Message from the Managing Director and Chair of the Executive Board


  • Message from the Managing Director and Chair of the Executive Board

  • 1. Overview

  • 2. The Medium-Term Strategy

  • 3. Surveillance in action during FY2006

  • 4. Strengthening surveillance and crisis prevention

  • 5. Strengthening IMF program support and crisis resolution

  • 6. The IMF’s role in low-income countries

  • 7. Technical assistance and training

  • 8. Financial operations and policies

  • 9. Governance and management of the IMF

  • Appendixes

A global institution

The International Monetary Fund is a specialized agency of the United Nations system set up by treaty in 1945 to help promote the health of the world economy. Headquartered in Washington, D.C., it is governed by its almost global membership of 184 countries.

The IMF is the central institution of the international monetary system—the system of international payments and exchange rates that enables business to take place between countries with different currencies.

The IMF’s statutory purposes include facilitating the balanced expansion of world trade, promoting the stability of exchange rates, avoiding competitive currency devaluations, and helping in the orderly correction of a country’s balance of payments problems.

To achieve these goals, the IMF

  • Monitors economic and financial developments and policies, in member countries and at the global level, and gives policy advice to its members based on its 60 years of experience.

  • Lends to member countries with balance of payments problems, to provide temporary financing in support of adjustment and reform policies aimed at correcting the underlying problems.

  • Provides the governments and central banks of its member countries with technical assistance and training in its areas of expertise.

By working to strengthen the international financial system and to accelerate progress toward reducing poverty, as well as promoting sound economic policies among all its member countries, the IMF is helping to make globalization work for the benefit of all.

This Annual Report of the Executive Board of the IMF reports on the activities of the Board during the financial year May 1, 2005, through April 30, 2006. Most of the Report consists of reviews of Board discussions of the whole range of IMF policy and operations. Further information is provided on the Fund’s website: www.imf.org.


Message from the Managing Director and Chair of the Executive Board

  • 1. Overview

    • The world economy

    • Global economic risks

    • The work of the Fund

  • 2. The Medium-Term Strategy

    • Implementing the Medium-Term Strategy: Executive Board Discussion

      • Surveillance · Emerging market countries · Low-income countries · Governance · Capacity building · Streamlining · Medium-term budget

    • International Monetary and Financial Committee Meeting, April 22, 2006

  • 3. Surveillance in action during FY2006

    • Global surveillance

      • World Economic Outlook · Global Financial Stability Report · IEO evaluation of multilateral surveillance

    • Country surveillance

    • Regional surveillance

      • ECCU · Euro area · CEMAC · WAEMU

  • 4. Strengthening surveillance and crisis prevention

    • Financial sector surveillance

      • Implications of Basel II · IEO report on FSAP

    • Fiscal analysis and policy advice

      • Public investment and fiscal policy · Statistical frameworks for strengthening fiscal analysis

    • Standards and codes, and data provision to the Fund

      • Standards and Codes Initiative · Data Standards Initiatives · Guide on Resource Revenue Transparency

    • Crisis prevention

      • IEO report on IMF approach to capital account liberalization · Balance sheet analysis · Impact of an avian flu pandemic

  • 5. Strengthening IMF program support and crisis resolution

    • Strengthening IMF program support

    • Crisis resolution

  • 6. The IMF’s role in low-income countries

  • Debt relief and sustainability

    • Enhanced HIPC Initiative · MDRI · Debt sustainability framework

  • Strengthening instruments for supporting low-income countries

    • PRGF program design · PSI · ESF · Review of Poverty Reduction Strategy approach · Global Monitoring Report

  • Trade and poverty reduction

  • 7. Technical assistance and training

    • Technical assistance delivery in FY2006

    • Task force on technical assistance

    • Review of regional technical assistance centers

    • IMF Institute

  • 8. Financial operations and policies

    • Regular financing activities

    • Concessional financing activities

      • PRGF · ESF · MDRI and Enhanced HIPC Initiative · Investments supporting concessional lending and debt relief · Emergency assistance

    • Income, charges, remuneration, and burden sharing

    • Credit risk management in the IMF and the level of precautionary balances

    • Quota developments

    • SDR developments

    • Safeguards assessments

    • Arrears to the IMF

    • External audit mechanism

  • 9. Governance and management of the IMF

    • Quotas and voice

    • Transparency

    • Communications and outreach

    • Administrative and capital budgets

    • Human resources

    • Organization

  • Appendixes

    • I International reserves

    • II Financial operations and transactions

    • III Principal policy decisions of the Executive Board

    • IV Press communiqués of the International Monetary and Financial Committee and the Development Committee

    • V Executive Directors and voting power, April 30, 2006

    • VI Changes in membership of the Executive Board

    • VII Financial statements, April 30, 2006

    • Acronyms and abbreviations


  • 2.1 Key elements of the IMF’s Medium-Term Strategy

  • 3.1 Inflation targeting

  • 3.2 Growth in central and eastern Europe

  • 3.3 Seminar on regional financial integration in Asia

  • 3.4 Regional financial integration in Central America

  • 4.1 Reorganizing the Fund’s financial sector work

  • 4.2 Financial soundness indicators

  • 4.3 Monitoring offshore financial centers

  • 4.4 Update on AML/CFT

  • 4.5 ROSCs and Data Standards Initiatives

  • 4.6 External debt Web site

  • 5.1 Stand-By Arrangement for Iraq

  • 6.1 Debt relief initiatives

  • 6.2 Workshop and handbook on scaling up aid

  • 6.3 Forum on Poverty Reduction Strategies for the western Balkans

  • 6.4 Helping Africa’s cotton producers

  • 7.1 Promoting legislation to combat the financing of terrorism

  • 7.2 Proposals of the Task Force on Technical Assistance

  • 7.3 Feedback from country officials on the IMF Institute’s curriculum

  • 8.1 The IMF’s financing mechanism

  • 8.2 Expectations versus obligations

  • 8.3 Financial Transactions Plan

  • 8.4 The IMF’s lending capacity

  • 8.5 The IMF’s financial structure for concessional assistance and debt relief to low-income member countries

  • 8.6 Financing of the MDRI

  • 8.7 Medium-term income outlook and options

  • 8.8 General reviews of quotas

  • 8.9 Review of SDR valuation and interest rate

  • 8.10 Safeguards assessment policy

  • 9.1 How the IMF is run

  • 9.2 Executive Board standing committees

  • 9.3 Disseminating information: the IMF’s publishing operations and Web site

  • 9.4 Risk management in the IMF

  • 9.5 Enhancing IMF–World Bank cooperation

  • 9.6 A common approach to fighting corruption

  • 9.7 The new medium-term budget framework

  • 9.8 Main changes in the Fund’s budgetary practices

  • 9.9 Resident representatives


  • 3.1 Article IV consultations completed during FY200

  • 5.1 IMF financial facilities

  • 6.1 Countries covered by the MDRI

  • 7.1 Technical assistance program areas, FY2004-06

  • 7.2 IMF technical assistance resources and delivery, FY2002-06

  • 7.3 Technical assistance evaluation program, FY2006-07

  • 7.4 IMF Institute training programs, FY2002-06

  • 7.5 IMF Institute regional training programs

  • 8.1 Extension of repurchase expectations in FY2006

  • 8.2 IMF regular loans approved in FY2006

  • 8.3 PRGF arrangements approved in FY2006

  • 8.4 Subsidy contributions for the ESF

  • 8.5 Delivery of MDRI debt relief to 20 qualifying members

  • 8.6 Subsidy contributions for emergency assistance

  • 8.7 Arrears to the IMF of countries with obligations overdue by six months or more

  • 9.1 Administrative budgets, FY2004-07

  • 9.2 Distribution of professional and managerial staff by nationality

  • 9.3 IMF staff salary structure

  • 9.4 Distribution of staff by gender

  • 9.5 Distribution of staff by developing and industrial countries


  • 1.1 Real GDP growth

  • 1.2 Current account balance

  • 1.3 Equity market performance

  • 1.4 Sovereign spreads

  • 7.1 Technical assistance by region, FY2006

  • 7.2 Technical assistance delivery by department, FY2006

  • 8.1 Regular loans outstanding, 1996-April 30, 2006

  • 8.2 IMF one-year forward commitment capacity, 1996-April 2006

  • 8.3 PRGF credit outstanding

  • 9.1 Indicative share of resources by key output areas, FY2007

  • 9.2 IMF organization chart

The IMF’s financial year is May 1 through April 30.

The unit of account of the IMF is the SDR; conversions of IMF financial data to U.S. dollars are approximate and provided for convenience. On April 30, 2006, the SDR/U.S. dollar exchange rate was US$1 = SDR 0.67978, and the U.S. dollar/SDR exchange rate was SDR 1 = US$1.47106. The year-earlier rates (April 30, 2005) were US$1 = SDR 0.65929 and SDR 1 = US$1.51678.

“Billion” means a thousand million; “trillion” means a thousand billion; minor discrepancies between constituent figures and totals are due to rounding.

As used in this Annual Report, the term “country” does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.

Message from the Managing Director and Chair of the Executive Board

Management team, from left:

Rodrigo de Rato, Managing Director and Chair of the Executive Board

Anne O. Krueger, First Deputy Managing Director

Agustín Carstens, Deputy Managing Director

Takatoshi Kato, Deputy Managing Director

the IMF’s financial year that ended on April 30, 2006, was a year of continuity and progress for the global economy, and a year of change for the Fund. The global economy continued to grow at an impressive pace, the expansion became more broadly spread geographically, and financial market conditions remained benign. This environment, largely free of economic crises, was conducive to debate, both within and outside the Fund, on the future direction of the institution–a debate that I encouraged when I launched a review of the Fund’s strategic direction in 2004.

I sought to crystallize the results from this debate in two reports: a report that I sent to the International Monetary and Financial Committee (IMFC) in September 2005 outlining a Medium-Term Strategy for the Fund, and a report to the IMFC in April 2006 on plans for implementing the strategy. I am pleased that the IMF’s Executive Board broadly endorsed both reports before they were submitted to the IMFC, and that the IMFC welcomed both and, in April, gave me and the Executive Board a mandate to produce proposals in surveillance, crisis lending, and the Fund’s own governance–all key areas–in the run-up to the Annual Meetings to be held in Singapore in September.

The road we need to take in surveillance is already clear: we need surveillance that is more focused, with more attention to spillovers between member countries. We also need to deepen our understanding of financial and capital markets. The new department that is being created from the merger of the International Capital Markets Department and the Monetary and Financial Systems Department will have an important role to play in this. Another key element of the Medium-Term Strategy (MTS) will be a new tool to supplement the Fund’s surveillance of the global economy: multilateral consultations, in which particular issues of global or regional significance will be taken up comprehensively and collectively with the key countries concerned, as well as with policymaking bodies formed by groups of members. Our first multilateral consultation is already under way, focused on the aim of narrowing global payments imbalances while maintaining robust global growth.

The past year has been one of progress and hope in low-income countries. Growth in Africa exceeded 5 percent for the second consecutive year. In July 2005, the leaders of the G-8 countries proposed a write-off of debts owed to international financial institutions by some of the poorest, most heavily indebted countries, and the international financial institutions responded quickly. Indeed, I am proud to say that the IMF led the way–putting in place by January 2006 mechanisms to cancel the debts to it of 19 countries. The Fund has risen to meet the challenges of poverty reduction in low-income countries in other respects, also: with a new facility to help members deal with exogenous shocks, with the Policy Support Instrument to help low-income countries that do not want or need financial support from the Fund, and with the Guide on Resource Revenue Transparency, to help countries overcome “the curse of natural resources.” We also continue to base our work on giving sound advice on macroeconomic policies–the Fund’s core function and the best way we can help low-income countries meet the Millennium Development Goals.

Financial year 2006 was a year in which there was little new regular (nonconcessional) lending by the Fund, and in which some major borrowers were able to repay the Fund early. This is a cause for celebration. But I do not believe that demand for the Fund’s financial assistance to help address balance of payments problems will remain dormant indefinitely, and the Fund needs to be ready to meet our members’ needs when they arise. With this in mind, I have proposed to the Executive Board, again as part of the MTS, that we develop a new instrument to provide financing to emerging market countries that have strong fundamentals but remain vulnerable to shocks. The instrument would be designed to help members avoid crises and to respond to crises if they do occur.

The Fund also worked to put its own house in better order over the past year. In April, we completed the Employment, Compensation, and Benefits Review. We also presented, for the first time, a medium-term budget. Work is under way on other important changes. I have appointed high-level external committees to advise us on two critical issues–the division of labor between the Fund and the World Bank, and new sources of income for the Fund in an era when crisis prevention may largely supersede crisis response and the Fund should not be as dependent as it has been on its income from lending. In addition to consideration of options to broaden the Fund’s income base, action is being taken on the expenditure side, where real reductions are proposed in the medium-term budget. Perhaps most fundamentally, I am preparing proposals on reform of the representation of member countries in the Fund. At present, the relative quotas and voting shares of our members do not adequately reflect the increased economic weight of some countries, including some of the largest emerging markets. I am also concerned that the voting power of low-income countries has been eroded over time. This gives rise to concerns about the adequacy of voice and representation for a number of countries that continue to borrow from the Fund but that have only a limited share in Fund voting. I will be making some specific proposals on how to take these governance issues forward in the run-up to this year’s Annual Meetings; they are critical for the Fund’s effectiveness in the years ahead.

We meet this year in Singapore, and it is appropriate that the Fund hold its Annual Meetings in Asia, where the pace of economic growth and change has been so fast in recent years. Many challenges lie in front of us, but when our members convene in September, they can celebrate a year of great progress and the prospect of a Fund that is continuing to renew itself for the benefit of the global community and that will continue to work unstintingly for them in the years ahead.

Letter of Transmittal to the Board of Governors

August 3, 2006

Dear Mr. Chairman:

I have the honor to present to the Board of Governors the Annual Report of the Executive Board for the financial year ended April 30, 2006, in accordance with Article XII, Section 7(a) of the Articles of Agreement of the International Monetary Fund and Section 10 of the IMF’s By-Laws. In accordance with Section 20 of the By-Laws, the administrative and capital budgets of the IMF approved by the Executive Board for the financial year ending April 30, 2007, are presented in Chapter 9. The audited financial statements for the year ended April 30, 2006, of the General Department, the SDR Department, and the accounts administered by the IMF, together with reports of the external audit firm thereon, are presented in Appendix VII.

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Rodrigo de Rato

Managing Director and Chair of the Executive Board