Writers on development organization often advocate the setting up of programing units in various government departments, each making plans for a single sector of the economy. But many governments of developing countries do not have the manpower for such ambitious spreading of rare expertise. The author suggests that it would often be wiser to concentrate available skills in a Central Projects Bureau.
International Monetary Fund. External Relations Dept.
How much does the IMF have available to lend? The IMF recently introduced a more transparent measure of its capacity to make new loans. The FCC, or one-year-forward commitment capacity, gives a concrete figure of the resources that the IMF has available for lending in the coming year. The IMF computes the FCC from the total resources in its balance sheet as follows (see table).
This paper discusses developments and issues concerning export credits from the perspective of the economic adjustment process of indebted developing countries. This emphasis is consistent with the principle that officially supported export credit—whether it takes the form of direct official credits or insurance and guarantees on privately funded credits—is an instrument of commercial financing for exports and not a means of aid finance. All creditor governments have a broad range of objectives in using the economic instruments at their disposal to help overcome the adjustment problems of heavily indebted countries, with which important bilateral trade relations are being maintained. In support of an expansion in world trade and notwithstanding the competitive element, export credit insurance and guarantees may have a special role in helping to catalyze private credit flows, especially since such a role coincides with the interest of private lenders to shift away from general purpose balance of payments finance to trade and project finance.
The role of exchange rate policy in economic adjustment has been widely studied and is the subject of numerous theoretical and empirical papers produced in the Fund and elsewhere. The Fund staff has reviewed from time to time the effectiveness of adjustment programs incorporating an active exchange rate policy.1 Other issues relating to exchange rate policy, including, in particular, the interaction between the exchange rate and other macroeconomic policy variables, also have received considerable attention.2 However, little detail is available on the methodology of developing and implementing exchange rate policies in the context of adjustment programs. Besides examining general issues related to formulating exchange rate policy in adjustment programs, this paper reviews the experience with development of exchange rate policy in programs supported by the Fund in 1983.
This paper draws lessons on the general principles, strategies and techniques for the effective management of systemic banking crises.1 Lessons outlined in this paper derive from the accumulated experiences of IMF staff. Principles and practices of crisis management derived from earlier crises have already been discussed by the IMF Executive Board and subsequently published.2 Recent financial sector crises and their resolution have raised new issues and provided additional experiences. Specifically, banking crises in Argentina, Ecuador, Russia, Turkey, and Uruguay have occurred within the context of highly dollarized economies, high levels of sovereign debt, and/or severely limited fiscal resources. These factors have introduced new challenges as the effectiveness of many of the typical tools for bank resolution has been affected.
Whenever a country undertakes a program of balance of payments adjustment, it needs to consider whether a change in the exchange rate is required to achieve a viable external position and a reasonable rate of economic growth over the medium term. The ways in which exchange rate policy works to correct balance of payments problems and to improve the allocation of resources are well known and need no repetition here. To provide a setting for the discussion in the remainder of the paper, however, this section briefly considers four conceptual issues: (1) the use of indicators to assess the appropriateness of the exchange rate in adjustment programs; (2) the role of exchange rate policy in relation to other program policies; (3) the extent to which exchange rate stability should in itself be a proximate policy objective in adjustment programs; and (4) the attention given to exchange rate policy when use of Fund resources is involved.
A systemic crisis emerges when problems in one or more banks are serious enough to have a significant adverse impact on the real economy. This impact is most often felt through the payment system, reductions in credit flows, or the destruction of asset values. A systemic crisis often is characterized by runs of creditors, including depositors, from both solvent and insolvent banks, thus threatening the stability of the entire banking system. The run is fueled by fears that the means of payment will be unobtainable at any price, and in a fractional reserve banking system this leads to a scramble for high-powered money and a withdrawal of external credit lines.
Irrespective of its origin, a systemic banking crisis first emerges as a liquidity problem in some or all of the banks. Large creditors, both foreign and domestic, are generally the first to leave the banking system.15 As the outflow becomes known, smaller depositors follow quickly. Very large amounts can move in hours and, if not stopped, such runs may stall the operation of the payment system.