Over the last four years, the transition countries have, on the whole, moved substantially toward more market-based exchange rate arrangements, with a view to promoting both greater economic efficiency and more effective macroeconomic stabilization.
Until the late 1980s, the financial sector of the transition countries was characterized by a banking system in which the central bank dominated the financial sector. The savings bank collected savings deposits from households at low interest rates, which were then placed at the Gosbank. According to the credit plan approved by the Planning Authorities, the Gosbank set policy guidelines determining the volume and allocation of credit to different sectors (the credit plan), and the volume and allocation of cash issuance (the cash plan). Funds were then passed to the specialized banks (such as the agricultural and industrial banks), which represented different sectors for on-lending to individual enterprises. Interest rates had no role in the allocation of credit.
V. Sundararajan,, Arne B. Petersen,, and Mr. Gabriel Sensenbrenner
Since 1992, the central banks of the Baltic states and the Commonwealth of Independent States (CIS) have undertaken to various degrees comprehensive reform of their monetary and exchange arrangements in support of their stabilization efforts.5 The objective has been to achieve market-based determination of interest rates and exchange rates, control of banking system liquidity through indirect instruments, and, pari passu, to enhance the use of markets for transmitting monetary policy signals.
The key to the broad-based macroeconomic stabilization that has taken hold since early 1995 has been a deeper understanding among the authorities of the role of strict financial policies as a precondition for price stability and economic recovery. This progress has taken place in the context of the implementation of comprehensive reform programs, frequently with Fund support (13 of the 15 transition economies). Increasingly, support from the Fund is being provided through multiyear arrangements, whether through the Extended Fund Facility (for Azerbaijan, Kazakstan, Lithuania, Moldova, and Russia) or the Enhanced Structural Adjustment Facility (for Armenia, the Kyrgyz Republic, and Georgia).6
Transition economies have on the whole made good progress in introducing indirect monetary policy instruments, but much still remains to be done to bring monetary operations to modern market standards.
Most transition countries are undertaking far-reaching reforms of their payments systems both to resolve urgent problems and to underpin development of efficient and stable systems for the medium term. Measures were initially adopted to minimize fraud and operational risks and to streamline processing and delivery of payments documents, relying on readily available automation and communications technology. These reforms improved the speed, predictability, and security of payments, helped to reduce the size and variability of float in the central bank balance sheet, and thereby facilitated management and interpretation of monetary aggregates.
The broad focus of reforms in central bank accounting and internal audit has been on the implementation of accounting systems that are both relevant and practical for supporting the policy actions of central banks in transition economies. The prime objective has been to present financial information in a manner consistent with internationally accepted accounting principles and standards.
International Monetary Fund. Monetary and Capital Markets Department
Only the IMF is officialy responsible for reporting the foreign exchange arrangements, exchange and trade restrictions, and prudential measures of its 185 member countries. This report draws upon information available to the IMF from a number of sources, including data provided in the course of official staff visits to member countries. Published since 1950, this authoritative, annually updated reference is based upon a unique IMF-maintained database that tracks monetary exchange arrangements for each of its 185 members, including historical information, along with entries for Hong Kong SAR (People's Republic of China) and Aruba and Netherlands Antilles (both Kingdom of the Netherlands). An introduction to the volume provides a summary of recent global trends and developments in the areas covered by the publication. It also provides insight into the types of capital controls most frequently used by countries dealing with increased capital inflows. Individual chapters for each member country report exchange measures in place, the structure and setting of exchange rates, arrangements for payments and receipts, procedures for resident and nonresident accounts, mechanisms for import and export payments and receipts, controls on capital transactions, and provisions specific to the financial sector. A separate section in each chapter lists changes made during 2006 and the first half of 2007. Information is presented in a clear, easy-to-read tabular format.
This paper describes why the international community needs to act now to stand a chance of meeting the Millennium Development Goals (MDGs). The paper gives example of Ethiopia, one of the poorest countries in the world, with an estimated per capita income of about US$100. According to the World Bank, recent national household surveys find 44 percent of the people in Ethiopia cannot meet basic needs. The paper discusses that Ethiopia in many ways epitomizes why the MDGs are important and why more money is needed to achieve them.
Since 1992, the central banks of the Baltic states and the Commonwealth of Independent States have undertaken comprehensive reform of their monetary and exchange arrangements in support of their stabilization efforts. Their efforts have been supported by extensive technical assistance provided by the IMF and 23 central banks. This book edited by V. Sundararajan, Arne B. Peterson, and Gabriel Sensenbrenner, contains the background papers prepared for the second joint coordinating meeting of participants. That meeting focused on the progress of structural reforms in central banking and bank restructuring and identified priorities for the deepening of reforms. The book documents the remarkable progress achieved by the Baltic and CIS central banks and the catalytic role they have played in financial market development.