As a companion piece to the Board paper on Structural Reforms and Macroeconomic Performance: Initial Considerations for the Fund, this paper presents a selection of case studies on the structural reform experiences of member countries. These papers update the Board on work since the Triennial Surveillance Review toward strengthening the Fund’s capacity to analyze and, where relevant, offer policy advice on macro-relevant structural issues. The paper builds on the already considerable analytical work underway across the Fund, setting out considerations to support a more strategic approach going forward.
Based on the Executive Board’s guidance during the first stage of the Review of Low Income Countries (LIC) Facilities, this paper suggests a number of refinements to the facilities and instruments that are consistent with the self-sustainability of the Poverty Reduction and Growth Trust (PRGT). The proposals seek to improve the tailoring and flexibility of Fund support. Taken together with those advanced in the parallel paper on PRGT eligibility, they are projected to keep the average annual demand for PRGT resources within a range consistent with the Board’s approved strategy to make the PRGT self-sustaining over the period 2013–35. The proposals are as follows.
Longer-term program engagement (LTPE) occurs when a member has spent at least seven of the past 10 years under Fund-supported financial arrangements. In response to the Executive Board’s request for periodic updates on the incidence of LTPEs, this is the fourteenth such report and provides information through July 1, 2013.
This paper provides Executive Directors with an update of safeguards assessment activities from July 1, 2008 through June 30, 2009. In common with previous updates, it covers the various types of safeguards activities undertaken during the year, highlighting the increased activity associated with the “twin crises” of food and fuel price shocks and the global financial crisis during 2008/09. It also briefly discusses developments in the latter part of that year, including the separate safeguards procedures introduced for members accessing the Flexible Credit Line (FCL).
This paper proposes to maintain the Poverty Reduction and Growth Trust (PRGT)-eligibility criteria established in early 2010 and considers, based on the application of such criteria, whether updates to the eligibility list are warranted at this time. The premise remains that access to the Fund’s scarce concessional resources should be preserved for members with low income and related vulnerabilities, while keeping PRGT eligibility closely aligned with International Development Association (IDA) practices. Based on the application of the PRGT-eligibility framework, no countries are proposed for entry or graduation at this time.
International Monetary Fund. Strategy, Policy, &, Review Department, International Monetary Fund. Finance Dept., and International Monetary Fund. Legal Dept.
This paper proposes safeguards broadly aligned with the GRA exceptional access policy that will apply in cases where combined GRA and PRGT credit exposure exceeds the GRA thresholds. The new safeguards would help to mitigate financial risks to the PRGT and the GRA, respectively, that arise from a member having high levels of combined credit from these two sources of funding. The proposed policy builds on the current policies on safeguards to Fund resources (both the Fund’s resources in the GRA and under the PRGT as Trustee, respectively).
Over the past two decades, many low- and lower-middle income countries (LLMICs) have improved control over fiscal policy, liberalized and deepened financial markets, and stabilized inflation at moderate levels. Monetary policy frameworks that have helped achieve these ends are being challenged by continued financial development and increased exposure to global capital markets. Many policymakers aspire to move beyond the basics of stability to implement monetary policy frameworks that better anchor inflation and promote macroeconomic stability and growth.
Many of these LLMICs are thus considering and implementing improvements to their monetary policy frameworks. The recent successes of some LLMICs and the experiences of emerging and advanced economies, both early in their policy modernization process and following the global financial crisis, are valuable in identifying desirable features of such frameworks.
This paper draws on those lessons to provide guidance on key elements of effective monetary policy frameworks for LLMICs.
During the 2012 Review of Poverty Reduction and Growth Trust (PRGT) Eligibility, Executive Directors expressed a number of concerns about the eligibility framework. The Board decided to bring forward the next review of eligibility by one year, to early 2013, in light of these concerns. In particular, Directors called for the review to assess:
Possible shortcomings of the gross national income (GNI) per capita criterion in the case of small states, and whether additional or alternative variables should be used to better capture members‘ circumstances, particularly those of small states; as well as further options to enhance the flexibility of the PRGT-eligibility framework to cover small and very small countries;
The application of the short-term vulnerabilities criterion for graduation, which can lead to repeated non-graduation of members that meet either the income or the market access criteria for graduation.
With single-digit inflation and substantial financial deepening, developing countries are adopting more flexible and forward-looking monetary policy frameworks and ascribing a greater role to policy interest rates and inflation objectives. While some countries have adopted formal inflation targeting regimes, others have developed frameworks with greater target flexibility to accommodate changing money demand, use of policy rates to signal the monetary policy stance, and implicit inflation targets.