-by-case analysis and statistical provisioning.Yes
    Specific provisions Substandardn.a.20%20%20%25%25%n.a.None10–25%
    Doubtfuln.a.50%50%50%50%50%n.a.50%50%
    Lossn.a.100%100%100%100%100%100%100%100%
    Monetary reserve requirementsYes, 40% of demanded deposits in local currency1.5%0%Yes, 3.25%Yes, 15% of total current deposits, 5% of each bank's depositsYes, 8% primary reserve, 35% secondary reserveYes, 15%Yes,4 20% on all depositsn.a.Yes, 20%
    Minimum liquid asset requirementsn.a.Yes, 60%Yes, 100%Yes, 10% for banks, 3% for credit institutionsYes, 15%YesYes, 20%Yes 30% short-term liabilities; 25% medium-term; 5% long-termn.a.Yes, 10%
    Limits on foreign exchange exposure, as percent of bank capitalNon.a.n.a.YesYesYesYesNoYesYes
    Single currencyNoNo5%
    Aggregate15%20%15%
    Limits in investing in nonbanks (percent of shareholding)NoYesYesYesYes, 10%–20%Yes, 25% (one subsidiary); aggregate 35% (more than one subsidiary)Yes, 25%Yes, 25% of unimpaired paidup capital and reserve account for aggregate shareholders; subject to approvalYesNo
    I.B. Supervisory practices
    Consolidation of accounting/supervisory activities
    Domestic subsidiariesNoNoNon.a.YesYesNoYesNoYes
    Foreign subsidiariesNoNoNoNon.a.YesNoYesn.a.Yes
    Sharing supervisory informationNoYesYesYesNoYesNo, under developmentNot explicitlyYesYes
    Supervisory power to object to management selectionYesYesYesYesYesYesYesYesYesYes
    Frequency of prudential returns/reportsMonthly/quarterlyMonthlyMonthlyMonthly/quarterlyWeekly/quarterlyWeekly/monthly/quarterly/semiannually/annually10 day/monthly/quarterly/annuallyMonthly/quarterly/annuallyMonthly, quarterlyQuarterly
    Supervisory on-site examinationYesYesYesYesYes, but no policy establishedYesYesYesYesNo, unless IMF/World Bank recommended
    Length of examination4–8 weeks6–12 weeks6–12 weeks6 weeks6–8 weeks3 months4 weeks4–6 weeks4–12 weeks
    I.C. Entry and exit
    Licenses issued in past five years06n.a.055202n.a.
    Rejections0n.a.n.a.YesYesYesYes21Yes
    Supervisory power to revoke licenseYesYesYesYesYesYesYesYesYesYes
    Supervisory power to restrict bank activitiesYesYesYesYesYesYesYesYesYesYes
    Possibility of appealn.a.YesYesNoYesYesYesNoYesYes
    Supervisory powers to fineYesYesYesYesYesYesNo5YesYesYes
    II. Safety net
    There is explicit government guaranteen.a.NoNoNoNo, not for private banksYesNoNoNoNo
    There is implicit understanding of safety netn.a.Yes, for all banksYes, for all banksNo, under discussionNoYesYes, for stateowned banksYes, for stateowned banksYes, for stateowned banksYes
    Deposit insurance is availablen.a.No, under considerationNo, but agreement has been reached to institute a scheme.No, under discussionNoNoYesNoNoNo
    Central bank acts as a lender of last resortYesYesYesYesYesYesYesYesYesYes
    Acted during last five yearsYesYesYesNoNoYesYesYesYesNo
    III. Disclosure
    Origin of accounting standardsMostly Portuguese accounting standardsNew compulsory banking accounting plan, mostly French accounting standardsMostly French accounting standardsInternational Accounting Standards CommitteeNo officially adopted standards. U.S./U.K. accounting standardsInternational accounting standardsInstitute of Certified Public Accountants of KenyaInternational Accounting Standards Committee/generally accepted accounting principles/national accounting standardsMostly French accounting standardsBanking industry
    Complying with international accounting standardsn.a.YesYesYesYesYesYesYesYesYes
    External audit requiredn.a.YesYesYesYesYesYesYesYesYes
    Supervisory veto in appointing external auditn.a.YesYesYesYesNoYesYesYesYes
    IV. Infrastructure
    There is adequate legal system protecting bank performanceNoNoNoNo (plans are under way to address deficiencies)NoNoNoYesNoNo
    There is adequate legal provision for liquidation of companiesn.a.YesYesYesYes, untestedYesYesYes, untestedYesYes (no special arrangements for banks)
    >Payment system efficiencyLowLowLowAbove averagen.a.AverageAverageLowLowLow
    MauritiusMozambiqueNamibiaRwandaSouth AfricaSwazilandTanzaniaUgandaZambiaZimbabwe
    1. Supervisory Framework
    Banking lawBanking Act, 1988; Bank of Mauritius Act, 1966; Foreign Exchange Dealers Act, 1995Law No. 1, 1992Banks Act, 1965New Bank Act about to be adoptedBanks Act, 1990; Mutual Banks Act, 1993The Financial Institutions (Consolidation) Order, 1975Banking and Financial Institutions Act of 1991Bills of Exchange Act, 1964; Bank of Uganda Statute, 1993; Financial Institutions Statute, 1993The Banking and Financial Services Act, 1994Banking Act of 1965. Revision is under way.
    Amendments since 1990YesNoNoYesYesNoYesYesYesNo
    Revisions plannedYesn.a.YesYesNoYesNoYesYesYes
    Supervisory authorityBank of MauritiusCentral bankBank of NamibiaCentral bankSouth African Reserve BankCentral Bank of SwazilandBank of TanzaniaBank of UgandaBank of ZambiaReserve Bank of Zimbabwe
    Supervises nonbank institutionsYesYesYesNoNoNoNo (intended to supervise microfinance institutions)YesYesYes
    Licenses banksYesYesYesYesYesYesYesYesYesNo, the registrar of banks in the ministry of finance is the licensing authority
    Ratio of banking supervision staff (percent of banks)280n.a.340160102160378120224486
    Average years of experience of supervisory staff14n.a.42455123–42–4
    AutonomyFullAverageFullFullFullFullLowFullAverageLow
    Appeal procedure existsYesn.a.YesYesYesn.a.YesNoYesYes
    Possibility of government overrule isUnlikelyn.a.LikelyLikelyNoLikely (by the king)n.a.UnlikelyUnlikelyHighly likely
    Manuals available for LicensingYesn.a.n.a.No (similar regulation available)NoNoNo (similar regulation available)NoNo (to be produced)
    On-site examinationsYesn.a.Yes, in draft formNo (being developed)n.a.YesNo (being developed)YesYesYes (not actively utilized)
    Off-site examinationsYesn.a.n.a.NoYesYes (draft)NoYesNoYes
    I.A. Prudential regulations
    Capital adequacy assessmentBasle-basedBasle-basedNot less than $0.44 million. Basle definition to be introducedBasle-basedBasle-based, in some cases new banks maintain a higher ratioBasle-basedBasle-basedBasle-basedLargely Baslebased. 10% by the Banking and Financial Services (Capital Adequacy) Regulations, 1995.Basle-based
    Capital ratio9–10%13%Above 8%65%9.8%8%1.55%6.15%15%10.1%
    Startup capitalUS$3.5 million (to be increased to US$4.7 million in 1999)US$1.5 millionUS$0.44 millionn.a.US$11 millionUS$0.25 millionUS$1.7 million (banks), US$0.8 million (nonbanks)US$0.48 million (local banks), US$0.96 million (foreign banks)US$1.5 millionUS$4.2 million
    Limits on Connected borrowerYesn.a.NoYesYesYes, 10%YesYes, 25%YesYes, 50%
    Single borrowerYesYes, 25%NoYesNoYes, 10%Yes, 25% secured, 5% unsecuredYes, 25%Yes, 10%Yes, 25%
    Classification and provisioning rulesYesn.a.No, but draftedYesYesNoYes, being rewrittenYes, based on “past due” daysYes, comprehensiveYes, under revision
    Provisioning requirements General provisions1%YesNon.a.Yesn.a.YesNoNo, to be introducedYes
    Specific provisions Substandard20%20%No20%Yesn.a.10%20%20%10–25%
    Doubtful50%45%50%50%50%50%50%
    Loss100%100%100%100%100%100%100%
    Monetary reserve requirementYes, 6% cash ratioYes, 10% of total time depositsYes7YesYes8Yes, 6% of deposit liabilitiesYes, 12% (to be changed to 10%)YesYes, 3–5% of deposit liabilitiesYes, 17.5%
    Minimum liquid asset requirementsReduced to zero in July 1997n.a.Yes, 20% short-term liabilities; 15% medium-term; 5% long-termn.a.YesYes, not less than 17.5%n.a.NoYes, 43.5%Yes, 10%
    Limits on foreign exchange exposure, as percent of bank capitalYesNo
    Single currencyNoYes, 10%n.a.n.a.Yes, 15%n.a.n.a.NoYes, 20%Yes, 10%
    AggregateYes, 15%Yes, 20%Yes, 15%Yes, 15%Yes, 20%Yes, 25%Yes, 25%Yes, 20%
    Limits in investing in nonbanks (percent of shareholding)Yes, required approval of Bank of Mauritiusn.a.Yes, 30%n.a.YesProhibitedn.a.Yes, 25%Yes, 15%No (under consideration)
    I.B. Supervisory practices
    Consolidation of accounting/supervisory activities
    Domestic subsidiariesYesn.a.YesNoYesn.a.YesNo, work is under wayNoYes
    Foreign subsidiariesYesn.a.YesNoYesYesn.a.No, work is under wayNo, work is under wayYes
    Sharing supervisory informationYesn.a.Not explicitlyYesYesNoYesYes, but not provided by lawYesYes
    Supervisory power to object to management selectionYes, to be incorporated in revised Banking Actn.a.NoYesYesYesYes, requiredYesYesYes, but limited
    Frequency of prudential returns/reportsDaily/weekly/monthly/quarterly/annuallyRegular and/or when neededMonthly/quarterlyMonthlyMonthlyMonthlyMonthly/quarterlyWeekly/monthly/quarterlyMonthlyQuarterly
    Supervisory on-site examinationYesYesYes, but newYesNo, limited to meetings with the CEO, directors, risk managersYes, but was not performedYesYesYesYes, but new
    Length of the examinationUp to 3 months4–6 weeksUp to 6 months4 weeks1 month5–6 weeks2–3 months
    I.C. Entry and exit
    Licenses issued in the past five yearsNone5112201681129
    RejectionsYesn.a.YesNoYesNoYesMoratorium for 2 yearsNoNo
    Supervisory power to revoke licenseYesYesYesYesYesYesYesYesYesNo
    Supervisory power to restrict bank activitiesYesYesYesYesYesYesYesYesYesNo (only to recommend)
    Possibility of appealYesn.a.NoYesYesYesYesNoYesYes
    Supervisory powers to fineNoYesYesYesYesNoYesYesNoNo
    II. Safety net
    There is explicit government guaranteeNon.a.NoNoNoNoYes (for deposits)NoNoNo
    There is implicit understanding of safety netNon.a.YesYes, for stateowned banksNoYesYesNoYesYes
    Deposit insurance is availableNoNoNoNoNo, but proposedNoYesYesNo, but proposedNo
    Central Bank acts as a lender of last resortYesYesYesYesYesNo stated policyn.a.YesYesYes
    Acted during last five yearsYesn.a.NoYesn.a.Non.a.Yes
    III. Disclosure
    Origin of accounting standardsInternational Accounting Standards Committee (international accounting standards 30), Mauritius Accounting StandardsSouth African Banks Act of 1990South African Banks Act of 1990BelgianSouth African Institute of Chartered AccountantsSouth African Banks Act of 1990Tanzanian National Board of Accountants and AuditorsInternational Accounting Standards Committee; local accounting body (not functioning)Two professional accounting organizations (close to generally accepted accounting principles)Banking industry
    Complying with International Accounting StandardsYesYesYesYesYesYesYesYesYesYes
    External audit requiredYesn.a.YesYesYesYesYesYesYesYes
    Supervisory veto in appointing external auditYesn.a.YesYesYesYesYesYesYes
    IV. Infrastructure
    There is adequate legal system protecting bank performanceYesn.a.YesNoYesNoNoYes (but no special facilities ensuring contracts performance)NoNo
    There is adequate legal provision for liquidation of companiesn.a.YesNoYesYes (tacitly)YesYesYesYes (no special arrangements for banks)
    Payment system efficiencyGoodAverageLowLowGoodGoodLowAverageLow, but improvement is under wayAverage

    Banking Supervision Agency 1996 Annual Report. BCEAO: Benin, Burkina Faso, Cote d'lvoire, Mali, Niger, Senegal, Togo (and Guinea-Bissau as of 1997). BEAC: Cameroon, Central African Republic, Chad,, Republic of Congo, Equatorial Guinea, Gabon.

    As of December 31, 1996.

    Central Bank of Kenya reduced the total lending and guarantees to a single borrower from the equivalent of 100 percent to no more than 25 percent of an institution's capital and unimpaired reserves.

    Three percent of savings deposits, 5 percent of time deposits, plus 9 percent of demand deposits.

    Bank Supervision Department in central bank lacks legal authority to impose penalties for violation of regulations that do not relate to monetary policy: this authority is vested with ministry of finance.

    Unofficial data.

    Five percent of short-term liabilities to the public, and 2 percent of medium-term liabilities.

    One percent of short-term liabilities, 2 percent of total liabilities.

    In addition, five licenses were issued for merchant banks.

    Table A5.Monetary Operations and Financial Market Development in Selected Sub-Saharan African Countries, 1997
    CountryMonetary Instruments and Procedures of OperationInterest Rate Determination (Management)Financial Market Development
    AngolaAngola's main instrument of monetary policy is credit controls. In the past, the National Bank of Angola (BNA) has lacked control over money creation, which is a by-product of budget deficits. However, monetary expansion is now limited to the purchase of foreign exchange by the banking system from the oil sector, excluding tax receipts and other oil revenues accruing to the central government. Inflation has thus been high, although it came down to more moderate levels in the first half of 1997.Interest rates have not been liberalized, in part because the authorities do not believe that the financial market is sufficiently competitive at present. Until April 1997, real interest rates were generally negative. The attempt to maintain real interest rates at positive levels since then has not been entirely successful.Primary market. None.

    Secondary market. None.

    Interbank market. None.

    Stock exchange. None.
    Reserve requirement. Required reserves are 40 percent of demand and time deposits in domestic currency with no requirement on foreign currency deposits. Reserves must be in the form of deposits with the central bank; vault cash is not counted as part of reserves. BNA pays interest on excess reserves, though not on required reserves.
    Credit controls. In 1991, a system of credit ceilings was established, but not used until recently. Currently, BNA strictly monitors credit limits imposed on commercial banks to control overall and bank-by-bank credit expansion. Also, increases in central bank credit to government have been strictly limited.
    BCEAO countriesThe countries of the West African Economic and Monetary Union (WAEMU) share a common currency—the CFA franc, which is pegged to the French franc. The central bank (BCEAO) conducts monetary policy at the regional level. During 1989–93, BCEAO shifted from direct to indirect instruments of monetary policy—specifically, operations in the money market and reserve requirements; auction of central bank bills was introduced in 1996. However, excess liquidity hampers effectiveness of the indirect instruments.

    Open market operations. BCEAO auctions central bank bills or auctions credit, using a volume auction.

    Reserve requirements. Yes. Introduced in 1993, reserve requirements have been maintained at 1.5 percent of sight deposits and short-term loans.

    Refinance. On a weekly basis, BCEAO either auctions credit to banks or auctions central bank bills using volume auctions.

    Lending facilities. BCEAO maintains a discount window (not used); a “pension window,” which functions like a discount window; and collateralized advances on certain claims of Senegal and Côte d'lvoire governments.
    Countries of WAEMU maintain a common interest rate structure. Interest rates have been largely liberalized. Since 1989, the only interest rates that have been fixed by the central bank are the discount rate; a usury rate, which is set at two times the discount rate; and a minimum rate on passbook savings deposits (interest rates paid on certain time deposits and certificates of deposits are indexed to the money market rate).Primary market. BCEAO conducts weekly auctions in the money market—either withdrawing liquidity by selling central bank bills or adding to liquidity by auctioning credit.

    Secondary market. There is essentially no secondary market. The Abidjan Stock Exchange includes bonds, but there is little trading volume.

    Interbank market. Yes, although it is not very active.

    Stock exchange. Yes. Established in 1976, the Abidjan Stock Exchange lists approximately 35 companies. The exchange is being transformed into a regional stock exchange with offices in all WAEMU countries.
    BEAC countriesCameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea, and Gabon subscribe to a common monetary authority—the Bank of Central African States (BEAC). These countries also maintain a common currency, the CFA franc, which is pegged to the French franc.

    Open market operations. On a weekly basis, BEAC auctions central bank bills and credit to banks, using volume auctions (interest rates are given by the central bank and banks make bids in terms of volumes). Repos are also used to provide shortterm credit to banks.

    Lending facility. Repos are offered to banks. Also, credit auctions are held weekly.

    Reserve requirement. Reserve requirement is available, but has not been activated.
    With pegged currency and free capital mobility, interest rates are tied to those in France. BEAC regulates maximum lending rates and minimum deposit rates of banks. It also determines interest rates for central bank bill and credit auctions. Interest rates on the interbank market are freely determined.Primary market. Central bank bills (7-, 28-, and 84-day bills) are auctioned weekly, using single-price auction.

    Secondary market. None.

    Interbank market. Yes, on a regional basis, but it is not very active.

    Stock market. None.
    BotswanaReserve requirement. Nonremunerated reserve requirement of 3.25 percent on domestic (pula) deposits; no requirement on foreign currency deposits. Requirement may be met by maintaining a monthly average balance in a segregated account. Shortfalls are penalized at the Bank of Botswana (BOB) rate plus 6 percentage points.

    Open market-type operations. The main monetary instrument consists of purchases and sales of BOB certificates. Currently, there are 12 counterparties that are allowed to deal directly with the BOB.

    Liquid asset requirement. Yes, 10 percent of assets. Qualifying assets include BOB certificates and cash.

    Lending facilities. (1) One-day borrowing with BOB certificates as collateral, at bank rate plus 6 percentage points; (2) one-day borrowing with commercial paper as collateral, at bank rate; and (3) sale of BOB certificates to BOB (auction rate plus 30 basis points).
    Interest rates are free of controls.Primary market. BOB certificates are sold at periodic auctions. Uniform price method has generally been used; however, recently, mini auctions using multiple price method have been introduced for comparison. It is hoped that eventually the main auctions can be changed to the multiple price system. BOB certificates can also be purchased outside the auctions from BOB.

    Secondary market. Limited secondary market exists, with BOB playing central role. Activity is sporadic. (No primary dealer system is in place.)

    Interbank market. Small interbank market has emerged.

    Stock exchange. Yes. Established in 1989, the stock exchange includes approximately 12 listed companies.
    EthiopiaReserve requirement. Ethiopia's one commercial bank, Commercial Bank of Ethopia (CBE), is required to maintain at the end of each week at least 5 percent of its net deposit liabilities in an unremunerated account with the National Bank of Ethiopia (NBE).

    Liquid asset requirement. CBE is also required to maintain liquid assets amounting to at least 20 percent of total net deposits.

    Credit controls. NBE regulates and monitors loans provided by the banking system, and determines which activities are to be financed and under what conditions, particularly with regard to credit terms, maturities, and collateral.

    Refinance facilities. NBE provides short- and longterm refinancing facilities to banks and other financial institutions. However, because of excess liquidity, these facilities have not been used by the CBE for several years.
    Interest rates were largely liberalized in February 1998. Commercial banks are free to set their own deposit and lending rates. The NBE sets only the minimum deposit interest rate (currently 6 percent).Primary market. Government borrows directly from the financial sector, including the NBE.

    Secondary market. None.

    Interbank market. Recently established.

    Stock exchange. None.
    GhanaIn 1987, the Bank of Ghana (BOG) began the transition from direct to indirect instruments. Currently, it relies entirely on indirect instruments.

    Open market operations. Currently, open markettype operations are its most important instrument—primarily (weekly) auctions of treasury bills and notes and BOG bills.

    Reserve requirement. There is an 8 percent reserve requirement on all bank deposits (domestic and foreign currency deposits).

    Liquid asset requirement. There is also a liquid asset (or liquidity reserve) requirement of 35 percent on deposits.

    Credit facilities. BOG operates an unrestricted rediscount facility, at a penalty rate.
    Interest rates are free of controls, but are relatively sticky.Primary market. There is an active primary market for government and central bank securities with weekly auctions of treasury bills and BOG bills. BOG recently ended “on tap” sales between auctions.

    Secondary market. Secondary market for government securities and BOG bills exists, but is relatively thin. High liquid asset requirement for banks stifles development of secondary market. BOG has made progress with implementing a book-entry system and has adopted a form of primary dealer system.

    Interbank market. Interbank lending occurs, but transaction volumes and liquidity are relatively limited.

    Stock exchange. Yes. Established in 1990, the stock exchange has approximately 19 companies listed.
    KenyaKenya began the process of financial liberalization and conversion to indirect monetary instruments during the late 1980s. It abandoned credit ceilings and liberalized interest rates in 1991.

    Open market operations. Central Bank of Kenya (CBK) uses auctions and “on tap” sales of treasury bills in its monetary policy. Also, the use of two-way repos with commercial banks was effected from July 1997. A rediscounting window is also available at the initiative of banks, with the rate at 5 percentage points above the 91-day treasury bill rate.

    Reserve requirement. On October 1, 1997, the cash reserve requirement was reduced to 15 percent of total deposits from 18 percent. Reserves are not remunerated. Averaging of reserves is permitted over 15-day periods, corresponding to the first half and the second half of every month, with a minimum level of 12 percent on any given day.

    Liquidity requirement. In June 1997, the commercial bank minimum liquidity ratio was reduced to 20 percent from 25 percent.

    Standing facilities. CBK operates a Lombard window; borrowing rate is 3 percentage points above the 91-day treasury bill rate; and also a window for last-resort borrowing at 5 points above 91-day treasury bill rate. These facilities require government paper of no more than 91 days to maturity or paper traded in the stock exchange as collateral.
    Interest rate controls were abandoned in 1991. Effective August 1, 1997, commercial banks are required to quote base lending rates in the daily press to enhance transparency and competitiveness.Primary market. The primary market with its periodic auctions is active, with a relatively large stock of public debt (approximately 25 percent of GDP).

    Secondary market. Secondary market for treasury bills is not well developed. No primary dealer system is in place. However, from January 1997, CBK instituted a central depository system, which enhanced efficiency in the rediscounting and redemption of treasury bills.

    Interbank market. Activity is limited; the market is segmented because of the risk of some banks. All quotes are for overnight lending.

    Stock exchange. The Nairobi Stock Exchange began operations in 1954. Currently, approximately 56 companies are listed.
    LesothoLesotho is a member of the Common Monetary Area and the South African Customs Union. The South African rand circulates as legal tender along with the loti, which is pegged at par to the rand. The Central Bank of Lesotho (CBL), established in 1982, uses reserve and liquid asset requirements as its main monetary instruments, along with interest rate and credit controls.

    Credit controls. CBL maintains bank-by-bank credit ceilings.

    Reserve requirement. CBL maintains a differential reserve requirement on demand and time deposits: 3 percent of savings deposits, 5 percent of time and call deposits, and 9 percent of demand deposits.

    Liquidity asset requirement. Yes, 30 percent of short-term deposit liabilities, 20 percent of medium-term liabilities, 5 percent of long-term liabilities, and 10 percent of customers' liabilities under acceptance.

    Interest rate controls. Yes.

    Open market operations. Although treasury bills are auctioned, open market operations are not yet an important instrument for the CBL.
    The overall level of interest rates is essentially determined by South Africa, the dominant member of the Common Monetary Area. Banks determine their prime lending rates. However, CBL controls the minimum savings deposit rate, the treasury bill rate, and rates on bank deposits at CBL.Primary market. Treasury bills are auctioned monthly. Recently, central bank paper was introduced, intended to complement treasury bills.

    Secondary market. None.

    Interbank market. None.

    Stock exchange. None.
    MadagascarSince 1996, the Banque Centrale de Madagascar (BCM) has used only indirect instruments.

    Open market operations. Treasury bills are auctioned; however, open market operations are not yet an important monetary instrument.

    Reserve requirement. A 20 percent reserve requirement on deposits is in effect. Requirement is determined on the basis of deposits at the end of the month.

    Standing facilities. A Lombard facility is available to banks, with the interest rate on borrowing equal to a reference rate established by the central bank plus a markup.
    Commercial bank borrowing and lending rates are determined freely with no controls.Primary market. Treasury bills are generally issued by means of auctions; however, real rates on these securities have generally been negative, although in the last two years they have turned positive.

    Secondary market. Little secondary trading of treasury bills takes place.

    Interbank market. An interbank market exists, but is not active.

    Stock exchange. None.
    MalawiReserve requirement. The reserve requirement is 35 percent on banks' domestic and foreign currency liabilities.

    Standing facilities. Reserve Bank of Malawi (RBM) maintains a discount window. Loans are collateralized, with maturities from overnight to two weeks.

    Open market operations. RBM conducts treasury bill auctions. Full-fledged open market operations are not yet conducted.

    Refinancing. The commonly used type of refinancing is the repurchase agreement, collateralized by short-term government securities. However, liquidity reserve requirements may be drawn upon for settlement balances in the clearinghouse (run by the RBM) at a penalty interest rate.
    Interest rates are freely determined.Primary market. Treasury bills are auctioned regularly. Book-entry system is used by the RBM, but approval of legislation is pending.

    Secondary market. Secondary trading of treasury bills takes place on the stock exchange; however, turnover and volumes are low.

    Interbank market. Yes, but very thin.

    Stock exchange. The Malawi Stock Exchange began operations in 1995; however, trading activity and volume remain low.
    MauritiusOpen market operations. As its main monetary policy instrument, Bank of Mauritius (BOM) regularly auctions treasury bills and BOM bills.

    Reserve requirement. The reserve requirement 6 percent of deposits net of interbank deposits and retained foreign currency accounts.

    Liquid asset requirement. This requirement was recently reduced to zero from 20 percent.

    Standing facilities. BOM provides a rediscount facility. Under the first tranche, banks can rediscount nonsugar export bills at I percent over the bank rate, or government securities including BOM bills at 1.5 percent over the bank rate. To encourage activity in the interbank market, BOM charges very high interest rates for the second and third tranches. BOM acts only as lender of last resort.

    Interest rate and credit controls. Despite a general move to more market-based monetary management—credit ceilings have been removed—there has been some reversion to special administered financing for priority sectors.
    Interest rates have not been liberalized except for interest rates on treasury bills and BOM bills. In June 1997, the rate of interest on savings deposits was 8 percent—slightly above the inflation rate of 7.9 percent for the 1.2-month period ended tone 1997.Primary market. Since April 1992, BOM has auctioned treasury bills and BOM bills on a weekly basis, using multiple-price method.

    Secondary market. A pseudo form of this activity consists of BOM traneactions with commercial banks outside the auctions. Until recently, secondary activity was inhibited by relatively high liquid asset requirement.

    Interbank market. Yes, but very thin.

    Stock exchange. Operations began in 1989; approximately 28 companies are listed currently.
    MozambiqueDirect instruments of monetary control—central bank credit and ceilings on commercial bank credit—continue to be the main monetary instruments in Mozambique; however, the importance of indirect instruments has been increasing.

    Credit controls. Bank of Mozambique (BOM) maintains bank-by-bank credit controls in the form of quarterly ceilings on the net domestic asset expansion of each commercial bank. The semiannual ceilings are enforced by penalties on excesses, as well as by reductions from subsequent ceilings.

    Reserve requirement. As of May 15, 1998, the reserve requirements are 9 percent of total demand and savings deposits for both local and foreign currency, including the bank aid government deposits.

    Standing facilities. BOM maintains a rediscount facility, with the rediscount rate positive in real terms.

    Refinance facility. Allocation is administratively determined.

    Open market operations. Treasury bills and BOM bills were recently issued for the first time.
    Interest rates have been liberalized. Bank lending and deposit rates were fully liberalized in June l994. The authorities have maintained positive real rediscount rates since the beginning of 1995. Reserve shortfalls and bank overdrafts are penalized at the rediscount rate plus percentage points.Primary market. BOM and treasury issue short-term securities on a quarterly basis, which are sold mainly to commercial banks.

    Secondary market. None.

    Interbank market. Interbank market in foreign exchange established in July 1996.

    Stock exchange. In preparation, money market established in September 1997.
    NamibiaNamibia is a member of the Common Monetary Area (along with Lesotho, South Africa, and Swaziland), and thus monetary policy is heavily influenced by South Africa. The Bank of Namibia (BON) was established in August 1990 as a central bank, and the national currency was introduced in 1993. Namibia has a currency board arrangement. Although there are legal requirements for reserves and liquidity, the BON cannot use them effectively for monetary purposes. Commercial banks are largely autonomous, with limited formal linkages to the central bank. Both the Namibia dollar and the South African rand are legal tender and exchange at par. However, the rand has been gradually withdrawn from circulation.

    Open market operations. BON conducts monthly auctions of treasury bills and notes and inland registered stocks.

    Reserve requirement. Yes, on domestic currency accounts: 5 percent of short-term deposits and 2 percent of medium-term deposits.

    Liquidity asset requirement. There is a minimum requirement of 20 percent on short-term deposits, 15 percent on medium-term deposits, and 5 percent on deposits over six months.

    Lending facility. BON maintains a discount facility, though it is seldom used because most banks have access to the South African market.
    Interest rates are market determined. Because of Namibia's membership in the Common Monetary Area and the national currency's peg to the rand, interest rates are strongly influenced by developments in South Africa. However, differentials exist between the two sets of rates, in part because of different reserve and liquidity requirements.Primary market. BON conducts auctions of treasury bills since 1991.

    Secondary market. There is no secondary market for short-term government securities, even though they are quoted on the stock exchange.

    Interbank market. Limited. Most commercial banks and nonbank financial institutions maintain close links with their South African parent or affiliated companies. Local interbank lending is limited since local banks frequently deal in the South African interbank market.

    Stock exchange. Established in 1992, the Namibian Stock Exchange lists approximately 33 companies and also maintains a dual listing of firms with the Johannesburg Stock Exchange. It is the second largest in sub-Saharan Africa after the Johannesburg Stock Exchange.
    RwandaMain monetary instruments are reserve requirements and rediscount window and lending and borrowing operations through the interbank market.

    Open market operations. Open market operations were interrupted for a time by an inability to pay interest on the public debt. However, authorities are restructuring government debt held by commercial banks and plan to resume open market operations in 1998.

    Reserve requirement. The main instrument of monetary policy in Rwanda, the requirement is set at 12 percent of deposits.

    Lending facilities. Central bank operates a rediscount window for government securities and prime quality private paper. The rediscount rate is set at 4 percentage points above the interbank money market rate.

    Refinance facility. A specialized refinance facility operated for financing crops, with the refinance rate maintained at the discount rate.
    Interest rates have been liberalized.Primary market. No activity currently. In recent years, the government and central bank have not been able to pay interest on public debt.

    Secondary market. Secondary market is not functioning.

    Interbank market. Interbank market is rudimentary. Small number of banks inhibits development of financial market.

    Stock exchange. None.
    South AfricaSouth Africa is a member of the Common Monetary Area (along with Lesotho, Namibia, and Swaziland) and plays a key role in determining monetary policy for the region. South African Reserve Bank (SARB) relies entirely on indirect instruments of monetary policy.

    Open market operations. SARB's active open market operations include transactions in government securities and in foreign exchange. In March 1998, it introduced repo operations and is developing a master repurchase agreement with participating banks. Also, foreign exchange swaps are frequently used to affect liquidity.

    Reserve requirements. Every commercial bank must have a basic cash reserve of 1 percent of total bank liabilities and a supplementary reserve of 1 percent of short-term bank liabilities.

    Credit facilities. SARB actively uses a rediscount facility to affect interest rates and credit conditions. Also, overnight loans are extended at the bank rate (currently 17 percent) against quality collateral.

    Other. Government funds are sometimes shifted between commercial banks and SARB to affect liquidity.
    Interest rates are free of controls. Real interest rates on government securities are positive—approximately 7 percent on long-term bonds in December 1997.Primary market. SARB conducts weekly auctions of treasury bills, other government securities, and (occasionally) central bank bills.

    Secondary market. It is active and highly developed. South Africa recently discontinued its system of primary dealers because it was considered no longer necessary.

    Interbank market. It is active and highly developed.

    Stock exchange. The Johannesburg Stock Exchange is modern and has a relatively high volume of transactions.
    SwazilandSwaziland is a member of the Common Monetary Area (with South Africa, Lesotho, and Namibia), which requires unrestricted transfers of funds between member states and uniform exchange controls with the rest of the world. The lilangeni is pegged to the rand at par. Monetary instruments include reserve requirements, liquidity requirements, and transactions with treasury and Central Bank of Swaziland (CBS) bills.

    Reserve requirement. An unremunerated reserve requirement of 6 percent is in effect (which is higher than in South Africa).

    Liquid asset requirement. CBS also has a liquid asset requirement of 17.5 percent of banks' deposits.

    Local asset requirement. This requirement was abolished in May 1996.

    Open market operations. Primary market operations are conducted.

    Credit facilities. A discount facility is maintained.
    Swaziland's interest rates are broadly in line with South Africa's. However, deposit rates and the discount rate have generally been somewhat below South Africa's, and inflation somewhat higher.Primary market. Treasury and CBS bills are auctioned periodically.

    Secondary market. The market for treasury and central bank bills is very illiquid.

    Interbank market. Little interbank lending takes place, in part because banks generally have excess liquidity.

    Stock exchange. It was started in 1990. However, only four companies are listed currently and activity is limited.
    TanzaniaSince the early 1990s, Tanzania has made good progress in liberalizing interest rates and developing indirect monetary instruments.

    Open market operations. Bank of Tanzania (BOT) uses transactions in the primary market and the foreign exchange market. Reverse repos (generally 7–14 days) are also used to absorb liquidity. Repos and reverse repos are carried out informally (i.e., without a master repurchase agreement).

    Reserve requirements. Currently, it is 10 percent on both domestic and foreign currency deposits. (Reserves on foreign currency deposits are held in domestic currency.)

    Liquid asset requirement. None.

    Lending facilities. There is a rediscount facility for government securities; the level of the rediscount rate is discretionary.

    Credit auctions. These auctions are collateralized.
    Interest rates are fully liberalized; however, real interest rates have at times been negative, particularly during periods of inflation.Primary market. Regular auctions of treasury bills (182–364 days) are conducted; 91-day BOT bills are also occasionally auctioned to mop up excess liquidity. These auctions function relatively well.

    Secondary market. Secondary market for government securities has not yet developed. There is no book-entry system or primary dealer system in place.

    Interbank market. Yes, although the market is thin, and loans are mostly uncollateralized.

    Stock exchange. The Dar es Salaam Stock Exchange commenced operations in April 1998.
    UgandaOpen market operations. These are carried out primarily through the primary market for treasury bills.

    Reserve requirement. Uganda has a reserve requirement of 9 percent of demand deposits, 8 percent of time and savings deposits, and 20 percent of foreign currency deposits. Banks are allowed to average reserves over a two-week maintenance period. Penalties are imposed for noncompliance.

    Lending facilities. A rediscount facility is available to banks, with borrowing rate determined by a margin (currently, 2 percentage points) over the 4-week moving average yield on 91-day treasury bills. Also, lender-of-last-resort facility is available up to 5 percent of required reserves (and possibly more) for a maximum period of two weeks.
    Interest rates are free of controls.Primary market. Auctions of treasury bills are conducted on a regular basis, using the multiple-price method. In addition, since February 1997, there have been five issues of Bank of Uganda bills—all have been undersubscribed.

    Secondary market. Secondary transfer of government securities is limited. Securities are based on physical form, and hand ledgers are maintained at the central bank. To enhance transferability, some treasury bills are in bearer form. In addition, there is a plan to introduce a central depository system in the near future.

    Interbank market. Interbank lending is relatively infrequent and long term (such as 30 or 60 days).

    Stock exchange. None.
    ZambiaOpen market operations. These are carried out in the primary market for treasury bills, in the foreign exchange market, and in auctions of repo agreements and Bank of Zambia (BOZ) term deposits. In July 1994, BOZ established a special sterilization account for treasury bills sold for monetary policy purposes; balances in this account can be used at the government's discretion. BOZ also relies on auctions of foreign exchange to meet its intermediate target for reserve money.

    Reserve requirement. In 1996, the reserve requirement was increased in two steps from 3 percent of deposits in July to 8 percent in December. Reserves on foreign currency deposits are held in local currency. Averaging of reserves is not permitted, and reserves are not available for settlement purposes.

    Liquidity requirement. In November 1997, the liquidity requirement was reduced to 38.5 percent of liabilities from 43.5 percent.

    Standing facilities. A rediscount facility for treasury bills is available to banks.

    Credit auction. Collateralized credit auctions are used.
    Interest rates are free of controls. However, some key interest rates are negative in real terms.Primary market. BOZ conducts weekly auctions of treasury bills, and also auctions repos and BOZ term deposits.

    Secondary market. A nascent, though relatively inactive, secondary market has emerged for government securities. An automated book-entry system was introduced in August 1997.

    Interbank market. There is an active, functioning interbank market, in which lending is mostly collateralized.

    Stock exchange. The stock exchange began operations in 1994.
    ZimbabweSince 1991, Zimbabwe has embarked on an ambitious economic and structural adjustment program, and the Reserve Bank of Zimbabwe (RBZ) has been relying increasingly on indirect instruments of monetary policy to bring inflation down to relatively low levels.

    Open market operations. These include primary and secondary markets, with RBZ making outright purchases and sales of treasury bills in the secondary market, but dealing only with discount houses.

    Deposit/RBZ bill facility. RBZ recently began offering a combination of deposit facility and RBZ bills to banks.

    Reserve requirement. A reserve requirement of 20 percent is in effect on banks' domestic deposits. On foreign currency deposits, a reserve requirement of 17.5 percent, payable in local currency, is in effect. It is based on the size of deposits measured twice a month, and the reserve must be maintained each day of the maintenance period.

    Standing facilities. RBZ maintains a rediscount facility and collateralized overnight facility, both available only to discount houses.
    Interest rates are free of controls. Positive real interest rates have generally been maintained.Primary market. Primary market for treasury bills is relatively active. Auctions are limited to discount houses, which function as intermediaries. RBZ also sells treasury bills on tap following auctions. Recently, RBZ deposits and RBZ bills have been offered to banks at a rate related to the cost of funds.

    Secondary market. Secondary market for treasury bills is relatively active. At present, Zimbabwe is implementing a book-entry system. To some extent, the five discount houses operate as primary dealers.

    Interbank market. Interbank market is relatively well developed and active.

    Stock exchange. Established in 1946, the stock exchange has approximately 80 companies listed.
    Table A6.Monetary Policy Instruments in Use in Selected Sub-Saharan African Countries, 1997
    Monetary Instruments
    DirectIndirect
    CreditInterest rateRes. requirementsCredit/deposit auctionsRepo agreementsTransaction outrightDiscount Facilities
    DomesticForeignGovernmentCentral bankOvernightOthers
    AngolaYYYNNNNNYY
    BCEAONNYNYYY1NNY
    BEACNNNNYNY1YNY
    BotswanaNNYNNNNYYY
    EthiopiaYNYNNNNNNY
    GhanaNNYYNNYYNY
    KenyaNNYNNYYY2YY
    LesothoYYYNNNYYNY
    MadagascarNNYYYNYNNY
    MalawiNNYYNNYNNY
    MauritiusNNYYNNYYYY
    MozambiqueYNYYNNYYYY
    NamibiaNNYNNNNNNY
    RwandaNNYYNNNNNY
    South AfricaNNYYNYYNYY
    SwazilandNNYYYNYNNY
    TanzaniaNNYYNYYNNY
    UgandaNNYYNNYYYN
    ZambiaNNYYYNYNYY
    ZimbabweNNYYNY3YNYY

    This was a onetime outright sale of long-term bonds.

    Lombard and lender-of-last-resort.

    The system can be categorized as quasi-repo agreement (collateralized advances).

    Table A7.Development of Securities Market in Selected Sub-Saharan African Countries, 1997
    Government Securities Market
    BiddersShort-term
    OpenLimited participationGovernment financingOpen market operationsAuctionsTapLong-term
    CompetitiveMarginal
    Angola1NNNNNNNN
    BCEAOYNNCentral bank billsNYNY2
    BEACYNNCentral bank billsNYNY2
    BotswanaNYNBOB certificatesY, miniY, main auctionsYN
    EthiopiaYNYNNYNN
    GhanaNYYYYNNY
    KenyaYNYYYNYY
    LesothoYNYYYNYY
    MadagascarNYYNYNYY
    MalawiYNYNYNNY
    MauritiusNYYYYNNY
    MozambiqueNNYNYNNN
    NamibiaYNYNYNNY
    RwandaNNYNNNYN
    South AfricaYNYT-bill central bank billsYNYY
    SwazilandYNYYYNNN
    TanzaniaYNYYYNYY
    UgandaYNNYYNNN
    ZambiaNYYYNYNY
    ZimbabweYYYYYNNY

    No government securities market yet.

    Securitization by BCEAO and BEAC of government debt for bank restructuring.

    Table A8.Developments in the Foreign Exchange Area in Selected Sub-Saharan African Countries, 1997
    CountryExchange Rate Arrangements and PolicyForeign Exchange Market StructureForeign Exchange Regulatory FrameworkCentral Bank Operations
    AngolaArrangements:

    1. Foreign exchange pegged to U.S. dollar since July 1, 1996; unitary official rate.

    2. Prescription. The National Bank of Angola (BNA) prescribes the currencies to be used in import/export transactions.

    3. Payments. Bilateral settlement (barter) arrangements, which do not contain bilateral payment features, are maintained with Brazil, Portugal, and Spain. No clearing arrangement.

    4. Administration of control. According to the new exchange law approved in early 1997, the BNA is the exchange authority.

      The BNA has authorized commercial banks and exchange houses to carry out transactions in the foreign exchange market. Authority has been delegated to banks to license and execute permitted invisible and capital foreign exchange transactions. Licensed foreign exchange dealers may deal only in banknotes and traveler's checks.

    5. Official payments arrears. Yes. Arrears on post-cutoff- date debt to Paris Club and multilateral.

    6. Controls on domestic banknotes. Export/import by travelers is prohibited.

      Outcome:

      The adjusted kwanza (KZR) was devalued by 2,740 percent (in national currency terms) during the first half of 1997, and again by 30 percent in July 1997.

      Gross reserves:

      Angola has incurred arrears on most categories of external debt (including pre-cutoff-date debt). Gross reserves fell from 1.5 months of imports at end-1996 to 0.9 months of imports at end-1997

      External financing: Dependency.

    Since July 1, 1996, all transactions are mandated to take place at the official exchange rate determined by BNA at fixing sessions when foreign exchange is being sold to commercial banks. BNA applies a spread of 1 percent to its buying and selling rates (primary official), and commercial banks apply a spread of 6.1 percent (secondary official).

    BNA adjusts the exchange rate whenever market conditions cause the emergence of a significant spread vis-á-vis the parallel market.

    The amounts of foreign exchange made available by BNA at fixings have dwindled into insignificance since September I995. BNA'S priority list exhausts the amounts channeled through the fixings. Some companies and high-level officials bypass the fixing by obtaining foreign exchange directly from BNA. As a result, the system lacks transparency.

    Reflecting the prospering informal sector funded mainly by illegal diamond sales, there has been a rapid growth in exchange houses. Since July 1, 1996, the exchange houses are no longer allowed to deal at market-determined rates, but instead at rates set for commercial banks.

    However, an illegal parallel rate also exists as a result of restrictions on official rate foreign exchange transactions, and the dollarization of the economy. The parallel market exchange rate depreciated from KZR 270,000 per U.S. dollar at end-December 1996 to KZR 398,000 at end-December 1997. During this period, the spread between the parallel and the official exchange rates rose to 52 percent from 34 percent.

    No forward exchange market or official coverage.

    The amount of debt guaranteed by future oil shipments is estimated at some US$2.5 billion.

    Volatility. Vulnerability to fluctuations in world commodity (petroleum) prices.
    Article XIV status.

    New banking, foreign exchange, and investment law:
    1. The IMF (MAE) has called for the establishment of a foreign exchange market system to be initiated with auctions. The IMF also calls for a new foreign exchange law and the external auditing of the BNA and the petroleum and diamond sectors.

    2. The new privatization program approved by the national assembly excludes privatization of the state-owned commercial banks. More recently, the national assembly separately voted the privatization of the banks, but the authorities hoped to improve management with the installation of a private management team.



    Accounts in foreign and domestic currencies:
    1. Foreign exchange accounts may be held domestically by residents and, with prior approval, by nonresidents. These accounts may be credited with retained export earnings, transfers from abroad, cash, traveler’s checks, foreign payment orders, and interest accrued. Nonresidents may deposit proceeds from their activities in Angola.

      Foreign exchange accounts may be debited with sales against domestic currency. For residents, checkbooks may not be issued against personal accounts; transfers between accounts are prohibited; and imports, invisibles, or capital payments may not be settled. Nonresidents may debit repatriation of all or part of the existing deposit.

    2. Domestic currency accounts held by nonresidents are not convertible and may be withdrawn to cover expenses incurred during their stay in Angola only.



    Import payments:
    1. Foreign exchange budget. All imports are subject to licensing according to a positive list and the foreign exchange budget. The issuance of import licenses for transactions paid with foreign exchange purchased from the banking system is subject to the availability of foreign exchange. The corresponding positive list assigns priority to particular transactions, which are periodically announced by BNA. Foreign exchange may be released to registered importers who file a pro forma invoice valid for 90 days to the ministry of commerce.

    2. Financing requirements. Importers using their own funds are required to sell a foreign exchange amount equal to the import value to a commercial bank prior to shipment.

    3. Documentation requirements for releasing foreign exchange. Domiciliation with banks, preshipment inspection by the Societe generale de surveillance, and letters of credit are required.



    Export proceeds:

    Except for foreign oil companies, all exports of goods and services are subject to licensing. Repatriation and surrender of proceeds are required within 30 days of shipment through the BNA or the commercial bank of domiciliation. The BNA may authorize exporters to retain a certain portion of foreign exchange earnings to be deposited in accounts with local banks. On a case-by-case basis, the BNA may permit retaining abroad.

    Invisibles:

    All payments require licensing, prior approval, and contracting local insurance for all transportation. Prior approval from the ministry of finance for remittance of dividends by foreign investors is granted if their investment in resident company exceeds US$250,000. Service earnings must be surrendered within 30 days of receipt unless provider authorized to retain by BNA.

    Capital transactions:

    All inward and outward capital transactions are controlled. Foreign investment activities are subject to the provisions of the Foreign Investment Law (1994) and foreign exchange control regulation. Implementation is the responsibility of the Foreign Investment Bureau (ministry of planning and economic coordination). Foreign investment in petroleum production, diamond mining, and financial institutions is governed by separate legislations. Foreign investors are guaranteed the right to transfer abroad the proceeds of the sale of investsments, including gains and amounts owed to them after payment of taxes due, but the ministry of finance's prior approval is required.

    Open foreign exchange exposure: N.a.
    Since mid-1996, the foreign exchange budget has been tightened and the positive list shortened. Moreover, imports with foreign exchange not purchased from the banking system have been banned.

    The official exchange rate has been adjusted whenever market conditions have caused the emergence of a significant spread vis-á-vis the parallel market. Interest rates have been raised to real terms and indexed to the official exchange rate.

    Strict limits on the monetary financing of budgetary and quasi-fiscal outlays and the strict monitoring of credit limits imposed on commercial banks resulted in a substantial reduction in the spread between official and parallel exchange rates.
    Central Bank of West African States (BCEAO): Benin, Burkina Faso, Côte d'lvoire, Guinea-Bissau, Mali, Niger, Senegal, TogoArrangements:

    1. Forejgn excnange. Pegged, unitary. The CFA franc is pegged to the French franc, the intervention currency, at the fixed rate of CFAF 1 per F 0.01, and the exchange rates for other currencies are derived from the rate for the currency at issue in the Paris exchange market and the fixed rate between the French and the CFA francs. The BCEAO levies no commission on transfers to or from all countries outside the WAEMU, but member governments may.

    2. Prescription. Because the BCEAO member countries are linked to the French treasury through an Operations Account, settlements with France, Monaco, and other Operations Account countries are made in CFA francs, French francs, or the currency of any other Operations Account country. Settlements with all other countries are usually effected through correspondent banks in France.

    3. Payments. Clearing agreement; current payments to or from The Gambia, Ghana, Guinea, Liberia, Mauritania, Nigeria, and Sierra Leone are normally made through the West African Clearing House.

    4. Administration of control. Part of the approval authority has been delegated to the BCEAO by the member governments.

    5. Controls on domestic banknotes. Since August 3, 1993, the BCEAO no longer repurchases its banknotes exported outside WAEMU.



    Outcome:

    The CFA franc depreciated by 2.4 percent in nominal terms against the U.S. dollar in 1996.

    External financing:

    Dependency—to be completed.
    The BCEAO uses persuasion to centralize foreign reserves. Foreign exchange transactions by commercial banks are normally made through the BCEAO. There are no local interbank foreign exchange market and no foreign exchange bureaus.

    In practice, banks may transact abroad through their correspondent banks in France and overseas. They maintain foreign exchange positions abroad in line with cover requirements for documentary credits and other current external transactions.

    Most commercial bank liquid assets are held in CFA francs with the BCEAO in deposit, short-term bills directly issued by the BCEAO, or public bonds guaranteed by the BCEAO.

    Forward exchange cover for eligible imports and exports may be arranged for residents only for a duration of one to four months as a maximum with prior authorization by member governments.

    No official coverage.

    Volatility: Vulnerability to fluctuations in world commodity (mainly coffee, cocoa, and cotton) prices and climatic conditions.
    All member countries accepted Article VIII status (June 1996).

    Resident and nonresident accounts:

    1. Accounts in foreign currency. Accounts domestically held by residents and nonresidents require prior approval by the member governments. Accounts held abroad by residents are not explicitly prohibited, but transfers tending to develop these holdings are prohibited.

    2. Since the BCEAO has suspended the repurchase of its banknotes held outside WAEMU, accounts in convertible domestic currency held by nonresidents may not be credited or debited with BCEAO banknotes.

      These accounts may not be overdrawn without prior authorization, but may be freely debited for the purpose of purchasing any foreign exchange in the official foreign exchange market. Transfers of funds between nonresident accounts are not restricted.



    Import payments:

    1. Financing requirements. Advance payments for imports require authorization, and importers may not acquire foreign exchange until the contractual date of the payments.

    2. Documentation requirements for releasing foreign exchange. Yes, domiciliation with authorized banks is required for all import transactions exceeding CFAF 500,000; preshipment inspection is also required.



    Export proceeds:

    1. Documentation. Exports of CFAF 500,000 and over must be domiciled with an authorized bank.

    2. Repatriation and surrender. Proceeds from exports, including those to WAEMU members and other Operations Account countries, must normally be repatriated within 120 days of arrival at destination and surrendered by the authorized intermediary banks to the BCEAO via transfer through the bank of issue not later than one month after due date.



    Invisibles:

    All payments are controlled on the basis of a bona fide test; indicative limits apply to payments for travel outside the franc zone. Proceeds from exports of goods must be repatriated and surrendered.

    Capital transactions:

    Capital movements among Operations Account countries are free of restrictions. Capital transfers to all other countries require prior authorization from member governments and are restricted, but capital receipts from these countries are permitted freely.

    Credit by residents to nonresidents is controlled and requires an “exchange authorization” to be delivered by the BCEAO.

    Open foreign exchange exposure is monitored and supervised by the BCEAO.
    The BCEAO maintains at least 65 percent of its international reserves in French francs in the Operations Account. Other international reserves comprise SDRs and bonds traded in the international security market.

    The BCEAO bears foreign exchange risks collectively on behalf of WAEMU countries.

    Because of the fixed foreign exchange arrangements with France, the scope for national policies in the member countries is limited to fiscal and domestic credit management.

    The member countries are all under programs with the IMF or are preparing for one. Program targets in monetary policies are set on government borrowing from the banking system.

    Gross official foreign assets of the individual countries are claims in CFA francs on the common foreign reserves invested abroad by thp BCEAO on behalf of the member countries.
    Bank of Central African States (BEAC): Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea, GabonArrangements:

    1. Foreign exchange. Pegged, unitary. The CFA franc is pegged to the French franc, the intervention currency, at the fixed rate of CFAF 1 per F 0.01. The exchange rates for other currencies are derived from the rate for the currency concerned in the Paris exchange market and the fixed rate between the French and the CFA francs. For certain transactions, a commission of 0.25 percent is levied on transfers to countries outside the Central African Economic and Monetary Community (CAEMC).

    2. Prescription. Because the CAEMC countries, whose central bank is the BEAC, are all linked to the French treasury through an Operations Account, settlements with France, Monaco, and other Operations Account countries are made in CFA francs, French francs, or the currency of any other Operations Account country. Settlements with all other countries are usually effected through correspondent banks in France in any of the currencies of those countries or in French francs through foreign accounts in French francs.

    3. Payments. Regional arrangement within the CAEMC, whose central bank is the BEAC.

    4. Administration of control. Local governments.

    5. Controls on domestic banknotes. Since August 3, 1993, the BEAC no longer repurchases its banknotes exported outside the CAEMC.



    Outcome:

    The CFA franc depreciated by 2.4 percent in nominal terms against the U.S. dollar in 1996.
    The BEAC uses persuasion to centralize foreign reserves and limit transfers abroad. Foreign exchange transactions by commercial banks are normally made through the BEAC.

    There are no local interbank foreign exchange market or foreign exchange bureaus. Informal trade in BEAC banknotes, particularly with Nigeria, has grown significantly during recent years.

    Banks may also transact abroad through their correspondent banks in France and overseas. They maintain foreign exchange positions abroad in line with cover requirements for documentary credits and other current external transactions.

    Most commercial bank liquid assets are held in CFA francs with the BEAC in deposit short-term bills directly issued by the BEAC.

    Forward exchange cover requires the prior authorization of the exchange control authorities. It must be denominated in the currency of settlement prescribed in the contract, and the maturity period must be between three and nine months. Settlements must effected within eight days the maturity date of the forward contract.

    There is no official coverage.

    Volatility: Vulnerability to fluctuations in crude petroleum receipts, and world commodity prices for cocoa, coffee, cotton, rubber, and timber.
    All member countries accepted Article VIII status (June 1996).

    Resident and nonresident accounts:

    1. Accounts in foreign currency. Residents and nonresidents are not permitted to maintain foreign exchange accounts domestically. Residents are not allowed to maintain foreign exchange accounts abroad.

    2. Accounts in convertible domestic currency held by nonresidents. The regulations pertaining to nonresident accounts are based on those applied in France.



    Since the BEAC has suspended the repurchase of its banknotes circulating outside the CAEMC, banknotes received by the foreign correspondents of authorized banks and mailed to the BEAC agencies may not be credited to foreign accounts in CFA francs.

    With prior approval, nonresidents are allowed to maintain bank accounts in convertible francs in the CAEMC countries only.

    These accounts, held mainly by diplomatic missions, international institutions, and their nonresident employees, may be credited only with (1) proceeds of spot or forward sales of foreign exchange transferred from abroad by account owners; (2) transfers from other nonresident convertible franc accounts; and (3) payments by residents in accordance with exchange regulations.

    These accounts may be debited only for (1) purchases of foreign currencies; (2) transfers to other nonresident convertible accounts; and (3) payments to residents in accordance with exchange regulations.

    Import payments:

    1. Financing requirements. None.

    2. Documentation requirements for releasing foreign exchange. Yes, domiciliation with authorized banks is required for all import transactions exceeding CFAF 500,000 if the goods are not considered in transit; preshipment inspection is also required.



    Export proceeds:

    1. Documentation. Exports of CFAF 500,000 and over must be domiciled with an authorized bank; preshipment inspection is required.

    2. Repatriation and surrender. Proceeds from exports to all countries must be repatriated within 30 days of the payment date stipulated in the sales contract, and surrendered within one month of collection if received in currencies other than those of France or an Operations Account country.



    Invisibles:

    Payments in excess of CFAF 500,000 to France, Monaco, and the Operations Account countries require prior declaration and are subject to presentation of relevant invoices. Payments related to trade follow the same regime as basic trade transactions, as do transfers of income accruing to nonresidents in the form of profits, dividends, and royalties.

    All payments are controlled on the basis of a bona fide test; quantitative limits apply to payments for travel, medical costs, study abroad, and family maintenance.

    Proceeds from exports of goods must be repatriated and surrendered.

    Capital transactions:

    Capital movements among Operations Account countries, France, and Monaco are free of exchange control. Outward capital transfers to all other countries require exchange control approval and are restricted. Inward transfers are free of restrictions, except for foreign direct investments and borrowing, which are subject to registration and authorization.

    Credit by residents to nonresidents requires prior exchange control authorization.

    Open foreign exchange exposure is monitored and supervised by the BEAC.
    The BEAC maintains at least 65 percent of its international reserves in French francs in the Operations Account. Other international reserves are mainly bonds traded in the international security market.

    Because of the fixed foreign exchange arrangements with France, the scope for national policies in the member countries is limited to fiscal and domestic credit management.

    The member countries all have a program with the IMF or are preparing for one. Program targets in monetary policies are based on net domestic credit by the central bank in each member country.

    Gross official foreign assets of the individual countries are claims in CFA francs on the common foreign reserves invested abroad by the BEAC on behalf of the CAEMC countries.
    BotswanaArrangements:

    1. Foreign exchange rate. Pula pegged to weighted currency basket, in which South African rand is dominant. In recent years, pula pegged predominantly to South African rand.

      Dual rate: multiple currency practice out of outstanding obligations under foreign exchange risk-sharing scheme discontinued since 1990.

    2. Payments. Unrestricted within Southern African Currency Union.

    3. Bilateral. Operative bilateral trade agreements. Participant in Southern African Currency Union and Southern African Development Community.

    4. Administration of control. Bank of Botswana (BOB) implements foreign exchange policy and administers foreign exchange control determined by government; delegates powers to commercial banks; invests and manages foreign exchange reserves.

    5. Official payments arrears. No.

    6. Control on domestic banknotes. Residents may export up to P 5,000 a trip. No limit on imports.

    7. Control on foreign banknotes. Export by residents limited to up to equivalent of P 5,000; import: no limit.



    Outcome:

    The pula depreciated by 16.6 percent in nominal terms against the U.S. dollar in 1996.

    Gross reserves were stable at 27.5 months of imports in 1996.
    A small informal foreign exchange interbank market is developing among authorized dealers on the basis of open positions on customers' accounts. All authorized dealers are expected to surrender foreign exchange to BOB and are being imposed zero positions on their own accounts.

    BOB deals with the commercial banks bilaterally and is not informed of the dealings among them.

    Draft regulation authorizing the establishment of foreign exchange bureaus for small cash transactions is being prepared.

    Forward exchange cover is offered by the commercial banks and may be given in respect of the foreign currency proceeds derived from the exportation of goods for up to six months.

    Volatility: Highly seasonal and substantial inflows of diamond receipts are associated mainly with tax payments by the mining company, Debswana.
    Accepted Article VIII status (November 1995).

    New banking, foreign exchange, and investment law:

    Stock Market Act passed 1995; Collective Investments Units Bill to be passed 1997/98; pending regulation on establishment of foreign exhange bureaus.

    Accounts in foreign, and convertible domestic, currency:

    Residents and nonresidents may open foreign exchange accounts with authorized dealers. With prior BOB approval, residents may maintain foreign currency accounts abroad if proven commercial need. Nonresidents may freely maintain foreign, and convertible domestic, currency accounts.

    Import payments:

    1. Financing requirements. Advance payments permitted for legitimate commercial needs.

    2. Documentation requirements for releasing foreign exchange. Proof of import for value exceeding P 10,000.



    Export proceeds:

    Foreign currency earned or owned by permanent and temporary residents, and nonresidents, may be kept in foreign currency accounts to be explicitly designated as either for current account or for capital transactions.

    Invisibles:

    Payments controlled. For payments in excess of P 10,000 a transaction, authorized dealers must require documentary evidence of legitimate purpose and current account transaction. Proceeds: same as exports.

    Capital transactions:

    There is a small stock market with Botswana acting as sole intermediary or stockbroker. No domestic bond financing and market. Market for BOB certificates traded by BOB and 12 primary dealers being developed as beginning of money and capital market.

    1. Inward investment is controlled.

      • Portfolio holdings by nonresidents may not exceed 49 percent of “free stock” of local company.

      • Nonresidents may not buy BOB monetary instruments.

      • Authorized dealers are permitted to receive loan funds from nonresidents for resident customers of up to P 100,000 (individuals) and P 1 million (companies) without any prior reference to BOB. Interest on these loans is restricted to 1 percent above the relevant London interbank offered rate.

    2. Control over outward investment.

      • Quantitative limit of up to P 100,000 and P 1 million for resident individuals and companies, respectively, in offshore securities, money market instruments, direct investment, and purchases of real estate.

      • Credit by resident credit institutions to nonresident-controlled entities up to 4:1 debt-to-equity ratio after initial tranche of P 1 million without reference to BOB.

      • Institutional investors are permitted to invest up to 70 percent of portfolio externally.



    Open foreign exchange exposure:

    The limit is 10 percent of core capital of a bank on account of customers only. Banks are strictly prohibited from taking any position on their own account
    Because of the effective peg of the pula to the rand, there is limited scope for independent foreign exchange and monetary policy.

    The BOB controls the growth of money supply and inflation through bank liquidity.

    The BOB regularly proceeds with open market operations in central bank certificates to sterilize capital inflows and absorb excess liquidity.

    The mission in February 1997 recommended the establishment of a small foreign exchange committee to formalize and monitor foreign exchange market. It also recommended creation of a complete array of monetary policy instruments to deal with cyclical and erratic short-term fluctuations and mediumterm trend.

    The net cost of the BOB open market operations is expected to disappear with further progress in liberalizing capital transactions.
    EthiopiaArrangements:

    1. Foreign exchange. Independent floating, unitary. A commission of 0.5 percent on buying and 1.5 percent on selling accrues to the National Bank of Ethiopia (NBE); authorized dealers may levy service charges of up to 0.25 percent on buying, and 0.75 percent on selling for their own account.

    2. Prescription and payments. Effective December 1997, all settlements with Eritrea are made in hard currency with the exception of small (up to Br 2,000) barter trade, which can be conducted in either birr or nakfa (the Eritrean currency).

    3. Clearing. No.

    4. Bilateral. No.

    5. Administration of control. Under NBE control, all foreign exchange transactions must be carried out through authorized dealers. The NBE Exchange Controller issues exchange licenses for all exports and payments abroad, and permits for all shipments. The ministry of trade formulates the external trade policy.

    6. Official payments arrears. More than 50 percent of the debt is owed to Russia, and the rescheduling of debts and arrears is now under negotiation between the two governments.

    7. Controls on domestic banknotes. Export/import by travelers limited to Br 10.



    Outcome:

    The Ethiopian birr depreciated by 1.7 percent in nominal terms against the U.S. dollar in 1996 (end of period) and by 6.6 percent in 1997 (end of period).

    Gross reserves rose from 6.6 months of imports of goods in 1994/95 to 7.9 months in 1995/96 and then declined to 5.1 months of imports of goods (or 4.3 months of goods and nonfactor services) in 1996/97 (July/June).

    External financing:

    Dependency.
    The official exchange rate of the birr against the U.S. dollar is the marginal rate (i.e., lowest successful bid) determined in weekly auctions for announced quantities of foreign exchange, as determined by the NBE.

    The two state-owned commercial banks, the four domestic private banks, and the foreign exchange bureaus participate in the auctions. The foreign exchange bureaus operate within the banking system and conduct transactions in invisibles only within approved limits.

    Commercial banks and foreign exchange bureaus may bid on their own account in foreign exchange auctions to fulfill demands for clients. Cover required in buying at auctions was reduced from 100 percent to 25 percent in July 1995 and was eliminated in July 1996.

    There is a parallel foreign exchange market. However, the premium in this market went down to about 18 percent by mid-1996, hovered in the range of 5–6 percent in the second half of 1997, and is now close to 0 percent.

    No forward exchange market or official coverage.

    Volatility: Vulnerability to fluctuations in world commodity (coffee) prices and climatic conditions.
    Article XIV status.

    New banking, foreign exchange, and investment law:

    Further removal of regulatory and legal impediments to private sector activity, particularly investment, is called for by the IMF. The foreign exchange bureaus should be made independent of the banks. The investment code needs to be revised so as to allow foreign investment/participation in more sectors (including banking), and the pace of privatization and government divestiture should be accelerated. The authorities engaged in a phased elimination of remaining current account restrictions until 1999.

    With prior NBE approval, accounts in foreign currency may be domestically held by residents and nonresidents under certain conditions:

    1. Residents. Exporters and recipients of remittances are allowed to open foreign exchange accounts. These accounts may be credited with 10 percent retained on proceeds. They may not be debited to acquire shares, stocks, bonds, or any other security denominated in foreign exchange, without prior NBE approval.

    2. Nonresidents. Foreign exchange acounts may be opened with NBE prior approval. These accounts must be credited with deposits in foreign exchange. Balances may be freely debited for transfers abroad; transfers between nonresident accounts do not require prior approval. Joint ventures are permitted to open foreign exchange accounts.



    Accounts in convertible domestic currency may be opened by nonresidents and diplomats with prior NBE approval. These accounts may be debited for payment of local expenses.

    Blocked accounts of nonresidents are maintained to retain funds in excess of Br 20,000 arising from disinvestments in Ethiopia.

    Import payments:

    Importer and exchange licenses must be obtained. Imports of vehicles require prior authorization from the ministry of transport and communications.

    1. Financing requirements. Most financing methods require NBE approval.

    2. Documentation requirements for releasing foreign exchange. Exchange licenses may be obtained when a valid importer's license is presented together with final invoices, nonnegotiable bill of lading, and evidence that adequate insurance has been arranged.



    Export proceeds:

    All exports are licensed through the exchange controller, and all shipments require permits from that office.

    Repatriation and surrender of 90 percent of the net proceeds are required: 50 percent to be surrendered to NBE on receipt, and 40 percent to commercial banks and foreign exchange bureaus within 21 days. Retention of 10 percent.

    Invisibles:

    Payments for invisibles require foreign exchange licenses. Invisibles connected with trade transactions are treated in a similar way without quantitative limits. Profits and dividends may be freely remitted by foreign companies after paying local taxes. Travel, medical, family maintenance, study expenses abroad, and workers' remittances are subject to prior approval and quantitative limits. Ninety percent of proceeds from invisibles must be surrendered within 21 days.

    Capital transactions:

    Inward, foreign borrowing, and outward transfers are controlled. Banks may place their funds abroad freely except on fixedterm deposits. Banks need prior NBE approval on all security investment and borrowing abroad. Inward direct investment is controlled by the investment office. Investment licensing is required for real estate purchases. Liquidation of investment and repatriation of capital must be authorized by the exchange controller.

    Open foreign exchange exposure:

    Banks need prior NBE approval to overdraw their accounts with foreign correspondents, borrow funds abroad, or accept deposits in foreign exchange.
    NBE intervention in the foreign exchange market is aimed at achieving international reserve targets consistent with broad money, which is a nominal anchor, as projected under the current ESAF program.

    NBE maintains flexibility in the official exchange rate.

    Reduction in the government debt vis-á-vis the banking system allowed for increases in credit to the private sector while achieving the broad money target.
    GhanaArrangements:

    1. Foreign exchange. Independent floating, unitary.

    2. Payments. Clearing agreement; current payments to or from the BCEAO countries, The Gambia, Guinea, Liberia, Mauritania, Nigeria, and Sierra Leone are normally made through the West African Clearing House.

    3. Bilateral. Yes, various inoperative.

    4. Administration of control. The Foreign Transactions Examinations Office of the Bank of Ghana (BOG) records and confirms foreign capital inflows and administers foreign exchange for official payments and travel. All foreign exchange transactions by the private sector are approved and effected by authorized banks without reference to the BOG.

    5. Official payments arrears. No.

    6. Controls on domestic banknotes. Export/import by travelers limited to equivalent of US$5,000.



    Outcome:

    The cedi depreciated by 17.4 percent in nominal terms against the U.S. dollar by end-1996. Gross reserves declined from 4.6 months of imports in 1995 to 3.4 montns in 1996.

    External financing: Dependency.
    The exchange rate is determined in the foreign exchange interbank market, which is not developed. Exchange rates are often negotiated bilaterally between the banks and the foreign exchange bureaus, and their customers. BOG transacts (usually selling) foreign exchange with banks only.

    The average market exchange rate is used for official valuation purposes but is not always applied by authorized banks in their transactions with each other or with their customers.

    No forward exchange market or official coverage.

    Volatility: Wide variation of inflows associated with traditional cocoa and mining exports.

    In 1996, there was a shortfall in donor financing related to poor program performance.
    Accepted Article VIII status (February 1994).

    New banking, foreign exchange, and investment law: None currently.

    Accounts in foreign currency may be freely held domestically by residents. With prior BOG approval, qualifying nonresidents may hold foreign exchange and convertible domestic currency accounts. These accounts may be credited with authorized outward payments, with transfers from other foreign accounts, and with the proceeds from sales of convertible currency. They may be debited for inward payments, for transfers to other foreign accounts, and for purchases of external currencies.

    Blocked accounts:

    Certain types of capital proceeds may be deposited and debited for authorized payments only.

    Import payments:

    1. Financing requirements. None.

    2. Documentation requirements for releasing foreign exchange. Yes, preshipment inspection.



    Export proceeds:

    Repatriation is required within 60 days of shipment. Proceeds from nontraditional exports may be fully retained or sold in foreign exchange bureaus. Partial surrender in various proportions required for traditional exports.

    Invisibles:

    Trade-related payments must be properly documented. Quantitative limits applied on payments for travel. Repatriation and surrender through sale to authorized dealers required for all receipts from invisibles.

    Capital transactions:

    1. Outward capital transfers require prior BOG approval or are not allowed. Institutional investors are permitted to invest portfolio externally without limit.

    2. Inward investment is controlled. Restrictions include quantitative limits on, and/or BOG prior approval of, portfolio investment.

    3. Inward direct investment and real estate purchases are subject to investment code provisions and prior approval by the Ghana Investment Center. Resident foreign-owned companies need prior BOG approval on local loan and overdraft facilities.

    4. For outward direct investment, prior BOG approval is required case by case, and real estate purchases abroad are normally not granted foreign exchange.

    5. Credit by residents to nonresidents is not controlled, but credit by nonresidents to residents requires prior BOG approval.



    Open foreign exchange exposure is limited on the basis of the volume of foreign exchange transactions of dealer banks, which is subject to periodic review.

    All authorized foreign exchange dealers are subject to daily limits on their net foreign exchange open positions. Excess holdings must be sold to other dealers or the BOG.
    BOG controls reserve money as a nominal anchor for reducing inflation and as a performance criterion in the current ESAF program.

    BOG intervention policy in the foreign exchange market is airectea at smootning short-term fluctuations, subject to meeting the ESAF program target for net foreign assets.

    In the event of strong unanticipated foreign exchange inflows, open market intervention by BOG is conducted to bring money supply in line with demand.

    However, in 1996, BOG proceeded with large unprogrammed foreign exchange sales to support exchange rates.
    KenyaArrangements:

    1. Foreign exchange. Independent floating, with occasional elements of managed floating, unitary; official exchange rate is set at previous day's averaged market rate.

    2. Payments. Clearing agreement within Common Market for Eastern and Southern Africa (former Preferential Trade Area for Eastern and Southern African States). The Kenya shilling is freely convertible in Tanzania and Uganda shillings since July 1, 1996. After clearing, excess holdings are credited in U.S. dollars to the respective central banks every two months.

    3. Bilateral. None.

    4. 4. The IMF granted temporary approval of the retention of the multiple currency practice (outstanding commitments under the ESAF abolished in 1994).

    5. Administration of control. The Central Bank of Kenya (CBK) holds regulatory power by Central Bank Act.

    6. Official payments arrears. Yes, rescheduled or under continuing negotiation.

    7. Controls on domestic banknotes. None.



    Outcome:

    The Kenya shilling depreciated by 4 percent in nominal effective terms at end-1997.

    Gross reserves rose from 1.8 months of imports in 1995 to 3.6 months in 1996.
    The exchange rate is determined in the foreign exchange interbank market. Foreign exchange bureaus are authorized to deal in cash and foreign traveler's checks.

    The official exchange rate applies only to government imports and external debtservice payments, for which there are specific budget allocations.

    Commercial banks are authorized to enter into forward exchange contracts with their customers at marketdetermined exchange rates in currencies of their choice. There are no limits on the amount or period of cover.

    Volatility: Was due, mainly, to large short-term private capital inflows in 1996, which were projected to moderate in 1997. Inflows reflected:

    1. increased demand for foreign currency credit and reduction in domestic currency debt;

    2. reduction in commercial banks' net foreign assets because of lower demand for forward cover by importers;

    3. higher investment by nonresidents, including institutional investors, in treasury bill market and deposits with banking system.



    Domestic public debt was equivalent to 20 percent of GDP in 1996.
    Accepted Article VIII status (June 1994).

    New banking, foreign exchange, and investment law:

    The Central Bank of Kenya Act was approved by parliament, and the legislation to establish an anticorruption authority was put in place.

    Accounts in foreign, and convertible domestic, currency may be freely held and credited/debited by, and between, residents and nonresidents.

    Import payments:

    1. Financing requirements. None.

    2. Documentation requirements for releasing foreign exchange. Yes, preshipment inspection, other customs documentation.



    Export proceeds:

    No repatriation or surrender requirements.

    Invisibles:

    No limits, prior approval, or other controls in effect.

    Capital transactions:

    No control on outward investment and foreign transfers by residents. No control on inward investment and transfers by nonresidents except for quantitative limits on purchases of shares in primary and secondary issues, and the prior approval by the Capital Market Authority required for the issuance of securities by nonresidents. No control on direct investment, outward or inward, but government approval is required for real estate purchases by nonresidents. No control on foreign credit. No provisions specific to institutional investors.

    Open foreign exchange exposure, defined as net foreign assets in the balance sheet, is limited to a maximum of 20 percent of paid-up capital (assigned).

    No reserve requirements on foreign exchange deposits.
    Monetary and foreign exchange policies primarily aim at containing inflation to a single digit. Intervention in foreign exchange market focuses on maintaining orderly conditions.

    In the event that the weakening sentiment toward the Kenya shilling cannot be straightened out through fiscal and interest rate measures and/or that short-term capital inflows exceed the demand for money, the exchange rate is allowed to vary more widely so as to maintain reserve money growth around the desired path in (an ESAF or staff-monitored) program.
    LesothoArrangements:

    1. Foreign exchange. Unitary rate pegged to South African rand. At par M1 = R1. The rand is also legal tender.

    2. Payments. Payments within the Common Monetary Area are unrestricted. All countries outside Common Monetary Area constitute the nonresident area. Residents of Lesotho have access to the South African markets in accordance with terms and conditions applied in those markets and may settle in rand to/from a nonresident account in any foreign currency.

    3. Bilateral. None. Participant in Common Monetary Area, Southern African Currency Union, and Southern African Development Community.

    4. Administration of control. The Central Bank of Lesotho (CBL) determines foreign exchange policy in compliance with Common Monetary Area membership, and is responsible for the management of foreign exchange reserves. It administers foreign exchange control and delegates powers to commercial banks.

    5. Official payments orreors. There are none.

    6. Controls on domestic banknotes. Export prohibited.

    7. Controls on foreign banknotes. Export by residents prohibited; nonresidents may reexport unspent portion.



    Outcome:

    The loti depreciated by 15.6 percent in nominal terms against the U.S. dollar in 1996.

    Gross reserves:

    Reserves grew steadily to six months of imports in 1996.
    Most foreign exchange transactions performed in South African markets. Commercial banks give out foreign exchange on request by CBL for foreign exchange reserve management.

    Workers' remittances from South Africa are largely deposited in passbook savings.

    Authorized dealers are permitted to conduct forward exchange operations through their correspondent banks abroad at rates quoted by the latter. Forward exchange cover, however, is not common in Lesotho.

    Volatility: Foreign exchange receipts depend largely on workers' remittances from South Africa.
    Article VIII status.

    Foreign exchange transactions through South African markets subject to foreign exchange control regulations in South Africa.

    Accounts in foreign, and convertible domestic, currency:

    Not allowed.

    Blocked accounts:

    Cash assets held in the Common Monetary Area by emigrants are subject to various exchange restrictions. Free transfer of income is limited to M 300,000 a family unit a year.

    Import payments:
    1. Financing requirements. Prior CBL approval required for advance payments, but authorized dealers are permitted to effect advance payments up to one-third for capital good imports.

    2. Documentation requirements for releasing foreign exchange. Proof of import.



    Export proceeds:

    Repatriation and surrender are required within six months of shipment.

    Invisibles:

    1. Trade-related payments. Authorized dealers may grant approval on basis of documentary evidence or declaration.

    2. Interest/profit/dividend payments. Authorized dealers apply bona fide test if royalty agreement approved and remittance does not involve excessive use of local credit.

    3. Other. Quantitative limits apply to payments for travel, study, and family maintenance abroad. Allowance in excess of above limit must be approved by CBL.



    Capital transactions:

    Inward investment unrestricted. Outward investment within Common Monetary Area allowed. Other outward capital transfers are controlled.

    1. Direct investment and real estate purchases abroad by residents are prohibited;

    2. Prior approval required for sales or issues of securities by nonresidents; borrowing abroad by residents requires approval for debt-monitoring purpose;

    3. Prior approval required on financial credit by residents to nonresidents, but not on commercial credit up to six months.



    Open foreign exchange exposure is limited to 15 percent of qualifying capital plus reserve.
    The CBL prudently diversifies part of its foreign exchange reserves into hard currencies other than the rand.

    The CBL conducts open market operations through auctions of treasury bills and CBL certificates in a growing but still very thin market.
    MadagascarArrangements:

    1. Foreign exchange. Independent floating, unitary. The Central Bank of Madagascar (CBM) issues the Malagasy franc (FMG).

    2. Payments. No regional or clearing arrangements.

    3. Bilateral. Mauritius.

    4. Administration of control. This is handled by the Exchange Operations Monitoring Unit of the General Directorate of the Treasury, which also supervises borrowing and lending abroad by residents, and the issue, sale, or introduction of foreign securities in Madagascar. Approval authority has been delegated to authorized inter-mediaries, and all exchange transactions relating to Foreign countries must be effected through them, except for capital operations.

    5. Official payments arrears. There are arrears, but they are being regularized.

    6. Controls on domestic banknotes. Export/import by travelers limited to FMG 25,000.



    Outcome:

    The FMG depreciated by 20.9 percent in nominal terms against the U.S. dollar by end-1996.

    Gross reserves rose from 1.4 months of imports in 1995 to about 2.2 months in 1996.

    External financing:

    Dependency—to be completed.
    The exchange rate is determined freely in the official foreign exchange interbank market. The French franc is the only currency quoted in this market, and the exchange rates of other currencies are determined on the basis of cross-rate relationships of the currencies concerned in the Paris exchange market.

    There are no foreign exchange bureaus.

    There are limited arrangements for forward cover against exchange risk.

    Volatility: There is a vulnerability to fluctuations in world commodity (vanilla) prices and climatic conditions.
    Accepted Artide VIII status (September 1996).

    New banking, foreign exchange, and investment law:

    The law on privatization, allowing divestiture from the two state-owned commercial banks, currently under management by conservators, was passed in August 1996. Action plans for actual divestiture, the opening of new banks by internationally reputable institutions, and the establishment of foreign exchange bureaus are being devised.

    Accounts in foreign, and convertible domestic, currency:

    1. The opening of foreign exchange accounts is granted to residents and nonresidents: only transfers from abroad or from another foreign currency account, as well as deposits of foreign banknotes or traveler's and bank checks may be credited in these accounts without justification. These accounts may be debited either for conversion into FMG through a sale in the interbank market or by transfer to a foreign account in Madagascar or abroad. Conversion in foreign banknotes is allowed only within the limits stipulated under the applicable foreign exchange control regulation.

    2. Nonresident domestic currency accounts are not convertible. Transactions between enterprises in the free trade zone and residents are conducted through the enterprises' foreign accounts in FMG.



    Import payments:

    1. Financing requirements. None.

    2. Documentation requirements for releasing foreign exchange for imports. Domiciliation of all imports and preshipment inspection are required.



    Export proceeds:

    Domiciliation of all exports is required above FMG 1 million.

    Repatriation is required within 90 days of shipment date.

    Invisibles:

    Transfers of interest payments, profits and dividends, foreign workers' wages, and pensions must be effected through licensed intermediaries and have, since September 1996, been subject to a simple declaration to them. In January 1997, the payment of airfares in FMG was authorized. Payments for invisibles related to authorized imports are not restricted.

    On payments, no quantitative limits or prior approval required.

    Proceeds must be repatriated within 30 days and surrendered through sales in the interbank market.

    Capital transactions:

    Capital movements between Madagascar and foreign countries, and between residents and nonresidents, are subject to prior authorization from the ministry of finance. There are no capital market regulations due to the absence of a capital market.

    Enterprises in the free trade zone are permitted to contract and service loans freely, and interest and amortization payments on foreign loans contracted directly by these companies are not restricted.

    Outward direct investment by nationals, including those made through foreign companies directly or indirectly controlled by resident persons in Madagascar and those made by overseas branches or subsidiaries of companies located in the country, are subject to prior authorization from the ministry of finance. Inward direct investment may be freely conducted. Proceeds from the liquidation of foreign investment may be repatriated with the ministry of finance's prior authorization.

    Open foreign exchange exposure is limited to a maximum of 25 percent of core capital for any given foreign currency and 40 percent of core capital for all currencies combined.
    While fighting inflation, CBM operations focused on raising interest rates to positive real levels and mopping up excess bank liquidity through auctions and high reserve ratios. This policy resulted in a credit crunch in 1995–96 and the real and nominal appreciation of the FMG, in spite of CBM parallel intervention in the foreign exchange market.
    MalawiArrangements:

    1. Foreign exchange. Independent/managed floating, unitary.

    2. Payments. No.

    3. Bilateral. No.

    4. Administration of control. Reserve Bank of Malawi (RBM) under the ministry of finance's authority.

    5. Official payments arrears. No.

    6. Controls on domestic banknotes. Export/import by travelers limited to MK 200.



    Outcome:

    The Malawi kwacha was stable and depreciated by only 0.2 percent in nominal terms against the U.S. dollar at end-1996. Further depreciation occurred in 1997 under pressure in the market and the authorities' policy of regaining competitiveness.

    Gross reserves rose from 2.1 months of imports in 1995 to 4.3 months in 1996.
    The exchange rate is market determined since authorized dealer banks may buy and sell foreign currencies at freely determined market exchange rates, and the spread between buying and selling prices is maintained at a maximum of 2 percent.

    Foreign exchange bureaus are authorized to conduct spot transactions with the general public on the basis of exchange rates negotiated with their clients.

    The introduction of revised or new guidelines for the foreign exchange operations of the bureaus and the banks led to the opening of the formal interbank foreign exchange market in September 1996.

    There is no forward exchange market or official coverage.

    Volatility: Vulnerability to fluctuations in world commodity (tobacco) prices, climatic conditions, and changes in aid flows (suspension of foreign nonhumanitarian balance of payments assistance in 1992–93).
    Accepted Article VIII status (December 1995).

    New banking, foreign exchange, and investment law: N.a.

    With RBM prior approval, foreign currency denominated accounts may be held domestically by residents regularly receiving foreign exchange from abroad. These accounts may be debited for import payments or conversion into kwachas. Transfers between account holders are not allowed, and overseas transfer of an account balance may be done only with RBM approval.

    Also with prior RBM approval, nonresidents are allowed to hold foreign, and convertible domestic, currency accounts. These accounts may be credited wih proceeds from the Malawi operations of the account holder; and debited with payments to residents for any purpose, transfers to other nonresident accounts, and payments to account holders temporarily residing in Malawi.

    Blocked accounts:

    Credits to, and debits from, these accounts do not require prior authorization, and authorization is normally given for balances to be invested in an approved manner; interest earned on balances may be transferred to the account holder's country of residence.

    Import liberalization was initiated in 1991, and all current account restrictions have been removed since December 1995. Import/export licenses have not been required since June 1997, except for a small number of products relating to health, security, and environmental policy.

    Import payments:

    1. Financing requirements. Prepayments not allowed.

    2. Documentation requirements for releasing foreign exchange. Customs and other relevant import documents are necessary.



    Export proceeds:

    Repatriation is required upon receipt. Authorized dealer banks are required to convert 60 percent of foreign exchange received from exports immediately upon receipt, using the ruling buying exchange rate. The remainder may be credited on foreign exchange accounts.

    Invisibles:

    Commercial banks are authorized to provide foreign exchange on a bona fide test for all current invisible payments. External payments on account of private and business travel, medical costs, and foreign workers' wages are subject to quantitative limits, which may be exceeded upon proof of need. Travel limits per trip are US$3,000 for tourists and US$5,000 for business. Proceeds from invisibles may be retained in full.

    Capital transactions:

    Inward transfers of non-debt-creating capital are not restricted, while borrowing abroad requires prior exchange control approval. All outward transfers of capital by residents require prior RBM approval.

    Repatriation of investment is permitted if the original investment was made with funds brought into the country.

    Open foreign exchange exposure is formally limited to 35 percent of tier 1 capital.
    In view of reducing vulnerability to external shocks, the RBM pursues a policy of strengthening international reserves under the current ESAF program. With the continued liberalization of trade and payments systems, and the market-based determination of the exchange rate, the RBM no longer takes on the role of a market maker, but lets the exchange rate reflect market conditions.

    The RBM intervenes in the foreign exchange market to smooth out changes due to temporary factors. A tight monetary stance has helped contain pressures in the foreign exchange market.

    As the Malawi kwacha came under significant pressure at the beginning of 1997, the RBM intervened more heavily than usual while easing bank liquidity with higher discount of securities. The exchange rate has been managed in a flexible manner so as to regain economic competitiveness.
    MauritiusArrangements:

    1. Foreign exchange. Managed floating, unitary.

    2. Payments. Partner in Common Market for Eastern and Southern Africa (former Preferential Trade Area for Eastern and Southern African States) clearing agreement.

    3. Bilateral. Madagascar.

    4. Administration of control. The Bank of Mauritius (BOM) issues foreign exchange dealing licenses to commercial banks, which act as authorized dealers and money changer licensees.

    5. Official payments arrears. No.

    6. Controls on domestic banknotes. None.



    Outcome:

    The MAU rupee depreciated by 1.7 percent in nominal terms against the U.S. dollar at end-1996.

    Gross reserves increased from 4.1 months of imports in 1994/95 to 5.4 months in 1995/96.

    External financing:

    African Development Bank, European Union, World Bank.
    The rupee–U.S. dollar exchange rate is determined by the foreign exchange interbank market. Following the revision of the Foreign Exchange Act of 1995 to permit the establishment of nonbank foreign exchange dealers, no new entry of dealers in the market has been registered, partly because of the prescribed high initial capital requirement and annual fee.

    The rapid growth of the offshore banking and financial sector has been based on the relatively easy-to-set-up “international status.”

    Commercial banks are free to provide forward exchange cover to their customers.

    Volatility: Vulnerability to fluctuations in world commodity (sugar) prices and to climatic conditions.
    Accepted Article VIII status (September 1993).

    New banking, foreign exchange, and investment law:

    A revised anti-money-laundering bill is envisaged. The capital adequacy ratio is to be raised to 10 percent for all banks in 1997. A formal limit on open foreign exchange exposure was introduced in l997. The establishment of a financial service authority is being contemplated to strengthen the regulatory and supervisory framework for offshore companies in the nonbank financial sector and the stock exchange. The BOM Act and other banking legislations are expected to be amended in 1998.

    Accounts in foreign, and convertible domestic, currency:

    There is no distinction between resident and nonresident accounts in Mauritius.

    Import payments:

    Importers must be licensed. Short negative import list.

    1. Financing requirements. None.

    2. Documentation requirements for releasing foreign exchange. None.



    Export proceeds:

    Repatriation is required.

    Invisibles:

    No limits, prior approval, or other controls are in effect.

    Capital transactions:

    No control. Purchase of real estate locally by nonresidents is subject to permission to be obtained from the minister of internal affairs. The purchase must be financed by funds transferred from abroad through banks.

    Offshore banks may lend in foreign currencies to both residents and nonresidents.

    Open foreign exchange exposure:

    Effective April 1997, domestic and offshore commercial banks are subject to a daily monitored 15 percent exposure limit on their open foreign exchange positions in relation to tier 1 capital.
    Monetary policy is based on achieving reserve money targets, while exchange and interest rates are determined by the market.

    The BOM intervenes only to smooth out short-term fluctuations in the rate.

    The foreign exchange market was broadened with the direct release of sugar export proceeds to the interbank market.
    MozambiqueArrangements:

    1. Foreign exchange. Independent floating, unitary.

    2. Payments. No.

    3. Bilateral. No.

    4. Administration of control. The Bank of Mozambique (BM) is responsible for foreign exchange policy and administers its control.

    5. Official payments arrears. No.

    6. Controls on domestic banknotes. Export/import by travelers limited to Mt 500,000.



    Outcome:

    The metical depreciated by 4.3 percent in nominal terms against the U.S. dollar at end-1996.

    Gross reserves rose from 2.7 months of imports in 1995 to 4.4 months in 1996.

    External financing: Dependency.
    The exchange rate is determined in the interbank foreign exchange market established in July 1996. In addition to the BM, the commercial banks, foreign exchange bureaus, and large enterprises may participate in the market provided that they are able to meet requirements on minimum transactions and reporting. Interbank market operates in twice-daily telephone sessions at the BM.

    Interdealer transactions are limited because of the small number of dealers, the predominant market share of the Banco Comercial de Mozambique, and the fact that official funds deposited with the BM are the main source of foreign exchange supply.

    There is no forward exchange market or official coverage.

    Volatility: There is vulnerability to fluctuations in world commodity (agricultural) prices and to climatic conditions. Because of the unsustainability of the external debt-service burden, access to the Initiative for Heavily Indebted Poor Countries has been granted, with June 1999 completion date.
    Article XIV status.

    New banking, foreign exchange, and investment law:

    Authorities are setting up procedures that will permit interbank foreign exchange transactions outside the fixing sessions. Action plans are being devised to remove remaining legal, institutional, and structural barriers to private investment. The commercial code is being revised.

    Accounts in foreign, and convertible domestic, currency:

    1. Foreign currency accounts may be freely opened domestically by residents and nonresidents without prior approval. Residents may hold foreign currency deposits abroad with prior approval only.

    2. Convertible domestic currency accounts may be held by residents. Domestic currency accounts held by nonresidents are not convertible and must be opened with funds from the conversion of foreign currency or approved technical assistance contracts; transfers of such funds abroad are not permitted.



    Import payments:

    All imports exceeding the equivalent of US$500 are subject to registration by the ministry of commerce. Licenses specifying, among other things, the place of embarkation and disembarkation of the goods, the amount and currency of payment, and the source of financing are routinely granted. Individuals may import goods up to the equivalent of US$500 without an import license if the goods are financed with their own foreign exchange resources and tied-aid funds are not involved.

    A negative product list exists for imports financed by donors' funds. The Office for the Coordination of Import Programs ensures that donors' requirements are met. Tied import support funds are allocated by the BM to the commercial banks.

    1. Financing requirements. Documentary proof of goods' arrival within 90 days of payment is required for allowing advance payment.

    2. Documentation requirements for releasing foreign exchange. Domiciliation required; preshipment inspection required for imports in excess of US$2,500 to ensure proper valuation.



    Export proceeds:

    All exports are subject to registration.

    Repatriation is required through the commercial banks; surrender was eliminated January 1, 1997; companies that export more than 85 percent of their production qualify for the status of free trade zone.

    Invisibles:

    Commercial banks and exchange bureaus are authorized to sell foreign exchange up to US$5,000 to pay expenses associated with travel, study, or medical treatment abroad. BM approval is required for most other operations.

    Remittances of profits and dividends from foreign direct investment may be made with prior approval if in accordance with the specific project authorization.

    Foreign experts working in Mozambique may remit abroad all or part of their salaries, depending on the terms of their employment contracts.

    Mozambican nationals working as miners in South Africa are obliged to remit 60 percent of their earnings through the BM and to convert them into meticais.

    Capital transactions:

    BM approval is required for purchases or sales abroad by residents of capital, money market instruments, and derivatives in excess of US$5,000.

    Inward operations are also controlled by BM largely through prior approval on borrowing abroad, monitoring foreign investors' guaranteed right to repatriate their initial capital and get access to domestic credit, and controlling real estate sales to foreigners.

    Foreign portfolio investment by institutional investors is subject to quantitative limits.

    Open foreign exchange exposure:

    Commercial banks and other financial institutions may have a limited amount of foreign exchange exposure.
    The BM closely coordinates monetary policy with foreign exchange market intervention to avoid excessive buildup of liquidity in the banking system. A monetary anchor is being used to ensure financial discipline, while BM intervention in the foreign exchange market is directed mainly to observing the international reserve targets of the (ESAF) program.
    NamibiaArrangements:

    1. Foreign exchange. Unitary rate pegged to South African rand at par, with N$1 = R 1. The rand is also legal tender.

    2. Payments. Payments within the Common Monetary Area are unrestricted. All countries outside Common Monetary Area constitute the nonresident area. Residents of Namibia have access to the South African markets in accordance with terms and conditions applied in those markets and may settle in rand to/from a nonresident account in any foreign currency.

    3. Bilateral. There are no bilateral arrangements. Namibia is a participant in Common Monetary Area, Southern African Currency Union, and Southern African Development Community.

    4. Administration of control. The Bank of Namibia (BON) determines foreign exchange policy in compliance with membership in the Common Monetary Area and is responsible for the management of foreign exchange reserves. The central bank administers foreign exchange control and delegates powers to commercial banks.

    5. Official payments arrears. No.

    6. Control on domestic banknotes. Any individual may export/import up to N$500.

    7. Control on foreign banknotes. Residents: export requires prior approval of the BON but no limit on import; nonresidents may reexport unspent portion.



    Outcome:

    The Namibia dollar depreciated by 15.6 percent in nominal terms against the U.S. dollar in 1996.

    Gross reserves:

    As of end-1996, 1.4 months of imports.
    The exchange market in Namibia has developed as an extension of the exchange market in South Africa. Local interbank transactions limited as banks frequently deal in the South African interbank market. Five commercial banks are authorized dealers.

    Subject to certain limitations, authorized dealers are permitted to conduct forward exchange operations, including forward cover for transactions by residents and nonresidents. Gold mining companies and houses may sell forward anticipated receipts of their future gold sales.

    The BON provides special forward cover at preferential rates in U.S. dollars only to autnonzea dealers against documentary evidence of import financing. Such cover is provided for maturities not exceeding 12 months in the form of Namibia dollars (South African rand)-U.S. dollar swap transactions with the margin based on an interest rate differential between the two currencies.

    Volatility: Private capital flows.
    Accepted Article VIII status (September 1996).

    Accounts in foreign, and convertible domestic, currency:

    With prior approval, residents may hold offshore foreign exchange accounts; free for nonresidents in export processing zones created on August 19, 1996.

    Blocked accounts:

    Cash assets held in the Common Monetary Area by emigrants are subject to the same exchange restrictions as in South Africa.

    Import payments:

    Similar to South Africa.

    Export proceeds:

    Similar to South Africa.

    Invisibles:

    Similar to South Africa.

    Capital transactions:

    Similar to South Africa. While encouraging additional companies to list their stocks, the Namibian Stock Exchange is also preparing an Unlisted Securities Market Authority that will organize a separate trading system for shares of companies that wish to have a market for them, but do not meet the stringent requirements for full board listing on the Johannesburg Stock Exchange.

    Open foreign exchange exposure is limited to 15 percent of qualifying caption plus reserve.
    The BON is passive in the foreign exchange market because of the Namibia dollar's peg to the South African rand.
    RwandaArrangements:

    1. Foreign exchange. Independent floating, unitary.

    2. Payments. The National Bank of Rwanda (NBR) maintains agreements with the central banks of the Economic Community of the Great Lakes Countries, Burundi, and the Democratic Republic of the Congo, according to which settlements are made through reciprocal accounts in convertible domestic currency. Payments to and from other Common Market for Eastern and Southern African countries are made through the Common Market for Eastern and Southern Africa (former Preferential Trade Area for Eastern and Southern Africa) clearinghouse.

    3. Bilateral. Inoperative barter agreement.

    4. Administration of control. Vested in the NBR, which has delegated authority to authorized banks to carry out some of the controls.

    5. Official payments arrears. Arrears are in the process of being regularized.

    6. Controls on domestic banknotes. Export/import by travelers exceeding the equivalent of US$100 requires declaration.



    Outcome:

    The Rwanda franc depreciated by 1.4 percent in nominal terms against the U.S. dollar at end-1996.

    Gross reserves declined from four months of imports in 1995 to about three months in 1996.

    External financing: Dependency.
    The exchange rate is determined freely in the foreign exchange commercial banks, and foreign exchange bureaus operate. Banks may apply a variable commission to transactions. The NBR does not announce official exchange rates, but calculates and publishes daily the average market exchange rate for reference purposes.

    Residents are free to acquire foreign exchange through commercial banks and foreign exchange bureaus, and make payments abroad for all current international transactions. Nonresidents are free to transfer abroad the proceeds of such transactions.

    There is a strong preference for foreign exchange in U.S. dollar–denominated banknotes, which are used not only for transactions in invisibles but also for import operations.

    The lack of an operational interbank market causes rigidities among the banks and also the foreign exchange bureaus.

    No forward exchange market or official coverage.

    Volatility: There is vulnerability to fluctuations in world commodity (coffee and tea) prices, climatic conditions, and the return to political normalcy.
    Article XIV status.

    New banking, foreign exchange, and investment law:

    Establishes an action plan based on audits to rehabilitate banking soundness.

    Foreign exchange accounts may be freely held domestically by residents and nonresidents. These accounts may be freely credited/debited between residents and nonresidents. Foreign exchange accounts to be held abroad by residents require prior NBR approval.

    Import payments:

    Open general import licenses, which are also used as foreign exchange licenses, are required. There is a negative import list for health and security purposes.

    1. Financing requirements. None.

    2. Documentation requirements for releasing foreign exchange. Preshipment inspection by international agency required for all imports with value exceeding US$10,000.



    Export proceeds:

    Export licenses are required and subject to prior declaration to the authorized bank. Proceeds must be repatriated within seven days of payment.

    Invisibles:

    Quantitative limits apply to payments of foreign exchange allowances for travel, medical, study, and family expenses. Payments on interest are permitted on loans previously declared to NBR, and on profits and dividends with prior NBR approval. Foreign workers' remittances are subject to a bona fide test and to prior NBR authorization for transfers exceeding US$20,000 a year. Proceeds must be repatriated but not surrendered.

    Open foreign exchange exposure:

    Prudential limit of 20 percent of the bank's own funds is applied.
    NBR intervention in the foreign exchange market is aimed at achieving international reserve targets in accordance with the staffmonitored program while letting the exchange rate reflect market conditions.
    South AfricaArrangements:

    1. Foreign exchange. Independent float, unitary; the authorities do not maintain margins.

    2. Prescription. Participant in Common Monetary Area with Lesotho, Namibia, and Swaziland. Banknotes issued in latter countries are freely convertible into rand at par. The rand is legal tender in Lesotho and Namibia, but not in Swaziland. Currencies of these three countries are not legal tender in South Africa. Payments within the Common Monetary Area are unrestricted.

      All countries outside Common Monetary Area constitute nonresident area. Settlements by/to Common Monetary Area residents with nonresident area may be made in rand to/from nonresident accounts and in any foreign currency, except the currencies of Lesotho, Namibia, and Swaziland.

    3. Bilateral. None. South Africa is a participant in Southern African Currency Union and Southern African Development Community.

    4. Administration of foreign exchange control. Treasury has delegated authority to the South African Reserve Bank (SARB), which, in turn, has delegated powers to authorized dealers. Minister of finance bears ultimate responsibility for foreign exchange and foreign exchange control policy.

      The SARB is coresponsible for foreign exchange policy formulation, and administers foreign exchange control.

    5. Official payments arrears. No.

    6. Control on domestic banknotes. No limitation on export/import to and from Common Monetary Area countries. Travelers to and from countries outside the Common Monetary Area: export/import limited to R 2,000 (not part of basic travel allowance).

      Limitations do not apply to migrant workers returning to neighboring countries.

    7. Control on foreign banknotes. Export by residents allowed within travel allowance; by nonresidents within amount brought in. Import: no limits.



    Outcome:

    The rand depreciated by 15 percent in nominal terms against the U S dollar in 1996 and by 7 percent in 1997

    Gross reserves declined from two months of imports in 1995 to one month in 1996. The net oversold forward position was about US$22 billion, or 17 percent of GDP, at end-1996, but was reduced to US$ 16 billion by end-1997.
    The exchange rate is determined in foreign exchange market consisting of 21 banking institutions appointed as authorized dealers by the minister of finance. Two foreign exchange brokers operating. There are no foreign exchange bureaus.

    The South African Reserve Bank's gold Durchases from mines are paid in U.S. dollars after an interruption between September 1985 and March 1989. SARB intervenes in spot and forward swap operations.

    Subject to certain limitations, authorized dealers are permitted to conduct forward exchange operations in any currency, including forward cover for trade and nontrade transactions by residents and nonresidents.

    Forward exchange contracts may cover the entire period of the outstanding commitments and accruals.

    Gold mining companies may sell forward anticipated receipts of their future gold sales.

    The SARB provides official forward cover only against U.S. dollars to authorized dealers and only against documentary evidence of foreign financing transactions to authorized dealers. Such cover is provided for maturities not exceeding 12 months in the form of rand–U.S. dollar swap transactions with the margin based on an interest rate differential between the U.S. dollar and the rand.

    Volatility: There are private and speculative capital flows with fluctuations in the world gold market.
    Accepted Article VIII status (September 1973).

    The SARB fixes parameters and conditions of foreign exchange operations. Since 1983, foreign exchange control on nonresidents has been abolished Among Common on nonresidents has been abolished. Among Common Monetary Area countries, payments can be freely made without foreign exchange control interference. South African residents may purchase foreign exchange for current transactions within certain limits without foreign exchange control approval, and similarly for capital transactions with foreign exchange control approval. On July 1, 1997, the limit on free transfers abroad bv residents was raised to R 200,000.

    The SARB has a supervision department monitoring foreign activities of South African banking institutions.

    Accounts in foreign, and convertible domestic, currency:

    With prior approval, residents and nonresidents may open foreign currency accounts domestically, and resident private individuals may retain foreign exchange abroad earned through income/dividends/services.

    Nonresident accounts may be credited with all authorized payments by residents, with the proceeds of sales of foreign currency to authorized dealers, and with payments from other nonresident accounts. They may be debited for payments to Common Monetary Area residents for any purpose (other than loans)—for payments to nonresidents for any purpose, by transfer to a local account for the cost of purchase of any currency; and for payments to account holders residing in South Africa for short periods.

    Blocked accounts:

    Cash assets held in the Common Monetary Area by emigrants are subject to various exchange restrictions.

    Import payments:

    1. Financing requirements. Advance payment allowed, but limited to one-third for capital goods imports.

    2. Documentation requirements for releasing foreign exchange. Transport, consignment, and other proof of import.

    3. Negative list.



    Export proceeds:

    Repatriation and surrender required within six months of shipment or seven days of accrual date.

    Invisibles:

    Payments are controlled on the basis of a bona fide test. Proceeds are to be surrendered within 30 days of accrual date, unless an exemption is granted.

    1. Trade-related payments. Authorized dealers may grant approval on basis of documentary evidence or declaration.

    2. Interest/profit/dividend payments. Authorized dealers apply bona fide test if royalty agreement approved and remittance does not involve excessive use of local credit.

    3. Other. Quantitative limits apply to payments for travel, study, and family maintenance abroad. An allowance in excess of the above limit should be approved by the SARB.



    Capital transactions:

    Inward investment unrestricted. Outward investment within Common Monetary Area allowed. Other requests for outward investment larger than R 200,000 are considered by the SARB on their merits. Transfers of capital assets of emigrants (blocked accounts) are controlled.

    1. Prior approval is required for asset swaps by institutions, direct investment and real estate purchases abroad by residents, and sales or issues of securities by nonresidents.

    2. Prior approval is required for sales or issues of securities, money market instruments, derivatives, and all borrowing abroad by residents for debt-monitoring purpose.

    3. Prior approval is required on financial credit by residents to nonresidents, but not on commercial credit up to six months.



    Open foreign exchange exposure is limited to 15 percent of qualifying capital plus reserve.
    The SARB allows the rand to float freely with occasional intervention in the foreign exchange market to stabilize temporary fluctuations. In 1996, the SARB intervened heavily in the spot and forward exchange markets to counteract the pressure on the rand as a result of past rapid monetary expansion and speculative capital out-flows. With tighter monetary stance and expected strengthening of the rand in 1997, the SARB seeks a reduction of commitments in the net oversold forward position while maintaining stability in the real effective exchange rate.

    The SARB participates in the creation of formal bill and bond markets to maintain lowest intermediation costs and encourage foreign investors. The central bank promotes trade reporting, price discovery, and transparency.
    SwazilandArrangements:

    1. Foreign exchange. Unitary rate pegged to South African rand at par at the rate of E 1 = R 1.

    2. Payments. Payments within the Common Monetary Area are unrestricted. All countries outside the Common Monetary Area constitute the nonresident area. Residents of Swaziland have access to the South African markets in accordance with terms and conditions applied in those markets and may settle in rand to/from a nonresident account in any foreign currency.

    3. Bilateral. None. Participant in Common Monetary Area, Southern African Currency Union, and Southern African Development Community.

    4. Administration of control. The Central Bank of Swaziland (CBS) is responsible for the foreign exchange policy in consultation with the ministry of finance and is also the custodian of foreign exchange reserves, administers foreign exchange control, and delegates powers to commercial banks.

    5. Official payments arrears. No.

    6. Controls on domestic banknotes. Any individual may export/import up to E 500; no control on Common Monetary Area residents

    7. Controls on foreign banknotes. Export within travel entitlement; import uncontrolled.



    Outcome:

    The lilangeni depreciated by 15.1 percent in nominal terms against the U.S. dollar in 1996.

    Gross reserves: N.a.
    Most foreign exchange transactions performed in South African markets.

    Commercial banks operate fairly freely under the CBS.

    Subject to certain limitations, authorized dealers are permitted to conduct forward exchange operations. The forward exchange rates are market determined.

    Volatility: N.a.
    Accepted Article VIII status (December 1989).

    Foreign exchange transactions through South African markets subject to foreign exchange control regulations in that country.

    Accounts in foreign, and convertible domestic, currency:

    Prior approval is required and rarely granted to residents.

    Blocked accounts:

    Cash assets held in the Common Monetary Area by emigrants are subject to the same exchange restrictions as in South Africa.

    Import payments:

    1. Financing requirements. Prior CBS approval is required for advance payments.

    2. Documentation requirements for releasing foreign exchange. Import licenses may be used as exchange licenses.



    Export proceeds:

    Repatriation and surrender are required within six months of shipment or 30 days of accrual.

    Invisibles:

    1. For trade-related and interest payments, authorized dealers may grant approval on the basis of bona fide test.

    2. For profit and dividend payments, prior CBS approval is required.

    3. Other. Quantitative limits apply to payments for travel, study, and family maintenance abroad. Allowance in excess of above limit must be approved by CBS.



    Capital transactions:

    Inward investment requires prior approval and appropriate documentation to facilitate subsequent repatriation of interest, dividends, profits, and other income. Outward investment within Common Monetary Area is allowed. Other outward capital transfers are controlled.

    1. Direct investment and purchases of securities, derivatives, and real estate abroad by residents require prior approval, which may be granted on their own merits.

    2. Prior CBS approval is required for commercial and financial credit operations outside the Common Monetary Area. Resident borrowing in foreign exchange is not allowed without prior approval.



    Open foreign exchange exposure is limited to 15 percent of qualifying capital plus reserve.
    The central bank does not intervene in the foreign exchange market. There is low external debt exposure.
    TanzaniaArrangements:

    1. Foreign exchange. Independent floating, unitary. Official exchange rate is set within 2 percent of tne current days market rate.

    2. Payments. Clearing agreement within Common Market for Eastern and Southern Africa (former Preferential Trade Area for Eastern and Southern African States). The Tanzania shilling may be freely convertible to Kenya and Uganda shillings since July 1, 1996. After clearing, excess holdings are credited in U.S. dollars to the respective central banks every two months.

    3. Bilateral: Mozambique (inoperative).

    4. Administration of control. The ministry of finance has delegated authority to customs and the Bank of Tanzania (BOT); the authority to make payments abroad is delegated to licensed banks.

    5. Official payments arrears. Yes. Exchange restrictions on external arrears have been granted temporary IMF approval.

    6. Controls on domestic banknotes. Export by travelers limited to the equivalent of US$ 100; import limited to T Sh 1,000.



    Outcome:

    The Tanzania shilling depreciated by 7.6 percent in nominal terms against the U.S. dollar at end-1996.

    Gross reserves rose from 2.0 months of imports in 1995/96 to 3.7 months in 1996/97.

    External financing: Dependency.
    The exchange rate is determined in the foreign exchange interbank market in which the BOT intervenes. Foreign exchange bureaus that did not develop into nonbank financial institutions have been prohibited from participating in the interbank market since July 1996. The opening of new foreign exchange bureaus has been limited by the new capital requirement.

    Authorized dealers may enter into forward exchange contracts for purchases and sales of foreign currencies with their customers in export/import transactions. BOT does not offer forward cover.

    Volatility: Private capital flows.
    Accepted Article VIII status (July 1996).

    New banking, foreign exchange, and investment law:

    New legislation on banking privatization has been prepared for discussion by parliament. A draft investment act is being revised before submission to parliament.

    Accounts in foreign, and convertible domestic, currency may be held domestically by residents and nonresidents, but nonresidents need prior BOT approval.

    All transfers of foreign exchange funds from residents to nonresidents or to foreign-controlled resident bodies, require specific BOT approval. Similarly, transfers of funds from nonresidents to residents require BOT approval. Residents are not allowed to hold foreign exchange accounts abroad. Nonresidents may transfer nonconvertible account balances abroad with BOT approval.

    Import payments:

    Negative import list for health and security purposes.

    1. Financing requirements. None.

    2. Documentation requirements for releasing foreign exchange. Yes, for imports above US$5,000 (preshipment inspection, other customs documentation).



    Export proceeds:

    Repatriation is required within two months, including export proceeds from Zanzibar, but no surrender required.

    Invisibles:

    Payments on income transfer by nonresidents are permitted provided that all tax obligations have been met. There are indicative limits on foreign payments for travel and medical costs, and quantitative limits on foreigners' wage repatriation.

    Capital transactions:

    All outward capital transfers are subject to approval by commercial banks, and all foreign investment by residents is subject to BOT approval. Various controls apply to inward transfers. Prior BOT approval is required for nonresidents' purchase of securities, derivatives, and real estate and all credit operations between residents and nonresidents. All foreign direct investment must be approved by the Investment Promotion Center.

    Open foreign exchange exposure is limited to a maximum of 20 percent of core capital.
    The BOT intervenes in the interbank market to smooth out changes due to temporary factors, including seasonal ity of exports and their financing, and achieve foreign reserve targets under the current ESAF program.

    During the first half of 1997, tne BOT intervened tnrougn open market operations to sterilize inflows resulting from good export performance. The BOT allowed the trend of real appreciation to be reversed.
    UgandaArrangements:

    1. Foreign exchange. Independent floating, unitary.

    2. Payments. Clearing agreement within Common Market for Eastern and Southern Africa (former Preferential Trade Area for Eastern and Southern African States). The Uganda shilling is freely convertible into Kenya and Tanzania shillings since July 1, 1996. After clearing, excess holdings are credited in U.S. dollars to the respective central banks every two months.

    3. Bilateral. Inoperative with a few African and Asian countries.

    4. Administration of control. The Bank of Uganda (BOU) administers exchange controls on behalf of the ministry of finance.

    5. Official payments arrears. All nonreschedulable arrears have been cleared. For reschedulable arrears, the authorities have asked for, but not yet obtained, comparable Paris Club treatment. Exchange restrictions on external arrears have been granted temporary IMF approval.

    6. Controls on domestic banknotes. None.



    Outcome:

    The Uganda shilling depreciated by 2 percent in nominal terms against the U.S. dollar by end-1996.

    Gross reserves averaged two months of imports in 1995 and 1996.

    External financing:

    Dependency—to be completed.
    The exchange rate is determined in the foreign exchange interbank market. Licensed foreign exchange bureaus may effect certain transactions at freely negotiated rates.

    Authorized banks may deal in the forward exchange market in certain convertible currencies, provided an underlying import/export contract has been approved.

    Volatility: There is vulnerability to external shocks associated with variations in coffee exports due to world prices and climatic conditions.
    Accepted Article VIII status (April 1994).

    New foreign exchange law:

    A new foreign exchange statute and legislation with respect to money laundering have been prepared for discussion in parliament. There is an outstanding agenda for external sector reforms to be completed early in Policy Framework Paper period.

    Accounts in foreign, and convertible domestic, currency may be held by residents and nonresidents without exchange control prior approval. These accounts may be freely credited/debited between residents and nonresidents.

    Import payments:

    Most imports require six month renewable licenses by the ministry of commerce and trade. License certificates apply to a broad range of goods that are not included on the negative list.

    1. Financing requirements. None.

    2. Documentation requirements for releasing foreign exchange for licensed imports. Yes (request form).



    Export proceeds:

    Exports require six month renewable licenses by the ministry of commerce and trade. Repatriation and surrender not required.

    Invisibles:

    No prior approval or other controls in effect.

    Capital transactions:

    Prior individual exchange control approval from the ministry of finance is required for outward capital transfers to all countries. Prior approval from BOU is required on most foreign transactions in securities, derivatives, real estate, and outward direct investment. Portfolio investment abroad are prohibited to residents. Inward direct investment required to obtain “approval status” from BOU. Most transactions in money market instruments are prohibited to nonresidents. There are no controls on foreign credit operations.

    Open foreign exchange exposure is limited to a maximum of 20 percent of core capital.
    BOU intervention in the interbank foreign exchange market is limited to smoothing out temporary fluctuations in the exchange rate, subject to meeting the international reserve target of the ESAF program.
    ZambiaArrangements:

    1. Foreign exchange. Independent floating. Multiple: there are four exchange rates: (a) the official rate, which is applied to all government transactions, and the purchase of proceeds from external borrowing and donor assistance by the Bank of Zambia (BOZ); (b) the commercial banks' corporate rate; (c) the commercial banks' retail rate; and (d) the interbank rate.

    2. Payments. None.

    3. Bilateral. None.

    4. Administration of control. All exchange controls have been abolished except that prior BOZ approval must be obtained for servicing private debt incurred before January 28, l984. The ministry of commerce, trade, and industry is responsible for trade control.

    5. Official payments arrears. Yes. Exchange restrictions on external arrears have been granted temporary IMF approval.

    6. Controls on domestic banknotes. None.



    Outcome:

    The Zambian kwacha depreciated by 22 percent in nominal terms against the U.S. dollar in 1996 (end of period).

    Gross reserves were stable at 1.7 months of imports during 1996.

    External financing: Dependency.
    The official exchange rate is market determined, and the spread between the BOZ's buying and selling rates is fixed at 1.6 percent. On the basis of daily bids and offers received, as well as other budgetary considerations (such as government and BOZ requirements, donor assistance funds, and export earnings), the BOZ determines the amount of foreign exchange to be sold to, or purchased from, the market through the dealing window. The exchange rates prevailing in the emerging interbank market follow closely those established at the BOZ's dealing window. There are foreign exchange bureaus.

    No forward exchange market or official coverage.

    Volatility: There is vulnerability to fluctuations in world commodity (copper and cobalt) prices. Donors' assistance over governance issues was suspended in 1996.
    Article XIV status.

    Foreign exchange law:

    Requires the publication of major regulations.

    Accounts in foreign, and convertible domestic, currency may be freely held domestically by residents and nonresidents. These accounts may be freely credited/debited between residents and nonresidents.

    Import payments:

    Import licenses, also used as exchange licenses, are granted automatically by commercial agents for statistical purposes.

    1. Financing requirements. None.

    2. Documentation requirements for releasing foreign exchange. Yes, preshipment inspection for imports above US$10,000.



    Export proceeds:

    Export licenses are required for most goods, although they are administered routinely by commercial banks under authority delegated by the ministry of commerce, trade, and industry. Exports of ivory are prohibited.

    No repatriation or surrender required.

    Invisibles:

    All payments for invisibles, except external debt-service payments, may be effected through banks and foreign exchange bureaus without limits or prior BOZ approval, subject to the requirement that no taxes are due. No surrender required on proceeds from remittances.

    Capital transactions:

    Outward transfers are free of controls. No restrictions apply to the sale of assets between nonresidents and between residents and nonresidents.

    All borrowings must be registered with the BOZ for statistical purposes.

    Open foreign exchange exposure is limited to 25 percent of regulatory capital.
    The BOZ intervenes through the dealing window to smooth out changes due to temporary factors and to achieve foreign reserve targets under the current ESAF, or staff-monitored, programs.
    ZimbabweArrangements:

    1. Foreign exchange. Independent floating, unitary. The Reserve Bank of Zimbabwe (RBZ) applies a spread of 0.8 percent between buying and selling rates; authorized dealers and foreign exchange bureaus may charge an additional 0.25 percent on either side of the quoted rates.

    2. Payments. A clearing agreement exists within Common Market for Eastern and Southern Africa (former Preferential Trade Area for Eastern and Southern African States).

    3. Bilateral. Arrangement is operative with Malaysia.

    4. Exchange restrictions and multiple currency practice on outstanding obligations have been granted temporary IMF approval.

    5. Administration of control. Powers delegated by the ministry of finance to RBZ. Authorized dealers are empowered to approve certain foreign exchange transactions.

    6. Official payments arrears. None.

    7. Controls on domestic banknotes. Export (as part of travel allowance) and import by travelers are limited to Z$250.



    Outcome:

    The Zimbabwe dollar depreciated by 41.8 percent in nominal terms against the U.S. dollar by end-1997.

    Gross reserves declined from 3.2 months of imports in 1995 to 2.9 months in 1996, and further to 0.8 months at end-1997.
    The exchange rate is determined in the interbank foreign exchange market held by commercial banks and foreign exchange bureaus. Foreign exchange bureaus became members of the interbank foreign exchange market in November 1997. Corporate foreign currency accounts were off-loaded.

    Forward exchange contracts are permitted for trade transactions only, for a duration of one year at least.

    Volatility: Exists mainly in export prices. Foreign exchange inflows, primarily from export earnings, affect broad money (M3).
    Accepted Article VIII status (February 1995).

    Draft Banking Act in preparation.

    Accounts in foreign, and convertible domestic, currency may be opened by residents and nonresidents, but prior approval is required for nonresidents. These accounts may be credited/debited between residents and nonresidents.

    Blocked accounts:

    Cash assets held in Zimbabwe by emigrants are subject to various exchange restrictions.

    Import payments:

    1. Financing requirements. Authorized dealers approve advance payments up to US$50,000.

    2. Documentation requirements for releasing foreign exchange for licensed imports. Customs documents are required.



    Export proceeds:

    Repatriation is required, but surrender is required from marketing boards only. Corporate foreign currency accounts were asked to be liquidated in November 1997 following the currency crisis.

    Invisibles:

    Control is delegated to commercial banks within certain limits, beyond which prior RBZ approval is required on basis of bona fide test. Quantitative limits apply to payments related to trade, profits and dividends, travel, medical costs, and family maintenance. For travel, the basic allowance is US$5,000 a year on holiday, and US$600 a day on business. Interest payments are approved by banks on basis of bona fide test.

    Capital transactions:

    Outward transfers are controlled. Nonresidents' purchases of securities and direct investments are controlled but purchases of money market instruments are not. The approval of the External Loans Coordinating Committee is required for foreign credit exceeding US$5 million to residents.

    Open foreign exchange position of credit institutions: Subject to overnight net exposure limits.
    Money is used as a nominal anchor for price stabilization. Exchange rates and interest rates are allowed to adjust to meet money supply and international reserve targets. RBZ intervenes to smooth out fluctuations.
    Table A9.Framework for Monetary Policy Formulation and Implementation in Selected Sub-Saharan African Countries, 1997
    CountryMedium-Term FrameworkShort-Term Framework
    AngolaAngola does not have a program with the IMF; however, the government adopted a December-to-December inflation target of 30 percent for 1997. It planned to achieve the target by setting new net credit to the government at zero and by limiting the expansion of commercial banks' credit. Although the credit limits were not strictly enforced, the hyperinflationary pressures evident in 1994–96 were contained, and inflation was reduced to 64 percent in 1997. The proposed medium-term program intends to reduce inflation to 15 percent by the year 2000.The levels of net domestic assets, net international reserves, and banking sector credit are closely monitored on a quarterly basis. The multiple exchange rates were unified in 1995. The central bank sets both the official price and the quantity of foreign exchange purchased from or sold to commercial banks. There is also an important parallel market for foreign exchange.
    BotswanaBotswana does not have a program supported by the IMF; discussions are conducted within the context of the IMF's Article IV consultations. The Bank of Botswana (BOB) uses projections agreed upon with the IMF as a basis for setting liquidity targets to be implemented through BOB certificates.Given the recent partial liberalization of capital account controls and the effective peg of the pula to the South African rand, there is no room for an independent monetary policy. In the short term, therefore, policies are merely adapted to changing regional circumstances, particularly those in South Africa. This is done largely through open market operations in BOB certificates. Botswana intends to abolish multiple currency practices.
    Burkina FasoBurkina Faso has a program supported by the IMF. The program targets net domestic assets of the banking system, net bank credit to government, net reduction in domestic payment arrears, and external public or publicly guaranteed borrowing on nonconcessional terms.Short-term liquidity monitoring is undertaken through quarterly targets on net domestic assets of the central bank and bank credit to the government under the IMF program.
    Côte d'lvoireCôte d'lvoire had a program with the IMF supported by the third annual ESAF arrangement, which expired in June 1997. A successor ESAF program was approved in March 1998. The program sets benchmarks and performance criteria on primary balance of the government, net bank credit to the central government, net domestic assets of the central bank, and external borrowing. In addition, there is an attempt to pursue a prudent regional monetary policy stance consistent with the goal of improving the net foreign asset position.Quarterly monitoring of the financial operations of the government, their accounting, and their impact or net credit to the government. The regional central bank, BCEAO, also monitors the liquidity position of the commercial banks. However, banks have had some difficulties in complying with the reporting requirements of the new accounting framework that became mandatory in January 1996. The difficulties are being addressed, although with limited success thus far.
    EthiopiaEthiopia has a three-year ESAF program with the IMF. Financial performance criteria and benchmarks were set under the first annual arrangement for net domestic assets of the banking system, net bank credit to the government, external payment arrears, new nonconcessional external borrowing contracted or guaranteed by the public sector, and minimum net international reserves of the banking system. However, the first annual arrangement was allowed to lapse on October 10, 1997 because the mid-term review was not completed.Banking sector liquidity, together with benchmarks of performance, is monitored on a quarterly basis. A cap is imposed on the expansion of domestic liquidity in line with nominal GDP growth.
    GhanaGhana has a program with the IMF; monetary performance criteria/benchmarks are set for reserve money, and net domestic financing of the government budget and of the Bank of Ghana, which are monitored quarterly.To curb the growth of liquidity, reserve money is continuously targeted. Also, the exchange rate is assigned the role of meeting overall balance of payments objectives and is therefore allowed to respond to demand and supply in the foreign exchange market; Bank of Ghana could, however, intervene to avert undue appreciation of the cedi.
    KenyaKenya had the first annual arrangement under a three-year ESAF program with the IMF approved on April 26, 1996. The first annual arrangement expired on July 31, 1997 without completion of the review because of failure to address outstanding governance issues.N.a.
    LesothoCurrently, Lesotho has no arrangements with the IMF. Owing to its membership in the Common Monetary Area, the pegging of the loti to the South African rand, and the free circulation of the rand as legal currency within Lesotho, there is little scope for independent monetary policy in Lesotho. Interest rates and inflation move broadly in concert with rates in South Africa, even with restrictions on capital mobility.In the short term, the authorities have tended to target and monitor the growth of bank credit to the private sector and the rather high interest rates attached to such flows.
    MadagascarMadagascar has a three-year ESAF program with the IMF under which the following quantitative benchmarks were established: a ceiling on external payment arrears, a flow on net foreign assets of the central bank, a ceiling on net claims on government by the banking sector, and a ceiling on the net domestic assets of the central bank. These targets are monitored quarterly.Liquidity is closely monitored through central bank auctions and through the development of a secondary market.
    MalawiMalawi has a three-year ESAF program with the IMF. The program sets targets on net domestic assets by the banking system, net credit to the government by the banking system, net international reserves, and the overall budget deficit. These targets are monitored quarterly.Short-term liquidity management is undertaken within the context of the authorities' need to maintain tight monetary policy. Reductions in the discount rate will take place only if inflation remains low and the fiscal program is on track. Interventions into the foreign exchange market are only to build up gross international reserves guided by the reserve money target.
    MaliAlthough Mali has a program with the IMF, monetary policy is conducted at the regional level by the regional bank, the BCEAO. Nevertheless, the program specifies targets for net credit to the central government, net domestic assets of the BCEAO, and changes in government arrears. These targets are monitored quarterly.Short-term liquidity monitoring is undertaken monthly for all targets specified under the program, except exchange rates, where monitoring is daily.
    MauritiusMauritius does not have a program with the IMF. The basic thrust of monetary policy in Mauritius is directed toward the achievement of price stability and a stable exchange rate of the rupee while assigning a greater role to market forces in the determination of interest rates and exchange rates.The Bank of Mauritius has set up a monetary policy committee to monitor short-term developments in the financial sector. As part of the new monetary framework, the central bank has established a reserve money program and a liquidity forecasting framework to be used effectively in daily operations. Intervention in the money market and foreign exchange market is integrated within this framework.
    MozambiqueMozambique has a program with the IMF that sets a target on the net domestic assets of the banking system, net bank credit to the government, and net foreign assets of the banking system.Since 1995, there has been monthly monitoring of commercial banks to ensure compliance with credit ceilings and reserve requirements. There has also been stricter enforcement of the penalty for overdrafts and reserve shortfalls. Since September 1997, a committee of the Bank of Mozambique meets weekly to analyze and coordinate operations on the interbank foreign exchange and money markets.
    NamibiaNamibia does not have a program with the IMF. Also, given its participation in the Common Monetary Area and its currency board arrangements with South Africa, the Namibian authorities cannot independently set monetary, trade, and exchange policies. Medium-term liquidity monitoring follows that of South Africa.The authorities monitor basic liquidity indicators, mostly on a monthly basis.
    RwandaRwanda does not have a program with the IMF. However, in seeking the use of IMF resources under an ESAF-supported program, the authorities have developed a medium-term framework of economic policies. Monetary benchmarks are net foreign assets of the National Bank of Rwanda (NBR), net credit to the government by the banking system, net domestic credit of the NBR, and reserve money. The targets will be monitored quarterly.The monetary policy management committee of the NBR follows financial and economic developments closely and intervenes in the money and foreign exchange market as necessary to achieve the objectives of the monetary program.
    SenegalAlthough Senegal has a program with the IMF, monetary policy continues to be defined in the context of the West African Monetary Union, of which it is a member. This is done by BCEAO. Nevertheless, the program sets performance criteria and benchmarks as follows: a ceiling on net domestic assets of the BCEAO, a ceiling on net bank credit to the central government, and zero ceilings on short-term and nonconcessional debt.Short-term operating targets are set in line with the monetary program agreed upon with the IMF.
    South AfricaSouth Africa does not have a program with the IMF. Monetary programming is done within the context of “The Growth, Employment, and Redistribution (GEAR) Strategy.” Indicative quantitative guidelines are set and monitored for broad money.For many years, the South African Reserve Bank announced guidelines for broad money as part of its apparatus for executing monetary policy. These guidelines were supplemented in 1995 by bank-to-bank guidelines on the growth of credits to the private sector.
    SwazilandSwaziland does not have a program with the IMF. In addition, given Swaziland's membership in the Common Monetary Area and the pegging of the lilangeni to the South African rand, and the free circulation of the rand in Swaziland, there is limited scope for monetary policy. Most monetary aggregates move in tandem with those of South Africa.Short-term liquidity monitoring is undertaken within the context of commercial banks' liquidity requirements. Since May 1, 1996, banks have had to comply with the liquidity ratio on a weekly average basis.
    TanzaniaMonetary performance criteria under the ESAF program supported by the IMF include net credit to the government by the Bank of Tanzania (BOT), net domestic financing of the government budget deficit, net domestic assets of the banking system, and net international reserves of the Bank of Tanzania. These aggregates are monitored quarterly.Since May 1996, the BOT has used reserve money as the main instrument of money management. It closely monitors reserve money as well as the actions of the commercial banks in achieving compliance with foreign exchange exposure limits to ensure that the liquidity impact of foreign exchange transfers is consistent with overall monetary objectives.
    UgandaUganda has a program with the IMF. The program sets targets for net domestic assets of the banking system, net claims on the government by the banking system, and minimum increase in net international reserves. These are monitored quarterly.Short-term operating targets are set in line with the monetary program agreed upon with the IMF. Furthermore, the Bank of Uganda has created its own security of a short-term duration, solely for liquidity absorption purposes. Consequently, this instrument will be offered only to commercial banks.
    ZambiaMonetary performance criteria under an ESAF program supported by the IMF are set for net domestic assets of the Bank of Zambia, net claims on government, domestic arrears of government, and net international reserves. These are monitored quarterly.The Bank of Zambia monitors its balance sheet and those of the commercial banks on a monthly basis.
    ZimbabweZimbabwe has a stand-by arrangement, which was approved on June 1, 1998 with the IMF. Under this arrangement, a framework of monetary management had been agreed upon with the IMF, which is monitored within the context of Article IV consultations.The Reserve Bank of Zimbabwe (RBZ) seeks to control reserve money, rather than net domestic assets, in its effort to reduce inflation. As a result, the RBZ monitors money demand and inflation very closely. The RBZ also intervenes in the foreign exchange market to stabilize the exchange rate.
    Appendix II MAE Technical Assistance to Sub-Saharan African Countries

    Strengthening the international monetary system through global implementation of appropriate monetary policies has been one of the main objectives of the IMF since its inception. However, implementing appropriate monetary policies requires adequate financial infrastructure and administration, which are not consistently present in member countries, particularly developing economies. To address this need, the IMF created a special unit to provide technical assistance to its members. Even though the IMF began offering technical assistance and advice to member countries soon after it commenced operations, a major turning point in its technical assistance program occurred in the early 1960s when many countries, mostly African, became independent and joined the organization.

    To meet the new requirements, in 1963, the IMF established the Central Banking Service (CBS), which became the Central Banking Department (CBD) and was later renamed the Monetary and Exchange Affairs (MAE) Department.

    Assistance Provided, 1964/97

    Initially, MAE concentrated on setting up central banks in the newly independent nations of sub-Saharan Africa. Most of the assistance was provided in the form of long-term resident experts in the areas of management and research activities. Additionally, advisory assistance was provided from headquarters, in cooperation with the Legal Department, in the form of comments on draft central and general banking legislation for the newly independent countries. In 1964, the first year of MAE activity in Africa, approximately three staff years of assistance were provided to three countries—Burundi, Rwanda, and Sierra Leone—in the form of two governors and a director-general. By 1974, MAE was providing almost 30 staff years of long-term assistance to African countries. This represented about 45 percent of total MAE assistance in that year (see Box A1 and Table A10).

    Table A10.Schedule of Past Intensive Technical Assistance Provided by MAE to Sub-Saharan African Countries, 1964/97
    Central BankTechnical Assistance in Staff-YearsPeriod Covered
    BCEAO (8 countries)741975–97
    BEAC (6 countries)511976–97
    Botswana381975–90
    Comoros81976–97
    Gambia, The391967–97
    Guinea391967–97
    Kenya411965–82
    Lesotho291974–90
    Liberia361973–88
    Madagascar91973–76

    1988–97
    Malawi181966–90
    Mauritius201970–88
    Mozambique101986–90
    Rwanda521964–97
    Sāo Tomé and Principe51977–97
    Seychelles181978–89
    Sierra Leone321964–86
    Tanzania351964–87
    Uganda351965–89
    Zaïre (former)601966–91
    Zambia331968–87

    By the 1970s, MAE assistance to sub-Saharan African countries had become more intensive. From management and research activities, the emphasis gradually moved toward other central bank activities. The composition of MAE assistance to these countries has evolved considerably over the last 20 years: technical assistance in management and research has gradually diminished, and emphasis has shifted to monetary operations and bank supervision (see Figure A1). This trend is a reflection of the evolution of central banking in sub-Saharan Africa from the initial establishment phase in the newly independent countries to one in which the financial system is market-based, indirect instruments of monetary policy implementation have become the main tools for interest rate determination, and the soundness of the financial sector is the major concern for emerging economies.

    Figure A1.MAE Technical Assistance to Sub-Saharan Africa in Selected Years (Staff years)

    In fiscal year 1997 (ended June), strengthening banking supervision and implementing open market operations accounted for 63 percent of the total technical assistance provided by MAE to sub-Saharan African countries, while management activities, together with payments system development, accounted for only 3 percent. Despite the initial emphasis on research and management, cumulatively, over the last 20 years, supervision has accounted for 21 percent of total assistance, compared with 18 percent for research activities and 12 percent for management.

    The mode of delivery of MAE technical assistance has also gradually, but not drastically, changed over the last 20 years. In fiscal year 1997, long-term assistance by MAE—that is, assignment of advisors for at least six months—has slowly decreased to 76 percent of the total assistance, compared with 91 percent during 1978/97. Short-term assistance in the form of ad hoc advisors for limited periods of time instead increased to 17 percent of total assistance as of October 1997. This trend reflects the near completion of one phase—that of building capacity in research, accounting, and management activities, requiring long-term advisors—and the move to the next phase of fine-tuned assistance on well-focused topics strictly related to structural measures envisaged under IMF-supported programs.

    The share of MAE advisory missions has also increased gradually and accounted for about 6 percent of total MAE assistance in fiscal year 1997. These statistics are explained by the expansion of MAE activities to all key operational functions of central banking in recognition of the increasing need for a simultaneous and comprehensive modernization of all central banking activities in sub-Saharan African countries. This expansion has also resulted from the integration of MAE activities into structural measures envisaged under IMF-supported programs. In this latter context, the major turning point occurred in 1987. The transition was facilitated by the need for closer interaction among member countries, area departments, and MAE to further enhance collaboration between the African Department and MAE. Enhanced collaboration would also facilitate the African Department's inputs into MAE's technical assistance program and work plan for the future.

    Although past MAE technical assistance was largely driven by the authorities' decisions to innovate and make changes, in recent years it has become an integral part of structural reforms in developing countries, mostly under SAF and ESAF programs. MAE has been increasingly requested to assist member countries in building the needed capacity to implement actions envisaged under IMF-supported programs, such as open market operations and floating exchange regimes, or to strengthen the supervision capabilities of the central bank to safeguard the soundness of the financial sector. Some of these actions are structural benchmarks under ESAF.

    MAE has so far provided little assistance to the sub-Saharan African countries in the area of modernizing payments systems. This is largely explained by the lack of emphasis and importance that central banks in these countries have placed on the subject. Indeed, in many central bank laws in sub-Saharan African countries, jurisdiction over the payments systems and the role of the central bank in promoting sound payments systems were not fully recognized. However, in view of recent trends that show that these countries are introducing indirect instruments and developing interbank markets, the existence of efficient and sound payments systems has become essential and is assuming growing importance. Further to the Southern African Development Community initiative, which plans to introduce common, safe standards in the payments systems of all countries in the region, MAE has provided a resident expert in the region to assist the initiative and to work as the region's peripatetic expert.

    Box A1.MAE Technical Assistance in Central Banking and Related Matters

    Main areas of MAE assistance

    • monetary operations and money market development,

    • foreign exchange operations and markets,

    • banking supervision and regulations,

    • central bank accounting systems and internal audit,

    • payment clearing and settlement systems,

    • monetary analysis and research,

    • public debt management and government securities market, and

    • legislation (in conjunction with the IMF's Legal Department).

    Main instruments of assistance

    Multitopic and diagnostic missions. Multitopic and diagnostic missions have proved particularly useful to sensitize the authorities about their technical assistance needs in the main areas of central banking and to design, together with MAE missions and other officials, an action plan that sets out an integrated program of reform. MAE missions have been instrumental in high-lighting the need for developing human resources and working together toward modernization. MAE recommendations have proved useful in prioritizing the need for specific training in departments of the central bank, where skilled labor is scarce or nonexistent.

    Short-term experts. Following initial diagnostic and multitopic missions, short-term MAE and expert visits have helped develop the knowledge of the recipient country's officials. The visits have focused on problem solving and cover areas where there is a well-defined actual plan to monitor. These visits give officials the opportunity to work directly with experienced staff on practical issues and to learn how to address problems.

    Long-term experts. Long-term experts have helped recipient central banks develop skills and expertise. This MAE strategy has always envisaged capacity biulding and the development and transmission of expertise from the long-term expert to the local counterparts. Since the main role of the long-term expert is to carry out the implementation of reforms, such as banking supervision, or to provide day-to-day advice on operational and policy issues (monetary operations, foreign exchange, accounting, general management), the officials greatly benefit because the continued presence of experts helps them develop their own expertise. Typically, at the end of the assignment, the long-term expert is replaced by local counterparts, and ad hoc short-term visits provide follow-up support during the transition period.

    Seminars and workshops. MAE has organized or participated in a number of other training activities, including seminars and workshops.

    The relatively small number of MAE workshops in the region is largely a reflection of the uneven start made by sub-Saharan African countries in moving toward a market economy. It is also a function of the lack of organized regional centers through which assistance over common issues and experiences can be provided to a large number of participants. The effectiveness of workshops hinges on the existence of a sizable number of countries that are at a similar stage of development of their financial sectors and that are seeking solutions to common problems. Therefore, collecting experiences from different countries on similar subjects and sharing information are crucial for the organization of such activities. This form of technical assistance, which has proved quite successful, was first introduced in Russia, the Baltics, and the other countries of the former Soviet Union, which were making the move to a market economy at virtually the same time as the countries of sub-Saharan Africa.

    See the Communiqué of the Group of Seven meeting in Lyon, France, June 1996.

    The countries are Angola, Botswana, Ethiopia, Ghana, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Rwanda, South Africa, Swaziland, Tanzania, Uganda, Zambia, Zimbabwe, the West African Economic and Monetary Union (WAEMU) countries—Benin, Burkina Faso, Côte d'Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo—and the Central African Economic and Monetary Community (CAEMC) countries—Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea, and Gabon. The 14 countries of the WAEMU and the CAEMC form the CFA franc zone (see footnote 4). Most of these countries have been recipients of technical assistance from the IMF and are currently reforming and modernizing their financial sectors.

    SAF/ESAF: Structural Adjustment Facility/Enhanced Structural Adjustment Facility. SAC/SAL: Structural Adjustment Credit/Loan.

    CFA stands for Communauté financière africaine in the WAEMU and Coopération financière en Afrique centrale in the CAEMC.

    Statistics are taken from the IMF's World Economic Outlook database.

    In Mozambique, a small foreign-owned bank, the Standard Tota, continued to operate, but otherwise the banking system was typical of centrally planned economies.

    For a more detailed account of changes in the structure of the financial sector in this region, see Tenconi (1992).

    The countries forming the Southern African Development Community are Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe.

    For a more detailed discussion, see Alexander and others (1995) and Popiel (1994).

    MAE's book-entry system is based on the personal computer operated on Access. It is operative in Malawi, Zambia, and Zimbabwe.

    Other members—Lesotho, Namibia, and Swaziland—are very small by comparison, and their monetary instruments far less developed than South Africa's.

    The rating on external convertibility is not necessarily consistent with that of the development of monetary policy instruments.

    A central bank has autonomy if it has sufficient authority (both de jure and de facto) over the level of reserve money to meet its primary objective and if it can use that authority without the government's influencing it in a nontransparent manner.

    The objective is stipulated in the South African Constitution of 1996 (Article 224(1)): “The primary object of the South African Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable economic growth in the Republic” (Government of the Republic of South Africa, 1997).

    See for example, Tuya and Zamalloa (1994) and Goodhart and Schoenmaker (1995) for an overview of the pros and cons of placing banking supervision in the central bank.

    Autonomy should, however, be balanced by accountability regarding both its monetary policy performance and its administration of public resources.

    Dismissal for lack of performance presumes that clearly defined performance criteria are established.

    See, for example, Leone (1993) and Mackenzie and Stella (1996) for a discussion of quasi-fiscal activities.

    For a detailed discussion on limiting credit to government, see Leone (1991) and Cottarelli (1993).

    Several countries with more developed financial markets prohibit the central bank from extending direct credit to the government (for example, the future European Central Bank).

    For instance, the 1991 regulation of clearing in Mozambique stipulated that the deadline for returning payments drawn in the same city was 24 hours; for payment documents between provincial capitals, 60 days; and as long as 90 days for some other cases.

    When the United States adopted the Monetary Control Act of 1980, for example, it introduced measures to reduce the float by adopting availability schedules and pricing the remaining float (Young, 1986). The pricing involved an explicit interest charge by the Federal Reserve on the proportion of banks' reserves that could be attributed to float.

    For a discussion of quasi-fiscal operations, see, for example, Mackenzie and Stella (1996).

    For a discussion of accounting for central bank foreign exchange operations, see Valencia (1997). MAE recommends that (1) foreign exchange transactions be recorded at the rate at which they are transacted; (2) assets and liabilities in foreign currencies be reported at the period closing rate; (3) realized gains and losses from transactions in foreign exchange be recorded in the income statements; and (4) unrealized foreign exchange gains or losses be deferred and posted in a revaluation reserve account in the balance sheet.

    A client-server environment is one where many specialized computers called servers (database servers, print servers, and communication servers) are interconnected with general-purpose workstations, called clients, in a single, integrated network.

    These figures represent the average for the region as a whole. There are significant country variations from this average.

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    Recent Occasional Papers of the International Monetary Fund

    169. Financial Sector Development in Sub-Saharan African Countries, by Hassanali Mehran, Piero Ugolini, Jean Philippe Briffaux, George Iden, Tonny Lybek, Stephen Swaray, and Peter Hayward. 1998.

    168. Exit Strategies: Policy Options for Countries Seeking Greater Exchange Rate Flexibility, by a staff team led by Barry Eichengreen and Paul Masson with Hugh Bredenkamp, Barry Johnston, Javier Hamann, Esteban Jadresic, and Inci Otker. 1998.

    167. Exchange Rate Assessment: Extensions of the Macroeconomic Balance Approach, edited by Peter Isard and Hamid Faruqee. 1998

    166. Hedge Funds and Financial Market Dynamics, by a staff team led by Barry Eichengreen and Donald Mathieson with Bankim Chadha, Anne Jansen, Laura Kodres, and Sunil Sharma. 1998.

    165. Algeria: Stabilization and Transition to the Market, by Karim Nashashibi, Patricia Alonso-Gamo, Stefania Bazzoni, Alain Feler, Nicole Laframboise, and Sebastian Paris Horvitz. 1998.

    164. MULTIMOD Mark III: The Core Dynamic and Steady-State Model, by Douglas Laxton, Peter Isard, Hamid Faruqee, Eswar Prasad, and Bart Turtelboom. 1998.

    163. Egypt: Beyond Stabilization, Toward a Dynamic Market Economy, by a staff team led by Howard Handy. 1998.

    162. Fiscal Policy Rules, by George Kopits and Steven Symansky. 1998.

    161. The Nordic Banking Crises: Pitfalls in Financial Liberalization? by Burkhard Dress and Ceyla Pazarbasioglu. 1998.

    160. Fiscal Reform in Low-Income Countries: Experience Under IMF-Supported Programs, by a staff team led by George T. Abed and comprising Liam Ebrill, Sanjeev Gupta, Benedict Clements, Ronald McMorran, Anthony Pellechio, Jerald Schiff, and Marijn Verhoeven. 1998.

    159. Hungary: Economic Policies for Sustainable Growth, Carlo Cottarelli, Thomas Krueger, Reza Moghadam, Perry Perone, Edgardo Ruggiero, and Rachel van Elkan. 1998.

    158. Transparency in Government Operations, by George Kopits and Jon Craig. 1998.

    157. Central Bank Reforms in the Baltics, Russia, and the Other Countries of the Former Soviet Union, by a staff team led by Malcolm Knight and comprising Susana Almuina, John Dalton, Inci Otker, Ceyla Pazarbasioglu, Arne B. Petersen, Peter Quirk, Nicholas M. Roberts, Gabriel Sensenbrenner, and Jan Willem van der Vossen. 1997.

    156. The ESAF at Ten Years: Economic Adjustment and Reform in Low-Income Countries, by the staff of the International Monetary Fund. 1997.

    155. Fiscal Policy Issues During the Transition in Russia, by Augusto Lopez-Claros and Sergei V. Alexashenko. 1998.

    154. Credibility Without Rules? Monetary Frameworks in the Post-Bretton Woods Era, by Carlo Cottarelli and Curzio Giannini. 1997.

    153. Pension Regimes and Saving, by G.A. Mackenzie, Philip Gerson, and Alfredo Cuevas. 1997.

    152. Hong Kong, China: Growth, Structural Change, and Economic Stability During the Transition, by John Dodsworth and Dubravko Mihaljek. 1997.

    151. Currency Board Arrangements: Issues and Experiences, by a staff team led by Tomas J.T. Balino and Charles Enoch. 1997.

    150. Kuwait: From Reconstruction to Accumulation for Future Generations, by Nigel Andrew Chalk, Mohamed A. El-Erian, Susan J. Fennell, Alexei P. Kireyev, and John F. Wilson. 1997.

    149. The Composition of Fiscal Adjustment and Growth: Lessons from Fiscal Reforms in Eight Economies, by G.A. Mackenzie, David W.H. Orsmond, and Philip R. Gerson. 1997.

    148. Nigeria: Experience with Structural Adjustment, by Gary Moser, Scott Rogers, and Reinold van Til, with Robin Kibuka and Inutu Lukonga. 1997.

    147. Aging Populations and Public Pension Schemes, by Sheetal K. Chand and Albert Jaeger. 1996.

    146. Thailand: The Road to Sustained Growth, by Kalpana Kochhar, Louis Dicks-Mireaux, Balazs Horvath, Mauro Mecagni, Erik Offerdal, and Jianping Zhou. 1996.

    145. Exchange Rate Movements and Their Impact on Trade and Investment in the APEC Region, by Takatoshi Ito, Peter Isard, Steven Symansky, and Tamim Bayoumi. 1996.

    144. National Bank of Poland: The Road to Indirect Instruments, by Piero Ugolini. 1996.

    143. Adjustment for Growth: The African Experience, by Michael T. Hadjimichael, Michael Nowak, Robert Sharer, and Amor Tahari. 1996.

    142. Quasi-Fiscal Operations of Public Financial Institutions, by G.A. Mackenzie and Peter Stella. 1996.

    141. Monetary and Exchange System Reforms in China: An Experiment in Gradualism, by Hassanali Mehran, Marc Quintyn, Tom Nordman, and Bernard Laurens. 1996.

    140. Government Reform in New Zealand, by Graham C. Scott. 1996.

    139. Reinvigorating Growth in Developing Countries: Lessons from Adjustment Policies in Eight Economies, by David Goldsbrough, Sharmini Coorey, Louis Dicks-Mireaux, Balazs Horvath, Kalpana Kochhar, Mauro Mecagni, Erik Offerdal, and Jianping Zhou. 1996.

    138. Aftermath of the CFA Franc Devaluation, by Jean A.R Clement, with Johannes Mueller, Stephane Cosse, and Jean Le Dem. 1996.

    137. The Lao People's Democratic Republic: Systemic Transformation and Adjustment, edited by Ichiro Otani and Chi Do Pham. 1996.

    136. Jordan: Strategy for Adjustment and Growth, edited by Edouard Maciejewski and Ahsan Mansur. 1996.

    135. Vietnam: Transition to a Market Economy, by John R. Dodsworth, Erich Spitaller, Michael Braulke, Keon Hyok Lee, Kenneth Miranda, Christian Mulder, Hisanobu Shishido, and Krishna Srinivasan. 1996.

    134. India: Economic Reform and Growth, by Ajai Chopra, Charles Collyns, Richard Hemming, and Karen Parker with Woosik Chu and Oliver Fratzscher. 1995.

    133. Policy Experiences and Issues in the Baltics, Russia, and Other Countries of the Former Soviet Union, edited by Daniel A. Citrin and Ashok K. Lahiri. 1995.

    132. Financial Fragilities in Latin America: The 1980s and 1990s, by Liliana Rojas-Suarez and Steven R. Weisbrod. 1995.

    131. Capital Account Convertibility: Review of Experience and Implications for IMF Policies, by staff teams headed by Peter J. Quirk and Owen Evans. 1995.

    130. Challenges to the Swedish Welfare State, by Desmond Lachman, Adam Bennett, John H. Green, Robert Hagemann, and Ramana Ramaswamy. 1995.

    129. IMF Conditionality: Experience Under Stand-By and Extended Arrangements. Part II: Background Papers. Susan Schadler, Editor, with Adam Bennett, Maria Carkovic, Louis Dicks-Mireaux, Mauro Mecagni, James H.J. Morsink, and Miguel A. Savastano. 1995.

    128. IMF Conditionality: Experience Under Stand-By and Extended Arrangements. Part I: Key Issues and Findings, by Susan Schadler, Adam Bennett, Maria Carkovic, Louis Dicks-Mireaux, Mauro Mecagni, James H.J. Morsink, and Miguel A. Savastano. 1995.

    127. Road Maps of the Transition: The Baltics, the Czech Republic, Hungary, and Russia, by Biswajit Banerjee, Vincent Koen, Thomas Krueger, Mark S. Lutz, Michael Marrese, and Tapio O. Saavalainen. 1995.

    126. The Adoption of Indirect Instruments of Monetary Policy, by a staff team headed by William E. Alexander, Tomas J.T. Balino, and Charles Enoch. 1995.

    125. United Germany: The First Five Years—Performance and Policy Issues, by Robert Corker, Robert A. Feldman, Karl Habermeier, Hari Vittas, and Tessa van der Willigen. 1995.

    124. Saving Behavior and the Asset Price “Bubble” in Japan: Analytical Studies, edited by Ulrich Baumgartner and Guy Meredith. 1995.

    Note: For information on the title and availability of Occasional Papers not listed, please consult the IMF Publications Catalog or contact IMF

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