The Annual Report 2007 to the Board of Governors reviews the IMF’s activities and policies during the financial year (May 1, 2006, through April 30, 2007). This year’s Report has been streamlined and translated into three more languages than in the past: Arabic, Japanese, and Russian. Besides an Overview, the chapters cover promoting financial and macroeconomic stability and growth through surveillance; program support; capacity building; technical assistance and training; and the IMF’s governance, organization, and finances. The full financial statements for the year and other appendixes are provided on a CD-ROM.

The International Monetary Fund

The IMF is the world’s central organization for international monetary cooperation in which almost all countries in the world work together to promote the common good. The IMF’s primary purpose is to safeguard the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to buy goods and services from each other. This is essential for achieving sustainable economic growth and raising living standards.

All of the IMF’s 185 member countries are represented on its Executive Board, which serves as a forum where they can discuss the national, regional, and global consequences of their economic policies. This Annual Report covers the activities of the Executive Board and Fund management and staff during the fi nancial year May 1, 2006, through April 30, 2007.

The main activities of the IMF include

  • providing advice to members on adopting policies that can help them prevent or resolve a fi nancial crisis, achieve macroeconomic stability, accelerate economic growth, and alleviate poverty;

  • making financing temporarily available to member countries to help them address balance of payments problems—that is, when they fi nd themselves short of foreign exchange because their payments to other countries exceed their foreign exchange earnings; and

  • offering technical assistance and training to countries at their request, to help them build the expertise and institutions they need to implement sound economic policies.

The IMF is headquartered in Washington, DC, and, refl ecting its global reach and close ties with its members, also has offi ces in more than 80 countries around the world.

The IMF’s fi nancial statements for the year ended April 30, 2007, can be found on the CD-ROM affi xed to the inside back cover of this Report. Additional information on the IMF and its member countries can be found on the Fund’s Web site, www.imf.org.

Preface from the Executive Board

This Annual Report of the Executive Board of the IMF to the Board of Governors covers the financial year 2007, which began on May 1, 2006, and ended on April 30, 2007. Two events that occurred after the close of FY2007 are of such importance for the IMF, however, that they merit a mention in this preface.

The first is the Executive Board’s decision in June 2007 to revise the Fund’s framework for surveillance. In the three decades since the original framework was established by the Executive Board in 1977, the nature of the challenges faced by our members has changed. When the 1977 decision was adopted, the most serious threats to international financial and macroeconomic stability were the manipulation of exchange rates by countries seeking to correct their balance of payments problems, and short-term exchange rate volatility. Today, in our increasingly globalized world, as international trade and cross-border capital flows reach unprecedented levels, the most serious threats are fundamental exchange rate misalignments and capital account vulnerabilities. The new decision, which has broad support across the membership, reflects the current environment and provides our members with clear guidelines on the expectations of the international community regarding the potential spillover effects of exchange rate policies, and provides guidance to staff with a view to focusing the Fund’s advice on macroeconomic policies that promote stability and growth.

The second event is Managing Director Rodrigo de Rato’s announcement that he would step down in October 2007. On behalf of the Executive Board, I offer my gratitude to Mr. de Rato for his strong leadership and immense contributions to the Fund since he took up the reins in 2005. I would note, in particular, the Medium-Term Strategy launched in 2006, an ambitious program calling for reform of the distribution of quotas and voting power in the Fund to ensure that all members are fairly and adequately represented, and setting in motion important changes in Fund operations and policies that will enable us to better meet the evolving needs of our members. In the process of selecting Mr. de Rato’s successor, Executive Directors have been invited to nominate candidates who have distinguished records as economic policymakers at senior levels and who are nationals of any of the Fund’s 185 member countries. The Executive Board will consider these candidates in September.

Readers can find information about these and other developments after the close of the financial year at www.imf.org, the IMF’s Web site.

The Executive Board is rightly proud of this new format of the IMF’s Annual Report. To shape it into a more effective communication tool, the Executive Board decided to streamline the Report and to have it translated into seven languages—Arabic, Chinese, French, German, Japanese, Russian, and Spanish—three more than in the past. Readers will find all of the appendixes—including the financial statements—that used to be in the print Report on the CD-ROM affixed to the inside back cover. On the CD-ROM, they will also find Public Information Notices, press releases, assorted reports, and tables and boxes offering more detail on the activities described in the print Report.

We trust that readers will welcome these changes, and we invite your feedback.

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Jonathan T. Fried


Executive Board Committee on the Annual Report


  • Message from the Managing Director

  • Letter of Transmittal to the Board of Governors

  • 1. Overview

    • Key economic and financial developments

    • Highlights of the work of the Executive Board

      • Strengthening and modernizing surveillance

      • Program support

      • Capacity building

      • Quota and voice reform

      • Communication and transparency

      • Improving internal governance

      • Reviewing the finances of the Fund

  • 2. Promoting financial and macroeconomic stability and growth through surveillance

    • Implementing surveillance

      • Global surveillance

      • Country surveillance

      • Regional surveillance and outreach

      • Financial sector surveillance and the Standards and Codes Initiative

    • Modernizing the surveillance framework and integrating financial sector analysis

      • Integrating financial sector and capital markets analysis into surveillance

  • 3. Program support

    • Emerging market economies

      • Lending

      • New financing instrument

    • Low-income countries

      • Concessional lending

      • Debt relief

      • Debt Sustainability Framework

      • Policy Support Instrument

    • Emergency assistance

    • Review of the IMF’s role and instruments

      • IMF and aid to sub-Saharan Africa

      • Ex post assessments

      • Precautionary arrangements

  • 4. Capacity building: technical assistance and training

    • Technical assistance

    • Training by the IMF Institute

  • 5. Governance, organization, and finances

    • Quota and voice reform

    • Communication and transparency

      • Communication

      • Transparency policy

    • Management and organization

      • How the IMF is run

      • Administrative and capital budgets

      • Modernizing the risk-management framework

      • Streamlining

    • Financial operations and policies

      • Income, charges, remuneration, and burden sharing

      • Arrears to the IMF

      • IMF audit mechanisms

  • Executive Directors and Alternates on April 30, 2007

  • Senior officers on April 30, 2007

  • IMF organization chart

  • Acronyms and abbreviations

  • CD-ROM

  • The following are included on the CD-ROM affixed to the inside back cover of this Report:

  • Text of Annual Report 2007 (English, French, Spanish)

  • Supplementary materials for text chapters (English)

  • Appendixes (English)

    • Appendix I International Reserves

    • Appendix II Financial operations and transactions

    • Appendix III Press communiqués of the IMFC and the Development Committee

    • Appendix IV Executive Directors and voting power

    • Appendix V Changes in membership of the Executive Board

    • Appendix VI Financial statements

  • Boxes

    • 1.1 Progress on implementing the Medium-Term Strategy

    • 2.1 Surveillance activities

    • 2.2 Monetary and Capital Markets Department

    • 2.3 ROSCs and Data Standards Initiatives

    • 3.1 Special Drawing Rights

    • 3.2 Tracking progress toward the Millennium Development Goals

    • 3.3 Trade liberalization and low-income countries

    • 4.1 Regional Technical Assistance Centers

    • 5.1 Initiation of the Thirteenth General Review of Quotas

    • 5.2 Liaison with intergovernmental, international, and regional organizations

    • 5.3 Activities of the IEO in FY2007

    • 5.4 Performance indicators

    • 5.5 Safeguard assessments

    • 5.6 Investment Account

  • Tables

    • 3.1 IMF lending facilities

    • 3.2 PRGF arrangements approved in FY2007

    • 4.1 Technical assistance by country income group, FY2007

    • 4.2 IMF technical assistance resources and delivery, FY2005–07

    • 4.3 Donors to the IMF’s technical assistance program

    • 5.1 Administrative budgets, FY2005–08

    • 5.2 Arrears to the IMF of countries with obligations overdue by six months or more, by type

  • Figures

    • 1.1 Real GDP growth

    • 1.2 Current account balance

    • 1.3 Equity market performance

    • 1.4 Sovereign spreads

    • 3.1 Regular loans outstanding, FY1997–FY2007

    • 3.2 Concessional loans outstanding, FY1997–FY2007

    • 5.1 Estimated gross administrative expenditures by key output areas, FY2007

    • 5.2 Estimated gross administrative expenditures by key output areas, FY2008

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

The unit of account of the IMF is the Special Drawing Right (SDR); conversions of IMF financial data to U.S. dollars are approximate and provided for convenience. On April 30, 2007, the SDR/U.S. dollar exchange rate was US$1 = SDR 0.65609, and the U.S. dollar/SDR exchange rate was SDR 1 = US$1.52418. The year-earlier rates (April 30, 2006) were US$1 = SDR 0.67978 and SDR 1 = US$1.47106.

“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

This is a time of transformation, in the global economy and in the International Monetary Fund. The sources of global growth have broadened: Europe, Japan, and the United States have all enjoyed solid economic performance over the past year, while middle-income emerging economies, including China and India, were also important contributors to global growth. Innovation in financial markets has continued, bringing with it many opportunities and some new risks. In the Fund, work on the reforms set out in the Medium-Term Strategy has proceeded, and we saw its first fruits in Financial Year 2007.

Some of the most important changes we have made in the past year have been in our economic oversight function, or surveillance, which is the Fund’s core activity. The introduction of multilateral consultations gives the Fund—and the international community—an important new tool to forge consensus on approaches to common problems. The first multilateral consultation, which focused on reducing global imbalances while sustaining strong global growth, resulted in the five participants—China, the euro area, Japan, Saudi Arabia, and the United States—jointly setting out their policy plans in a document circulated at our Spring Meetings to ministers representing the Fund’s 185 members. The participating countries putting forward these policies and discussing them collaboratively shows their commitment to multilateralism. As they are implemented, these policy plans will reduce global imbalances while helping to sustain growth.

The Fund also made important progress in deepening its work on financial markets and financial systems. We are better integrating our work on financial sectors with our work on macroeconomic issues. And through the merger of two Fund departments into the Monetary and Capital Markets Department in June 2006, we have established a center of excellence in financial market issues—an area of growing importance to the global economy and to the Fund’s members.

In FY2007 we also began work on reforms of the legal framework for bilateral surveillance, which culminated in an Executive Board Decision on a New Framework for Surveillance early in FY2008. The new decision is the first major revision of the surveillance framework in some 30 years, and has broad support from our membership. It reflects current best practice in our work of monitoring members’ exchange rate policies and domestic economic policies; reaffirms that surveillance should be focused on the Fund’s core mandate—promoting countries’ external stability; updates the principles for the guidance of members in the conduct of their exchange rate policies; and sets out clearly what is expected of surveillance, including candor and evenhandedness.

The Fund’s work with low-income countries has remained intense. Ten new programs under the Poverty Reduction and Growth Facility were approved last year, and 24 countries have now benefited from debt relief under the Multilateral Debt Relief Initiative. We are also taking steps to ensure that we are focusing on critical macroeconomic and financial areas, which is where we can make the greatest contribution to stability, growth, and poverty reduction in low-income countries. We will continue to work in partnership with the World Bank and other development agencies, and in doing so can now draw on an important report on Bank-Fund collaboration by a committee of external experts headed by Pedro Malan. The Committee’s report, delivered in February 2007, will help us clarify roles and work better with our World Bank colleagues.

Technical assistance and training remain important elements of our work, especially in low-income countries. FY2007 saw the opening of a regional technical assistance center in Libreville, Gabon, the third in Africa, as well as the opening of the Joint Indian-IMF Training Program in Pune, India, the seventh regional training center worldwide. Meanwhile, the consolidation of anti–money laundering and combating the financing of terrorism (AML/CFT) activities in the Fund’s Legal Department has made it the largest multilateral provider of technical assistance on AML/CFT.

In January 2007, we received a report from a Committee of Eminent Persons chaired by Andrew Crockett. Arguing that the Fund needs a new income model and that it should not continue to rely almost entirely on lending to finance public goods such as surveillance and technical assistance, the Crockett Report recommended that the Fund broaden its sources of income. Establishing reliable income sources—together with effective management of expenditure—is important to give our members confidence that the Fund will be able to carry out its mandate in the future and to enable us to make reliable plans to implement agreed policies. We have already acted on expenditure: the medium-term budget for FY2008–10 implies a reduction in the IMF’s real administrative resources in each of the next three years, to be achieved by increasing efficiency and by scaling back or eliminating lower-priority activities. Addressing the income side of the equation will be a major priority for FY2008.

The September 2006 Annual Meetings were held in Singapore. The meetings gave all of our members a chance to see how far Asia has come since the crisis a decade ago. They also saw the Fund take a major step forward with the completion of the first stage of reform of quotas and voice. On September 18, 2006, our Board of Governors approved ad hoc quota increases for four countries—China, Korea, Mexico, and Turkey—that were clearly underrepresented and agreed on more fundamental reforms to be delivered within two years. This was a historic agreement for the Fund. In January 2007, the Executive Board began work on a proposed amendment to the Articles of Agreement to increase basic votes, with the aim of protecting the voting share of low-income countries as a group. And at its meeting on April 14, 2007, the International Monetary and Financial Committee (IMFC) gave us guidance on a new formula for broader changes in quotas. The IMFC agreed that the new formula should be simple and transparent, and appropriately capture the relative positions of members in the global economy. The reform should also result in higher shares for dynamic economies, many of which are emerging market economies, whose weight and role in the global economy have increased. Our objective remains to complete these reforms by the 2007 Annual Meetings if possible, and by no later than the 2008 Annual Meetings. Meeting this target will require leadership from members, and compromises among them. But if we can continue to draw on the spirit of multilateral cooperation that we saw in Singapore then I am confident that we will succeed.

The past year has been a year of great change at the Fund, and there are many changes still to come. There have also been changes in staff and management. Anne Krueger, First Deputy Managing Director from 2001 to 2006, has been succeeded by John Lipsky. Agustí;n Carstens, Deputy Managing Director from 2003 to 2006, has become Secretary of Finance of Mexico and has been succeeded by Murilo Portugal. Among the changes to come will be my own departure. I will step down as Managing Director after the 2007 Annual Meetings.

However, there are also important continuities: in the commitment to the Fund of our members, represented by our excellent Executive Board; in the dedicated career staff of the Fund; in the work of the institution; and in our sense of vision and purpose. I am proud to be have been able to help guide the Fund during this time of change, and to have had the opportunity to serve all of the members of this great institution.

Letter of Transmittal to the Board of Governors

August 3, 2007

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, 2007, 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, 2008, are presented in Chapter 5. The audited financial statements for the year ended April 30, 2007, 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 VI. The external audit and financial reporting processes were overseen by the External Audit Committee, comprising Dr. Len Konar (Chair), Mr. Satoshi Itoh, and Mr. Steve Anderson, as required under Section 20(c) of the Fund’s By-Laws.

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Rodrigo de Rato

Managing Director and Chair of the Executive Board