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AR; AREA; wolf-dieter Donecker; votes of the Islamic State; votes of the Democratic Republic of the Congo; IMF surveillance; total vote; Currencies; Personal income; Emerging and frontier financial markets; Global; Asia and Pacific; Africa; East Asia; Europe
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Abstract

Contents

Appendices

Contents

  • Appendix I. International Reserves

    • Foreign Exchange Reserves

    • Holdings of IMF-Related Assets

    • Gold Reserves

      • Developments in the First Quarter of 199

    • Currency Composition of Foreign Exchange Reserves

    • Refinements of Reserves Data

    • Tables in Appendix I

      • I.1. Official Holdings of Reserve Assets, 1993–March 1999

      • I.2. Share of National Currencies in Total Identified Official Holdings of Foreign Exchange, End of Year 1989–98

      • I.3. Currency Composition of Official Holdings of Foreign Exchange, End of Year 1990–98

  • Appendix II. Financial Operations and Transactions of the Fund

    • Tables in Appendix II

      • II.1. Arrangements Approved During Financial Years Ended April 30, 1953–99

      • II.2. Arrangements in Effect at End of Financial Years Ended April 30, 1953–99

      • II.3. Stand-By Arrangements in Effect During Financial Year Ended April 30, 1999

      • II.4. Extended Arrangements in Effect During Financial Year Ended April 30, 1999

      • II.5. Arrangements Under the Enhanced Structural Adjustment Facility in Effect During Financial Year Ended April 30, 1999

      • II.6. Summary of Disbursements, Repurchases, and Repayments, Financial Years Ended April 30, 1948–99

      • II.7. Purchases and Loans from the IMF, Financial Year Ended April 30, 1999

      • II.8. Repurchases and Repayments to the IMF, Financial Year Ended April 30, 1999

      • II.9. Outstanding IMF Credit by Facility and Policy, Financial Years Ended April 30, 1992–99

      • II.10. Enhanced Structural Adjustment Facility, Estimated Value of Contributions (Commitments as of April 30,1999)

      • II.11. Special One-Time Allocation of SDRs Pursuant to Schedule M of the Proposed Fourth Amendment of the Articles of Agreement

      • II.12. Summary of Transactions and Operations in SDRs, Financial Year Ended April 30, 1999

      • II.13. Holdings of SDRs by All Participants and by Groups of Countries as Percent of Their Cumulative Allocations of SDRs and of Their Nongold Reserves, Financial Years Ended April 30, 1975–99

      • II.14. Key IMF Rates, Financial Year Ended April 30, 1999

      • II.15. Members’ Quotas, April 30, 1998 and April 30, 1999

      • II.16. Members That Have Accepted the Obligations of Article VIII, Sections 2, 3, and 4 of the Articles of Agreement

      • II.17. Exchange Rate Arrangements and Anchors of Monetary Policy as of April 30, 1999

  • Appendix III. Principal Policy Decisions of the Executive Board

    • A. Access Policy—Guidelines on Access Limits

    • B. IMF’s Income Position

    • C. Enhanced Structural Adjustment Facility (ESAF)

    • D. Supplemental Reserve Facility (SRF)

    • E. Multiple Currency Practices—Approval Period

    • F. Operational Budget

    • G. European Economic and Monetary Union and the IMF

    • H. Resources in Connection with Debt- and Debt-Service-Reduction Operations

    • I. Eleventh General Review of Quotas Attachment: Communications to All Members

    • J. European Central Bank—Observer Status

    • K. Access to the IMF’s Archives—Review and Amendment of Policy

  • Appendix IV. IMF Relations with Other International Organizations

    • Liaison with Other Organizations

    • Relations with the United Nations

    • Relations with the World Trade Organization

    • Collaboration with the World Bank

    • Cooperation with Regional Development Banks

    • Role of IMF Management

  • Appendix V. External Relations

    • Purposes, Audiences, and Instruments of External Communications

    • Board Review of External Communications

    • External Consultants Assess IMF’s External Communications

    • Table in Appendix V

      • V.I Publications Issued, Financial Year Ended April 30, 1999

    • Boxes in Appendix V

      • V.I New Features on the IMF’s Website

      • V.2 IMF to Open New Public Outreach Center at IMF Headquarters

  • Appendix VI. Press Communiqués of the Interim Committee and the Development Committee

    • Interim Committee of the Board of Governors of the International Monetary System

      • Fifty-First Meeting, Washington, D.C., October 4, 199

      • Fifty-Second Meeting, Washington, D.C., April 27, 1999

    • Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries (Development Committee)

      • Fifty-Eighth Meeting, Washington, B.C., October 5, 1998

      • Fifty-Ninth Meeting, Washington, D.C., April 28, 1999

  • Appendix VII. Executive Directors and Voting Power on April 30, 1999

  • Appendix VIII. Changes in Membership of the Executive Board

  • Appendix IX. Financial Statements

    • Report of the of the External Audit Committee

    • Financial Statements of the International Monetary Fund

      • General Department

        • Balance Sheet

        • Income Statement

        • Statement of Changes in Reserves and Resources

        • Notes to the Financial Statements

          • schedule 1—Quotas, IMF’s Holdings of Currencies, Reserve Tranche Positions, and Members’ Use of Resources

          • Schedule 2—Financial Resources and Liquidity Position

          • Schedule 3—Schedule of Repurchases and Repayments of Loans

          • Schedule 4—Status of Arrangements

      • SDR Department

        • Statement of Allocations and Holdings

        • Statement of Receipts and Uses of SDRs

        • Notes to the Financial Statements

    • Financial Statements of Accounts Adminstered by the IMF

      • Enhanced Structural Adjustment Facility Trust

        • Balance Sheet

        • Income Statement

        • Statement of Changes in Resources

        • Notes to the Financial Statements

          • Schedule 1—Schedule of Outstanding Loans

          • Schedule 2—Contributions to and Resources of the Subsidy Account

          • Schedule 3—Schedule of Borrowing Agreements

          • Schedule 4—Schedule of Repayments of Borrowing

          • Schedule 5—Status of Loan Arrangements

          • Schedule 6—Schedule of Repayments of Loans Receivable

      • Enhanced Structural Adjustment Facility Administered Accounts

        • Balance Sheets

        • Income Statements

        • Statements of Changes in Resources

        • Saudi Fund for Development Special Account

        • Notes to the Financial Statements

      • ESAF-HIPC Trust

        • Balance Sheet

        • Income Statement and Changes in Resources

        • Notes to the Financial Statements

      • Administered Accounts

        • Balance Sheets

        • Income Statements and Changes in Resource

        • Notes to the Financial Statements

      • Trust Fund

        • Balance Sheet

        • Income Statement

        • Statement of Changes in Resources

        • Notes to the Financial Statements

      • Supplementary Financial Facility Subsidy Account

        • Balance Sheet

        • Income Statement and Changes in Resources

        • Notes to the Financial Statements

      • Retired Staff Benefits Investment Account

        • Balance Sheet

        • Income Statement and Changes in Resources

        • Notes to the Financial Statements

    • Financial Statements of the Staff Retirement Plan

      • Staff Retirement Plan

      • Report of the External Audit Committee

        • Statement of Accumulated Plan Benefits and Net Assets Available for Benefits

        • Statement of Changes in Accumulated Plan Benefits

        • Statement of Changes in Net Assets Available for Benefits

        • Notes to the Financial Statements

      • Supplemental Retirement Benefit Plan

      • Report of the External Audit Committee

        • Statement of Accumulated Plan Benefits and Net Assets Available for Benefits

        • Statement of Changes in Accumulated Plan Benefits

        • Statement of Changes in Net Assets Available for Benefits

        • Notes to the Financial Statements

Appendix I. International Reserves

Total international reserves remained essentially unchanged in 1998 relative to the previous year—at SDR 1.4 trillion (Table I.I). Nongold reserves, which consist of foreign exchange reserves and IMF-related assets, fell by SDR 10 billion (1 percent) and stood at SDR 1.24 trillion at the end of the year. Foreign exchange reserves declined by 2 percent to SDR 1.16 trillion, while IMF-related assets increased by 20 percent to SDR 81 billion. The market value of gold reserves held by monetary authorities increased by 3 percent to SDR 197 billion at the end of 1998.1

Table I.1

Official Holdings of Reserve Assets, 1993–March 19991

(In billions of SDRs)

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Note: Components may not sum to totals because of rounding. Source: International Monetary Fund, International Financial Statistics.

End-of-year figures for all years except 1999. “IMF-related assets” comprise reserve positions in the IMF and SDR holdings of all IMF members. The entries under “Foreign exchange” and “Gold” comprise official holdings of those IMF members for which data are available and certain other countries or areas.

One troy ounce equals 31.103 grams. The market price is the afternoon price fixed in London on the last business day of each period.

Foreign Exchange Reserves

Foreign exchange reserves constitute the main component of reserve assets, accounting for 94 percent of nongold assets. Total foreign exchange reserves declined by 2 percent during 1998, following annual increases of about 10 to 15 percent over the previous five years. Foreign exchange reserves of industrial countries declined by 7 percent in 1998, while those of developing countries increased by 2 percent. Developing countries have steadily increased their share of foreign exchange holdings, and at the end of 1998, they held 58 percent of total foreign exchange reserves. Developing countries without debt-servicing problems increased their foreign exchange reserves by 6 percent to SDR 425 billion. In contrast, foreign exchange reserves of countries with debt-servicing problems declined by 9 percent, following annual increases of 10 to 25 percent during the 1990s.

Holdings of IMF-Related Assets

IMF-related assets represent 7 percent of total reserve assets. During 1998, IMF-related assets increased by 20 percent to SDR 81 billion. Members’ reserve positions in the IMF, which comprise their reserve tranche and creditor positions, increased in 1998 by 29 percent (SDR 14 billion), following a 24 percent increase in 1997. The high rates of increase of these reserve assets during these two years reflect increases in industrial countries’ reserve positions in the IMF associated with purchases of their currencies by certain member countries experiencing balance of payments difficulties.

Holdings of SDRs by IMF member countries during 1998 remained essentially unchanged from the previous year at SDR 20.4 billion. Of the total allocation of 21.4 billion SDRs, the IMF holds SDR 687 million and other prescribed institutions hold the remaining SDR 455 million.

Gold Reserves

The market value of gold reserves held by monetary authorities increased by 3 percent to SDR 197 billion at the end of 1998. During 1998, the SDR market price of gold fell by 5 percent, while the physical stock of gold reserves increased by 8 percent. This increase in the stock of gold mainly reflects the return of the gold portion of the European currency unit (ecu) reserves by the new European Central Bank to the central banks of the 11 countries participating in the first round of European Economic and Monetary Union (EMU). The share of gold reserves in total reserves has declined gradually to 14 percent at the end of 1998 from about 50 percent in the early 1980s. Gold reserves represent 23 percent of total reserves for industrial countries and less than 5 percent of total reserves for developing countries. Industrial countries hold 84 percent of all gold reserves.

Developments in the First Quarter of 1999

Holdings of reserve assets declined by SDR 52 billion (4 percent) during the first quarter of 1999. Total reserves of industrial countries declined by 8 percent (SDR 56 billion), while those of developing countries increased by 1 percent. These changes are attributable mainly to changes in foreign exchange reserves. IMF-related assets fell by 3 percent. The sharp decline of SDR 5 billion (25 percent) in the SDR component of IMF-related assets in the first quarter of 1999 reflects quota payments made by member countries, following the quota increase that was approved in early 1999. The market value of gold reserves declined by 2 percent.

Currency Composition of Foreign Exchange Reserves

The degree of diversification in the currency composition of foreign exchange reserves has not changed significantly over the past decade (Table I.2). The U.S. dollar remains the dominant international reserve currency. The share of the U.S. dollar in total foreign exchange reserves declined during the 1980s, but, after reaching a low of 48 percent in 1990, gradually rebounded to 60 percent by 1998. The shares of the deutsche mark and the Japanese yen peaked around 1990 and declined to 12 percent and 5 percent, respectively, by the end of 1998. Following a similar pattern, the shares of the French franc, the Swiss franc, and the Dutch guilder peaked around 1990 and have declined gradually since then. By contrast, the share of the pound sterling increased by about 1 percentage point during the 1990s.

Table I.2

Share of National Currencies in Total Identified Official Holdings of Foreign Exchange, End of Year 1989–981

(In percent)

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Note: Components may not sum to total because of rounding.

Note that ecus are treated as a separate currency. Only IMF member countries that report their official holdings of foreign exchange are included in this table.

The residual is equal to the difference between total foreign exchange reserves of IMF member countries and the sum of the reserves held in the currencies listed in the table.

The calculations here rely to a greater extent on IMF staff estimates than do those provided for the group of industrial countries.

In the calculation of currency shares in Table I.2, the ecu is treated as a separate currency. Official ecu reserves existed in the form of claims on both the private sector and on the European Monetary Institute (EMI). The ecu reserves that represented claims on the EMI had been issued in exchange for deposits equal to 20 percent of both dollar and gold reserves. In December 1998, prior to the start of Stage Three of EMU and the creation of the euro, the gold and dollar reserves swapped for ecus were returned to the central banks of EMU countries by the European Central Bank, the successor to the EMI. Hence, the share of ecus in total official foreign exchange reserves fell sharply at the end of 1998. The remaining component of ecu foreign exchange reserves consists of official claims on the private sector, usually in the form of ecu deposits and bonds.2

The share of unspecified currencies, which includes currencies other than those discussed above as well as foreign exchange reserves for which no information on the currency composition is available, increased significantly through the 1990s. This mainly reflects data problems since many transition economies that have become IMF members in recent years report only their total holdings of foreign exchange reserves but do not provide information on the currency composition of their reserves. The share of unspecified currencies stood at 16 percent in 1998 (indicating that the evolution of currency shares discussed here should be interpreted with considerable caution, especially for developing countries).

For industrial countries, the share of the U.S. dollar in foreign exchange reserves increased by 6 percentage points at the end of 1998, with a concomitant decline in the share of ecu holdings. For developing countries, the U.S. dollar portion of foreign exchange has remained around 57 percent since 1991. Unspecified currencies accounted for 22 percent of developing countries’ foreign exchange reserves in 1998.

Changes in the SDR value of foreign exchange reserves can be decomposed into quantity and valuation (price) changes for each of the major currencies as well as the ecu (Table I.3). In 1998, total official foreign exchange reserves in major identifiable currencies decreased by SDR 26 billion, reflecting a quantity decrease of SDR 6 billion and a decrease of SDR 19 billion in the valuation of these reserves in SDR terms.

Table I.3

Currency Composition of Official Holdings of Foreign Exchange, End of Year 1990–981

(In millions of SDRs)

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Note: Components may not sum to totals because of rounding.

The currency composition of foreign exchange is based on the IMF’s currency survey and on estimates derived mainly, but not solely, from official national reports. The numbers in this table should be regarded as estimates that are subject to adjustment as more information is received. Quantity changes are derived by multiplying the changes in official holdings of each currency from the end of one quarter to the next by the average of the two SDR prices of that currency prevailing at the corresponding dates. This procedure converts the change in the quantity of national currency from own units to SDR units of account. Subtracting the SDR value of the quantity change so derived from the quarterly change in the SDR value of foreign exchange held at the end of two successive quarters and cumulating these differences yields the effect of price changes over the years shown.

Each item represents the sum of the eight currencies above.

Includes a residual whose currency composition could not be ascertained, as well as holdings of currencies other than those shown.

Official reserves held in U.S. dollars increased by SDR 19 billion in 1998; this reflected an increase of SDR 47 billion in the quantity of dollars held as reserves that more than offset a decrease of SDR 28 billion in the SDR value of these holdings. A similar pattern of an increase in the quantity of holdings, offset by a smaller negative valuation effect, resulted in an increase in the net value of pound sterling reserves. Despite valuation increases, the SDR value of deutsche mark holdings fell because of a substantial decline in the quantity of reserve holdings of this currency. By contrast, the increase in the SDR value of the Japanese yen more than offset the quantity decline for this currency, resulting in an increase of SDR 2 billion in the holdings of Japanese yen. There were no significant changes in the values of French franc, Swiss franc, and Dutch guilder holdings in 1998. Official holdings of ecu reserves declined by SDR 48 billion, reflecting the reconstitution of the dollar- and gold-backed ecus originally issued by the EMI.

Refinements of Reserves Data

In collaboration with other international organizations—including the World Bank, the Organization for Economic Cooperation and Development (OECD), and the Bank for International Settlements (BIS)—the IMF has initiated a project to improve the coverage, quality, and timeliness of data provided by national authorities on official reserves and related items. In particular, under the aegis of the IMF’s Special Data Dissemination Standard (see Chapter 5), guidelines are being developed for national authorities to provide comprehensive data on reserves in a consistent format that will enable timely and efficient dissemination of these data. Furthermore, efforts are under way to improve the quality of reserves data obtained from countries that have recently become IMF members. These initiatives should result in superior and more timely data on reserves and related items becoming available in the near future.

Appendix II. Financial Operations and Transactions

The tables in this appendix supplement the information given in Chapter 10 on the IMF’s financial operations and policies.

Table II.1

Arrangements Approved During Financial Years Ended April 30, 1953–99

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Table II.2

Arrangements in Effect at End of Financial Years Ended April 30, 1953–99

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Table II.3

Stand-By Arrangements in Effect During Financial Year Ended April 30, 1999

(In millions of SDRs)

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Includes SDR 9 billion available until December 1, 1999 under the Supplemental Reserve Facility (SRF).

The authorities have indicated their intention not to draw under the arrangement.

Extended from April 19, 1999.

Extended from June 30, 1998. Increased by SDR 2 million.

Canceled prior to expiration date of November 4, 2000 and replaced by an Extended Arrangement.

Includes SDR 10 million available until December 17, 1998 under the SRF.

Table II.4

Extended Arrangements in Effect During Financial Year Ended April 30, 1999

(In millions of SDRs)

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The authorities have indicated their intention not to draw under the arrangement.

Original amount approved was equivalent to the undrawn balance of the canceled Stand-By Arrangement (SDR 4,669 million). The arrangement was later increased by SDR 714 million.

Increased by SDR 6,306 million in 1998/99. Included SDR 4 billion available until July 19,1999 under the Supplemental Reserve Facility (SRF). Canceled prior to expiration date of March 25, 2000.

Table II.5

Arrangements Under the Enhanced Structural Adjustment Facility in Effect During Financial Year Ended April 30, 1999

(In millions of SDRs)

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Expiration of the commitment period or the current annual arrangement, whichever is later.

Augmented amounts are shown in 1998/99.

Includes an augmentation of SDR 9 million.

Includes an augmentation of SDR 4 million.

Table II.6

Summary of Disbursements, Repurchases, and Repayments, Financial Years Ended April 30, 1948–99

(In millions of SDRs)

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Includes reserve tranche purchases.

Excludes reserve tranche purchases.

Table II.7

Purchases and Loans from the IMF, Financial Year Ended April 30, 1999

(In millions of SDRs)

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Includes reserve tranche purchases made in connection with the use of the same-day SDR borrowing arrangement by members paying the reserve asset portion of their quota increase.

Emergency natural disaster assistance.

Includes purchases of SDR 6.5 billion under the Supplemental Reserve Facility (SRF).

Emergency postconflict assistance.

Less than SDR 500,000.

Includes purchase of SDR 2.85 billion under the SRF.

Includes purchase of SDR 675 million under the SRF.

Table II.8

Repurchases and Repayments to the IMF, Financial Year Ended April 30, 1999

(In millions of SDRs)

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SRF repurchase.

Includes Comoros, Democratic Republic of the Congo, Dominica, Guinea-Bissau, Liberia, and Sao Tome and Principe, each of which had small repurchases or repayments.

Table II.9

Outstanding IMF Credit by Facility and Policy, Financial Years Ended April 30, 1992-99

(In millions of SDRs and percent of total)

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Includes outstanding credit tranche and emergency purchases.

Includes outstanding associated loans from the Saudi Fund for Development.

Less than ½ of 1 percent of total.

Table II.10

Enhanced Structural Adjustment Facility, Estimated Value of Contributions (Commitments as of April 30, 1999)

(In millions of SDRs)

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The amounts reported for grant contributions are the “as needed” equivalent of the resources committed, or implicit in loans or deposits at concessional interest rates. The calculations are based on actual interest rates through April 30, 1999 and an assumed rate of 5.0 percent a year thereafter. Grants committed in local currency are valued at April 30, 1999 exchange rates.

Loan contributions are provided either at concessional interest rates or on the basis of weighted averages of market interest rates in the five currencies comprising the SDR basket.

A few of the contributions listed are subject to parliamentary approval or have yet to be confirmed.

Corresponds to the associated borrowing agreement with the Saudi Fund for Development (SFD).

The sum of individual contributions has been adjusted downward to take into account additional loan costs.

The SDR equivalent of $50 million valued at the exchange rate of April 30, 1999.

Special Disbursement Account.

Table II.11

Special One-Time Allocation of SDRs Pursuant to Schedule M of the Proposed Fourth Amendment of the Articles of Agreement

(In SDRs)

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Participants as of September 19, 1997 will receive a special one-time allocation of SDRs in an amount that will result in their cumulative allocations of SDRs being equal to 29.315788813 percent of their Ninth General Review quota.

These countries currently have Eighth General Review quotas. The Federal Republic of Yugoslavia (Serbia/Montenegro) has not completed arrangements for succession to membership and is not currently a participant in the SDR Department.

A country that becomes a participant in the SDR Department after September 19, 1997 and within three months of its membership in the IMF will receive a special one-time allocation of SDRs based on a notional Ninth General Review quota. The Republic of Palau, which became a member and a participant in the SDR Department in December 1997 with an initial quota of SDR 2.25 million, will be entitled to receive a special one-time allocation of SDR 659,605.

Table II.12

Summary of Transactions and Operations in SDRs, Financial Year Ended April 30, 1999

(In thousands of SDRs)

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The assets and liabilities of the former Socialist Federal Republic of Yugoslovia were assumed by five successor states. As of April 30,1999, the Federal Republic of Yugoslavia (Serbia/Montenegro) had not completed arrangements for succession to membership in the IMF.

Table II.13

Holdings of SDRs by All Participants and by Groups of Countries as Percent of Their Cumulative Allocations of SDRs and of Their Nongold Reserves, Financial Years Ended April 30, 1975–99

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Consists of member countries that are participants in the SDR Department. At the end of 1998/99, of the total SDRs allocated to participants in the SDR Department (SDR 21.4 billion), SDR 4.1 billion was not held by participants but instead by the IMF and prescribed holders.

Based on IFS classification (International Monetary Fund, International Financial Statistics, various years).

Table II.14

Key IMF Rates, Financial Year Ended April 30, 1999

(In percent)

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Under the decision on burden sharing, the rate of remuneration is adjusted downward and the rate of charge is adjusted upward to share the burden of protecting the IMF’s income from overdue charges and of contributing to the IMF’s precautionary balances. The amounts generated from burden sharing are refundable when overdue charges are paid and when overdue obligations cease to be a problem. The basic rate of charge presented is the effective rate following the retroactive reduction that was implemented after the end of the financial year. The basic rate of charge, which was set at 107.0 percent of the SDR interest rate, was reduced to 106.9 percent of the SDR interest rate as a result of the retroactive reduction.

Table II.15

Members’ Quotas, April 30, 1998 and April 30, 19991

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Board of Governors Resolution No. 53-2, adopted January 30, 1998.

Member has not completed payment of its quota increase.

Member has overdue financial obligations to the General Resources Account and consequently cannot consent to its quota increase under Board of Governors Resolution No. 53-2.

Table II.16

Members That Have Accepted the Obligations of Article VIII, Sections 2, 3, and 4 of the Articles of Agreement

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Table II. 17.

Exchange Rate Arrangements and Anchors of Monetary Policy as of April 30, 1999

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Sources: IMF staff reports.

A country with an asterisk, *, indicates that the country adopts more than one nominal anchor in conducting monetary policy.

These countries also have a currency board arrangement within the common market.

The country has no explicitly stated nominal anchor but rather monitors various indicators in conducting monetary policy.

Until they are withdrawn in the first half of 2002, national currencies will retain their status as legal tender within their home territories.

Member maintained exchange arrangements involving more than one market. The arrangement shown is that maintained in the major market.

The indicated country has a de facto arrangement under a formally announced policy of managed or independent floating. In the case of Jordan, it indicates that the country has a de jure peg to the SDR but a de facto peg to the U.S. dollar. In the case of Mauritius, the authorities have a de facto policy of independent floating, with only infrequent intervention by the central bank.

Exchange rates are determined on the basis of a fixed relationship to the SDR, within margins of up to ±7.25 percent. However, because of the maintenance of a relatively stable relationship with the U.S. dollar, these margins are not always observed.

Comoros has the same arrangement with the French treasury as do the CFA franc zone countries.

The band width for these countries is Croatia (unspecified), Cyprus (±2.25 percent), Denmark (±2.25 percent), Greece (±15 percent), Iceland (±6 percent), Libya (±77.5 percent), Ukraine (Hrv 3.4—4.6 per U.S. dollar), and Vietnam (7 percent one-sided).

The band for these countries is Colombia (±9 percent), Chile (±16 percent), Honduras (±7 percent), Hungary (±2.25 percent), Israel (symmetric band of 30 percent), Poland (±15 percent), Sri Lanka (±2 percent), Uruguay (±3 percent), and Venezuela (±7.5 percent).

There is no relevant information available for the country.

Appendix III. Principal Policy Decisions of the Executive Board

A. Access Policy—Guidelines on Access Limits

(a) Extension of Annual Access Limit and Period for Review

The Fund decides that the annual review of the guidelines and limits for access to the Fund’s general resources under the credit tranches and the Extended Fund Facility prescribed by paragraph 2 of Decision No. 11608-(97/112),1 adopted November 13, 1997, shall be completed by December 31, 1998, and that, until this review is completed, the annual access limit of 100 percent of quota established by Decision No. 10819-(94/95),2 adopted October 24, 1994, as amended by Decision No. 11608-(97/112),3 shall remain in effect.

Decision No. 11818-(98/110)

October 28, 1998

(b) Extension of Period for Review

The Fund decides that the annual review of the guidelines and limits for access to the Fund’s general resources under the credit tranches and the Extended Fund Facility prescribed by paragraph 2 of Decision No. 11608-(97/112),4 as amended, shall be completed by January 15, 1999.

Decision No. 11863-(99/l)

December 21, 1998

(c) Limits in Credit Tranches and Under Extended Fund Facility—Review

1. The Fund, having reviewed Decision No. 10181- (92/132),5 adopted November 3, 1992, and Decision No. 10819-(94/95),6 adopted October 24, 1994, and in light of the increases in quotas under the Eleventh Review of Quotas that will take effect upon the fulfillment of the requirement for the effectiveness of such increases specified by paragraph 3 of the Resolution of the Board of Governors No. 53-2, decides that the limits for access by members to the Fund’s general resources in the credit tranches and under the Extended Fund Facility remain appropriate. Accordingly, such access shall be subject to an annual limit of 100 percent of quota and a cumulative limit of 300 percent of quota, net of scheduled repurchases. These limits shall not be regarded as targets. Within these limits, the amount of access in individual cases will vary according to the circumstances of the member in accordance with criteria established by the Executive Board. The Fund may approve Stand-By or Extended Arrangements that provide for amounts in excess of these access limits in exceptional circumstances.

2. The guidelines and the access limits set forth in this decision shall be reviewed not later than December 31, 1999 and at least annually thereafter on the basis of all relevant factors, including the magnitude of members’ payments problems and developments in the Fund’s liquidity.

Decision No. 11876-(99/2)

January 6, 1999

(d) Access Limits Under Special Facilities

Upon the fulfillment of the requirement for effectiveness of the increases in quotas under the Eleventh General Review of Quotas specified by paragraph 3 of the Resolution of the Board of Governors No. 53-2:

(a) The percentage of a member’s quota referred to in Decision No. 8955-(88/126),7 August 23, 1988, on the establishment of the Compensatory and Contingency Financing Facility shall be changed as follows:

  • in paragraph 8(a)(i), 80 percent shall be changed to 55 percent;

  • in paragraph 8(a)(ii), 65 and 30 percent shall be changed to 45 and to 20 percent, respectively;

  • in paragraph 8(a)(iii), 30 percent shall be changed to 20 percent;

  • in paragraph 8(a)(iv), 65 and 15 percent shall be changed to 45 and to 10 percent, respectively;

  • in paragraph 8(a)(vi), 95 percent shall be changed to 65 percent;

  • in paragraph 8(b), 30, 15, and 20 percent shall be changed to 20, 10, and 15 percent, respectively;

  • in paragraphs 12(a)(i) and 12(a)(ii), 30 percent shall be changed to 20 percent, and 50 percent to 35 percent, respectively;

  • in paragraphs 12(b)(i), 12(b)(ii), and 12(b)(iii), 15 percent shall be changed to 10 percent, 30 percent to 20 percent, and 50 percent to 35 percent, respectively;

  • in paragraph 12(c), 65 percent shall be changed to 45 percent;

  • in paragraph 19(b), 70 percent shall be changed to 50 percent;

  • in paragraph 20(c)(iii), 25 percent shall be changed to 15 percent;

  • in paragraph 20(e), the three references to 30 percent shall be changed to 20 percent;

  • in paragraphs 31(b)(i) and 31(b)(ii), 15 percent shall be changed to 10 percent and 35 percent shall be changed to 25 percent, respectively;

  • in paragraphs 31(c)(i) and 31(c)(ii), 15 percent shall be changed to 10 percent and 35 percent shall be changed to 25 percent, respectively;

  • in paragraph 31(d), 83 percent shall be changed to 45 percent; and

  • in paragraph 32(a), 80 percent shall be changed to 55 percent.

(b) The percentage in paragraph 2 of Decision No. 2772-(69/47),8 June 25,1969, on the Buffer Stock Financing Facility, shall be changed from 35 percent to 25 percent.

Decision No. 11878-(99/2)

January 6, 1999

(e) Access Limits Under Enhanced Structural Adjustment Facility

Upon the fulfillment of the requirement for effectiveness of the increases in quotas under the Eleventh General Review of Quotas specified by paragraph 3 of the Resolution of the Board of Governors No. 53-2, the percentages of quota referred to in paragraphs 1 and 2 of Decision No. 8845- (88/61) ESAF,9 April 20, 1988, on access under the Enhanced Structural Adjustment Facility shall be as follows:

  • 190 percent shall be changed to 140 percent, and

  • 255 percent shall be changed to 185 percent.

Decision No. 11879-(99/2) ESAF

January 6,1999

B. IMF’s Income Position

(a) Disposition of Net Income for FY 1999

SDR 106,675,756 of the Fund’s net income for financial year 1999 shall be placed in the Fund’s Special Reserve after the end of the financial year.

Decision No. 11943-(99/49)

April 30,1999

(b) Rate of Charge on the Use of Fund Resources for FY 2000

1. Not withstanding Rule I-6(4)(a), effective May 1, 1999, the proportion of the rate of charge referred to in Rule 1-6(4) to the SDR interest rate under Rule T-l shall be 113.7 percent.

2. Any net income for financial year 2000 in excess of an amount equivalent to 5 percent of the Fund’s reserves at the beginning of that financial year shall be used to reduce retroactively the proportion of the rate of charge to the SDR interest rate for financial year 2000. If net income for financial year 2000 is below an amount equivalent to 5 percent of the Fund’s reserves at the beginning of that financial year, the amount of projected net income for financial year 2001 shall be increased by the equivalent of that shortfall. For the purpose of this provision, net income shall be calculated without taking into account net operational income generated by the Supplemental Reserve Facility and Contingent Credit Lines or the effect on income of the implementation of International Accounting Standard 19—Employee Benefits.

Decision No. 11944-(99/49)

April 30, 1999

(c) ESAF Trust-Reserve Account—Transfer to the ESAF-HIPC Trust

For financial year 2000, no reimbursement shall be made to the General Resources Account from the ESAF Trust Reserve Account for the cost of administering the ESAF Trust. One-fourth of the estimated annual cost shall be transferred at the end of each financial quarter ended July 31 and October 31, 1999 and January 31 and April 30, 2000 from the ESAF Trust Reserve Account (through the Special Disbursement Account) to the ESAF-HIPC Trust.

Decision No. 11946-(99/49)ESAF

April 30,1999

(d) Supplemental Reserve Facility and Contingent Credit Lines—Disposition of Net Operating Income

For financial year 2000, after meeting the cost of administering the ESAF Trust, any remaining net operational income generated by the Supplemental Reserve Facility and Contingent Credit Lines shall be transferred, after the end of that financial year, to the General Reserve.

Decision No. 11949- (99/49) SRF/CCL

April 30,1999

C. Enhanced Structural Adjustment Facility (ESAF)

(a) ESAF Trust-Reserve Account—Review

Pursuant to Decision No. 10286-(93/23) ESAF,10 adopted February 22, 1993, the Fund has reviewed the adequacy of the Reserve Account of the ESAF Trust and determines that amounts held in the account are sufficient to meet all obligations that could give rise to a payment from the Reserve Account to lenders to the Loan Account of the ESAF Trust in the six months from July 1 to December 31, 1998.

Decision No. 11754-(98/71) ESAF

June 30, 1998

(b) ESAF Trust-Reserve Account—Review

Pursuant to Decision No. 10286-(93/23) ESAF,11 adopted February 22,1993, the Fund has reviewed the adequacy of the Reserve Account of the ESAF Trust, and determines that amounts held in the account are sufficient to meet all obligations that could give rise to a payment from the Reserve Account to lenders to the Loan Account of the ESAF Trust in the six months from January 1 to June 30, 1999.

Decision No. 11864-(99/l) ESAF

December 30,1998

(c) ESAF Trust-Reserve Account—Transfer to the ESAF-HIPC Trust

(See Section B above, Fund’s Income Position, subsection (c) for the full text of this Decision.)

(d) ESAF Trust—Amendment

Part I

1. The Instrument to Establish the Enhanced Structural Adjustment Facility Trust (the Instrument) annexed to Decision No. 8789-(87/176) ESAF12 shall be amended as follows:

Section A

  • (i) In Section II, Paragraph 1: subparagraphs (e) and (f) shall be deleted;

  • (ii) In Section II, Paragraph 2: in subparagraph (d), the first two sentences shall be replaced by the following sentence:

    The amount of resources committed to a qualifying member under a three-year arrangement may be increased at the time of consideration of each annual program or at the time of any review contemplated under an annual arrangement, to help meet a larger balance of payments need or to support a strengthening of the program during the period of such annual arrangement.

  • (iii) In Section II, Paragraph 3: subparagraph (b) shall be amended to read as follows:

    • (b) Disbursements must precede the expiration of the three-year commitment period. If an annual arrangement expires with undisbursed amounts, the Trustee may rephase those amounts over the remaining annual arrangements under the three-year commitment. It may also extend the period of the three-year commitment for up to one year to allow the disbursement of undisbursed amounts or of additional resources committed to the member, subject to appropriate conditions consistent with the terms of assistance under this Instrument.

    • Each annual arrangement shall determine the phasing of disbursements, which, in principle, shall be at semiannual intervals (one upon approval and at approximately six-monthly intervals thereafter) with semiannual performance criteria and appropriate monitoring of key financial variables in the form of quarterly quantitative benchmarks and structural benchmarks for important structural reforms. Arrangements shall also contain provisions for reviews of the member’s program with the Trustee to evaluate the macroeconomic and structural reform policies of the member and reach new understandings if necessary. In cases where closer monitoring is needed, an annual arrangement may provide for quarterly performance criteria and reviews and quarterly disbursements. In establishing the phasing under an arrangement, the Trustee shall endeavor to avoid undesirable bunching of disbursements under one arrangement with the disbursements under the subsequent arrangement.

Section B

  • (iv) In Section II: a new subparagraph l(aa) shall be added, which will read as follows:

    • (aa) The provisions of subparagraphs l(b), 2(d), and 3(b) of this Section shall apply to assistance committed to qualifying members through November 20, 1998. The provisions of subparagraphs l(bb), 2(dd), and 3(bb) of this Section shall apply to assistance committed after that date.

  • a new subparagraph l(bb) shall be added, which will read as follows:

  • (bb) Assistance shall be committed and made available to a qualifying member under a single three-year arrangement in support of a three-year macroeconomic and structural adjustment program presented by the member. The member shall also present a detailed statement of the policies and measures it intends to pursue for the first twelve months of the arrangement, in line with the objectives and policies of the three-year program. The three-year arrangement will prescribe the total amount of resources committed to the member, the amount to be made available during the first year of the arrangement, the phasing of disbursements during that year and the overall amounts to be made available during the second and third years of the arrangement. In principle, disbursements shall be phased at semiannual intervals (one upon approval and at approximately six-monthly intervals thereafter) with semiannual performance criteria and appropriate monitoring of key financial variables in the form of quarterly quantitative benchmarks and structural benchmarks for important structural reforms. The arrangement shall also provide for reviews of the member’s program with the Trustee to evaluate the macroeconomic and structural reform policies of the member and the implementation of its program and reach new understandings if necessary. In cases where closer monitoring is needed, the arrangement may provide for quarterly performance criteria and reviews and quarterly disbursements. The determination of the phasing of, and the conditions applying to, disbursements during the second and third years of the arrangement will be made by the Trustee in the context of a review of the program with the member, and of a detailed statement presented by the member describing progress made under the program, and of the policies it will follow during the subsequent year of the arrangement to further the realization of the objectives of the three-year program, with such modifications as may be necessary to assist it to achieve its objectives in changing circumstances. After the expiration of a three-year arrangement for an eligible member, the Trustee may approve additional arrangements for that member in accordance with the Instrument.

  • a new subparagraph 2(dd) shall be added, which will read as follows:

  • (dd) The amount of resources committed to a qualifying member under a three-year arrangement may be increased at the time of any review contemplated under the arrangement, to help meet a larger balance of payments need or to support a strengthening of the program. The amount committed to a member shall not be reduced because of developments in its balance of payments, unless such developments are substantially more favorable than envisaged at the time of approval of the three-year arrangement and the improvement for the member derives in particular from improvements in the external environment.

  • a new subparagraph 3(bb) shall be added, which will read as follows:

  • (bb) Disbursements under a three-year arrangement must precede the expiration of the arrangement period. If phased amounts under an arrangement do not become available as scheduled due to delays in program implementation, nonobservance of conditions attached to such disbursements or delays in reaching new understandings when necessary, the Trustee may rephase those amounts over the remaining period of the arrangement. The Trustee may also extend the period of the arrangement for up to one year to allow for the disbursement of rephased amounts or to provide additional resources, subject to appropriate conditions consistent with the terms of assistance under the Instrument.

Section C

(v) In Section V, Paragraph 1:

  • a new subparagraph (f) shall be added, which will read as follows:

  • (f) repayments of the principal under Trust loans, to the extent that resources in the Reserve Account have been used to make payments to a lender due to a difference in timing between scheduled principal repayments to the lender and principal repayments under Trust loans.

(vi) Section V, Paragraph 3 shall be amended to read as follows:

  • Any repayment of principal under Trust loans, to the extent that repayment to a lender has been made from the Reserve Account due to differences in timing between scheduled principal repayments to the lender and principal repayments under Trust loans, any payments of overdue principal or interest or interest thereon under Trust loans, and any payments of interest under Trust loans to the extent that payment has been made to a lender from the Reserve Account, shall be made to the Reserve Account.

Section D

(vii) In Section II, Paragraph 1:

  • a new subparagraph (e) shall be added, which will read as follows:

  • (e) The Managing Director shall not recommend for approval, and the Trustee shall not approve, a request for a three-year arrangement under this Instrument whenever the member has an overdue financial obligation to the Fund in the General Resources Account, the Special Disbursement Account, or the SDR Department, or to the Fund as Trustee, or while the member is failing to meet a repurchase expectation to the Fund pursuant to Decision No. 7842-(84/165)13 on the Guidelines on Corrective Action, or pursuant to subparagraphs 16(a) or 33(a) of Decision No. 8955-(88/126) on the Compensatory and Contingency Financing Facility, or in respect to a purchase in support of debt- and debt-service- reduction operations pursuant to Decision No.9331 -(89/167),14 or a purchase pursuant to Decision No. 11627-(97/123) SRF15 on the Supplemental Reserve Facility, or pursuant to the Guidelines for Fund Support for Currency Stabilization Funds, or is failing to meet a repayment expectation pursuant to the provisions of Appendix I to this Instrument.

(viii) In Section II, Paragraph 3:

  • a new subparagraph (e) shall be added, which will read as follows:

  • (e) In cases of misreporting and noncomplying disbursements of Trust loans, the provisions of Appendix I, which shall be incorporated at the end of this Instrument, shall apply.

  • a new subparagraph (f) shall be added, which will read as follows:

  • (f) Disbursements under an arrangement to a qualifying member shall be suspended in all the cases specified in Paragraph l(e) of this Section.

(ix) The following Appendix I shall be incorporated at the end of the Instrument:

Appendix I Misreporting and Noncomplying Disbursements Under ESAF Arrangements—Provisions on Corrective Action

a. A noncomplying disbursement occurs when (i) the Trustee makes a disbursement to a member under an arrangement approved in accordance with the Instrument on the basis of a finding by the Trustee or the Managing Director that all applicable performance criteria and other conditions established for that disbursement under the terms of the decisions on the arrangement have been observed, and (ii) that finding later proves to be incorrect. For the purposes of these provisions, a condition established under the terms of a decision on an arrangement means a condition specified in the arrangement, in a decision approving the arrangement, completing a review, or granting a waiver for the nonobservance of a performance criterion under the arrangement.

b. Whenever evidence comes to the attention of the Trustee indicating that a member may have received a noncomplying disbursement within the previous two years, the Managing Director shall promptly inform the member concerned.

c. If, after consultation with the member, the Managing Director determines that the member did receive a noncomplying disbursement, he shall promptly notify the member and submit a report to the Executive Board together with his recommendations, which may include a recommendation that the member be called upon to make an early repayment or that the nonobservance be waived. If the decision of the Executive Board is to call upon the member to make an early repayment, the member will be expected to repay an amount equivalent to the noncomplying disbursement, together with any interest accrued thereon, within a period of 30 days from the date of the Executive Board decision.

d. A waiver will be granted only if the deviation from the relevant performance criterion or other condition was minor or temporary, or if, subsequent to the disbursement, the member had adopted additional measures appropriate to achieve the objectives of the program supported by the arrangement under which the disbursement was made.

e. If a member fails to meet a repayment expectation under these guidelines within the period established by the Executive Board, (i) the Managing Director shall promptly submit a report to the Executive Board together with a proposal on how to deal with the matter, and (ii) interest shall be charged on the amount subject to the repayment expectation at the rate applicable to overdue amounts under Section II, Paragraph 4 of the Instrument.

Part II

2. All the provisions applying to assistance under the Enhanced Structural Adjustment Facility Trust Instrument, other than those amended or deleted pursuant to Part A of this Decision, shall continue to apply to assistance committed after November 20, 1998 under such Instrument, including the maturity of loans, which will continue to be repaid in 10 equal semiannual installments beginning not later than five-and-a-half years from the date of each disbursement and completed at the end of the tenth year after that date.

3. The Managing Director shall not recommend, and the Fund shall not approve, a request by a member for the use of the Fund’s general resources, Special Disbursement Account resources, or resources administered by the Fund as Trustee, whenever the member is in arrears, or is failing to meet a repayment expectation, to the Enhanced Structural Adjustment Facility Trust.

4. Provision shall be made in Stand-By and Extended Arrangements for the suspension of further purchases whenever a member fails to meet a repayment obligation to the ESAF Trust or a repayment expectation to that Trust within the period established by the Executive Board pursuant to the provisions of Appendix I to the ESAF Trust Instrument.

Decision No. 11832- (98/119) ESAF

November 23, 1998

(e) Trust for Special ESAF Operations for the Heavily Indebted Poor Countries and Interim ESAF Subsidy Operations—Amendment

The Instrument to Establish a Trust for Special ESAF Operations for the Heavily Indebted Poor Countries and Interim ESAF Subsidy Operations annexed to Decision No. 11436- (97/10) ESAF16 shall be amended as follows:

In Section III:

  • (i) paragraph l(b): the words “two-year period beginning October 1, 1996" shall be amended to read:

  • period beginning October 1, 1996 and ending December 31, 2000.

  • (ii) paragraph 2(c): in the third sentence, delete the word “or" appearing before “decisions on rights accumulations” and add the following words at the end of the sentence:

  • , or programs supported by the Fund under the policy on emergency assistance for postconflict countries.

  • (iii) paragraph 3: the following new paragraph (c) shall be inserted after paragraph (b):

  • In case of protracted delays by a member in reaching the completion point because of problems in policy implementation, the Trustee may reassess that member’s eligibility and qualification for assistance, including the amount of assistance committed at the decision point.

  • (iv) former paragraph (c) shall become paragraph (d), and the following sentence shall be added at the end of the paragraph:

  • For the purposes of this paragraph, references to the commitment of assistance at the decision point will be deemed to include any adjustment of the amount of such assistance in accordance with (c) above.

  • (v) former paragraph (d) shall become paragraph (e).

  • (vi) former paragraph (e) shall become paragraph (f).

Decision No. 11861-(98/131) ESAF

December 18, 1998

D. Supplemental Reserve Facility (SRF)

(a) Amendment to System of Increases of Rate of Charge

In the first sentence of paragraph 8 of Decision No. 11627- (97/123) SRF,17 “from the date of approval of financing under this Decision” shall be replaced by “from the date of the first purchase financed under this Decision.”

Decision No. 11895-(99/ll) SRF

January 25,1999

(b) Disposition of Net Operating Income

(See Section B above, Fund’s Income Position, subsection (d) for the full text of this Decision.)

E. Multiple Currency Practices—Approval Period

The Policy on Multiple Currency Practices, Decision No. 6790- (81/43),18 adopted March 20,1981, shall be amended to replace the last sentence in paragraph 5 with the following: “Consistent with the cycle of consultations under Article IV, approval will be granted for periods of approximately one year, in order to provide for a continual review by the Executive Board, except where the practice is maintained only for existing arrangements and for a specified period of time.”

Decision No. 11728-(98/56)

May 21,1998

F. Operational Budget

(a) Review of Guidelines for Allocation of Currencies

1. Pursuant to Decision No. 11386-(96/107), adopted December 2, 1996, the Fund has reviewed the guidelines for the use of currencies in the General Resources Account approved by Decision No. 10279-(93/19),19 adopted February 10, 1993. The Executive Board approves the new guidelines set out below:

2. Currencies to be used for transfers in the operational budget will be allocated in proportion to members’ quotas.

3. Currencies to be used for receipts in the operational budget will be allocated in such a way as to promote over time balanced positions in the Fund in relation to quotas. Receipts in currencies will be allocated to members with positions in the Fund above the average of all members included in the operational budget. The amount allocated in each currency shall be in proportion to the difference between the member’s position in the Fund and the projected average of all members included in the operational budget, expressed as a percent of quota, at the end of the budget period.

4. A member’s “position in the Fund” shall be defined as its reserve tranche position plus any outstanding loans to the Fund by the member or an institution of the member under credit arrangements that are judged by the Fund to provide it, on a continuing basis, with the ability to finance uses of its resources by members on terms comparable to those applicable to the Fund’s use of its currency holdings for this purpose.

5. The Fund’s holdings of a member’s currency in terms of quota resulting from allocations of currencies for transfers shall not be reduced below a floor of one-half of the projected average level, in percent of quota, of the Fund’s holdings of usable currencies at the end of the budget period.

6. The Fund will seek to maintain adequate working balances of each member’s currency included in the operational budget for transfers of not less than 10 percent of the quotas of these members.

7. These guidelines will enter into effect with the operational budget for the period December 1998-February 1999. Their operation will be reported to the Executive Board in the context of the quarterly operational budgets.

8. The guidelines will be reviewed by the Executive Board not later than December 31, 2000.

Decision No. 11837-(98/121)

November 30, 1998

(b) Specification of Currencies

Paragraph 3 of Decision No. 6274-(79/158),20 adopted September 14, 1979, is abrogated.

Decision No. 11838-(98/121)

November 30, 1998

G. European Economic and Monetary Union and the IMF

(a) SDR Valuation and SDR Interest Rate
1. SDR Valuation Basket—Amendment

With effect on January 1, 1999, references in Decision No. 11073-(95/92) G/S,21 September 25, 1995 to the deutsche mark and the French franc shall be replaced by references to the euro as the currency of Germany and France, respectively.

Decision No. 11801-(98/101) G/S

September 21, 1998

2. Amendment to Rules O-l and T-l (c)

With effect on January 1, 1999, references in Rule O-l and T-l(c) to the deutsche mark and the French franc shall be replaced by references to the euro as the currency of Germany and France, respectively.

Decision No. 11802-(98/101) G/S

September 21, 1998

3. Guidelines for Conversion into Currency Amounts of Euro of Currency Amounts of Deutsche Mark and French Franc

The Fund notes that with the introduction of the euro on January 1, 1999, the currency amounts of the deutsche mark and the French franc in the SDR valuation basket will be automatically replaced by the euro as the currency of Germany and France, respectively, and decides that such conversion shall be made in accordance with the principles set out in the guidelines for the calculation of the currency amounts in the SDR valuation basket established by Decision No. 8160- (85/186) G/S,22 adopted December 23, 1985.

Decision No. 11803-(98/101) G/S

September 21, 1998

(b) Members of Euro Area—Surveillance Over Monetary and Exchange Rate Policies

The Executive Board approves the modalities for conducting surveillance over the monetary and exchange rate policies of the members of the euro area.

Decision No. 11846-(98/125

December 9, 1998

Effective December 11, 1998

(c) Freely Usable Currencies

Pursuant to Article XXX(/), and after consultation with the members concerned, the Fund determines that, effective January 1, 1999 and until further notice, the euro, Japanese yen, pound sterling, and U.S. dollar are freely usable currencies.

Decision No. 11857-(98/130)

December 17, 1998

(d) Determination of Representative Exchange Rate for Euro

1. The Fund finds, after consultation with the authorities of Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal, and Spain, that the representative exchange rate for the euro, under Rule O-2(b)(i) of the Fund’s Rules and Regulations, is the rate against the U.S. dollar as published daily by the European Central Bank.

2. The European Central Bank will communicate to the Fund the representative exchange rate for the euro daily and will promptly inform the Fund of any changes in the exchange arrangements that may affect the determination of the representative exchange rate.

Decision No. 11858-(98/130) G/S

December 17, 1998

(e) Rates for Computations and Maintenance of Value

Decision No. 5590-(77/163),23 adopted December 5, 1977, effective April 1, 1978, shall be amended as follows:

“Current paragraphs 2(d) and 2(e) shall become paragraphs 2(c) and 2(f), respectively, and a new paragraph 2(d) shall be added to read as follows:

“(d) with respect to the euro, on the last business day of each month,”

Decision No. 11859-(98/130)

December 17,1998

H. Resources in Connection with Debt- and Debt-Service-Reduction Operations

Upon the fulfillment of the requirement for effectiveness of the increases in quotas under the Eleventh General Review of Quotas specified by paragraph 3 of the Resolution of the Board of Governors No. 53-2, the limit for additional resources under Stand-By or Extended Arrangements in support of debt- and debt-service-reduction operations shall be changed from 30 percent of quota to 20 percent of quota. Moreover, the amount that could be set aside under a Stand- By or Extended Arrangement for the same purpose may be about 15 percent instead of about 25 percent of actual access under the arrangement.

Decision No. 11877-(99/2)

January 6, 1999

I. Eleventh General Review of Quotas

(a) Effectiveness of Increases in Quotas

1. The Executive Board determines that members having 85 percent of the total of quotas on December 23,1997 have consented to the increases in their quotas under the Eleventh General Review. This determination is effective on January 22, 1999.

2. The Secretary is authorized and directed to dispatch to members a communication on January 22, 1999, the text of which is set out in the Attachment.

Decision No. 11887-(99/9)

January 22,1999

Attachment Communication to All Members

The International Monetary Fund has determined that members having 85 percent of the total of Fund quotas as of December 23, 1997 have consented to increases in their quotas under the Eleventh General Review of Quotas. This is to advise you, therefore, that the participation requirement of the Eleventh General Review of Quotas under Board of Governors Resolution No. 53-2 has been met. Your attention is drawn to the following points of timing and procedure.

First, members that have not as yet consented to their quota increases may still consent but their consent must be received in the Fund not later than 6:00 p.m., Washington time, on January 29, 1999. The Executive Board may extend this period for consent.

Second, each member that has already consented to the quota increase as of January 22, 1999 must pay to the Fund this increase within 30 days thereafter, that is, not later than February 21, 1999.24 Members that consent later than January 22, 1999 must pay the increase within 30 days after the date on which the Fund is duly notified of their consent. The Executive Board may also extend the payment period.

Third, a member with overdue repurchases, charges or assessments to the General Resources Account may not consent to nor pay for the increase in its quota until it becomes current with these obligations.

The Treasurer’s Department will continue to be in touch with the fiscal agencies of members regarding the modalities of the payments for these quota increases.

(b) Period for Consent to Increases—Extensions

Pursuant to Paragraph 4 of the Resolution of the Board of Governors No. 53-2, “Increase in Quotas of Fund Members—Eleventh General Review,” the Executive Board decides that notices of consent from members to increases in their quotas must be received in the Fund before 6:00 p.m., Washington time, on July 30, 1999.

Decision No.11896-(99/12)

January 29,1999

J. European Central Bank—Observer Status

1. The European Central Bank (ECB) shall be invited to send a representative to meetings of the Executive Board on:

  • Fund surveillance under Article IV over the common monetary and exchange rate policies of the euro area;

  • Fund surveillance under Article IV over the policies of individual euro-area members;

  • role of the euro in the international monetary system;

  • world economic outlook;

  • international capital markets reports; and

  • world economic and market developments.

2. In addition, the ECB shall be invited to send a representative to meetings of the Executive Board on agenda items recognized by the ECB and the Fund to be of mutual interest for the performance of their respective mandates.

3. At Executive Board meetings, the representative of the ECB will have the status of observer and, as such, will be able to address the Board with the permission of the Chairman on matters within the responsibility of the ECB.

4. The Fund shall communicate to the ECB (i) the agenda for all Board meetings and (ii) the documents for the Executive Board meetings to which the ECB has been invited.

5. The decision shall become effective upon receipt by the Fund of a certification by the ECB that it will preserve the confidentiality of all information and documents communicated by the Fund to the ECB, as specified by the Fund, and that any such information and documents shall be solely for the internal use of the ECB.

6. This decision shall be reviewed before January 1, 2000.

Decision No. 11875-(99/l)

December 21, 1998

K. Access to the IMF’s Archives—Review and Amendment of Policy

The first sentence of Decision No. 11192-(96/2),25 adopted January 17, 1996, shall be amended to read as follows:

The Executive Board decides that outside persons, on request, will be given access to documentary materials maintained in the Fund’s archives that are over 30 years old until September 8, 1999, after which access will be given to Executive Board documents that are over 5 years old and to other documentary materials maintained in the Fund’s archives that are over 20 years old, provided, however, that access to Fund documents originally classified as “Secret” or “Strictly Confidential” will be granted only upon the Managing Director’s consent to their declassification.

Decision No. 11915-(99/23)

March 8, 1999

Appendix IV. IMF Relations with Other International Organizations

The lessons and experiences of the Asian financial crisis, and the need to strengthen the architecture of the international financial system, led to continuing extensive collaboration between the IMF and other international organizations in 1998/99. The IMF worked closely with such organizations as the World Bank, the United Nations and its specialized agencies, the World Trade Organization (WTO), the Organization for Economic Cooperation and Development (OECD), the Bank for International Settlements (BIS), and other institutions sharing common interests and goals on different aspects of the global economy, including financial, structural, and social issues of importance to strengthening the international financial system.

Liaison with Other Organizations

The IMF’s Office in Europe, the Office in Geneva, the Regional Office for Asia and the Pacific, and the IMF Office at the United Nations all provide vital links between the IMF and other international organizations. The Paris Office reports on the activities of the international and regional institutions located throughout Europe, including the OECD, the BIS, the European Bank for Reconstruction and Development (EBRD), and the European Commission. The Office also coordinates with various European monetary authorities and is responsible for organizing meetings of the Group of Ten industrial countries. The IMF’s Office in Geneva reports on, and monitors, the activities of Geneva-based socioeconomic agencies, particularly those emphasizing the multilateral trading system and trade-related developments in the European Union. These institutions include, among others, the WTO, the International Labor Organization (ILO), the United Nations Conference on Trade and Development (UNCTAD), and the World Health Organization (WHO).

Staff of the Paris Office in cooperation with other departments in the IMF participated in the preparation of documents on developments in the European Union, including those on progress toward European Economic and Monetary Union (EMU). The IMF has been cooperating closely with the BIS in developing a code of good practices on transparency in monetary and financial policies, which was supported by the Group of Seven industrial countries in their communiqué of February 20, 1999. Effective January 5, 1999, the IMF granted the European Central Bank (ECB) observer status at selected Executive Board meetings when items of mutual interest are discussed. Recently, the first of a new series of quarterly releases of statistics on external debt for 176 developing and transition countries was jointly published by the BIS, the IMF, the OECD, and the World Bank (see Chapter 5). The aim of this initiative is to facilitate access to a single set of data that brings together information currently compiled and published separately by the contributing institutions on components of countries’ external debt. Contributing organizations also include the United Nations, the ECB, and the Statistical Office of the European Communities (Eurostat).

The IMF’s Regional Office for Asia and the Pacific, located in Tokyo, is responsible for ensuring the IMF’s participation in, and awareness of, economic and financial developments in the region. The Office promotes an IMF dialogue with Asian policymakers through various regional policy forums. It maintains close contact with the Asian Development Bank (AsDB) and the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), as well as with the World Bank’s office in Japan. It also participates in the Consultative Group meetings of donor nations held in the Asia and Pacific region.

Relations with the United Nations

Collaboration between the IMF and the United Nations and its specialized agencies, both in New York and overseas, is coordinated by the IMF Office at the UN in New York. The focus of the UN Office is to define and strengthen cooperation in such areas as the social aspects of adjustment, the environment, sustainable development, and those issues likely to affect the formulation of macroeconomic, financial, and fiscal policies. The Office reports to the Executive Board on the annual deliberations of the General Assembly and the UN Economic and Social Council (ECOSOC). In its report on the Annual Substantive Session of the ECOSOC (held in New York in July 1998), staff observed that collaboration between the Bretton Woods institutions and the UN system is part of the larger effort by the UN to harmonize the goals and programs of the international financial institutions with UN programs. The dominant theme of the fifty-third session of the General Assembly of the United Nations (held in New York from September 17 to December 18, 1998) was the recent global financial crisis and proposals to reform the monetary and financial system. The IMF was recognized as playing a central role in helping its members design appropriate policies and structural reforms in the global economy.

All the IMF offices outside of headquarters provide analytical input on issues and policies and also represent the IMF at meetings on developing country matters, expert meetings, and lectures and seminars. These offices maintain operational linkages with management and other IMF departments on various issues and on the reciprocal transmittal of documents between the IMF and other international organizations.

Relations with the World Trade Organization

The IMF’s Geneva Office represents the IMF in ministerial conferences and meetings of the WTO, including participation at the WTO’s Committee on Balance of Payments Restrictions. Since December 1996, when the Cooperation Agreement between the IMF and the WTO was signed, cooperation between the two organizations has expanded. Management and staff contacts have occurred at all levels, with attendance at respective meetings and exchanges of documents and information. All this has led to enhanced understanding between the two institutions. After their October 3, 1998, meeting in Washington, the heads of the IMF, the World Bank, and the WTO issued a joint statement in which they underscored the importance of continued collaboration among the international organizations concerned with the global economy.

Collaboration with the World Bank

Over the years, the IMF and the World Bank have closely coordinated their efforts as mandated in their respective Articles of Agreements and in the 1989 Concordat clarifying the two institutions’ areas of responsibility (see also Chapter 5). In the light of the recent financial crises, the two institutions focused on an intensified collaborative effort in monitoring developments in the financial system, especially in areas such as surveillance, policy advice, lending operations, and crisis management. The IMF’s Interim Committee, in its communiqué of October 4, 1998, stressed the importance of stronger cooperation in helping countries implement integrated stabilization and structural reform programs and in strengthening financial systems. A Bank-IMF Financial Sector Liaison Committee was established in September 1998 to advance the delineation of financial sector work by IMF and Bank staff in individual countries and help make best use of institutional expertise. The Committee will also promote the dissemination of good practices and standards and help to resolve differences of view on financial sector issues.

Both institutions have also given priority to collaboration on public sector reform and social sector issues; on the latter, IMF staff attended the Conference on Social Issues at the World Bank Regional Meeting held in Bangkok on January 21, 1999. The intensified efforts of the IMF and the Bank have helped ensure the integration of public expenditure reforms in IMF-supported stabilization and adjustment programs and enhanced the quality of policy advice and technical assistance given to member countries. The management of both organizations are committed to continuing intensive collaboration on the Enhanced Structural Adjustment Facility (ESAF) as well as the Initiative for the heavily indebted poor countries (HIPC Initiative). This includes periodic consultations of senior staff, participation in each other’s missions, attendance at each other’s meetings, and sharing of information. Collaboration at the staff level, both in policy advice and operational matters, is supported by the ongoing dialogue between IMF and Bank management.

Cooperation with Regional Development Banks

The IMF’s role in strengthening the global financial system includes continued cooperation with such multilateral and regional developments banks as the African Development Bank (AfDB), the AsDB, the EBRD, and the Inter-American Development Bank (IaDB). On September 30, 1998, multilateral creditors to the heavily indebted poor countries (HIPCs) met under the chairmanship of the World Bank. IMF staff joined the meeting and briefed participants on various aspects of the HIPC Initiative. The Executive Board’s approval in July 1997 of a proposal to allow representatives of multilateral creditors to attend country-specific IMF Executive Board discussions on HIPC matters has strengthened further the IMF’s partnership with development banks. Collaboration with the multilateral development banks includes formulation and implementation of policies in the economic and financial areas, release of information, staff visits, and attendance at meetings. IMF staff regularly participate in meetings, seminars, and forums sponsored by other regional, economic, and financial organizations in Africa, Asia and the Pacific, Latin America and the Caribbean, and the Middle East. On January 22, 1999, the AfDB, the IMF, and the World Bank established the Joint Africa Institute (JAI) to provide policy-related training to government officials and other participants from African countries (see Chapter 9). Courses offered by the JAI will focus on macroeconomic management and policies and on such structural, social, and project-related issues as governance, poverty alleviation, growth, and the environment.

Role of IMF Management

IMF Managing Director Michel Camdessus plays a vital role in the continued collaboration among the IMF, other international organizations, and multilateral and regional development banks. On July 6, 1998, Mr. Camdessus addressed the High-Level Meeting of the ECOSOC where he drew attention to the work in progress on a new architecture for the international monetary system and on the Asian financial crisis. He attended meetings of the UN Administrative Committee for Coordination (ACC) in October 1998 and April 1999. He also delivered the opening address at the IMF Conference on Transition held in February 1999 in Washington, in which staff of other international financial institutions such as the EBRD and the World Bank also participated. Mr. Camdessus traveled to Paris in March 1999 to address and attend the annual meetings of the Inter-American Development Bank and to New York in April 1999 to attend a special session of the UN ECOSOC.

In recent years, the Deputy Managing Directors of the IMF have supported the efforts of the Managing Director in enhancing collaboration with other international organizations. First Deputy Managing Director Stanley Fischer participated in the monthly meeting of the BIS in February 1999, and in March he participated in the ILO Governing Body Symposium on the Asian financial crisis. Deputy Managing Director Alassane Ouattara addressed the members of the Second Committee of the UN General Assembly and met with the UN Secretary-General in June 1998. And Deputy Managing Director Shigemitsu Sugisaki participated in the WTO High- Level Symposium on Trade and Development in March 1999.

Appendix V. External Relations

In 1998/99, the IMF continued to respond to rising demands for transparency in its activities and policies by stepping up considerably its publication of information—both in print and on its website—and liberalizing substantially its policy on access to IMF archives; through frequent public appearances and interviews by its management and staff; and by pressing its member countries to release more information on their economic conditions. In addition to disseminating more information, the IMF solicited public comment on draft standards and policy assessments in an ongoing effort to maintain a dialogue with outside audiences. The advances in IMF transparency during the financial year were part of the IMF’s broader efforts to strengthen the architecture of the international financial system (see Chapter 5).

Purposes, Audiences, and Instruments of External Communications

The IMF’s external communications activities are intended to support its core institutional work by:

  • promoting understanding of the need for sound macroeconomic policies and best practices by disseminating widely staff analyses and research, and through consensus- building activities and advocacy;

  • contributing to public understanding and support for the institution and its work by providing information on the IMF’s policies and activities; and

  • helping influence economic policy in member countries by communicating IMF views in the context of bilateral surveillance and the provision of financial assistance.

In approaching external communication, the IMF focuses on certain audiences:

  • the public policy community—government and central bank officials, parliamentarians, and influential public officials;

  • the media—both print and broadcast;

  • the academic community—universities as well as public policy institutes;

  • financial markets and the business sector—to inform them of information released by member countries, as well as of policies and programs enacted with IMF advice and assistance;

  • civil society—nongovernmental organizations (NGOs), labor and religious groups, and women’s groups; and

  • kindred international organizations (see Appendix IV).

In carrying out external communications initiatives and conveying the institution’s messages to these varied audiences, the IMF makes use of several instruments:

  • the IMF’s website http://www.imf.org)—the IMF resorted heavily to its Internet website in 1998/99 to make an increasing amount of information accessible to the public, thus serving the ends of enhancing the transparency of the IMF’s work (Box V.I);

  • publications—reports, periodicals, statistical compilations, books, manuals, pamphlets, booklets, and working papers (see Table V.I for a list of publications released in 1998/99, as well as the IMF’s annual Publications Catalog (also on the IMF’s website));

  • press releases and Public Information Notices (PINs)—press releases inform the public of Executive Board decisions; the News Brief series is used to make the public aware of management and senior staff views on topical matters; PINs, authorized for release by member countries, convey to the public a summary of the Board’s review of a country’s Article IV consultation and Board policy discussions, at the decision of Executive Directors;1

  • op-ed articles and letters to the editor—these allow the IMF to state its case, and to correct serious misconceptions, directly to the public;2

  • speeches, conferences, and seminars—from addresses by management to participation by staff in professional symposiums, such gatherings allow two-way interaction and enhance dialogue; and

  • management and staff contacts with nonofficials, including the media—frequent public briefings and interviews, both at headquarters and abroad, inform the public of the IMF’s work and policies and provide the opportunity for the IMF to hear and consider alternate views and perceptions; resident representatives, staff of IMF regional offices, and heads of IMF missions to member countries increasingly participate in the institution’s outreach efforts, and a broader range of contacts—with the academic community, the corporate sector, and civil society—are being engaged.

New Features on the IMF’s Website

During 1998/99, the content of the IMF’s website (http://www.imf.org) was augmented substantially, with an improved search feature and an electronic mail notification service introduced.

Monthly usage of the website (“hits”) reached 2 million in April 1999 from 958,000 in May 1998.

Specific additions to the website included:

  • Comprehensive and timely information on the IMF’s financial position, including a liquidity table, and summaries of countries’ accounts with the IMF and all outstanding loans (Financial Resources and Liquidity Position; Members’ Accounts in the IMF).

  • New series on the IMF staffs regular (“Article IV”) consultations with national authorities (List of Recent Article IV Consultations and Concluding Remarks of Article IV Missions); these are in addition to the ongoing Public Information Notice (PIN) series summarizing the Board’s assessment following Article IV consultations.

  • Material related to the Heavily Indebted Poor Countries (HIPC) Initiative, including a report on the Current Framework and Options for Change and a Supplement on Costing. In addition, the HIPC Debt Initiative Progress Report, Review and Outlook, Country Papers, the IMF’s Response to Critics of the Initiative, and a report on the HIPC consultative process, with a request for public comments, were posted.

  • A Joint BIS-IMF-OECD-World Bank series of Statistics on External Debt. This quarterly release of external debt indicators and international reserve data for 176 developing and transition countries provides access for the first time to a single set of data previously compiled and published separately by the contributing institutions.

  • A Guide to Progress in Strengthening the Architecture of the International Monetary System and a Statement and Report by the Managing Director on Progress in Strengthening the Architecture of the International Financial System, posted during the 1999 spring meeting of the Interim Committee. Earlier in the year, the website added the Declaration of Group of Seven (G-7) Finance Ministers and Central Bank Governors, G-7 Leaders’ Statement on the World Economy, and a Memorandum on the Work Program on Strengthening the Architecture of the International Monetary System.

  • A section on Transparency in Monetary and Financial Policies, including the Draft Code of Good Practices.

  • A section on Fiscal Transparency—including the Code of Good Practices, a draft of the Manual on Fiscal Transparency, a questionnaire to review fiscal management practices, and an outline of a self-evaluation report.

  • MULTIMOD, a modern dynamic multicountry macroeconometric model of the world economy, was released on the website in September 1998, along with model documentation and programs needed to run simulations.

  • Major publications in full text, including editions of the World Economic Outlook, and International Capital Markets, and the Annual Report in English, French, German, and Spanish. In May 1999, the full text of Staff Papers was posted, along with underlying data sets. In addition, French and Spanish editions of Finance & Development, the IMF Survey, the Articles of Agreement, By-Laws, Rules, and Regulations, and What Is the IMF? were posted.

  • The Dissemination Standards Bulletin Board site, the IMF Recruitment site, and the Finance & Development site—all of which can be accessed through the main IMF website—were redesigned to make them more easily accessible.

Board Review of External Communications

Given the continued high public interest in the activities of the IMF during 1998/99, its Executive Board reviewed, in July 1998, the IMF’s approach to external communications and discussed measures for improving its communications strategy. Directors endorsed the overall strategy for the IMF to be more proactive in communicating its message and noted the long-term, multilevel nature of the task, requiring greater involvement on the part of IMF staff, management, the Board, and country authorities. Preserving and enhancing the credibility of the IMF was seen as the most important objective of the strategy, but several Directors cautioned that greater transparency should not come at the expense of candor in the IMF’s dialogue with member countries. In this respect, it was important that press releases and news briefings set a balanced tone. External communications, the Board agreed, must be a genuine dialogue: the IMF should be open to suggestions and criticism by informed external parties and should take such feedback into account during its policy discussions.

In discussing specific suggestions of the staff, Directors expressed a range of views:

  • PINs had proven a useful means of conveying the IMF’s views at the conclusion of Article IV consultations with member countries, and some Directors suggested hat this practice be extended to cover discussions of IMF programs.

  • The Board generally favored encouraging members to release Letters of Intent, Memoranda of Economic and Financial Policies, and Policy Framework Papers (analyses prepared jointly by IMF and World Bank staff), noting that several countries were already publishing these, and expressing the desirability of more countries doing so. (Subsequently, in April 1999, the Board established a presumption that member countries would release these documents.)

  • Directors considered that it would also be useful to release the summings up of its discussions on key policy issues—perhaps on a case-by-case basis, and taking account of whether a discussion was ongoing or final. There was support in the Board for supplementing release of such policy discussions by including the executive summaries of the related staff papers. (The first policy PINs were released in March and April 1999.)

  • To increase transparency with respect to the IMF’s annual work program, Directors broadly supported regular ex post briefings on the activities of the Board.

  • Some Directors favored releasing Interim Committee documents in advance, recognizing, however, the practical constraints since these documents are produced under tight deadlines. Other Directors proposed publishing Interim Committee documents immediately after Committee meetings, and still others suggested previewing for the public, in a general manner, items on the Committee’s agenda.

  • Directors supported a review of the policy on access to the IMF’s archives, with a view to reducing considerably the waiting period for access. (In March 1999, the Board reduced the waiting period for access to Executive Board documents to 5 years from 30 years and for other archived documents to 20 years, effective September 8, 1999.)

In addition, Directors endorsed proposals to increase contacts among the media and the public at large on the part of IMF staff (including mission chiefs and resident representatives) and Executive Directors to help clarify the IMF’s role. Some cautioned that IMF staff should be well-trained in media relations, that the IMF should convey a consistent message, that broad guidelines should be established for public contacts, and that the participation of country authorities in such contacts should be left to the authorities’ discretion. Other avenues of communication currently in use could be further developed. For instance, the program of seminars with outside participants—including representatives of the media—could be expanded, as could the amount of country information—in addition to data now made available through the Dissemination Standards Bulletin Board—posted on the IMF’s website. The Board would also discuss other related suggestions during the year, including the release of staff reports for Article IV consultations and the IMF’s liquidity position. (In October 1998, the IMF began to post regularly on its public website, its liquidity position and members’ accounts with the IMF; see Box 14.)

The Board expressed considerable support for expanding the IMF’s outreach program to include members of the public as well as members of civil society (Box V.2). This effort should include use of staff based at IMF headquarters as well as resident representatives abroad. Directors also endorsed providing more basic information about the IMF to nontechnical audiences and in local languages. Such efforts should contribute to greater ownership of economic reform programs by governments and the public generally.

The Board instructed the staff to report briefly during the 1999/2000 financial year on experience with implementing the steps discussed in July 1998. This staff report would be supplemented by the ongoing work of external consultants, who would offer further insights into the effectiveness of the IMF’s external communications and its public image.

IMF to Open New Public Outreach Center at IMF Headquarters

Recognizing the need for greater interaction with the media and the general public, the IMF will open a new center adjacent to IMF headquarters in the summer of 1999. The center’s goal is to heighten public understanding of today’s world economy and the IMF’s role in the evolving international monetary system. It will include permanent and special exhibitions, a bookstore with two IMF Internet-access computer kiosks, and a small theater featuring video presentations on the IMF. A 150-seat auditorium will serve as a meeting place for public discussions of international economic issues and trends, including the “Economic Forum Series”—a series of panels presented throughout the year by senior IMF staff and guest speakers. (The forums are open to the public and reservations are not needed.)

The new center nearly doubles the size of the former IMF Visitor’s Center, maintained during 1984–94, at which exhibits on financial and cultural topics, presentations on topical economic issues, and videos depicting the IMF’s work were offered regularly to the public.

External Consultants Assess IMF’s External Communications

The IMF, in December 1998, engaged Edelman Public Relations Worldwide, together with Wirthlin Worldwide, a leading survey research firm, to offer recommendations for improving the ways in which it communicates information about its work to the public.

In announcing the project, Shailendra J. Anjaria, Director of the External Relations Department, said: “We want to strengthen public understanding of the IMF’s mission and to this end are seeking the advice of outside specialists to learn how we might do more to explain ourselves better.” He added, “I see this project as reinforcing our ongoing effort to increase the IMF’s openness.”

The six-month project, to be completed in the summer of 1999, consists of two parts:

  • A survey by the consultants to gauge perceptions and thinking about the IMF among policymakers, the media, academics, the corporate sector, and representatives of civil society (nongovernmental organizations, labor unions, religious groups) in a range of countries broadly representative of the IMF’s membership. The findings then form the basis for recommendations on how the IMF can enhance the information it provides the public.

  • An evaluation by the consultants of the methods and instruments the IMF uses to explain its purposes, work, and processes, and recommendations on how these might be improved.

The study was conducted under the oversight of the IMF’s External Relations Department, which will draw on the main conclusions and recommendations to define options for improving the IMF’s external communications.

Table V.I.

Publications Issued, Financial Year Ended April 30, 1999

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Copies of IMF publications may be obtained from Publication Services, International Monetary Fund, 700 19th Street, N.W., Washington, D.C. 20431, U.S.A.: Telephone: (202) 623-7430 Telefax: (202) 623-7201 E-mail: publications@imf.org. Internet: http://www.imf.org Additional information about the IMF and its publications—including the current Publications Catalog, a searchable IMF Publications Database, and ordering information and forms—is available on the IMF’s websitehttp://www.imf.org).

Available in full text on the IMF’s website.

Appendix VI. Press Communiqués of the Interim Committee and the Development Committee

Interim Committee of the Board of Governors of the International Monetary System

PRESS COMMUNIQUÉS

Fifty-First Meeting, Washington, D.C., October 4, 1998

1. The Interim Committee held its fifty-first meeting in Washington, D.C. on October 4, 1998 under the Chairmanship of Mr. Carlo Azeglio Ciampi, Minister of the Treasury of Italy. The Committee expressed its appreciation to the outgoing Chairman, Mr. Philippe Maystadt, former Deputy Prime Minister and Minister of Finance and Foreign Trade of Belgium, for his invaluable contribution to the Committee’s work.

2. Developments in the World Economy
a. Problems and Challenges in the World Economy and International Capital Market

The outlook for the world economy has worsened considerably since the Committee’s April meeting, with a scaling down of prospects for growth of output and trade. Recessions in Japan and several Asian emerging market economies have deepened; Russia’s financial crisis has contributed to a general retreat by investors from emerging markets; stock markets worldwide have declined significantly from their recent peaks; and commodity prices have weakened further. The downside risks to the current outlook have increased significantly. Many emerging market economies face a particularly difficult environment associated with reduced access to external financing and widening risk premiums. These developments also pose difficulties for financial systems and an orderly process of economic adjustment and push back prospects for economic growth. Recent problems have been aggravated by a general weakening of market confidence, reflecting the greater prevalence and intensity of contagion in an increasingly globalized economy. These contagion effects were most evident in those countries with weak policies and inadequate institutions, but many countries with sound fundamentals have also not been spared.

The Committee also noted that there are some positive features that, if reinforced, can help carry forward the response to the crisis. First, there is continuing, generally solid, growth in the industrial countries of North America and western Europe, amid low inflation and progress toward needed fiscal consolidation. Second, economic and monetary union in Europe, which is on the verge of being introduced, is already contributing to monetary stability. The Committee looks forward to a successful EMU, which contributes to growth and stability in the international monetary system. Third, there has been maintenance of growth in China and India, while progress in some of the Asian crisis countries toward financial stabilization and strengthened external positions has allowed the recent cautious easing of macroeconomic policies. Fourth, there has also been a considerable strengthening in recent years of economic fundamentals and underlying growth performance in several developing and transition countries, which has served to contain the crisis and limit the resort to market restrictions. Fifth, protectionist pressures have so far been kept in check.

The Committee considered at length the challenges facing the world economy. It is its unanimous view that forceful action is required on the part of member countries over a broad range of policies with the overriding aim of restoring market confidence and growth where needed.

b. Policy Responses to Recent Crises

In view of the seriousness of the present global situation, the Committee deemed it crucial that a strong cooperative effort be pursued by all countries and institutions to support those countries that have been most adversely affected by the recent developments and which are implementing strong economic adjustment programs. To contain the crisis, confidence restoring policy measures are needed to address domestic and external sources of vulnerability; in particular forceful and timely actions have to be taken in countries with deep-seated weaknesses.

The Committee reviewed and endorsed the overall strategy adopted by the international community in dealing with the Asian crisis. It noted that stability in the affected countries’ currencies should, if maintained, allow for a further cautious easing of monetary policies. The Committee nonetheless remained concerned about the depth of the recession in many countries of Asia and its negative impact on the welfare of large sections of their population. It supported the scope provided for fiscal policy to alleviate pressures on the real economy and, in particular, to back countries’ social safety nets, and to absorb the costs of bank restructuring. In order to secure the recovery of these economies, the Committee considered it essential that they continue to address forcefully the structural weaknesses in their financial and corporate sectors that lie at the heart of the recent loss of confidence, and to develop effective mechanisms to facilitate debt workouts.

Regarding Russia’s financial crisis, the Committee encouraged the new government to take immediate measures to reestablish confidence in the ruble, restore the payments mechanism, and work with its creditors to develop a cooperative solution to Russia’s debts. It also emphasized the need for vigorous action to tackle the root causes of the crisis, especially the persistent fiscal imbalances and inadequacies in the taxation system and the banking sector, while strengthening the rule of law, market competition, and the private enterprise sector and also minimizing the social impact of the crisis. Members reaffirmed that the international community, including the international financial institutions, stands ready to support convincing and effective measures to stabilize and reform the Russian economy. The IMF should continue to fully support those countries most affected by the Russian crisis that are performing adequately under their adjustment programs.

As for other emerging market and developing economies, with capital markets highly sensitive to any sign of policy deficiencies, it is essential that they persevere with sound policies to reduce vulnerability to changes in investor sentiment. The Committee noted that many countries in Asia and in other regions are dealing effectively with the spillover effects from the crisis. It also welcomed the reaffirmation of China’s commitment not to devalue its currency, which has provided an important anchor to the region. In Latin America, while progress during the past decade in macroeconomic policies and structural reforms has enabled many countries to cope with the recent financial market turbulence, there still remains a strong need in some countries for fiscal consolidation and strengthening of financial systems.

The Committee stressed the importance of the role that the industrial countries have to play in sustaining global growth, containing deflationary risks, and creating environments conducive to a smooth resolution of financial crises. While noting the recent steps in this direction, the Committee considered it essential that Japan should take prompt and resolute action to strengthen its banking system and to provide sufficient and sustained stimulus to revive domestic demand and restore confidence until the recovery is well established. In most other industrial countries, growth is sufficiently robust for fiscal policy not to be diverted from medium-term objectives. In view of the favorable inflation and growth prospects in these countries and the seriousness of the global financial market crisis and its spillover effects, the Committee welcomed the recent interest rate cut in the United States as a useful step in this regard and the convergence of interest rates in the countries participating in the euro towards the lowest levels prevailing in the area. Should there be a worsening of the crisis or a further slowdown in economic activity, additional action on both domestic and international grounds would be required by both emerging market countries and industrial countries.

The Committee agreed to explore a strengthened capacity, based in the IMF and together with the general increase of IMF quotas and establishment of the New Arrangements to Borrow, to provide more effectively contingent finance to help countries pursuing sound policies to maintain stability in the face of difficult global financial conditions.

3. Strengthening the Architecture of the International Monetary System

The Committee welcomed the progress that has been made during the past six months in the work on aspects related to the strengthening of the architecture of the international monetary system. Recent crises have, however, exposed broader and deeper difficulties in the system, underscoring the need to widen the scope of recent work to encompass other crucial aspects with respect to the management and resolution of financial crises. These pertain, in particular, to mechanisms for the allocation of capital and for the management of risk, the regulation and supervision of financial sectors, and standards of transparency. The roles of the various institutional components of the system also need a thorough review, including the possibility for strengthening and/or transforming the Interim Committee. Members invited the Executive Board to develop its work in these directions and to report to the Committee at its next meeting.

On a number of points of great importance for the stability of the international financial system and the effective functioning of global capital markets, preparatory work is already well under way, and agreement around them is broad. Now is the time to follow up with concrete and rapid action. The following points were emphasized:

Standards

  • There is an urgent need to further develop and disseminate internationally accepted norms as a means to raise the transparency of economic policy and to enable financial markets to better assess borrowers’ creditworthiness, as well as standards as benchmarks for the assessment of good practices. Furthermore, appropriate means should be sought to encourage offshore financial centers to comply with such norms and standards. The Committee welcomed the introduction by the IMF of the code of conduct on fiscal transparency, as well as the ongoing work on the code of monetary and financial policies, and called on the Executive Board to complete its work in this area urgently. The Committee also noted the need for similar agreed codes and standards on corporate governance, accountancy, and insolvency regimes, and called on the IMF to collaborate closely with relevant international financial institutions and other standard-setting bodies in these areas of less direct operational concern to the IMF.

Transparency

  • Greater transparency and reporting by both the public and private sectors is critical for better functioning financial markets. Comprehensive, frequent, and timely disclosure of countries’ international reserve positions and external exposure is needed. Work must proceed expeditiously to improve the availability of data on reserves, external debt, and other capital flows, particularly short-term private flows. To this end, the Committee endorsed the current proposals to strengthen the Special Data Dissemination Standard, and the agreement on a minimum standard for data provision to the IMF with respect to reserves and related items. The Committee urged the Inter-Agency Task Force on Finance Statistics convened by the IMF to accelerate the work to improve the systems for reporting external debt, as a matter of priority.

  • Greater transparency is also needed on the part of financial market participants and may require additional regulatory and disclosure measures. In that context, the Committee called for an in-depth analysis by concerned agencies of the prudential and supervisory implications arising from the operations of international institutional investors, including highly leveraged operations, with a view to determining whether additional disclosure requirements or regulations are appropriate to allow better public assessment of the risks involved.

  • The IMF, for its part, is contributing to transparency through greater openness, about its own policies and the advice it provides to members. These efforts should be strengthened through a wider use of Public Information Notices (PINs), (including on IMF policy decisions); the broader publication of Letters of Intent (LOIs) and Policy Framework Papers (PFPs) underpinning IMF-supported programs; and more public information on, and evaluations of, the IMF’s operation and policies.

Private Sector Contribution

  • Greater involvement of the private sector is also of critical importance both in preventing and resolving financial crises. The Committee recognized that the issues involved in this domain are complex. The IMF could build on the experience from the several cases, over the past nine months, in which member countries, creditors, and the IMF found practical approaches for rapid and effective action. In this regard, the Committee asked the Board to study further the use of market-based mechanisms to cope with the risk of sudden changes in investor sentiment leading to financial crises.

Capital Movements

  • Introducing or tightening capital controls is not appropriate to deal effectively with fundamental economic imbalances. Any temporary breathing space such measures might bring would be outweighed by the long-term damage to investor confidence and the distortionary effects in resource allocation. These controls are no substitute for addressing at the source weaknesses in dealing with structural or macroeconomic imbalances. Temporary impediments to capital movements, however, have been used under certain circumstances, and in this regard, the Committee asked the Board to review the experience with the use of controls on capital movements, and the circumstances under which such measures may be appropriate.

  • As regards capital movements, the preconditions for a successful opening of national markets must be carefully ascertained and created. It is essential to prevent participation in global capital markets from becoming a channel or a source of financial instability (in the domestic economy), with the attendant risk of negative spillovers onto the rest of the world economy. The opening of the capital account must be carried out in an orderly, gradual, and well sequenced manner, keeping its pace in line with the strengthening of countries’ ability to sustain its consequences. The Committee underscored the crucial importance in this regard of solid domestic financial systems and of an effective prudential framework. To this end, the IMF was encouraged to continue its work, in the context of its surveillance activities and adjustment programs, to prompt countries to adopt adequate measures and to support these efforts, in close collaboration with the World Bank, through several means, including technical assistance and dissemination of standards.

IMF Support

  • The Committee endorsed the Board’s recent reaffirrmation of the 1989 policy of lending into arrears and its agreement to consider extending this policy, under carefully designed conditions and on a case-by-case basis.

Computer Date Change

  • In connection with these discussions, the Committee urged all countries to prepare expeditiously for a smooth transition to the year 2000 computer date change, and invited the IMF to contribute to raising awareness of the associated problem in the context of its surveillance and program activities.

The Committee requested the Executive Board to advance its work in all of these areas, in cooperation with other institutions and fora, and to report to the Committee at its next meeting.

4. Reports on Other IMF Policies and Operations
a. IMF Liquidity, Quotas, NAB, and SDR Amendment

The Committee expressed serious concern over the IMF’s tight liquidity position. It stressed the critical importance in current conditions of augmenting the IMF’s resources and urged all members to accelerate the process leading to the implementation of the agreed quota increase. The Committee also called for the completion of countries’ adherence to the New Arrangements to Borrow and for the early acceptance of the Fourth Amendment of the Articles of Agreement allowing for the special one-time allocation of SDRs. These were viewed as indispensable actions in present circumstances.

b. ESAF and HIPC Initiative—Implementation, Financing, and Lessons from Evaluation and Review; Postconfliet Assistance

  • The Committee welcomed the progress made in the implementation of the HIPC Initiative, the extension by the Executive Board of the original two-year period for countries to begin qualifying for assistance until end- 2000, as well as the Board’s decision to add a degree of flexibility in its evaluation of track records of policy performance for countries receiving post-conflict assistance. The Committee strongly encouraged potentially eligible countries to start the necessary program of adjustment as soon as possible as a prerequisite to benefit from the Initiative, so that every eligible country is in the process by the year 2000.

  • The Committee stressed the urgency of securing the financing of the ESAF and the HIPC Initiative and requested the Executive Board to take the necessary decisions soon after the Annual Meetings. It called upon industrial countries that have not contributed to the ESAF-HIPC Trust Fund to come forward with their contributions without delay.

  • The Committee supported proposals based on the recent internal and external reviews of ESAF operations, to achieve better design and implementation of ESAF-supported programs. It regarded them as part of a continuing effort to adapt the IMF’s strategy for the purpose of promoting growth and adjustment; in this context, it encouraged the deepening of the dialogue between the IMF and other relevant organizations.

  • The Committee took note of the joint Bank-Fund report on assistance to post-conflict countries and requested that the Executive Board consider the issues quickly and explore further viable proposals that recognize the special needs of poor post-conflict countries, especially those with arrears to IFIs.

c. Bank-Fund Collaboration

The Committee considered recent initiatives to strengthen collaboration between the Bank and the IMF. While recognizing the specific mandates of the two institutions, it stressed the importance of their working together, including in joint missions, to assist countries in implementing integrated stabilization and structural reform programs. Enhanced collaboration would maximize the effectiveness of the two institutions at a time of high demands on their resources. The Committee attached particular importance to stronger cooperation in helping countries strengthen financial systems.

d. EMU and the Fund—Operational Issues

The Committee welcomed the decision of the European Union (EU) that 11 EU members will move to the third and final stage of economic and monetary union (EMU) on January 1, 1999. EMU will necessitate some changes in the IMF’s operational procedures, including those related both to surveillance and to the financing of the IMF. In light of the importance of the euro area, the IMF should develop its surveillance activities in this domain and complete its work to deal with the operational implications of the advent of EMU. In this context, the Committee underlined the importance of establishing an effective exchange of views with relevant EU institutions, especially the ECB.

The next meeting of the Interim Committee will be held in Washington, D.C. and is provisionally scheduled for April 27, 1999.

Annex: Interim Committee Attendance October 4, 1998

Chairman

Carlo Azeglio Ciampi

Managing Director

Michel Camdessus

Members or

Ibrahim A. Al-Assaf, Minister of Finance and National Economy, Saudi Arabia

Gordon Brown, Chancellor of the Exchequer, United Kingdom

Chatu Mongol Sonakul, Governor, Bank of Thailand

Antonio Fazio, Governor, Banca d’Ttalia (Alternate for Carlo Azeglio Ciampi, Minister of the Treasury, Italy)

E.A. Evans, Secretary, Commonwealth Treasury of Australia (Alternate for Peter Costello, Treasurer, Australia)

Dai Xianglong, Governor, People’s Bank of China

Marcel Doupamby Matoka, Minister of Finance, Economy, Budget and Equity Financing, Gabon

Roque B. Fernandez, Minister of Economy and Public Works and Services, Argentina

Viktor Gerashchenko, Chairman, Central Bank of the Russian Federation

José Angel Gurria, Secretary of Finance and Public Credit, Mexico

Marianne Jelved, Minister of Economic Affairs, Denmark

Abdelouahab Keramane, Governor, Banque d’Algérie

Trevor A. Manuel, Minister of Finance, South Africa

Sultan Bin Nasser Al-Suwaidi, Governor, United Arab Emirates Central Bank (Alternate for Mohammed K. Khirbash, Minister of State for Finance and Industry, United Arab Emirates)

Pedro Sampaio Malan, Minister of Finance, Brazil

Paul Martin, Minister of Finance, Canada

Robert E. Rubin, Secretary of the Treasury, United States

Yashwant Sinha, Minister of Finance, India

Dominique Strauss-Kahn, Minister of Economy, Finance and Industry, France

Sadakazu Tanigaki, State Secretary for Finance, Ministry of Finance, Japan

Kaspar Villiger, Minister of Finance, Switzerland

Jean-Jacques Viseur, Minister of Finance, Belgium

Hans Tietmeyer, President, Deutsche Bundesbank, Germany (Alternate for Theo Waigel, Federal Minister of Finance, Germany)

Gerrit Zalm, Minister of Finance, Netherlands

Observers

Yilmaz Akyuz, Chief, Macro-Economics and Development Policies Branch, UNCTAD

Andrew D. Crockett, General Manager, BIS

Nitin Desai, Under-Secretary-General for Economic and Social Affairs, UN

Yves-Thibault de Silguy, Commissioner for Economic, Monetary and Financial Affairs, EC

Wim F. Duisenberg, President, ECB

Donald J. Johnston, Secretary-General, OECD

Renato Ruggiero, Director-General, WTO

Tarrin Nimmanahaeminda, Chairman, Joint Development Committee

James D. Wolfensohn, President, World Bank

Fifty-Second Meeting, Washington, D.C, April 27, 1999

1. The Interim Committee held its fifty-second meeting in Washington, D.C. on April 27, 1999 under the Chairmanship of Mr. Carlo Azeglio Ciampi, Minister of the Treasury of Italy.

2. Developments in the World Economy; Policy Response in Recent Crises
a. Developments in the World Economy

The Committee was encouraged by a number of policy actions and developments since its October 1998 meeting that have helped to improve market confidence and reduce the risks of a global recession. Nonetheless, the outlook is for world output growth to remain sluggish in 1999 while a moderate recovery is foreseen for 2000. Serious challenges remain that will take some time to resolve.

Among the positive developments, the Committee noted that:

  • Activity in most of the Asian crisis economies seems to be turning towards recovery. Continued progress with structural reforms will help to restore and maintain economic dynamism in the longer run.

  • In Brazil, the situation has stabilized since early March. Spillovers to financial markets elsewhere in the region have generally been moderate, reflecting in part the past decade’s efforts to strengthen fiscal positions and to build sound financial systems.

  • The U.S. and Canadian economies have continued to grow remarkably strongly, while inflation has remained subdued.

  • Investor sentiment toward emerging markets has broadly improved since the beginning of the year. In mature financial markets, sentiment has improved markedly since last October, as concerns about the risk of a liquidity shortage have subsided.

Not withstanding these positive developments, there have also been some concerns. The crisis in Brazil, although it has abated since early March, has imparted a contractionary impulse to other Latin American countries and to the world economy. In Japan, despite some improvement, short-term prospects remain uncertain, and growth in much of Europe has further slowed below potential. In Russia, economic activity has been recovering from the low point in September and monthly inflation has decreased, but the fiscal and debt imbalances remain unsustainable. Commodity-exporting countries—many of which have incurred steep losses in export revenues since the start of the Asian crisis—face significant adjustment challenges.

The Committee considered the policies that would be required to address the downside risks to growth and other policy challenges—in particular, the continuing uneven pattern of growth among the United States, the euro area, and Japan, which has contributed to a marked widening of global trade imbalances. Priority should be given to an appropriate mix of macroeconomic and structural measures aimed at generating early, vigorous, and sustained recoveries in the crisis afflicted emerging market countries; to policies of financial restructuring and domestic demand-led growth in Japan; and to policies for supporting domestic demand in Europe. In this connection, the Committee recognized the important policy initiatives in Japan aimed at stimulating domestic demand and easing financial sector strains, but stressed the importance of Japan implementing stimulus measures until growth is restored, using all available tools. The Committee welcomed the recent interest rate reduction by the European Central Bank. The Committee emphasized the importance of open and competitive markets as a key component of efforts to sustain growth and stability in the global economy. It encouraged further trade liberalization, including market access for developing country exports, and looked forward to the launch of a new round of trade negotiations at the WTO in November with a balanced agenda that addresses the concerns of all WTO member countries.

The Committee welcomed the start of European Economic and Monetary Union (EMU), which should contribute to financial stability and sustainable growth in the euro area and globally. Members of the euro area need to attack the root causes of high unemployment. An appropriate policy mix to support stronger domestic demand, accompanied by structural reforms in labor, capital, and product markets, is essential to enhancing growth and employment prospects, especially in the medium term, in order for the euro area to be a major source of growth in the world economy.

b. Policy Response in Recent Crises

The Committee endorsed the broad strategy adopted, and noted the lessons learned, by the international community in dealing with the Asian financial crisis. It pointed to the progress made by Korea, Thailand, the Philippines, and Indonesia under IMF-supported programs, which had been responsive to evolving circumstances—including through the strengthening of social safety nets—and had benefited from the support of the international community. While noting that the worst of the crisis was over, the Committee stressed that serious challenges remain ahead and thus urged the countries affected to persevere with the needed reforms, and so lay the basis for a resumption of sustainable and high quality growth.

Drawing lessons from the crisis, the Committee emphasized, in particular, the need to address in a timely way the sources of economic vulnerabilities, such as inappropriate policy mixes, leading in particular to significant exchange rate misalignments; excessive debt accumulation; imprudent debt management policies; financial sector fragility particularly in a situation of weak financial supervision and regulation; limitations in information available to markets; weaknesses in corporate structures; inappropriate sequencing of capital account liberalization; and deficient risk management by creditors. It also emphasized the critical importance of strong national ownership of programs.

On Brazil, where public sector imbalances have been at the root of the crisis, the Committee expressed support for the authorities’ revised economic program and emphasized the importance of its full implementation as well as the continued support of the private financial community for Brazil.

In reviewing prospects for Russia, the Committee stressed that, despite recent improvements, vigorous action is needed to tackle the root causes of the crisis, especially persistent fiscal imbalances, structural rigidities, and financial sector weaknesses.

Regarding exchange rate regimes, the Committee noted that desirable arrangements may vary across countries, and that any regime must be supported by disciplined policies and robust financial systems. Recent crises have demonstrated that the policy requirements of maintaining a pegged rate are demanding, in particular in an environment of increased mobility of international capital. However, at the same time, the Committee observed that a number of economies with fixed exchange rate arrangements, including under currency boards, had been successful in maintaining exchange rate parities. It requested the Executive Board to consider further the issue of appropriate exchange rate arrangements, including in the context of large-scale official financing.

Building upon the useful review by the Executive Board of IMF-supported programs in the Asian financial crisis, the Committee requested the Executive Board to discuss ways to further improve IMF surveillance and programs so that they better reflect the changes in the world economy, in particular potentially abrupt large-scale cross border capital movements.

3. Strengthening the Architecture of the International Monetary System

The Committee noted that broad agreement had been reached on key aspects of a strengthened architecture and welcomed the actions by the IMF in a number of important areas. Nevertheless, it remains to develop some issues further and to implement several of the proposals that have been put forward. The international financial system needs to be strengthened to reduce the risks posed by weaknesses in policy and by the volatility of capital flows, and also to facilitate access to capital markets by the many countries that have not yet benefited from globalization. With that in mind, the Committee considered several of the interrelated elements of the reform agenda and called on the private sector, national authorities, as well as on the IMF and other institutions and forums to carry forward this work in the months ahead. The Committee requested the Executive Board to consider further the systemic aspects of prevention. It recognized the central importance of IMF surveillance in carrying forward this reform agenda.

a. Forestalling and Resolving Financial Crises

The Committee emphasized that prevention of crises remains the key. It endorsed the Executive Board’s decision to establish a contingent credit line in the IMF. This new instrument is an important component of the ongoing effort to strengthen the architecture of the international monetary system. The new contingent credit line will help countries pursuing sound and sustainable policies to maintain stability, even in the face of deteriorating global financial conditions. This facility will provide an important instrument of crisis prevention, by creating further incentives for countries to adopt strong policies, notably debt management and sustainable exchange rate policies; to adhere to internationally accepted standards; and to involve the private sector in a constructive manner—thereby containing the risks of financial market contagion, while taking into account the potential impact on the IMF’s liquidity.

Further work is needed on crisis prevention, in particular in conjunction with the private sector: improved risk assessment and its reflection in pricing; better data, including on private sector capital flows; strengthened monitoring of capital flows, in particular short-term flows; more information about countries’ policies and the IMF’s assessment of these policies; adherence to internationally recognized standards; stronger financial systems, and improved regulatory oversight of highly leveraged institutions, including hedge funds, and of offshore banking centers.

The Committee endorsed the IMF’s intention to intensify its work with member governments to put in place as soon as possible mechanisms that could facilitate the avoidance or orderly resolution of crises, inter alia:

  • Adhere to sound principles of debt management, avoid excessive accumulation of short-term debt and, more generally, maintain an appropriate structure of liabilities;

  • Establish systems for high-frequency monitoring of private external liabilities;

  • Maintain effective communication with private capital markets;

  • Maintain adequate foreign exchange liquidity, including by considering the establishment of contingent credit lines, call options, or similar arrangements with private creditors;

  • Support proposals that seek to eliminate the present regulatory bias in favor of short-term interbank credit lines;

  • Identify other arrangements that could better assure continuing private financing in times of potential stress.

The Committee also noted that, in future international bond issues, sovereigns should consider the inclusion of provisions that would facilitate orderly resolution of debt crises. The Committee invited the Board and other relevant forums to explore appropriate ways to introduce collective action clauses in sovereign bond issues.

The Committee also encouraged further consideration of the appropriate response in cases of severe liquidity crises, and stressed the importance of seeking appropriate involvement of the private sector in a cooperative way. The Committee reaffirmed the general principle that borrowers should honor their debts. It noted the IMF’s preparedness, under appropriate conditions, and in extreme situations to lend in the presence of arrears to private creditors, thus allowing the IMF to promote effective balance of payments adjustment during possibly protracted negotiations with creditors. The Committee asked the Executive Board to continue its work on all these issues, and report to the Interim Committee, including on ways to assure more orderly debt workouts.

b. Institutional Reform and Strengthening and/or Transforming the Interim Committee

The Committee agreed that the IMF should remain at the center of the international monetary system, while improving in a pragmatic manner the modus operandi of its institutional components and cooperation with other institutions and forums.

The Committee asked its deputies and the Executive Board to explore further the scope for institutional improvements, including of the Interim Committee, and to report at the next meeting of the Interim Committee.

c. Capital Movements

The Committee encouraged the IMF to continue its work on the appropriate pace and sequencing of capital account opening and, in particular, to further refine its analysis of the experience of countries with the use of capital controls, and to explore further issues related to the IMF’s role in an orderly and well-supported approach to capital account liberalization.

The Committee reiterated the importance of timely and comprehensive data on capital flows for effective IMF surveillance of this area. It welcomed the agreement to improve data on short-term liabilities of the official sector in the context of strengthening the Special Data Dissemination Standard (SDDS) as an important first step, and the arrangements to facilitate access to creditor-side external debt data prepared by the IMF, the World Bank, the BIS, and the OECD. The Committee urged moving forward expeditiously with the efforts under way to improve data on capital flows.

d. International Standards and Fund Surveillance

The Committee welcomed the IMF’s progress in developing, disseminating, and monitoring the implementation of internationally recognized standards, given the contribution that the observance of standards will make to strengthening the international financial system. In particular, the Committee welcomed:

  • The strengthening of the SDDS, notably by adopting a comprehensive template for the dissemination of data on international reserves and related liabilities. The Committee strongly encouraged members that have not subscribed to do so. It also called for increased efforts at participation in the General Data Dissemination System. The Committee called on all subscribers to the SDDS to begin disseminating data according to the reserves template, and encouraged completion of the work on transition plans for external debt data and indicators of financial sector soundness.

  • The completion of the Manual on Fiscal Transparency to assist members in implementing the Code of Good Practices on Fiscal Transparency. The Committee encouraged all members to work toward improving fiscal transparency in line with the Code.

  • The progress achieved in developing a draft Code of Good Practices on Transparency in Monetary and Financial Policies; and the broad collaborative effort to this end by the IMF and other international agencies and bodies. The Committee encouraged the Board to complete its work ojnti the development of the Code as soon as possible, and not later than the Annual Meetings, and to proceed promptly in preparing, in cooperation with appropriate institutions, a supporting document to the Code.

  • The Committee also took note of the progress made in developing other standards relevant for the functioning of the international financial system (accounting, auditing, banking supervision, bankruptcy, corporate governance, insurance and securities market regulations, payment systems, etc.). It encouraged standard-setting bodies and organizations to continue their efforts to develop comprehensive standards. The Committee welcomed the IMF’s work in the area of insolvency laws. It called on the IMF to continue its collaboration with the World Bank, United Nations Commission on International Trade Law (UNCITRAL), and other relevant institutions in promoting effective insolvency systems. While noting their voluntary nature, the Committee also encouraged countries to adopt the new standards as they are being developed.

In the context of IMF surveillance, the Committee encouraged the IMF to develop the process to encompass the standards and codes relevant to international financial stability. It welcomed the IMF’s use of experimental case studies in the preparation of transparency reports and the planned financial system stability assessments, in order to better identify and address the practical issues that need to be considered. The Committee encouraged the broadening of the experiment to a large group of countries and to take stock of these experiences to improve work in this field, and also encouraged the IMF to use transparency reports on a trial basis as a part of its surveillance.

e. Transparency—Recent Progress and Perspectives

The Committee underscored the importance of greatly increased transparency—of national government policies, of private sector reporting, and of international financial institutions, including the IMF. It welcomed the progress that had been made by the IMF in furthering transparency in members’ economic policies and its own operations, including:

  • greater use of Public Information Notices (PINs) for IMF policy discussions;

  • a presumption toward release of Letters of Intent/Memoranda of Economic and Financial Policies and Policy Framework Papers underpinning IMF-supported programs;

  • the issuance of a Chairman’s statement capturing the key points of the Board discussion following Board approval or review of members’ arrangements;

  • the liberalization of access to the IMF’s archives; and

  • a pilot project for voluntary public release of Article IV staff reports.

The Committee requested the Executive Board to continue work on furthering transparency and urged more countries to participate in the pilot project to ensure its success. The Committee underscored that efforts on transparency should not undermine the role of the IMF as confidential advisor to members. It reaffirmed the importance of strengthening the IMF’s contribution to transparency by more public information on, and evaluations of, the IMF’s operations and policies.

4. HIPC Initiative and ESAF

The Committee noted that the time had come to give new impetus to efforts to further reduce the debt of low-income countries undertaking strong adjustment programs. The Committee welcomed the further review of the HIPC Initiative and encouraged the Executive Board of the IMF—together with the Board of the World Bank—to develop more specific proposals to strengthen the current framework so as to enhance debt relief to countries in need in a way that strengthens incentives for the adoption of strong programs of adjustment, reform, and good governance. This relief should provide a clear exit from unsustainable debt burdens. In this context, the Committee recognized the need for appropriate burden sharing among creditors. The Committee looked forward to a report at its next meeting on ways to enhance the link between HIPC Initiative assistance and poverty reduction.

In light of the increased costs associated with the proposed modifications to the HIPC Initiative, and since contributions remain significantly below the financing needs of interim ESAF and HIPC Initiative, the Committee stressed the need to redouble efforts to secure the full financing of these initiatives. It also urged the Executive Board to adopt as soon as possible the decisions needed to ensure that the initiatives are fully funded. The Committee welcomed the substantial progress that has been made in securing additional loan resources for the current ESAF. Members were encouraged to come forward as soon as possible with the resources required to support ESAF operations until the start of the interim ESAF in 2001.

5. Fund Assistance to Post conflict Countries

The Committee welcomed the measures agreed by the Executive Board to enhance IMF assistance to post-conflict countries, including improving the terms of emergency post-conflict assistance and providing higher access over a longer period in appropriate circumstances. It also welcomed the Executive Board’s preparedness to consider, for those post-conflict countries with arrears to the IMF, on a case-by-case basis, relaxing the requirement for payments to the IMF as a test of cooperation, provided the member is cooperating on policies and that other multilateral institutions take at least comparable action. The Committee noted that the debt burden of the heavily indebted poor post conflict countries would eventually need to be addressed under the HIPC Initiative. The Committee asked the Executive Board to consider further steps in cooperation with the World Bank.

6. Regional Economic Impact of the Kosovo Crisis

The Committee endorsed the need for a rapid, substantial, and coordinated response by the international community to the economic consequences of the Kosovo crisis. Such a response is urgently needed to ensure that sufficient aid is provided to alleviate the suffering of the refugees from Kosovo and to ensure that countries in the vicinity of the crisis have access to external financing to support their efforts towards macroeconomic stability and structural reform. The Committee stressed that it would be highly regrettable if the considerable progress being made by the affected countries in reforming their economies was set back because of a lack of external financing, on appropriate terms, to meet these increased needs. It emphasized that all humanitarian relief costs should be financed by external aid and grants. Other external financing needs arising as a direct consequence of the crisis should be met from both bilateral and multilateral sources. The international financial institutions should play an important role in this effort. External financing of balance of payments and budget costs in affected countries that are ESAF-eligible should also be provided on highly concessional terms and the Committee looked forward to the ongoing discussions of the affected countries’ external debt positions in the framework of the Paris Club. The Committee asked the IMF and the Bank staffs to continue their work in coordinating the international response to the economic impact of the crisis in close cooperation with other interested agencies and donors.

7. Quotas, NAB, and Fourth Amendment of the Articles

The Committee welcomed the coming into effect of the New Arrangements to Borrow (NAB) and the increase in quotas approved under the Eleventh General Review, which will provide the IMF with the financial resources that will enable it to carry out its mandate at the center of the international monetary system. The Committee noted the relatively slow progress in members’ acceptance of the Fourth Amendment of the Articles, allowing for the special one-time allocation of SDRs. The Committee called on members that have not done so to complete the necessary procedures promptly.

The next meeting of the Interim Committee will be held in Washington, D.C. on September 26, 1999

Annex: Interim Committee Attendance April 27, 1999

Chairman

Carlo Azeglio Ciampi

Managing Director

Michel Camdessus

Members or Alternates

Ibrahim A. Al-Assaf, Minister of Finance and National Economy, Saudi Arabia

Gordon Brown, Chancellor of the Exchequer, United Kingdom

Antonio Casas Gonzalez, President, Banco Central de Venezuela

Antonio Fazio, Governor, Banca d’Italia (Alternate for Carlo Azeglio Ciampi, Minister of the Treasury, Italy)

Peter Costello, Treasurer, Australia

Liu Mingkang, Deputy Governor, People’s Bank of China (Alternate for Dai Xianglong, Governor, People’s Bank of China)

Emile Doumba, Minister of Finance, Economy, Budget and Privatization, Gabon

Hans Eichel, Minister of Finance, Germany

Pedro Pou, President, Central Bank of Argentina (Alternate for Roque B. Fernandez, Minister of Economy and Public Works and Services, Argentina)

Viktor Gerashchenko, Chairman, Central Bank of the Russian Federation

Marianne Jelved, Minister of Economic Affairs, Denmark

Abdelouahab Keramane, Governor, Banque d’Algérie

Sultan Bin Nasser Al-Suwaidi, Governor, United Arab Emirates Central Bank (Alternate for Mohammed K. Khirbash, Minister of State for Finance and Industry, United Arab Emirates)

Pedro Sampaio Malan, Minister of Finance, Brazil

Trevor A. Manuel, Minister of Finance, South Africa

Paul Martin, Minister of Finance, Canada

Kiichi Miyazawa, Minister of Finance, Japan

Robert E. Rubin, Secretary of the Treasury, United States

Syahril Sabirin, Governor, Bank Indonesia

Bimal Jalan, Governor, Reserve Bank of India (Alternate for Yashwant Sinha, Minister of Finance, India)

Dominique Strauss-Kahn, Minister of Economy, Finance and Industry, France

Kaspar Villiger, Minister of Finance, Switzerland

Jean-Jacques Viseur, Minister of Finance, Belgium

Gerrit Zalm, Minister of Finance, Netherlands

Observers

Andrew D. Crockett, General Manager, BIS

Nitin Desai, Under-Secretary-General for Economic and Social Affairs, UN

Yves-Thibault de Silguy, Commissioner for Economic, Monetary and Financial Affairs, European Commission

Wim F. Duisenberg, President, ECB

Katherine Ann Hagen, Deputy Director-General, ILO

Donald J. Johnston, Secretary-General, OECD

Renato Ruggiero, Director-General, WTO

Tarrin Nimmanahaeminda, Chairman, Joint Development Committee

John Toye, Director, Division on Globalization and Development Strategies, UNCTAD

James D. Wolfensohn, President, World Bank

Javad Yarjani, Head, Petroleum Market Analysis Department, OPEC

Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries (Development Committee)

PRESS COMMUNIQUÉS

Fifty-Eighth Meeting, Washington, D.C., October 5, 1998

1. The fifty-eighth meeting of the Development Committee was held in Washington, D.C. on October 5, 1998 under the chairmanship of Mr. Tarrin Nimmanahaeminda, Minister of Finance of Thailand.1

2. Anwar Ibrahim. The Committee expressed its great appreciation to Mr. Anwar Ibrahim, who had served so ably as Chairman of the Committee.

3. Implications of the Asian Crisis. The Committee paid particular attention on this occasion to development priorities and the response of the World Bank Group.

4. Ministers recognized that the economic and social aftershocks of the crisis were more severe than earlier anticipated. The crisis had now spread beyond Indonesia, Korea, Thailand, and Malaysia, and its global ramifications had increased the vulnerability of all countries. Ministers therefore noted the need to support an early and sustained recovery in East Asia and contain the risks of crises elsewhere, and to assist countries more generally to develop the prerequisites for sustainable economic growth in a more integrated international financial and economic system.

5. Ministers agreed that a concerted strategy for restoring sustainable growth and reversing the dramatic increase in poverty in East Asia should include the following key elements: (i) maintaining and accelerating progress on structural reforms, including governance structures required for the efficient working of markets; (ii) restructuring the banking system and corporate sectors and, in the short term, restoring credit to viable businesses; (iii) mobilizing necessary resources to finance growth; (iv) regenerating demand; and (v) protecting the environment. Crucial to all these elements is a focus on social concerns and the need to mitigate the most harmful effects of the crisis on the poor.

6. Ministers further noted that, if it were allowed to continue, financial turmoil could result in major setbacks to the global economy, and particularly to the progress most developing countries had achieved in the 1990s. The Committee agreed that actions were needed to help restore confidence and prevent contagion in the event of market pressures. Emerging market countries should strengthen their policies and institutions at an early stage to minimize their vulnerability to adverse shifts in investor sentiment. Industrial countries should take early and decisive actions to help regain or maintain growth momentum and global financial stability. All countries should continue the process of market opening and resist protectionism. All countries and the international financial institutions (IFIs) need to attach high priority to the promotion of good governance and the elimination of corruption.

7. Ministers stressed that, given the magnitude of reversals in capital flows that East Asia and other regions had experienced, resumption of private flows was key to recovery. Ministers also emphasized the important catalytic role played by official flows from multilateral agencies and bilateral sources.

8. In this context, the Committee agreed that, beyond responding to the immediate crisis, and in parallel with ongoing efforts to improve the international financial architecture, concerted actions were needed to help countries bolster their structural and social policies and institutions. These include strengthening the financial sector; establishing a sound business environment; improving public and private sector governance, particularly transparency and accountability; and strengthening social protection. Ministers noted that the primary role of the World Bank was to help eliminate poverty and improve social well-being, in line with international development goals. They therefore encouraged the World Bank to work with the United Nations, the IMF, and other partners to develop general principles of good practice in structural and social policies (including labor standards).

9. Bank Group Response. The Committee welcomed the prompt response of the Bank Group to the crisis, including the pledge of up to $17 billion in financing for affected countries in the region. Ministers expressed appreciation for the significant steps already taken by the Bank Group to assist countries to address the social consequences of the crisis; restructure their financial and corporate sectors; and strengthen structural reforms. They welcomed the Bank Group’s intention to further enhance, within the Strategic Compact, its capacity (including through consideration of new instruments) to support member governments’ structural and social development programs.

10. The Committee noted the decisions and recommendations recently made by the Executive Board related to the Bank’s income dynamics. Given the increasing demands on the Bank’s financial resources, Ministers asked the Executive Board to explore appropriate options to ensure that the Bank remains able to respond quickly and effectively to the development needs of its members. Ministers reaffirmed the fundamental importance of maintaining a financially strong Bank.

11. Bank-Fund Collaboration. The Committee noted the important roles to be played by the International Financial Institutions in meeting the range of new challenges facing the international community. In this context, the Committee expressed its appreciation for the major efforts undertaken by the IMF and Bank to help countries deal with the crisis and its broad consequences. They stressed the importance they attached to effective coordination between the Bank and the IMF. Ministers noted the joint report from the IMF’s Managing Director and the Bank’s President that set out the respective responsibilities of the two institutions and how each would support the macroeconomic policy and structural reform agendas of member governments. Ministers welcomed the proposed measures to improve operational mechanisms and the environment for collaboration, including information sharing, so as to enhance the institutions’ capacity to serve member countries. Ministers requested that the Bank and IMF Executive Boards keep implementation of these actions, as well as the scope for further strengthening of collaboration, under review.

12. Ministers also encouraged the Executive Boards of the IMF and Bank to review the roles of the Interim and Development Committees as part of the ongoing consideration of steps to strengthen the international financial architecture.

13. Partnerships. Ministers also welcomed the continued deepening of the partnerships between the World Bank, the Asian and African Development Banks, and other multilateral and bilateral agencies in addressing the crisis and its longerterm impact. (Ministers looked forward to receiving at the Committee’s next meeting the Bank President’s report on progress achieved in strengthening World Bank cooperation with regional development banks.) Given the importance of trade for sustained recovery, Ministers urged the IFIs to intensify cooperation in the Integrated Framework for Trade Related Technical Assistance for the Least Developing Countries. They also encouraged the World Bank to work closely with WTO, UNCTAD, and other interested parties in building poor countries’ capacity to prepare for a new global trade round. Ministers also urged enhanced cooperation between IFIs and the United Nations system at the country level.

14. Implementation of the Debt Initiative for Heavily Indebted Poor Countries (HIPC). Ministers were encouraged by the progress made during the Initiative’s first two years. They noted that nine countries have so far reached the decision point, and total commitments to the seven requiring assistance under the Initiative amount to about $6.1 billion in nominal debt-service relief ($3.1 billion in net present value (NPV) terms). Ministers welcomed the fact that Bolivia had reached its completion point, based on continued strong policy performance; savings in nominal debt service were about $760 million (or about $450 million in NPV terms). The Committee also welcomed the recent agreement that Mali had reached its decision point and was expected to reach its completion point in December 1999.

15. Ministers expressed continued strong support for the Initiative. They endorsed the extension of the entry deadline, from September 1998 until the end of 2000, and the decision to add a degree of flexibility in its evaluation of track records of policy performance for countries receiving post conflict assistance. Ministers encouraged potentially eligible countries, including those emerging from conflict, to undertake the necessary Bank/IMF-supported programs as soon as possible so that by the year 2000 every eligible country is included in the Initiative. They also stressed the importance of additional contributions to the Initiative to assist all multilateral institutions to meet their share of the cost, including, in particular, the African Development Bank.

16. Ministers encouraged the establishment of closer ties between debt relief and support for poverty reduction, as ways of making progress toward achievement of the international development targets. Ministers also supported the plan to carry out a comprehensive review of the Initiative, including an update of cost estimates, as early as 1999.

17. Assistance to Post conflict Countries. Ministers discussed the special problems faced by post conflict countries. They noted that a wide range of support had been provided these countries by the Bank and IMF, along with the UN System and bilateral partners. Ministers encouraged them, within their respective mandates, to assist these countries with effective conflict prevention policies, thereby paving the way for a durable and successful post conflict resolution. Ministers recognized, however, that in a number of cases, especially those with large and protracted arrears to multilateral institutions, the international community should explore additional ways to provide assistance more quickly and effectively. In particular, Ministers emphasized the need to provide (and, where needed, increase) positive net transfers from official creditors to post conflict countries that are adopting sound economic and social policies. The Committee welcomed the initial work done by the Bank and the IMF in identifying the issues. Ministers recognized that providing additional assistance, especially from the IFIs, raised significant policy and resource issues which would need to be considered more fully. Given the need to provide more effective support to post conflict countries, Ministers requested that the Bank and the IMF, in cooperation with the African Development Bank and other major creditors, develop an approach to guide assistance to these countries on a case-by-case basis, taking account of the specific capabilities of each institution. The Bank and IMF were asked to report back to the Committee at its next meeting.

18. IMF and IDA Resources. Ministers urged all members to implement the agreed IMF quota increase without delay to ensure the IMF has adequate resources to meet the substantial additional demands placed upon it. Ministers also stressed the urgency of securing the financing of the ESAF. Moreover, given the vital need for concessional resources to sustain support for poverty reduction in poor countries, particularly in Africa, they urged IDA Deputies to reach a successful conclusion of IDA 12 negotiations before the end of 1998.

19. Executive Secretary. The Committee extended Alexander Shakow’s term as Executive Secretary until October 1999.

20. Next Meeting. The Committee’s next meeting is provisionally scheduled for April 28, 1999 in Washington, D.C.

Fifty-Ninth Meeting, Washington, D.C, April 28, 1999

1. The fifty-ninth meeting of the Development Committee was held in Washington, D.C, on April 28, 1999 under the chairmanship of Mr. Tarrin Nimmanahaeminda, Minister of Finance of Thailand.2

2. Debt Initiative for Heavily Indebted Poor Countries (HIPC). Encouraged by the progress made over the last two and half years, Ministers expressed their continued strong support for the Initiative and reaffirmed its overarching objective of poverty reduction. They discussed ways to strengthen the Initiative and welcomed the results of the extensive external consultation process in this regard. The Committee endorsed the current review and examination of options designed to enable HIPC Initiative debt relief to be broader, deeper, and faster. Ministers reiterated the importance of ensuring a clear link between debt relief and the goals of sustainable development and poverty reduction and looked forward to the results of ongoing consultations in this area. From the outset, the underlying reform programs should have an integral pro-poor growth focus. Programs for HIPC should fully reflect social concerns by protecting social expenditures.

3. Ministers endorsed a set of principles that should be used in considering changes to the current HIPC framework. These guiding principles include recommendations that debt relief should: (i) reinforce the wider tools of the international community to promote sustainable development and poverty reduction; (ii) strengthen the incentives for debtor countries to adopt and implement economic and social reform programs; (iii) provide a clear exit from an unsustainable debt burden—taking into account external vulnerabilities of each eligible country; and (iv) be consistent with the need to preserve the financial integrity of the IFIs. Moreover, any changes should simplify implementation of the Initiative.

4. Ministers took note of the updated and higher cost estimates of the current framework, as the alternative costs of potential enhancements to the Initiative, and the importance of early debt-service reduction. They emphasized that the review of options for change should continue to be based on cost estimates provided by the Bank and the IMF that take into account those countries likely to qualify for relief, and an estimate of total resources required as well as the likely time period of expenditures. The review would need to be matched by a broad-based effort to find appropriate and equitable financing solutions. In particular, there is a need for increased bilateral contributions—with fair burden sharing—to the HIPC Trust Fund to help those multilateral creditors unable to meet additional costs from their own resources. In addition, ministers stressed the need to secure financing for the IMF ESAF/HIPC Trust. While acknowledging the financial constraints facing multilateral creditors, ministers encouraged them to examine further the funding they can provide for the HIPC Initiative. Ministers requested that changes to the HIPC Initiative framework and financing plans be presented for their consideration at the Committee’s next meeting, including specific proposals for multilateral institutions to provide cash flow relief between the decision and completion points.

5. Ministers also welcomed the proposals from bilateral creditors to consider enhanced debt relief, including more relief of the eligible HIPCs’ ODA debts. The Committee supported a better coordinated effort to ensure that new financing to HIPCs be in the form of grants or on highly concessional terms. Ministers urged an intensification of efforts on both the aid and trade fronts, emphasizing that HIPC Initiative debt relief alone would be insufficient to reach the overarching International Development Goal of halving the proportion of people living in absolute poverty by 2015.

6. Assistance to Post conflict Countries. Ministers noted the progress achieved by the Bank and the IMF in enhancing their capacity to assist postconflict countries. They welcomed the recent agreement by the IMF Executive Board to enhance postconflict emergency financial assistance and to take into account, on a case-by-case basis, the special circumstances of postconflict countries with arrears to the IMF. The Committee also welcomed the Bank’s progress in designing financial instruments aimed at providing positive net transfers to post-conflict countries implementing policies conducive to stabilization, growth, and poverty reduction. Ministers stressed the need, where relevant, to link such efforts to preparing countries for participation in the HIPC Initiative. They encouraged the two institutions to continue to work together, and with UN agencies, bilateral partners, and other institutions, to strengthen their assistance to postconflict countries and to implement enhanced assistance in individual countries as soon as possible, in the context of appropriate macroeconomic and structural policies. They stressed that these initiatives would need to complement strengthened efforts by the international community to assist in the early and orderly transition from conflict to stabilization and economic growth. They emphasized the need for demonstrated commitment to lasting peace by the previously conflicting parties to enable donors and creditors to provide exceptional support.

7. Bank Group Financial Capacity. The Committee welcomed the successful conclusion of the IDA-12 replenishment agreement and the MIGA general capital increase that will provide essential resources for two key parts of the World Bank Group. Ministers also welcomed the attention being devoted by the Bank’s Executive Board and management to the financial strength of the IBRD and the International Finance Corporation (IFC). Ministers reaffirmed their strong commitment to preserve the IBRD’s and IFC’s financial integrity. They recognized that the institutions must respect appropriate financial limits in the conduct of their operations. Ministers accordingly asked that the Executive Board review IBRD and IFC priorities, particularly in light of recent global economic and financial developments, and report back to the Committee at its next meeting with balanced options for maintaining and supporting the institutions’ financial capacity to help them meet the future development needs of borrowing member countries.

8. Comprehensive Development Framework (CDF). The Committee welcomed the holistic approach to sustainable development envisaged in the CDF. Ministers appreciated that the CDF emphasizes the ultimate importance of country ownership of decision making as well as partnership and coordination between government, civil society, the private sector, and other multilateral and bilateral actors, in pursuit of poverty reduction—the Bank’s central goal. They underscored the importance, within the CDF, of each partner sharpening its focus. They noted that many governments had expressed interest in working as partners with the Bank in helping to develop the CDF. Ministers recognized that the ultimate test of the CDF would be in its implementation, and they called on the Executive Board to monitor and evaluate progress in the pilot country cases as they evolve over the next 18 months.

9. Multilateral Development Bank (MDB) Cooperation. Ministers welcomed the President’s report on strengthened World Bank cooperation with regional development banks, an important set of development partners. They underscored the importance of continuing to strengthen cooperation between the World Bank, regional development banks, and the IMF. Ministers believe such enhanced collaboration, while respecting each institution’s unique mandate, can improve lending efficiency and effectiveness; they urged further concrete steps be taken by the MDBs as, for example, in developing comparable methods for evaluating development effectiveness and in establishing best-practice MDB procurement rules.

10. Principles and Good Practice in Social Policy. Ministers noted the important contributions of the Bank and the IMF in current efforts to strengthen the architecture of the international financial system through their participation in the formulation of international standards, principles, and best practices. Reflecting on the lessons of the recent financial crisis, Ministers reiterated the importance of concerted action to help countries bolster their social policies and institutions. They considered a draft note on principles and good practice in social policy, prepared at the Committee’s request by the World Bank in cooperation with the UN and others. Ministers agreed that further development of these basic social principles was best pursued within the framework of the United Nations, as part of the international community’s follow- up on the Copenhagen Declaration of the World Summit for Social Development. Ministers encouraged the Bank to help countries mobilize the necessary domestic and external resources to implement these principles and to share best practice on the effective use of such resources. Ministers emphasized the importance of the Bank concentrating on strengthening its support for member countries in translating broad principles into practical country-specific results, based on the Bank’s extensive operational role in promoting broad-based, poverty-reducing development—experience of best practice that should be an important part of the Bank’s contribution to the United Nations discussion of principles. They emphasized the importance and urgency of work by the Bank and the IMF to help countries be better prepared for crisis situations, and to ensure that when crisis strikes the most vulnerable groups are protected and the process of longer-term development is sustained; ministers asked the World Bank to report back to the Committee at the Annual Meetings on associated policies and practices that could support national and international implementation of these objectives.

11. Strengthening International Forums. Ministers discussed a number of options for strengthening the Development and Interim Committees. They recognized the importance of reaching agreement as soon as possible and asked the two Executive Boards to develop proposals for consideration by the Committees at their next meetings.

12. The Balkan Crisis. Ministers were informed of the results of the special high-level meeting of governments and international agencies held on April 27. Convened by the World Bank and the International Monetary Fund, the meeting focused on the economic impact of the Kosovo crisis on neighboring countries in the Balkan region. The Committee welcomed the attention being paid to the region’s short-term financial needs, as well as a medium-term approach to economic stability in these countries. They emphasized that conflict and postconflict situations elsewhere also required a high level of attention by the international community. Ministers welcomed the request that the World Bank and the European Union coordinate these efforts for the Balkan crisis. Ministers looked forward to being informed of follow-up actions in due course.

13. Next Meeting. The Committee’s next meeting is scheduled for September 27, 1999 in Washington D.C.

Appendix VII. Executive Directors and Voting Power on April 30, 1999

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Voting power varies on certain matters pertaining to the General Department with use of the IMF’s resources in that department.

Percentages of total votes (2,120,222) in the General Department and the SDR Department.

This total does not include the votes of the Islamic State of Afghanistan and Somalia, which did not participate in the 1998 Regular Election of Executive Directors. The total votes of these members is 2,146—0.10 percent of those in the General Department and SDR Department.

This total does not include the votes of the Democratic Republic of the Congo and Sudan, which were suspended effective June 2, 1994 and August 9, 1993, respectively, pursuant to Article XXVI, Section 2(b) of the Articles of Agreement.

This figure may differ from the sum of the percentages shown for individual Directors because of rounding.

Appendix VIII. Changes in Membership of the Executive Board

Changes in membership of the Executive Board between May 1, 1998 and April 30, 1999 were as follows:

Han Mingzhi (China) relinquished his duties as Alternate Executive Director to Zhang Zhixiang (China), effective June 30, 1998.

Zhang Fengming (China) was appointed as Alternate Executive Director to Zhang Zhixiang (China), effective July 1, 1998.

Andrei Vernikov (Russia) relinquished his duties as Alternate Executive Director to Aleksei V. Mozhin (Russia), effective July 5, 1998.

Andrei Lushin (Russia) was appointed as Alternate Executive Director to Aleksei V. Mozhin (Russia), effective July 6, 1998.

Gus O’Donnell (United Kingdom) relinquished his duties as Executive Director for the United Kingdom, effective July 31, 1998.

Stephen Pickford (United Kingdom) was appointed Executive Director for the United Kingdom, effective August 1, 1998.

Enzo R. Grilli (Italy) completed his term of service as Executive Director for Albania, Greece, Italy, Malta, Portugal, and San Marino, effective October 31, 1998.

Dinah Z. Guti (Zimbabwe) completed her term of service as Executive Director for Angola, Botswana, Burundi, Eritrea, Ethiopia, The Gambia, Kenya, Lesotho, Liberia, Malawi, Mozambique, Namibia, Nigeria, Sierra Leone, South Africa, Swaziland, Tanzania, Uganda, Zambia, and Zimbabwe, effective October 31, 1998.

Alexandre Kafka (Brazil) completed his term of service as Executive Director for Brazil, Colombia, Dominican Republic, Ecuador, Guyana, Haiti, Panama, Suriname, and Trinidad and Tobago, effective October 31, 1998.

Jon Shields (United Kingdom) relinquished his duties as Alternate Executive Director to Stephen Pickford (United Kingdom), effective October 31, 1998.

Juan José Toribio (Spain) completed his term of service as Executive Director for Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Spain, and Venezuela, effective October 31, 1998.

Koffi Yao (Côte d’Ivoire) completed his term of service as Executive Director for Benin, Burkina Faso, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Republic of Congo, Côte d’Ivoire, Djibouti, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Madagascar, Mali, Mauritania, Mauritius, Niger, Rwanda, Sao Tome and Principe, Senegal, and Togo, effective October 31, 1998.

Abdulrahman A. Al-Tuwaijri (Saudi Arabia) was reelected Executive Director by Saudi Arabia effective November 1, 1998.

Alexandre Barro Chambrier (Gabon), formerly Alternate Executive Director to Koffi Yao (Côte d’Ivoire), was elected Executive Director by Benin, Burkina Faso, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Republic of Congo, Côte d’Ivoire, Djibouti, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Madagascar, Mali, Mauritania, Mauritius, Niger, Rwanda, Sao Tome and Principe, Senegal, and Togo, effective November 1, 1998.

Thomas A. Bernes (Canada) was reelected Executive Director by Antigua and Barbuda, The Bahamas, Barbados, Belize, Canada, Dominica, Grenada, Ireland, Jamaica, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines, effective November 1, 1998.

Roberto F. Cippa (Switzerland) was reelected Executive Director by Azerbaijan, Kyrgyz Republic, Poland, Switzerland, Tajikistan, Turkmenistan, and Uzbekistan, effective November 1, 1998.

Stephen P. Collins (United Kingdom) was appointed as Alternate Executive Director to Stephen Pickford (United Kingdom), effective November 1, 1998.

Nicolás Eyzaguirre (Chile), formerly Alternate Executive Director to A. Guillermo Zoccali (Argentina), was elected Executive Director by Argentina, Bolivia, Chile, Paraguay, Peru, and Uruguay, effective November 1, 1998.

Riccardo Faini (Italy) was elected Executive Director by Albania, Greece, Italy, Malta, Portugal, and San Marino, effective November 1, 1998.

Javier Guzmán-Calafell (Mexico), formerly Alternate Executive Director to Juan José Toribio (Spain), was elected Executive Director by Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Spain, and Venezuela, effective November 1, 1998.

Kai Aaen Hansen (Denmark) was reelected Executive Director by Denmark, Estonia, Finland, Iceland, Lativa, Lithuania, Norway, and Sweden, effective November 1, 1998.

Willy Kiekens (Belgium) was reelected Executive Director by Austria, Belarus, Belgium, Czech Republic, Hungary, Kazakhstan, Luxembourg, Slovak Republic, Slovenia, and Turkey, effective November 1, 1998.

Abbas Mirakhor (Islamic Republic of Iran) was reelected Executive Director by Algeria, Ghana, Islamic Republic of Iran, Iraq, Morocco, Pakistan, and Tunisia, effective November 1, 1998.

Jose Pedro de Morais, Jr. (Angola), formerly Alternate Executive Director to Dinah Z. Guti (Zimbabwe), was elected Executive Director by Angola, Botswana, Burundi, Eritrea, Ethiopia, The Gambia, Kenya, Lesotho, Liberia, Malawi, Mozambique, Namibia, Nigeria, Sierra Leone, South Africa, Swaziland, Tanzania, Uganda, Zambia, and Zimbabwe, effective November 1, 1998.

Aleksei V. Mozhin (Russia) was reelected Executive Director by Russia, effective November 1, 1998.

Charles X. O’Loghlin (Ireland) relinquished his duties as Alternate Executive Director to Thomas A. Bernes (Canada), effective November 1, 1998.

Damian Ondo Mañe (Equatorial Guinea) was appointed as Alternate Executive Director to Alexandre Barro Chambrier (Gabon), effective November 1, 1998.

Hernán Oyarzábal (Venezuela) was appointed as Alternate Executive Director to Javier Guzman-Calafell (Mexico), effective November 1, 1998.

Murilo Portugal (Brazil) was elected Executive Director by Brazil, Colombia, Dominican Republic, Ecuador, Guyana, Haiti, Panama, Suriname, and Trinidad and Tobago, effective November 1, 1998.

Cyrus D.R. Rustomjee (South Africa) was appointed as Alternate Executive Director to Jose Pedro de Morais, Jr. (Angola), effective November 1, 1998.

A. Shakour Shaalan (Egypt) was reelected Executive Director by Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Maldives, Oman, Qatar, Syrian Arab Republic, United Arab Emirates, and Republic of Yemen, effective November 1, 1998.

M.R. Sivaraman (India) was reelected Executive Director by Bangladesh, Bhutan, India, and Sri Lanka, effective November 1, 1998.

Gregory F. Taylor (Australia) was reelected Executive Director by Australia, Kiribati, Korea, Marshall Islands, Federated States of Micronesia, Mongolia, New Zealand, Palau, Papua New Guinea, Philippines, Seychelles, Solomon Islands, Vanuatu, and Samoa, effective November 1, 1998.

J. de Beaufort Wijnholds (Netherlands) was reelected Executive Director by Armenia, Bulgaria, Bosnia and Herzegovina, Croatia, Cyprus, Georgia, Israel, former Yugoslav Republic of Macedonia, Moldova, Netherlands, Romania, and Ukraine, effective November 1, 1998.

Zamani Abdul Ghani (Malaysia) was reelected Executive Director by Brunei Darussalam, Cambodia, Fiji, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, Nepal, Singapore, Thailand, Tonga, and Vietnam, effective November 1, 1998.

Zhang Zhixiang (China) was reelected Executive Director by China, effective November 1, 1998.

A. Guillermo Zoccali (Argentina), formerly Executive Director for Argentina, Bolivia, Chile, Paraguay, Peru, and Uruguay, was appointed as Alternate Executive Director to Nicolas Eyzaguirre (Chile), effective November 1, 1998.

Peter Charleton (Ireland) was appointed as Alternate Executive Director to Thomas A. Bernes (Canada), effective November 2, 1998.

Zamani Abdul Ghani (Malaysia) relinquished his duties as Executive Director for Brunei Darussalam, Cambodia, Fiji, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, Nepal, Singapore, Thailand, Tonga, and Vietnam, effective November 30, 1998.

Kleo-Thong Hetrakul (Thailand) was elected Executive Director by Brunei Darussalam, Cambodia, Fiji, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar, Nepal, Singapore, Thailand, Tonga, and Vietnam, effective December 1, 1998.

Hideaki Ono (Japan) relinquished his duties as Alternate Executive Director to Yukio Yoshimura (Japan), effective December 9, 1998.

Masahiko Takeda (Japan) was appointed as Alternate Executive Director to Yukio Yoshimura (Japan), effective December 10, 1998.

Mohamad Hassan Elhage (Lebanon) relinquished his duties as Alternate Executive Director to A. Shakour Shaalan (Egypt), effective January 19, 1999.

Abdelrazaq Faris Al-Faris (United Arab Emirates) was appointed as Alternate Executive Director to A. Shakour Shaalan (Egypt), effective January 20, 1999.

Zhang Zhixiang (China) relinquished his duties as Executive Director for China, effective February 28, 1999.

Wei Benhua (China) was elected Executive Director by China, effective March 1, 1999.

Hamid O’Brien (Trinidad and Tobago) relinquished his duties as Alternate Executive Director to Murilo Portugal (Brazil), effective April 2, 1999.

Olver Luis Bernal (Colombia) was appointed as Alternate Executive Director to Murilo Portugal (Brazil), effective April 3, 1999.

The following served as Temporary Alternate Executive Directors to the Executive Directors indicated during 1998/99.

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Appendix IX. Financial Statements

Report of the External Audit Committee

Washington, DC

June 24, 1999

Authority and Scope of the Audit

In accordance with Section 20(b) of the By-Laws of the International Monetary Fund, we have carried out procedures in order to form an opinion on the financial statements of the International Monetary Fund covering the:

  • General Department as at and for the year ended April 30, 1999;

  • SDR Department as at and for the year ended April 30, 1999; and

  • Accounts Administered by the International Monetary Fund as at and for the year ended

April 30, 1999, which consist of the

  1. Enhanced Structural Adjustment Facility Trust;

  2. Enhanced Structural Adjustment Facility Administered Accounts:

    • — Austria,

    • — Belgium,

    • — Botswana,

    • — Indonesia,

    • — Chile,

    • — Greece,

    • — Islamic Republic of Iran,

    • — Portugal,

    • — Saudi Fund for Development Special Account;

  3. ESAF-HIPC Trust, including the Umbrella Account for HIPC Operations;

  4. Administered Accounts Established at the Request of Members:

    • — Administered Account Japan,

    • — Administered Account for Selected Fund Activities—Japan,

    • — Framework Administered Account for Technical Assistance Activities,

    • — Administered Account for Rwanda;

  5. Trust Fund;

  6. Supplementary Financing Facility Subsidy Account; and

  7. Retired Staff Benefits Investment Account.

These financial statements are the responsibility of the International Monetary Fund. Our responsibility is to express an opinion on the financial statements based on our procedures.

These included reviews of accounting and internal control systems and an evaluation of the extent and results of tests of the accounting records, which were substantially conducted using an outside accounting firm. In our opinion, the procedures undertaken by us, after reviewing the work performed by the outside accounting firm and the Office of Internal Audit and Inspection, constitute an audit conducted in accordance with generally accepted auditing standards.

Using these standards we planned and performed the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the International Monetary Fund, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Audit Opinion

In our opinion, the financial statements of the General Department, the SDR Department, and the Accounts Administered by the International Monetary Fund, have been prepared in accordance with generally accepted accounting principles as described in Note 1 to each set of financial statements, on a basis consistent with that of the preceding year, and give a true and fair view of their respective financial positions and of the allocations and holdings of Special Drawing Rights as at April 30, 1999, and of the results of operations and transactions during the year then ended.

EXTERNAL AUDIT COMMITTEE

/ s / José Nicolas Agudin, Chairman (Argentina)

/ s / Penny Jones (United Kingdom)

/ s / K.N. Memani (India)

General Department
Balance Sheet as at April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes and schedules are an integral part of the financial statements.
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Income Statement for the Years Ended April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes and schedules are an integral part of the financial statements.
Statement of Changes in Reserves and Resources for the Years Ended April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes and schedules are an integral part of the financial statements.
Notes to the Financial Statements as at April 30, 1999 and 1998
General Department

The General Department consists of the General Resources Account, the Special Disbursement Account, and the Investment Account, which had not been activated at April 30, 1999.

General Resources Account

The General Resources Account holds the general resources of the IMF including currencies of the IMF’s member countries, SDR holdings, and gold. These reflect the receipt of quota subscriptions, purchases and repurchases, collection of charges on members’ use of IMF credit, payment of remuneration on members’ creditor positions in the IMF, and borrowing and payment of interest on borrowing.

The IMF makes its resources available to its members in accordance with established policies by selling to members, in exchange for their own currencies, SDRs, or currencies of other members. When members make purchases they incur an obligation to repurchase, within specified periods, the IMF’s holdings of their currencies by payments in SDRs or other currencies determined by the IMF. The IMF’s policies on the use of its general resources are intended to ensure that their use is temporary and will be reversed within the agreed repurchase periods.

The composition of the IMF’s holdings of currencies changes as a result of the IMF’s transactions, including purchases and repurchases. Currencies consist of currency holdings and notes payable on demand, which substitute for the members’ currencies.

A member has a reserve tranche in the IMF to the extent that the IMF’s holdings of its currency, excluding holdings that reflect the member’s use of IMF credit, are less than the member’s quota. A member’s reserve tranche is considered a part of the member’s external reserves, and it may draw on the reserve tranche at any time when it represents that it has a need. Reserve tranche purchases are not considered a use of IMF credit and are not subject to repurchase obligations or charges.

A member is entitled to repurchase at any time the IMF’s holdings of its currency on which the IMF levies charges and is expected to make repurchases as and when its balance of payments and reserve position improve.

Special Disbursement Account

The Special Disbursement Account was activated on June 30, 1981 to receive transfers from the Trust Fund, which is being wound up. The Structural Adjustment Facility (SAF) was established in March 1986 within the Special Disbursement Account to provide balance of payments assistance on concessional terms to qualifying low-income developing country members.

The assets of the account are held separate from resources of other accounts of the General Department. Assets that exceed the needs of the account are transferred to the Reserve Account of the Enhanced Structural Adjustment Facility Trust (ESAF Trust), which is administered separately by the IMF as Trustee. Resources of the ESAF Trust Reserve Account that are determined to be in excess of its estimated needs are to be transferred back to the Special Disbursement Account. Upon liquidation of the ESAF Trust, the amounts remaining in the ESAF Trust Reserve Account after the discharge of all liabilities shall be transferred to the Special Disbursement Account. The IMF has also transferred certain resources derived from the termination of the 1976 Trust Fund to the ESAF Trust Subsidy Account. Upon liquidation of the ESAF Trust, any resources remaining in the ESAF Trust Subsidy Account will be returned to the Special Disbursement Account and the contributors of the ESAF Trust Subsidy Account.

1. Summary of Significant Accounting Practices

The IMF prepares its financial statements in accordance with generally accepted accounting principles that are in compliance with international accounting standards as they apply to the IMF. Further discussions of specific accounting principles and disclosure practices have been included in other notes.

Unit of Account

The accounts are expressed in terms of the SDR. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of a basket of currencies of five members. As of January 1, 1999, the deutsche mark and the French franc were substituted by the euro in the SDR valuation basket. The currencies in the basket and their amounts are as follows:

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Valuation of Currencies

Each member is obligated to maintain the value of the balances of its currency held by the IMF in the General Resources Account in terms of the SDR. Currencies are valued in terms of the SDR on the basis of the representative exchange rate determined for each currency. Whenever the IMF revalues its holdings of a member’s currency, a receivable or a payable is established for the amount of currency payable by or to the member in order to maintain the SDR value of the IMF’s holdings of the currency. The balances of the receivables or payables are included in the IMF’s total currency holdings.

Income Recognition and Deferral

Income is recognized as it is earned and expenses are recorded as they are incurred, except that income from charges from members that are overdue in settling their obligations to the IMF by six months or more is deferred and is recognized as income only when paid, unless the member has remained current in settling charges when due. The IMF generates compensating income for the amount of charges being deferred through the burden-sharing mechanism (for a more detailed description of this mechanism, see Note 5).

Capital Assets

Land, buildings, and equipment with a cost in excess of $100,000, are capitalized at cost and depreciated using the straight-line method over the estimated useful lives of the assets, ranging from 3 years for equipment to 30 years for buildings.

2. Quotas, Currencies, and Securities

Each member is required to pay to the IMF the amount of its initial quota and subsequent increases partly in its own currency and the remainder in the form of reserve assets, except that in 1978 members were permitted to pay the entire increase in their own currencies. A member’s quota is not increased until the member consents to the increase and pays the subscription. Each member has the option to substitute nonnegotiable and non-interest-bearing securities for the amount of its currency held by the IMF in the General Resources Account that is in excess of ¼ of 1 percent of the member’s quota. These securities, which are part of the IMF’s currency holdings, are encashable by the IMF on demand. The Eleventh General Review of Quotas became effective on January 22, 1999, after members having 85 percent of the total quotas consented to the increase in quotas. When all members will have consented and paid the increase, the quotas of members in the IMF will increase to SDR 212 billion. At April 30, 1999, 156 members had made their quota payments under the Eleventh General Review amounting to SDR 62.7 billion.

Changes in the IMF’s holdings of members’ currencies for the years ended April 30, 1999 and 1998 were as follows:

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On December 14, 1992, the Federal Republic of Yugoslavia (Serbia/Montenegro) agreed, as a successor state, to share in the assets and liabilities of the former Socialist Federal Republic of Yugoslavia, but has yet to succeed to IMF membership. IMF credit outstanding with respect to the Federal Republic of Yugoslavia (Serbia/Montenegro), amounted to SDR 56 million at April 30, 1999 and 1998. This amount is included in charges, interest, and other receivables in the balance sheet.

Receivables and payables arising from valuation adjustments at April 30, 1999, when all holdings of currencies of members were last revalued, amounted to SDR 29,185 million and SDR 2,308 million, respectively (SDR 11,250 million and SDR 1,139 million, respectively, at April 30, 1998). At June 18, 1999, the amounts receivable were SDR 25,279 million, and the amounts payable were SDR 2,396 million.

The IMF’s holdings of members’ currencies at April 30, 1999 are shown in Schedule 1.

3. SDR Holdings

SDRs are reserve assets created by the IMF and allocated to members participating in the SDR Department. Although SDRs are not allocated to the IMF, the IMF may acquire, hold, and dispose of SDRs through the General Resources Account. The IMF receives SDRs from members in the settlement of their financial obligations to the IMF and uses SDRs in transactions and operations between the IMF and its members. The IMF earns interest on its SDR holdings at the same rate as all other holders of SDRs.

4. Gold Holdings

The Articles of Agreement limit the use of gold in the IMF’s operations and transactions. Any use provided for in the Articles requires the approval by 85 percent majority of the total voting power of the Executive Board. In accordance with provisions of the Articles, proceeds from the sale of gold in excess of the stipulated valuation, described below, are to be transferred to the Special Disbursement Account, to the Investment Account, or to members that were members on August 31, 1975.

At April 30, 1999 and 1998, the IMF held 3,217,341 kilograms equal to 103,439,916 fine ounces of gold at designated depositories. In accordance with the IMF’s Articles of Agreement, gold is valued on the basis of 0.888671 gram of fine gold per SDR, which is equivalent to SDR 35 per fine ounce (except for 21,396 fine ounces of gold acquired at a market value equivalent to SDR 5.1 million). This valuation is equal to the original cost at which the gold was acquired. As of April 30, 1999, the value of the IMF’s holdings of gold calculated at the market price was SDR 21.9 billion (SDR 23.9 billion at April 30, 1998).

5. IMF Operations

The IMF’s financial resources are made available to members under a number of policies and facilities that differ in the type of balance of payments need they seek to address, in the length of repurchase period, the charges levied on outstanding use of IMF credit, and in the degree of conditionality attached to them. Changes in the outstanding use of IMF credit under the various facilities during the years ended April 30, 1999 and 1998 were as follows:

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Members’ use of IMF resources is shown in Schedule 1; scheduled repurchases in the General Resources Account and repayments of loans to the Special Disbursement Account are shown in Schedule 3. As of April 30, 1999 and 1998, use of credit in the General Resources Account by the largest users was as follows:

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Arrangements in the General Department

At April 30, 1999, the undrawn balances under the 21 arrangements that were in effect in the General Department amounted to SDR 15,929 million (SDR 19,197 million under 27 arrangements at April 30, 1998). These arrangements are listed in Schedule 4.

Charges

The IMF levies periodic charges on its holdings of members’ currencies that derive from their use of IMF credit. The rate of charge is set as a proportion of the SDR interest rate. This rate is adjusted periodically to offset the effect on the IMF’s income of the deferral of unpaid charges and to finance the additions to the first Special Contingent Account, as discussed below. A surcharge progressing from 300 basis points above the rate of charge up to 500 basis points applies to use of credit under the Supplemental Reserve Facility. Special charges are levied on holdings that are not repurchased when due, and on overdue charges that are not settled when due. Special charges do not apply to members that are six months or more overdue to the IMF. A service charge is levied by the IMF on each purchase, except on a reserve tranche purchase. A stand-by fee is charged on Stand-By and Extended Arrangements. This fee is refunded in proportion to purchases made under the arrangement. At April 30, 1999, the total holdings on which the IMF levied charges amounted to SDR 60,651 million (SDR 49,701 million at April 30, 1998). Charges due to the IMF at April 30, 1999 amounted to SDR 1,585 million (SDR 1,521 million at April 30, 1998).

Remuneration

The IMF pays remuneration on a member’s remunerated reserve tranche position. A remunerated reserve tranche position is the amount by which the member’s norm exceeds the IMF’s holdings of its currency, excluding holdings that derive from the use of IMF credit. The norm, which varies for each member, on average amounted to 96.1 percent of quota at April 30, 1999 (94.5 percent of quota at April 30, 1998). The rate of remuneration is equal to the SDR interest rate and is adjusted, subject to a specific floor, to offset the effect of the deferral of charges on income and to finance the additions to the first Special Contingent Account, as discussed below.

At April 30, 1999, total creditor positions on which the IMF paid remuneration amounted to SDR 57,076 million (SDR 44,011 million at April 30, 1998).

Overdue Obligation

At April 30, 1999 and 1998, six members were six months or more overdue in settling their financial obligations to the IMF and four of these members were overdue to the General Department. In addition, the Federal Republic of Yugoslavia (Serbia/Montenegro) was also six months or more overdue in meeting its financial obligations to the IMF. Credit extended to these members and the Federal Republic of Yugoslavia (Serbia/Montenegro) through the General Resources Account and the Special Disbursement Account amounted to SDR 1,144 million as of April 30, 1999 (SDR 1,182 million at April 30, 1998).

GRA repurchases, SAF loan repayments, GRA charges, and SAF interest that are six months or more overdue to the General Department were as follows:

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The type and duration of these arrears as of April 30, 1999, were as follows:

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Strengthened Cooperative Strategy

The IMF follows a cooperative strategy aimed at resolving the issue of overdue obligations to the IMF. Three major elements form the basis of the cooperative strategy: (1) preventive measures, (2) remedial and deterrent measures, and (3) intensified collaboration and the rights approach. Under the intensified collaborative approach, the IMF has developed IMF-monitored programs and rights accumulation programs, which permit a member with protracted arrears to the IMF to establish a track record of performance related to policy implementation and payments. A rights accumulation program allows the member to earn rights toward future financing through the implementation of a comprehensive economic program. Rights would be encashed under a successor arrangement after clearance of arrears and when all the requirements for that successor arrangement are met.

Deferred Income and Special Contingent Accouts

It is the policy of the IMF to exclude from current income and record as deferred income charges due by members that are six months or more overdue in meeting payments to the IMF unless the member is current in the payment of charges. Deferred income amounted to SDR 960 million at April 30, 1999 (SDR 918 million at April 30, 1998).

Since May 1, 1986, the IMF has adopted decisions whereby debtor and creditor members share equally the financial consequences of overdue obligations. An amount equal to deferred charges (excluding special charges) is generated and included in the IMF’s income by an adjustment to the rate of charge and the rate of remuneration. These adjustments also finance the accumulation of precautionary balances that are held in the Special Contingent Accounts (see following paragraphs). The proceeds from the subsequent settlement of overdue charges are distributed to members that paid additional charges or received reduced remuneration when and to the extent that deferred charges that gave rise to adjustments are paid.

In view of the existence of protracted overdue obligations, the IMF accumulates precautionary balances, inter alia, in the Special Contingent Accounts. At April 30, 1999, the balances held in the first and second Special Contingent Accounts (SCA-1 and SCA-2) amounted to SDR 1,991 million, of which SDR 991 million was held in the SCA-1 (SDR 884 million at April 30, 1998). The SCA-1 is financed by quarterly adjustments to the rate of charge and the rate of remuneration. Balances in the SCA-1 are to be distributed to the members that share the cost of financing it when there are no outstanding overdue charges and repurchases, or at such earlier time as the IMF may decide.

The SCA-2 was established on July 1, 1990 as part of the strengthened cooperative strategy to accumulate SDR 1.0 billion over a period of approximately five years through a further adjustment to the rate of charge and the rate of remuneration. Financing of the SCA-2 was completed during financial year 1997. The resources accumulated in the SCA-2 safeguard against potential losses arising from purchases made under a successor arrangement after a rights accumulation program has been successfully completed by members with protracted arrears to the IMF at the end of 1989, while at the same time providing additional liquidity to assist in financing such purchases. Refunds of contributions are to be made after all repurchases under the rights approach have been made, or at such earlier date as the IMF may determine. Outstanding credit in the General Resources Account following the completion and encashment of rights accumulation programs amounted to SDR 407 million at April 30, 1999 (SDR 514 million at April 30, 1998).

The adjustments to charges and remuneration for deferred charges and SCA-1 during the years ended April 30, 1999 and 1998 were as follows:

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The cumulative charges, net of settlements, that have been deferred since May 1, 1986 and have resulted in adjustments to charges and remuneration, amounted to SDR 771 million at April 30, 1999 (SDR 729 million at April 30, 1998). The cumulative refunds for the same period, resulting from the settlements of deferred charges for which burden-sharing adjustments have been made, amounted to SDR 963 million (SDR 962 million at April 30, 1998).

6. Other Assets

Other assets include capital assets which at April 30, 1999 and 1998 amounted to SDR 223 million and SDR 216 million, respectively, and consisted of:

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7. Reserves

The IMF determines annually what part of its net income shall be placed to the General Reserve or to the Special Reserve, and what part, if any, shall be distributed. The Articles of Agreement permit the IMF to use the Special Reserve for any purpose for which it may use the General Reserve, except distribution. An administrative deficit for any financial year must be charged first against the Special Reserve. Net operational income generated from the use of resources under the SRF for financial year 1999, after meeting the expenses of conducting the ESAF Trust, has been transferred to the General Reserve.

8. Borrowing

Under the General Arrangements to Borrow (GAB), the IMF may borrow up to SDR 18.5 billion when supplementary resources are needed, in particular, to forestall or to cope with an impairment of the international monetary system. The GAB became effective on October 24, 1962, and has been extended through December 25, 2003. The GAB was activated on July 20, 1998. Interest on borrowing under the GAB is calculated at a rate equal to the SDR interest rate.

Under the New Arrangements to Borrow (NAB), the IMF may borrow up to SDR 34 billion of supplementary resources. The NAB is the facility of first and principal recourse, but it does not replace the GAB which will remain in force. Outstanding drawings and commitments under these two borrowing arrangements are limited to a combined total of SDR 34 billion. The NAB became effective on November 17, 1998 and was activated on December 2, 1998. Interest on borrowing under the NAB is payable to the participants at the SDR interest rate, plus 100 basis points for the first year, augmented by one-third of an increase of 50 basis points for each six-month period thereafter up to a maximum increase of one-third of 200 basis points. As a condition for the activation of the NAB, the IMF will be required to transfer to the ESAF-HIPC Trust an amount equal to 100 basis points above the rate of charge levied on outstanding SRF purchases under the arrangement that was originally financed by the NAB, augmented by one-third of an increase of 50 basis points for each six-month period thereafter up to a maximum increase of one-third of 200 basis points.

During the financial year the IMF borrowed SDR 1,443 million under the GAB and SDR 2,876 million under the NAB; these amounts were repaid in full on March 11, 1999.

9. Administrative Expenses

The administrative expenses for the years ended April 30, 1999 and 1998 were as follows:

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The General Resources Account is to be reimbursed annually for expenses incurred in administering the Special Disbursement Account and the ESAF Trust; however, following the establishment of the SRF and the consequent increase in net operational income, the Board decided to forgo reimbursement of the expenses incurred in administering the ESAF Trust for financial years 1998 and 1999 and to transfer the amounts that would otherwise have been reimbursed to the GRA, SDR 41.1 million for financial year 1999 (SDR 40.7 million for financial year 1998), from the ESAF Trust Reserve Account, through the Special Disbursement Account, to the ESAF-HIPC Trust. This amount has been included under Transfers to the ESAF-HIPC Trust in the Statement of Changes in Reserves and Resources.

The IMF has a funded defined-benefit Staff Retirement Plan and a funded defined-benefit Supplemental Retirement Benefits Plan (“the Plans”) covering nearly all staff. Contributions to the Plans and all other assets, liabilities, and income of the Plans are administered separately from the General Department and can be used only for the benefit of the participants in the Plans and their beneficiaries. Participants contribute a fixed percentage of their pensionable remuneration. The IMF contributes the remainder of the cost of funding the Plans and pays certain administrative costs of the Plans. The IMF uses the aggregate cost method for determining its pension cost. Under this method, the IMF’s contributions, including those for cost of living adjustments and for experience gains and losses, are spread over the expected future working lifetimes of the participants in the plans. During financial year 1999, the IMF contributed SDR 15 million to the Plans (SDR 14 million during financial year 1998). This included prepayments amounting to SDR 13 million (SDR 11 million during financial year 1998). As a result, other assets include an amount of SDR 24 million at April 30, 1999 (SDR 11 million at April 30, 1998), arising from the difference between the IMF’s contribution and the amount recognized as pension expense in financial years 1999 and 1998. The funding and cost of the Plans for the year ended April 30, 1999 are based on an actuarial valuation at the beginning of financial year 1998. The results of the valuations, based on the principal actuarial assumptions of an expected rate of return and a discount rate of 8.5 percent and an inflation rate of 5 percent, were as follows:

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The IMF will be implementing the provisions of the revised International Accounting Standard IAS 19, Employee Benefits, during FY 2000.

The IMF provides certain health care benefits to retirees that elect to continue participation in its medical benefits and group life insurance plans during retirement. Both participants and the IMF contribute toward meeting the costs of these benefits. The IMF’s cost, which includes a past-service obligation, is actuarially determined using the projected unit credit method; the funding and cost for the year ended April 30, 1999 were based on an actuarial valuation at May 1, 1998. The total liability in this respect was estimated at SDR 146 million at April 30, 1999 (SDR 136 million at April 30, 1998). The IMF has established a Retired Staff Benefits Investment Account to hold and invest the resources contributed by the IMF toward the payment of these benefits. At April 30, 1999, an amount of SDR 147 million was held by that account (SDR 130 million at April 30, 1998).

Schedule 1 Quotas, IMF’s Holdings of Currencies, Reserve Tranche Positions, and Members’ Use of Resources as at April 30, 1999

(In thousands of SDRs)

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Includes nonnegotiable, non-interest-bearing notes that members are entitled to issue in substitution for currencies, and outstanding currency valuation adjustments.

Includes the share of the Federal Republic of Yugoslavia (Serbia/Montenegro) in the liabilities of the former Socialist Federal Republic of Yugoslavia, although this state has not succeeded to IMF membership.

The Special Disbursement Account (SDA) of the General Department provides financing under Structural Adjustment Facility (SAF) and Enhanced Structural Adjustment Facility (ESAF) arrangements.

For information purposes only. The ESAF Trust provides financing under ESAF arrangements and is not a part of the General Department.

Includes outstanding Trust Fund loans to Liberia (SDR 23.6 million), Somalia (SDR 6.5 million), and Sudan (SDR 59.2 million).

Less than SDR 500.

Schedule 2 Financial Resources and Liquidity Position in the General Resources Account as at April 30, 1999 and 1998

(In thousands of SDRs)

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Sundry assets, net of sundry liabilities reflect current assets (charges, interest, and other receivables) and other assets that include capital assets (land, buildings, and equipment), net of sundry liabilities (remuneration payable and other liabilities).

Resources regarded as nonusable in the financing of the IMF’s ongoing operations and transactions are (1) gold holdings, (2) currencies of members that are using IMF credit, (3) currencies of other members with relatively weak external positions, and (4) sundry assets, net of sundry liabilities.

Usable resources consist of (1) holdings of currencies of members considered by the Executive Board as having balance of payments and reserve positions sufficiently strong for their currencies to be used in transfers, (2) SDR holdings, and (3) any unused amounts under credit lines that have been activated.

Amounts committed under active arrangements, which reflect undrawn balances committed under operative Stand-By and Extended Arrangements, other than precautionary arrangements, are deducted from the total of usable resources, as are one-half of the amounts committed under precautionary arrangements. The Executive Board has decided that minimum working balances be set at 10 percent of the quotas of members deemed sufficiently strong for their currencies to be used in operations and transactions.

Net uncommitted usable resources are defined as usable resources less resources committed under arrangements and minimum working balances, as described above. The amount represents the resources available to meet requests for use of IMF credit under new credit arrangements and for members’ use of their reserve positions in the IMF.

Liquid liabilities consist of (1) members’ reserve tranche positions, and (2) the amount of any outstanding borrowing by the IMF under the GAB or NAB. Both reserve tranche positions and outstanding lending under the GAB and NAB (together called members’ reserve positions in the IMF) are part of members’ international reserves. The IMF cannot challenge a request by a member to draw on its reserve position when developments in its balance of payments or reserve position make this necessary, and the IMF must therefore at all times be in a position to meet such requests.

The liquidity ratio is a measure of the IMF’s liquidity position, represented by the ratio of its net uncommitted usable resources to its liquid liabilities. While this ratio is neither a fixed nor a minimum ratio, historically it has not fallen below 25–30 percent of liquid liabilities for any length of time, thereby ensuring the IMF’s capacity to meet members’ requests.

Schedule 3 Schedule of Repurchases and Repayments of Loans as at April 30, 1999

(In thousands of SDRs)

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A member is entitled to repurchase at any time the IMF’s holdings of its currency subject to charges and is expected to make repurchases as and when its balance of payments and reserve position improve.

Schedule 4 Status of Arrangements as at April 30, 1999

(In thousands of SDRs)

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Includes SDR 9.1 billion available until December 1, 1999 under the Supplemental Reserve Facility.

SDR Department
Statement of Allocations and Holdings as at April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
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Statement of Receipts and Uses of SDRs for the Years Ended April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements as at April 30, 1999 and 1998
SDR Department

All transactions and operations involving SDRs are conducted through the SDR Department. At April 30, 1999, all members of the IMF were participants in the SDR Department. SDRs are reserve assets allocated by the IMF to members that are participants in the SDR Department in proportion to their quotas in the IMF. Six allocations have been made (in 1970, 1971, 1972, 1979, 1980, and 1981) for a total of SDR 21.4 billion. A proposed amendment of the IMF’s Articles of Agreement has been approved to allow for a special one-time allocation of SDRs equal to 21.4 billion. The amendment will enter into force after three-fifths of the members, having 85 percent of the total voting power, have accepted it. Upon termination of participation or liquidation of the SDR Department, the IMF will provide to holders the currencies received from the participants in settlement of their obligations. The IMF is empowered to prescribe certain official entities as holders of SDRs; at April 30, 1999, 15 institutions had been prescribed as holders. These prescribed holders do not receive allocations.

Uses of SDRs

Participants and prescribed holders can use and receive SDRs in transactions and operations by agreement among themselves. Participants can also use SDRs in operations and transactions involving the General Resources Account, such as the payment of charges and repurchases. The IMF ensures, by designating participants to provide freely usable currency in exchange for SDRs, that a participant can use its SDRs to obtain an equivalent amount of currency if it has a need because of its balance of payments or its reserve position or developments in its reserves.

1. Accounting Practices

The accounts are expressed in terms of the SDR. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of a basket of currencies of five members. As of January 1, 1999, the deutsche mark and the French franc were substituted by the euro in the SDR valuation basket. The currencies in the basket and their amounts are as follows:

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Further discussions of specific accounting principles and disclosure practices have been included in other notes.

2. Interest, Chargesy and Assessment

Interest is paid on holdings of SDRs. Charges are levied on each participant’s net cumulative allocation plus any negative balance of the participant or unpaid charges. Interest on SDR holdings is paid, and charges on net cumulative allocations are collected quarterly. Interest and charges are levied at the same rate and are settled by crediting and debiting individual holdings accounts on the first day of the subsequent quarter. The SDR Department is required to pay interest to each holder, whether or not sufficient SDRs are received to meet the payment of interest. If sufficient SDRs are not received, because charges are overdue, additional SDRs are temporarily created.

At April 30, 1999, charges amounting to SDR 92.1 million were overdue to the SDR Department (SDR 78.7 million at April 30, 1998). At April 30, 1999 and 1998, six members were six months or more overdue in meeting their financial obligations to the IMF, and five of these members were six months or more overdue to the SDR Department. In addition, the Federal Republic of Yugoslavia (Serbia/Montenegro) was also six months or more overdue in meeting its financial obligations. While the Federal Republic of Yugoslavia (Serbia/Montenegro) agreed to its share in the assets and liabilities of the former Socialist Federal Republic of Yugoslavia in the IMF, it had not succeeded to membership in the IMF as of April 30, 1999, and, consequently, it is not a participant in the SDR Department.

Charges due from members and the Federal Republic of Yugoslavia (Serbia/Montenegro) that are six months or more overdue to the SDR Department were as follows:

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The amount and duration of arrears were as follows:

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The rate of interest on the SDR is determined by reference to a combined market interest rate, which is a weighted average of yields or rates on short-term instruments in the capital markets of France, Germany, Japan, the United Kingdom, and the United States. The combined market interest rate used to determine the SDR interest rate is calculated each Friday, using the yields or rates of that day. The SDR interest rate, which is set equal to the combined market interest rate, enters into effect on the following Monday and applies through the following Sunday.

The expenses of conducting the business of the SDR Department are paid by the IMF from the General Resources Account, which is reimbursed in SDRs by the SDR Department at the end of each financial year. For this purpose, the SDR Department levies an assessment on all participants in proportion to their net cumulative allocation.

Enhanced Structural Adjustment Facility Trust

Balance Sheet for the Years Ended April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes and schedules are an integral part of the financial statements.
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Income Statement for the Years Ended April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes and schedules are an integral part of the financial statements.
Statement of Changes in Resources for the Years Ended April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes and schedules are an integral part of the financial statements.
Notes to the Financial Statements as at April 30, 1999 and 1998
Purpose

The Enhanced Structural Adjustment Facility Trust (“the Trust”), for which the IMF is Trustee, was established in December 1987 and was extended and enlarged in February 1994 to provide loans on concessional terms to qualifying low-income developing country members. The resources of the Trust are separate from the assets of all other accounts of, or administered by, the IMF and may not be used to discharge liabilities or to meet losses incurred in the administration of other accounts.

The operations of the Trust are conducted through a Loan Account, a Reserve Account, and a Subsidy Account.

Loan Account

The resources of the Loan Account consist of the proceeds from borrowing, repayments of principal, and interest payments on loans extended by the Trust. Resources of the Loan Account are committed to qualifying members for a three-year period, upon approval by the Trustee, in support of the member’s macroeconomic and structural adjustment programs. Interest on the outstanding loan balances is currently set at the rate of ½ o f 1 percent a year. At April 30, 1999, loans totaling SDR 5,717.9 million were outstanding (SDR 5,269.6 million at April 30, 1998). Members’ outstanding loans are presented in Schedule 1.

Reserve Account

The Reserve Account consists of amounts transferred by the IMF from the Special Disbursement Account and net earnings from investment of resources held in the Reserve Account and in the Loan Account.

The Resources held in the Reserve Account are to be used by the Trustee, in the event that amounts payable from borrowers’ principal repayments and interest together with the authorized interest subsidy are insufficient to repay loan principal and interest on borrowing of the Loan Account.

Subsidy Account

The resources held in the Subsidy Account consist of donations to the Trust, including transfers of net earnings from ESAF Administered Accounts, SDR 400 million transferred by the IMF from the Special Disbursement Account, net earnings on loans made to the Trust for the Subsidy Account, and the net earnings from investment of Subsidy Account resources.

The resources available in the Subsidy Account are drawn by the Trustee to pay the difference, with respect to each interest period, between the interest due from the borrowers under the Trust and the interest due on Loan Account loans.

1. Accounting Practices

The accounts are expressed in terms of the SDR. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of a basket of currencies of five members. As of January 1, 1999, the deutsche mark and the French franc were substituted by the euro in the SDR valuation basket. The currencies in the basket and their amounts are as follows:

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Members are not obligated to maintain the SDR value of their currencies held in the accounts of the Trust.

The accounts of the Trust are maintained on the accrual basis; accordingly, income is recognized as it is earned, and expenses are recorded as they are incurred. Further discussions of specific accounting principles and disclosure practices have been included in other notes.

2. Investments

The resources of the Trust are invested pending their use. Investments are denominated in SDRs or in currency and are carried at cost, which does not exceed net realizable value. Pending their investment, resources may be temporarily held in currency, which also may give rise to valuation gains and losses.

3. Contributions

The Trustee accepts contributions for the Subsidy Account on such terms and conditions as agreed between the Trust and the contributor. At April 30, 1999, cumulative contributions received, including transfers from the Special Disbursement Account, amounted to SDR 2,049.6 million (SDR 1,866.7 million at April 30, 1998). Cumulative contributions are listed in Schedule 2.

4. Borrowing

The Trust borrows for the Loan Account and for the Subsidy Account on such terms and conditions as agreed between the Trust and the lenders.

Schedules 3 and 4 present lenders’ borrowing agreements and scheduled repayments of outstanding borrowing, respectively. The following summarizes the borrowing agreements concluded as of April 30, 1999:

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The Trustee has agreed to hold and invest, on behalf of a lender, principal repayments of Trust borrowing in a suspense account within the Loan Account. Principal repayments will be accumulated until the final maturity of the borrowing, when the full proceeds are to be transferred to the lender. Amounts deposited in this account are invested by the Trustee, and payments of interest to the lender are to be made exclusively from the earnings on the amounts invested.

5. Commitments Under Loan Arrangements

At April 30, 1999, undrawn balances under 35 loan arrangements amounted to SDR 2,156.1 million (SDR 2,164.5 million under 33 arrangements at April 30, 1998). Loan arrangements are listed in Schedule 5. Scheduled repayments of outstanding loans receivable are shown in Schedule 6.

6. Transfers Through the Special Disbursement Account

The expenses of conducting the business of the Trust are paid by the General Resources Account of the IMF and reimbursed through the Special Disbursement Account; corresponding transfers are made from the Reserve Account to the Special Disbursement Account when and to the extent needed. For financial years 1999 and 1998, the Executive Board decided to forgo such reimbursement and to transfer an equivalent amount from the Reserve Account, through the Special Disbursement Account, to the ESAF-HIPC Trust. The amounts transferred for financial years 1999 and 1998 were SDR 41.1 million and SDR 40.7 million, respectively.

Resources of up to SDR 250 million may be transferred, as needed, from the Reserve Account through the Special Disbursement Account to the ESAF-HIPC Trust to be used to provide grant or loans to eligible members under the HIPC initiative. At April 30, 1999, SDR 20.3 million had been transferred for this purpose (SDR 20.3 million at April 30,1998).

Schedule 1 Schedule of Outstanding Loans as at April 30, 1999

(In thousands of SDRs)

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Since Structural Adjustment Facility (SAF) loans have been disbursed in connection with ESAF arrangements, the above list includes these loans, as well as loans disbursed to members under SAF arrangements. These loans are held by the Special Disbursement Account, and repayments of all SAF loans are transferred to the ESAF Reserve Account when received.

Schedule 2 Contributions to and Resources of the Subsidy Account as at April 30, 1999

(In thousands of SDRs)

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In addition to direct contributions, a number of members also make loans available to the Loan Account on concessional terms. See Schedule 3.

Schedule 3 Schedule of Borrowing Agreements as at April 30, 1999

(In thousands of SDRs)

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The loans under this agreement are made at market-related rates of interest fixed at the time the loan was disbursed.

The agreement with France made before the enlargement of ESAF (SDR 800 million) provides that the interest rate shall be 0.5 percent on the first SDR 700 million drawn, and for variable, market-related rates of interest thereafter. The agreement with France made for the enlargement of the ESAF (SDR 750 million) provides that the interest rate shall be 0.5 percent until the cumulative implicit interest subsidy reaches SDR 250 million, and at variable, market-related rates of interest thereafter.

The loans under these agreements are made at variable, market-related rates of interest.

The agreement expired with an undrawn balance of SDR 3.6 million.

The agreement with the OPEC Fund for International Development is for an amount of $50 million.

This amount represents principal repayments held and invested on behalf of a lender.

In accordance with the agreement with Thailand, outstanding borrowings were repaid at the the request of Thailand on January 30, 1998.

The interest rate payable on the borrowing from Uruguay is equal to the rate on SDR-denominated deposits less 2.6 percent a year.

Schedule 4 Schedule of Repayments of Borrowing as at April 30, 1999

(In thousands of SDRs)

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Repayment periods are as provided in the borrowing agreements between the Trustee and lenders, including maximum periods for those repayments that are to be held in suspense, as agreed with the lender. See Note 4.

Schedule 5 Status of Loan Arrangements1 as at April 30, 1999

(In thousands of SDRs)

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The Saudi Fund for Development may also provide resources to support arrangements under the ESAF through loans to qualifying members in association with loans under the ESAF. As at April 30, 1999, SDR 49.5 million of such associated loans had been disbursed.

Schedule 6 Schedule of Repayments of Loans Receivable as at April 30, 1999

(In thousands of SDRs)

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Enhanced Structural Adjustment Facility Administered Accounts

Balance Sheets as at April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
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Income Statements for the Years Ended April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
Statements of Changes in Resources for the Years Ended April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
Saudi Fund for Development Special Account Statement of Receipts and Uses of Resources as at April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements as at April 30, 1999 and 1998
Purpose

At the request of certain member countries, the IMF established administered accounts for the benefit of the Subsidy Account of the Enhanced Structural Adjustment Facility Trust (the ESAF Trust). The administered accounts comprise deposits made by contributors. The difference between interest earned by the administered accounts and the interest payable on deposits is transferred to the Subsidy Account of the ESAF Trust.

The Saudi Fund for Development (SFD) Special Account was established at the request of the SFD to provide supplementary finance in association with loans under the Enhanced Structural Adjustment Facility (ESAF). The IMF acts as agent of the SFD. Disbursements from the SFD Special Account are made simultaneously with ESAF disbursements. Payments of interest and principal due to the SFD under associated loans are to be transferred to the SFD.

The resources of each administered account are separate from the assets of all other accounts of, or administered by, the IMF and may not be used to discharge liabilities or to meet losses incurred in the administration of other accounts.

1. Accounting Practices

The accounts are expressed in terms of the SDR. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of a basket of currencies of five members. As of January 1, 1999, the deutsche mark and the French franc were substituted by the euro in the SDR valuation basket. The currencies in the basket and their amounts are as follows:

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The administered accounts are maintained on the accrual basis; accordingly, income is recognized as it is earned, and expenses are recorded as they are incurred. Further discussions of specific accounting principles and disclosure practices have been included in other notes.

2. Investments

The resources of each administered account are invested in SDR-denominated deposits and valued at cost, which approximates market value.

3. Deposits

The Administered Account Austria was established on December 27, 1988 for the administration of resources deposited in the account by the Austrian National Bank. Two deposits (one of SDR 60.0 million made on December 30, 1988, and one of SDR 50.0 million made on August 10, 1995) are to be repaid in ten equal semiannual installments beginning five and a half years after the date of each deposit and ending at the end of the tenth year after the date of each deposit. The deposits bear interest at a rate of ½ of 1 percent a year. The first deposit from Austria had been repaid in full as of April 30, 1999.

The Administered Account Belgium was established on July 27, 1988 for the administration of resources deposited in the account by the National Bank of Belgium. Four deposits (SDR 30.0 million made on July 29, 1988; SDR 35.0 million made on December 30, 1988; SDR 35.0 million made on June 30, 1989; and SDR 80.0 million made on April 29, 1994) have an initial maturity of six months and are renewable by the IMF, on the same basis. The final maturity of each deposit, including renewals, will be ten years from the initial date of the individual deposits. The deposits bear interest at a rate of ½ of 1 percent a year. In accordance with an addendum to the account, effective as of July 24, 1998, the maturities of the first three deposits will be extended by the National Bank of Belgium, for further periods of six months, provided that the total maturity period of each deposit does not exceed five years. The deposits shall be invested by the IMF, and the IMF shall pay the National Bank of Belgium interest on each deposit at an annual rate of ½ of 1 percent. The difference between the interest paid to the National Bank of Belgium and the interest earned on the deposits (net of any cost to the IMF) shall be retained in the account and invested, pending further disposition by the National Bank of Belgium.

The Administered Account Botswana was established on July 1, 1994 for the administration of resources deposited in the account by the Bank of Botswana. The deposit, totaling SDR 6.9 million, is to be repaid in one installment ten years after the date of deposit. The deposit bears interest at a rate of 2 percent a year.

The Administered Account Chile was established on October 4, 1994 for the administration of resources deposited in the account by the Banco Central de Chile. The deposit, totaling SDR 15.0 million, is to be repaid in one installment ten years after the date of deposit. The deposit bears interest at a rate of ½ of 1 percent a year.

The Administered Account Greece was established on November 30, 1988 for the administration of resources deposited in the account by the Bank of Greece. Two deposits of SDR 35.0 million each (December 15, 1988 and April 29, 1994), are to be repaid in ten equal semiannual installments beginning five and a half years after the date of deposit and will be completed at the end of the tenth year after the date of the deposits. The deposits bear interest at a rate of ½ of 1 percent a year. The first deposit from Greece had been repaid in full as of April 30, 1999.

The Administered Account Indonesia was established on June 30, 1994 for the administration of resources deposited in the account by the Bank Indonesia. The deposit, totaling SDR 25.0 million, is to be repaid in one installment ten years after the date the deposit was made. The interest payable on the deposit is equivalent to that obtained for the investment of the deposit less 2 percent a year.

The Administered Account Islamic Republic of Iran was established on June 6, 1994 for the administration of resources deposited in the account by the Central Bank of the Islamic Republic of Iran (CBIRI). The CBIRI has made five annual deposits, each of SDR 1.0 million. All of the deposits will be repaid at the end of ten years after the date of the first deposit. Each deposit bears interest at a rate of ½ of 1 percent a year.

The Administered Account Portugal was established on May 16, 1994 for the administration of resources deposited in the account by the Banco de Portugal (BdP). The BdP has agreed to make six annual deposits, each of SDR 2.2 million. Each deposit is to be repaid in five equal annual installments beginning six years after the date of the deposit and will be completed at the end of the tenth year after the date of the deposit. Each deposit bears interest at a rate of ½ of 1 percent a year.

4. Associated Loans

The SFD has provided resources to support arrangements under the ESAF through loans in association with loans under the ESAF. Funds become available under an associated loan after a bilateral agreement between the SFD and the recipient country has been effected. Amounts denominated in SDRs, for disbursement to a recipient country under an associated loan, are placed by the SFD in the Special Account for disbursement by the IMF simultaneously with disbursements under an ESAF arrangement. These loans are repayable in ten equal semiannual installments commencing not later than the end of the first six months of the sixth year, and are to be completed at the end of the tenth year after the date of disbursement. Interest on the outstanding balance is currently set at a rate of ½ of 1 percent a year.

ESAF-HIPC Trust

Balance Sheet as at April 30, 1999 and 1998

(In thousands of SDRs

(Note 1)

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The accompanying notes are an integral part of the financial statements.
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Income Statement and Changes in Resources for the Years Ended April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements as at April 30, 1999 and 1998
Purpose

The Trust for Special ESAF Operations for the Heavily Indebted Poor Countries and for Interim ESAF Subsidy Operations (“the ESAF-HIPC Trust”), for which the IMF is Trustee, was established on February 4, 1997 to provide balance of payments assistance to low-income developing members by making grants and loans to eligible members for the purpose of reducing their external debt burden and for interim ESAF subsidy purposes. The resources of the ESAFHIPC Trust are separate from the assets of all other accounts of, or administered by, the IMF and may not be used to discharge liabilities or to meet losses incurred in the administration of other accounts.

The operations of the ESAF-HIPC Trust are conducted through the ESAF-HIPC Trust Account and the Umbrella Account for HIPC Operations.

ESAF-HIPC Trust Account

The resources of the ESAF-HIPC Trust Account consist of grant contributions, deposits, loans, and other types of investments made by contributors; amounts transferred by the IMF from the Special Disbursement Account and the General Resources Account; and net earnings from investment of resources held in the ESAF-HIPC Trust Account.

The resources held in the ESAF-HIPC Trust Account are to be used by the Trustee to make grants or loans to eligible members that qualify for assistance under the HIPC Initiative and for subsidizing the interest rate on interim ESAF operations to ESAF-eligible members.

Umbrella Account for HIPC Operations

The Umbrella Account for HIPC Operations (“the Umbrella Account”) receives and administers the proceeds of grants or loans made to eligible members that qualify for assistance under the terms of the ESAF-HIPC Trust. Within the Umbrella Account, resources received are administered through the establishment of subaccounts for each eligible member upon the approval of a disbursement under the ESAF-HIPC Trust.

The resources of a subaccount of the Umbrella Account consist of (i) amounts disbursed from the ESAF-HIPC Trust Account as grants or loans for the benefit of a member, and (ii) net earnings from investment of the resources held in the subaccount.

The resources held in a subaccount of the Umbrella Account are to be used to meet the member’s debt obligations to the IMF in accordance with the schedule agreed upon by the Trustee and the member for the use of the proceeds of the ESAF-HIPC disbursements.

1. Accounting Practices

The accounts are expressed in terms of the SDR. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of a basket of currencies of five members. As of January 1, 1999, the deutsche mark and the French franc were substituted by the euro in the SDR valuation basket. The currencies in the basket and their amounts are as follows:

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Members are not obligated to maintain the SDR value of their currencies held in the accounts of the ESAF-HIPC Trust.

The accounts of the ESAF-HIPC Trust are maintained on the accrual basis; accordingly, income is recognized as it is earned, and expenses are recorded as they are incurred. Further discussions of specific accounting principles and disclosure practices have been included in other notes.

2. Investments

The resources of the ESAF-HIPC Trust are invested pending their use. Investments are denominated in SDRs or in currency and are carried at cost, which does not exceed net realizable value. Pending their investment, resources may be temporarily held in currency, which also may give rise to valuation gains and losses.

3. Contributions and Transfers
ESAF-HIPC Trust Account

The Trustee accepts contributions of resources on such terms and conditions as agreed between the ESAF-HIPC Trust and the contributor. At April 30, 1999, six contributions amounting to SDR 53.3 million had been received (four contributions amounting to SDR 34.2 million at April 30, 1998): SDR 2.3 million from Finland; SDR 1.1 million from Nigeria; SDR 27.2 million and SDR 19.1 million, respectively, from Japan; SDR 3.6 million from the Netherlands; and SDR 20,000 from Belize. The contribution from the Netherlands is earmarked for interim ESAF subsidy operations.

Total transfers from the ESAF Trust Reserve Account through the Special Disbursement Account amounted to SDR 102.1 million at April 30, 1999 (SDR 61.0 million at April 30, 1998). At April 30, 1999, there was a transfer due from the General Resources Account amounting to SDR 13.3 million (no transfers had been made at April 30, 1998).

Umbrella Account

The Umbrella Account receives the proceeds of grants or loans disbursed by the ESAF-HIPC Trust on behalf of an eligible member. Two grants amounting to SDR 51.5 million and SDR 21.2 million had been received on behalf of Uganda and Bolivia, respectively, at April 30, 1999 (one grant of SDR 51.5 million at April 30, 1998).

4. Deposits
ESAF-HIPC Trust Account

The Trustee accepts deposits, loans, and other types of investments made by contributors to the ESAF-HIPC Trust on such terms and conditions as agreed between the ESAFHIPC Trust and the Contributor. At April 30, 1999, five deposits amounting to SDR 41.6 million had been received by the ESAF-HIPC Trust Account (two deposits amounting to SDR 15.6 million at April 30, 1998). The first deposit of SDR 14.6 million bears interest at a rate of 2 percent a year and is to be repaid in one installment five years after the date of deposit, made on April 30, 1997. Two deposits of SDR 1 million each, which bear interest at a rate of ½ of 1 percent a year and are to be repaid in one installment ten years after the date of the initial deposit, were made on May 30, 1997 and May 30, 1998, respectively. The fourth and fifth deposits of SDR 15 million and SDR 10 million, respectively, bear interest at a rate of 2 percent a year and are to be repaid in one installment ten years after the date of the deposit, made on June 29, 1998 and November 20, 1998, respectively.

5. Disbursements
ESAF-HIPC Trust Account

The proceeds of grants or loans made on behalf of an eligible member will be paid in a single disbursement to the Umbrella Account for the benefit of that member. Resources needed for interim ESAF subsidy operations will be drawn by the Trustee as needed. At April 30, 1999, two disbursements of SDR 51.5 million and SDR 21.2 million had been made to the Umbrella Account for the benefit of Uganda and Bolivia, respectively (one disbursement of SDR 51.5 million at April 30, 1998).

Umbrella Account

The resources of a subaccount within the Umbrella Account, including any income from investments, shall be used to meet the member’s debt-service payments on its existing debt to the IMF as they fall due in accordance with the schedule agreed upon by the Trustee and the member. At April 30, 1999, disbursements of SDR 9.8 million and SDR 6.8 million had been made from the subaccounts of Uganda and Bolivia, respectively, in accordance with the agreed schedules (no disbursements had been made at April 30, 1998).

Administered Accounts Established at the Request of Members

Balance Sheets as at April 30, 1999 and 1998

(Note 1)

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The accompanying notes are an integral part of the financial statements.
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Income Statements and Changes in Resources for the Years Ended April 30, 1999 and 1998

(Note 1)

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The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements as at April 30, 1999 and 1998
Purpose

At the request of members, the IMF has established special purpose accounts to administer contributed resources and to perform financial and technical services consistent with the purposes of the IMF. The assets of each account and each subaccount are separate from the assets of all other accounts of, or administered by, the IMF and are not to be used to discharge liabilities or to meet losses incurred in the administration of other accounts.

Administered Account Japan

At the request of Japan, the IMF established an account on March 3, 1989 to administer resources, made available by Japan or other countries with Japan’s concurrence, that are to be used to assist certain members with overdue obligations to the IMF. The resources of the account are to be disbursed in amounts specified by Japan and to members designated by Japan. At April 30, 1999 and 1998, cumulative resources received amounted to $135.2 million, of which $72.5 million had been disbursed.

Administered Account for Selected Fund Activities—Japan

At the request of Japan, the IMF established the Administered Technical Assistance Account—Japan on March 19, 1990 to administer resources contributed by Japan to finance technical assistance to member countries. On July 21, 1997 the account was renamed the Administered Account for Selected Fund Activities—Japan and amended to include the administration of resources contributed by Japan in support of the IMF’s Regional Office for Asia and the Pacific (OAP). The resources of the account designated for technical assistance activities are used with the approval of Japan and include the provision of scholarships; the resources designated for the OAP are used as agreed between Japan and the IMF for certain activities of the IMF with respect to Asia and the Pacific through the OAP. Disbursements can also be made from the account to the General Resources Account to reimburse the IMF for qualifying technical assistance projects and OAP expenses. At April 30, 1999, cumulative contributions received by the account designated for technical assistance amounted to $122.3 million, of which $101.4 million had been disbursed ($98.2 million and $81.3 million, respectively, at April 30, 1998).

Cumulative contributions include $5.9 million earmarked for scholarships, of which $5.6 million had been disbursed at April 30, 1999 ($4.7 million and $4.4 million, respectively, at April 30, 1998). At April 30, 1999, cumulative contributions designated for the OAP amounted to $2.2 million, of which $2.0 million had been disbursed ($1.2 million and $1.0 million, respectively, at April 30, 1998).

Framework Administered Account for Technical Assistance Activities

The Framework Administered Account for Technical Assistance Activities (“the Framework Account”) was established by the IMF on April 3, 1995 to receive and administer contributed resources that are to be used to finance technical assistance consistent with the purposes of the IMF. The financing of technical assistance activities is implemented through the establishment and operation of subaccounts within the Framework Account. The establishment of a subaccount requires the approval of the Executive Board.

Resources are to be used in accordance with the written understandings between the contributor and the Managing Director. Disbursements can also be made from the Framework Account to the General Resources Account to reimburse the IMF for its costs incurred on behalf of technical assistance activities financed by resources from the Framework Account. At April 30, 1999, cumulative contributions received by the account amounted to $11.8 million, of which $7.5 million had been disbursed ($7.1 million and $4.0 million, respectively, at April 30, 1998).

Subaccount for Japan Advanced Scholarship Program

At the request of Japan, this subaccount was established on June 6, 1995 to finance the cost of studies and training of nationals of member countries in macroeconomics and related subjects at selected universities and institutions. The scholarship program focuses primarily on the training of nationals of Asian member countries, including Japan. At April 30, 1999, cumulative contributions received amounted to $4.3 million, of which $2.7 million had been disbursed ($2.9 million and $1.3 million, respectively, at April 30, 1998).

Rwanda-Macroeconomic Management Capacity Subaccount

At the request of Rwanda, this subaccount was established on December 20, 1995 to finance technical assistance to rehabilitate and strengthen Rwanda’s macroeconomic management capacity. At April 30, 1999, cumulative contributions received amounted to $1.5 million, of which $1.5 million had been disbursed ($1.5 million and $1.3 million, respectively, at April 30, 1998).

Australia-IMF Scholarship Program for Asia Subaccount

At the request of Australia, this subaccount was established on June 5, 1996 to finance the cost of studies and training of government and central bank officials in macroeconomic management so as to enable them to contribute to their countries’ achievement of sustainable economic growth and development. The program focuses primarily on the training of nationals of Asian countries. At April 30, 1999, cumulative contributions received amounted to $0.7 million, of which $0.5 million had been disbursed ($0.5 million and $0.3 million, respectively, at April 30, 1998).

Switzerland Technical Assistance Subaccount

At the request of Switzerland, this subaccount was established on August 27, 1996 to finance the costs of technical assistance activities of the IMF that consist of policy advice and training in macroeconomic management. At April 30, 1999, cumulative contributions received amounted to $4.6 million, of which $2.3 million had been disbursed ($2.0 million and $0.9 million, respectively, at April 30, 1998).

French Technical Assistance Subaccount

At the request of France, this subaccount was established on September 30, 1996 to cofinance the costs of training in economic fields for nationals of certain member countries. At April 30, 1999, cumulative contributions received amounted to $0.26 million, of which $0.22 million had been disbursed ($0.26 million and $0.13 million, respectively, at April 30, 1998).

Denmark Technical Assistance Subaccount

At the request of Denmark, this subaccount was established on August 25, 1998 to finance the costs of technical assistance activities of the IMF that consist of advising on policy and administrative reforms in the fiscal, monetary, and related statistical fields. At April 30, 1999, cumulative contributions received amounted to $0.47 million, of which $0.19 million had been disbursed.

Administered Account for Rwanda

At the request of the Netherlands, Sweden, and the United States (“the donor countries”), the IMF established an account on October 27, 1995 to administer resources contributed by the donor countries to provide grants to Rwanda. These grants are to be used for reimbursing the service charge and reducing, to the equivalent of a rate of ½ of 1 percent a year, the rate of the quarterly charges payable by Rwanda on its use of the IMF’s financial resources under the Compensatory and Contingency Financing Facility (CCFF). At April 30, 1999, cumulative contributions received by the account amounted to SDR 1.54 million, of which SDR 1.19 million had been disbursed (SDR 1.54 million and SDR 0.86 million, respectively, at April 30, 1998).

1. Accounting Practices

The accounts are maintained on the accrual basis; accordingly, income is recognized as it is earned, and expenses are recorded as they are incurred. Further discussions of specific accounting principles and disclosure practices have been included in other notes.

Administered Account Japan, Administered Account for Selected Fund Activities—Japan, and Framework Administered Account for Technical Assistance Activities

The accounts are expressed in U.S. dollars. All transactions and operations of these accounts, including the transfers to and from the accounts, are denominated in U.S. dollars, except for transactions and operations in respect of the OAP, which are denominated in Japanese yen, or in other currencies as agreed between Japan and the IMF. Contributions denominated in other currencies are converted into U.S. dollars upon receipt of the funds.

Administered Account for Rwanda

The accounts are expressed in terms of the SDR. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of a basket of currencies of five members. As of January 1, 1999, the deutsche mark and the French franc were substituted by the euro in the SDR valuation basket. The currencies in the basket and their amounts are as follows:

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Transfers to and disbursements from the accounts are made in U.S. dollars or in other freely usable currencies. Transactions and operations of the accounts shall be denominated in SDRs. Contributions denominated in other currencies are converted into SDRs upon receipt of the funds.

2. Investments

The assets of the accounts are invested pending their disbursement and are valued at cost, which approximates market value. Interest received on these assets varies and is market related.

3. Accounts Termination
Administered Account Japan

The account can be terminated by the IMF or by Japan. Any remaining resources in the account at termination are to be returned promptly to Japan.

Administered Account for Selected Fund Activities—Japan

The account can be terminated by the IMF or by Japan. Any resources that may remain in the account at termination, net of accrued liabilities under technical assistance projects or in respect of the OAP, are to be returned promptly to Japan.

Framework Administered Account for Technical Assistance Activities

The Framework Account or any subaccount thereof may be terminated by the IMF at any time. The termination of the Framework Account shall terminate each subaccount thereof. A subaccount may also be terminated by the contributor of the resources to the subaccount. Termination shall be effective on the date that the IMF or the contributor, as the case may be, receives notice of termination. Any balances, net of the continuing liabilities and commitments under the activities financed, that may remain in a subaccount upon its termination are to be returned promptly to the contributor.

Administered Account for Rwanda

The account can be terminated at any time by the IMF or by unanimous agreement of the donor countries. The account shall, in any case, be terminated by the IMF when Rwanda’s financial obligations to the IMF under the CCFF have been fully discharged or when the resources of the account have been exhausted, whichever is earlier. Any balance in the account at termination shall be transferred promptly to the donor countries, in proportion to their contribution, or to Rwanda, if so instructed.

Trust Fund
Balance Sheet as at April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
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Income Statement for the Years Ended April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
Statement of Changes in Resources for the Years Ended April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements as at April 30, 1999 and 1998
Purpose

The Trust Fund, for which the IMF is Trustee, was established in 1976 to provide balance of payments assistance on concessional terms to eligible members that qualify for assistance.

In 1980, the IMF, as Trustee, decided that, upon the completion of the final loan disbursements, the Trust Fund would be terminated as of April 30, 1981, and after that date, the activities of the Trust Fund have been confined to the conclusion of its affairs. The resources of the Trust Fund are separate from the assets of all other accounts of, or administered by, the IMF and cannot be used to discharge liabilities or to meet losses incurred in the administration of other IMF accounts.

I. Accounting Practices

The accounts are expressed in terms of the SDR. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of a basket of currencies of five members. As of January 1, 1999, the deutsche mark and the French franc were substituted by the euro in the SDR valuation basket. The currencies in the basket and their amounts are as follows:

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The accounts are maintained on the accrual basis; accordingly, income is recognized as it is earned, and expenses are recorded as they are incurred, except that interest income from members that are overdue in settling their obligations to the Trust Fund by six months or more is deferred and is recognized as income only when paid, unless the member has remained current in settling charges when due (see Note 3). Further discussions of specific accounting principles and disclosure practices have been included in other notes. Following the termination of the Trust Fund as of April 30, 1981, residual administrative costs have been absorbed by the General Resources Account of the IMF.

2. Loans

Loans were made from the Trust Fund to those eligible members that qualified for assistance in accordance with the provisions of the Trust Fund instrument. The final Trust Fund loan installment was due on March 31, 1991. Interest on the outstanding loan balances is charged at the rate of ½ of 1 percent a year, although special charges have been levied on overdue payments of interest and principal since February 1986. Beginning May 1, 1993, special charges on overdue obligations to the Trust Fund have been suspended for members who are more than six months overdue.

3. Overdue Obligations

At April 30, 1999 and 1998, three members with obligations to the Trust Fund were six months or more overdue in discharging their obligations to the Trust Fund. The recognition of interest income on the loans outstanding to these members and of special charges due from them is being deferred. At April 30, 1999, total deferred income amounted to SDR 26.4 million (SDR 26.0 million at April 30, 1998). Overdue loan repayments and interest and special charges due from these members were as follows:

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The type and duration of the arrears of these members at April 30, 1999 were as follows:

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4. Transfer of Resources

The resources of the Trust Fund held on April 30, 1981 or received thereafter have been used to pay interest and principal when due on loan obligations and to make transfers to the Special Disbursement Account.

Supplementary Financing Facility Subsidy Account
Balance Sheet as at April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
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Income Statement and Changes in Resources for the Years Ended April 30, 1999 and 1998

(In thousands of SDRs)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements as at April 30, 1999 and 1998
Purpose

The Supplementary Financing Facility Subsidy Account ("the Subsidy Account"), which is administered by the IMF, was established in December 1980 to assist low-income developing country members to meet the cost of using resources made available through the IMF’s Supplementary Financing Facility and under the policy on exceptional use. All repurchases due under these policies were scheduled for completion by January 31, 1991, and the final subsidy payments were approved in July 1991. However, two members (Liberia and Sudan), overdue in the payment of charges, remain ineligible to receive previously approved subsidy payments until their overdue charges are settled. Accordingly, the account remains in operation and has retained amounts for payment to these members after the overdue charges are paid.

The resources of the Subsidy Account are separate from the assets of all other accounts of, or administered by, the IMF and cannot be used to discharge liabilities or to meet losses incurred in the administration of other IMF accounts.

1. Accounting Practices

The accounts are expressed in terms of the SDR. The value of the SDR is determined by the IMF each day by summing the values in U.S. dollars, based on market exchange rates, of a basket of currencies of five members. As of January 1, 1999, the deutsche mark and the French franc were substituted by the euro in the SDR valuation basket. The currencies in the basket and their amounts are as follows:

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The accounts are maintained on the accrual basis; accordingly, income is recognized as it is earned, and expenses are recorded as they are incurred. Further discussions of specific accounting principles and disclosure practices have been included in other notes.

2. Deposits

The assets of the Subsidy Account, pending their disbursement, are held in the form of interest-earning time deposits denominated in SDRs.

3. Transfer of Resources

Resources in excess of the remaining subsidy payments are to be transferred to the Special Disbursement Account. At April 30, 1999 and 1998, subsidy payments totaling SDR 2.2 million had not been made to Liberia and Sudan and were being held pending the payment of overdue charges by these members.

Retired Staff Benefits Investment Account
Balance Sheet as at April 30, 1999 and 1998

(In thousands of U.S. dollars)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
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Income Statement and Changes in Resources for the Years Ended April 30, 1999 and 1998

(In thousands of U.S. dollars)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements as at April 30, 1999 and 1998
Purpose

The Retired Staff Benefits Investment Account ("the RSBIA") was established to hold, administer, and invest resources contributed by the IMF for meeting postretirement medical and life insurance benefits to eligible retirees of the IMF and other beneficiaries. The RSBIA accumulates resources to finance benefits to current and future retirees.

The assets of the RSBIA consist of the IMF’s contributions and the income earned thereon. Assets are within the sole ownership of the IMF and are to be used to meet the claims of retirees and the administrative costs of the RSBIA. Contributions are made periodically from the General Resources Account to the RSBIA, taking into consideration the actuarial valuation of the IMF’s cumulative cost of these benefits. Cumulative contributions received by the RSBIA amounted to $150 million at April 30, 1999 ($140 million at April 30, 1998).

The portion of the cumulative past-service cost that has been charged to income in the General Resources Account is fully funded.

The assets of the RSBIA are kept separate from the assets of all other accounts of, or administered by, the IMF and are not to be used to discharge liabilities or to meet losses incurred in the administration of other accounts.

1. Accounting Practices

The RSBIA is expressed in U.S. dollars. All transactions and operations of the RSBIA, including the transfers to and by the RSBIA, are denominated in U.S. dollars. The cost of transactions in other currencies—for example, the payment of future benefits—will be paid by the RSBIA.

The RSBIA is maintained on the accrual basis; accordingly, income is recognized as it is earned, and expenses are recorded as they are incurred. Further discussions of specific accounting principles and disclosure practices have been included in other notes.

2. Investments

Resources placed to the RSBIA have been invested by the IMF. In accordance with its investment policy, the RSBIA invests in equity securities, debt securities, short-term investments, and real estate. Investments in securities listed on stock exchanges are valued at the last reported market sales price on the last business day of the accounting period. Over-the-counter securities are valued at their bid price on the last business day of the accounting period. The valuation of purchases and sales is made on the trade date basis.

The net gain in the current value of investments represents the gains and losses realized during the year from the sale of investments, the unrealized appreciation and depreciation of the market value of investments, and, for investments denominated in currencies other than the U.S. dollar, valuation differences arising from exchange rate changes of other currencies against the dollar market value.

A summary of the RSBIA’s investments at market values is as follows:

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In addition to these investments, the RSBIA held commitments in fixed-income futures contracts to minimize interest rate risk. At April 30, 1999, the notional value of these derivatives amounted to $9.6 million and the unrealized gain was less than $0.1 million ($11.1 million and less than $0.1 million at April 30, 1998).

3. Actuarial Valuation

Eligible retirees can elect to continue their life insurance coverage and medical coverage. The cost of these benefits is actuarially determined, based on the data in effect at the beginning of the year. The IMF’s actuarially determined cost is estimated at $198 million at April 30, 1999 ($183 million at April 30, 1998). Each year the IMF amortizes a portion of the past-service cost and recognizes the increase in the liability during the year as an expense in the General Resources Account. These amounts, less the return on investments, are transferred to the RSBIA to be held and invested pending their use by the IMF. During the year ended April 30, 1999, an amount of $10.2 million has been transferred to the RSBIA ($12.6 million during the year ended April 30, 1998).

It is expected that the RSBIA will be a net recipient of resources until the unfunded cost is fully amortized and its assets meet the cost of benefits to retirees.

4. Account Termination

The RSBIA can be terminated by the IMF at any time. After meeting any existing obligations, the resources remaining in the RSBIA are to be transferred to the General Resources Account of the IMF.

Report of the External Audit Committee to the Board of Governors of the International Monetary Fund

Washington, DC

June 24, 1999

Authority and Scope of the Audit

In accordance with Section 20(b) of the By-Laws of the International Monetary Fund, we have carried out procedures in order to form an opinion on the financial statements of the Staff Retirement Plan as at and for the year ended April 30, 1999.

These financial statements are the responsibility of the International Monetary Fund. Our responsibility is to express an opinion on these financial statements based on our procedures.

These included reviews of accounting and internal control systems and an evaluation of the extent and results of tests of the accounting records, which were substantially conducted using an outside accounting firm. In our opinion, the procedures undertaken by us, after reviewing the work performed by the outside accounting firm and the Office of Internal Audit and Inspection, constitute an audit conducted in accordance with generally accepted auditing standards.

Using these standards, we planned and performed the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the International Monetary Fund, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Audit Opinion

In our opinion, the financial statements of the Staff Retirement Plan have been prepared in accordance with generally accepted accounting principles as described in Note 1 to the financial statements, on a basis consistent with that of the preceding year, and give a true and fair view of the financial position as at April 30, 1999, and of the results of operations and transactions during the year then ended.

EXTERNAL AUDIT COMMITTEE

/s/ José Nicolas Agudin, Chairman (Argentina)

/s/ Penny Jones (United Kingdom)

/s/ K.N. Memani (India)

Staff Retirement Plan
Statement of Accumulated Plan Benefits and Net Assets Available for Benefits as at April 30, 1999 and 1998

(In thousands of U.S. dollars)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
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Statement of Changes in Accumulated Plan Benefits for the Years Ended April 30, 1999 and 1998

(In thousands of U.S. dollars)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets Available for Benefits for the Years Ended April 30,1999 and 1998

(In thousands of U.S. dollars)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements as at April 30, 1999 and 1998
Description of the Plan
General

The Staff Retirement Plan ("the Plan") is a defined-benefit pension plan covering nearly all staff members of the International Monetary Fund ("the Employer"). All assets and income of the Plan are the property of the Employer and are held and administered by it separately from all its other property and assets and are to be used solely for the benefit of participants, retired participants, and their beneficiaries.

Benefits

Annual Pension

Participants are entitled to an unreduced pension beginning at normal retirement age of 62. The amount of the pension is based on the number of years of service, age at retirement, and highest average gross remuneration. The provisions for determining gross remuneration are different for benefits earned before and after May 1, 1990. The gross remuneration on which pensions from the Plan are based is limited to a predetermined amount, which is periodically adjusted. Pension benefits attributable to gross remuneration in excess of this amount are paid from the Supplemental Retirement Benefit Plan ("the SRBP").

The accrual rate of benefits earned before May 1, 1990 was 2 percent of gross remuneration for each year of service, while the accrual rate of benefits earned after May 1, 1990 is 2.2 percent for the first 25 years of service and 1.8 percent for the next 10 years of service. The pensions of participants hired before May 1, 1990 are based on a prorated combination of the old and new accrual rates, using the time period of service before and after May 1, 1990.

Participants between the ages of 50 and 55 may retire with a reduced pension if their age and years of service total at least 75. Participants aged 55 and older may retire with an unreduced pension if the sum of their age and years of service equals 85 or more.

Cost of Living Adjustment

Whenever the cost of living increases during a financial year, pensions shall be augmented by a pension supplement that, expressed in percentage terms, shall be equal to the increase in the cost of living for the financial year of the country of permanent residence. If the cost of living increase for a financial year exceeds 3 percent, the Employer has the right, for good cause, to reduce prospectively the additional supplement to not less than 3 percent. Deferred pensions become subject to cost of living adjustments when the sum of a former participant’s age and years of service is at least 50.

Withdrawal Benefit

Upon withdrawal from the Plan, a participant with at least three years of eligible service may elect to receive either a withdrawal benefit or a deferred pension to commence after the participant has reached the age of 55 or age 50 if age and years of service add to at least 75. The withdrawal benefit is a percentage of the participant’s highest average gross remuneration.

Commutation

A pensioner entitled to receive a normal, early retirement, or deferred pension may elect to commute up to one-third of his or her pension, and receive a lump-sum amount at retirement in lieu of the amount of pension commuted. A participant entitled to receive a disability pension may elect to commute one-third of the early retirement pension that would otherwise have been applicable.

Disability Pensions, Death Benefits, and Survivor Benefits

The Plan also provides for disability pensions, death benefits, and benefits to surviving spouses and children of deceased participants.

Currency of Pension Payments

A participant may elect to have his or her pension paid in the currency of the country in which he or she has established permanent residence or in a combination of two currencies, the U.S. dollar and the currency of the country in which the participant is a permanent resident.

Contributions

Participants

As a condition of employment, regular staff members are required to participate in, and to contribute to, the Plan. The contribution rate is presently 7 percent of the participant’s gross remuneration. Certain other categories of staff members may elect to participate in the Plan.

Employer

The Employer meets certain administrative costs of the Plan, such as the actuary’s fees, and contributes any additional amount not provided by the contribution of participants to pay costs and expenses of the Plan not otherwise covered. In financial year 1999, the administrative costs met by the Employer were approximately $0.13 million ($0.09 million in 1998).

Plan Termination

In the event of the termination of the Plan by the Employer, the assets of the Plan shall be used to satisfy all liabilities to participants, retired participants and their beneficiaries, and all other liabilities of the Plan. Any remaining balance of the assets shall be returned to the Employer.

1. Accounting Practices

The financial statements of the Plan are prepared on the accrual basis; accordingly, income is recognized as it is earned, and expenses are recorded as they are incurred. Further discussions of specific accounting principles and disclosure practices have been included in other notes.

Accumulated Plan Benefits

The actuarial value of vested benefits is presented for two categories. For retired participants, the amount presented equals the present value of the benefits expected to be paid over the future lifetime of the pensioner and, if applicable, the surviving spouse of the pensioner. For active participants, the amount presented equals the present value of the deferred pension earned to the valuation date for a participant, or, if greater, the value of the withdrawal benefit for that participant, summed over all participants. For the purpose of determining the actuarial value of the vested benefits at the end of the Plan year, it is assumed that the Plan will continue to exist and that salaries will continue to rise, but that participants will not earn pension benefits beyond the date of the calculation.

The amount of nonvested benefits represents the total of the withdrawal benefits of all participants with less than three years of eligible service together with the estimated effect of projected salary increases on benefits expected to be paid.

In contrast to the actuarial valuation for funding purposes, the actuarial valuation used for the financial statements represents the portion of the benefit obligation that had been accumulated by April 30, 1999. It reflects only the service to that date and does not take into account the fact that the value of accumulated benefits, which are the Plan’s liabilities, is expected to increase each year. Nor does it take into account the fact that the market value of investments may fluctuate from year to year, which is significant because the Employer’s liability is the excess of the present value of accumulated benefits over the value of the assets. Accordingly, the financial statements do not measure the amount that the Employer will be required to fund in the future.

Valuation of Investments

Investments are recorded at market value. For investments in securities listed on stock exchanges, market value is the last reported market sales price on the last business day of the accounting period. For over-the-counter securities, market value is the bid price on the last business day of the accounting period. For investments in real estate, market value is the last reported adjusted appraised value. Derivatives are valued at fair value, which is equivalent to the unrealized gain or loss.

Trading Instruments

The net gain or loss in the market value of investments represents the gains and losses realized during the accounting period from the sale of investments, the unrealized appreciation and depreciation of the market value of investments, and, for investments denominated in currencies other than the U.S. dollar, valuation differences arising from exchange rate changes of other currencies against the dollar.

Risk-Management Instruments

The net fair value of forward contracts, futures contracts, swaps, and options is included in the net assets available for Plan benefits, and the changes in value of such contracts are recognized currently in the financial statements. For swap derivatives, options, and forward and futures contracts, the contract or notional amounts do not represent exposure to credit loss. The potential credit loss on these instruments, if any, approximates the unrealized gain on the open contract.

2. Actuarial Valuation and Funding Policy

Under the actuarial valuation used for funding purposes, it is assumed that the Plan will continue to exist and that active participants will continue to earn pension benefits beyond the date of the valuation until the date of withdrawal, disability, death, or retirement, but that no new participant will join the Plan (the “closed method").

Funding by the Employer is based on a valuation method, known as the “aggregate cost method,” that expresses liabilities and contribution requirements as single consolidated figures that include provision for experience gains and losses and cost of living increases. Required Employer contributions are expressed as a percentage to be applied to the gross remuneration of participants and are based on the valuation completed 12 months previously. The Employer contribution rate for the year beginning May 1, 1997 was set at 5 percent of pensionable gross remuneration. Of this amount, 0.05 percent represented a current contribution (equal to $0.15 million) and 4.95 percent represented a deferred contribution (equal to $14.7 million). For financial year 1999, the entire amount represents a deferred contribution (equal to $15.8 million). The deferred contribution represents the Employer’s prepayment of future contributions.

The actuarial assumptions used in the valuation to determine the Employer’s contributions include (1) life expectancy based on the 1984 and 1982 United Nations mortality tables for men and women, respectively; (2) withdrawal or retirement of a certain percentage of staff at each age, differentiated by gender; (3) an average rate of return on investments of 8.5 percent a year; (4) a discount rate of 8.5 percent; (5) an average inflation rate of 5 percent a year; (6) salary increase percentages that vary with age; and (7) valuation of assets using a five-year moving-average method.

The results of the April 30, 1998 and 1997 valuations were:

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3. Investments

In accordance with its investment policy, the Plan invests in equity securities, debt securities, short-term investments, real estate investments, and other financial instruments for risk management including futures, forward currency contracts, options, and swaps.

A summary of the Plan’s investments, valued at market value or fair value, is as follows:

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In addition to the above investments, the Plan holds investments in derivatives, which are aimed at optimizing investment positions, given levels of market, credit, counterparty, and foreign currency risk. These derivative investments are recorded at fair value.

At April 30, 1999 and 1998, the notional value of the Plan’s risk management investments was as follows:

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Futures Contracts

Futures contracts are commitments to either purchase or sell a financial instrument at a future date for a specified price and may be settled in cash or through delivery of the underlying financial instrument. The credit risk of futures contracts is limited because of daily cash settlement of the net change in the value of open contracts; therefore, there were no unrealized gains or losses at April 30, 1999 or 1998.

The Plan enters into financial futures contracts to protect the Plan against market price risks and to take investment positions. Contracts generally have terms of less than one year.

Forward Contracts

Forward contracts are similar in character to futures contracts. However, they have a greater degree of credit risk, depending on the counterparties involved, because daily cash settlements are not required. To manage this exposure, the Plan deals with counterparties of good credit standing and enters into master netting agreements whenever possible.

The Plan’s principal objective in entering into forward foreign currency exchange contracts is to manage foreign currency fluctuations relative to investments in its international portfolio. These contracts generally have terms of not more than three months. At April 30, 1999, the unrealized loss totaled $8.3 million ($1.7 million unrealized gain at April 30, 1998).

Swaps

Equity swaps are commitments to exchange the returns arising from one equity portfolio with the returns of another equity portfolio for a specified time period on a notional amount invested. Credit risk on an equity swap contract varies according to the terms of the agreement and the counterparties involved, which are only those of good credit standing.

The Plan’s principal objective in entering into equity swap agreements is to facilitate a market-neutral strategy in the United Kingdom. At April 30, 1999, there were no swaps outstanding. The unrealized loss on swaps at April 30, 1998 totaled $1.6 million.

Report of the External Audit Committee to the Board of Governors of the International Monetary Fund

Washington, DC

June 24, 1999

Authority and Scope of the Audit

In accordance with Section 20(b) of the By-Laws of the International Monetary Fund, we have carried out procedures in order to form an opinion on the financial statements of the Supplemental Retirement Benefit Plan as at and for the year ended April 30, 1999.

These financial statements are the responsibility of the International Monetary Fund. Our responsibility is to express an opinion on these financial statements based on our procedures.

These included reviews of accounting and internal control systems and an evaluation of the extent and results of tests of the accounting records, which were substantially conducted using an outside accounting firm. In our opinion, the procedures undertaken by us, after reviewing the work performed by the outside accounting firm and the Office of Internal Audit and Inspection, constitute an audit conducted in accordance with generally accepted auditing standards.

Using these standards, we planned and performed the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the International Monetary Fund, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Audit Opinion

In our opinion, the financial statements of the Supplemental Retirement Benefit Plan have been prepared in accordance with generally accepted accounting principles as described in Note 1 to the financial statements, on a basis consistent with that of the preceding year, and give a true and fair view of the financial position as at April 30, 1999, and of the results of operations and transactions during the year then ended.

EXTERNAL AUDIT COMMITTEE

/s/ Jose Nicolas Agudin, Chairman (Argentina)

/s/ Penny Jones (United Kingdom)

/s/ K.N. Memani (India)

Supplemental Retirement Benefit Plan
Statement of Accumulated Plan Benefits and Net Assets Available for Benefits as at April 30, 1999 and 1998

(In thousands of U.S. dollars)

(Note 1)

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The accompanying notes are an integral part of the financial statements.
article image
Statement of Changes in Accumulated Plan Benefits for the Years Ended April 30, 1999 and 1998

(In thousands of U.S. dollars)

(Note 1)

article image
The accompanying notes are an integral part of the financial statements.
Statement of Changes in Net Assets Available for Benefits for the Years Ended April 30, 1999 and 1998

(In thousands of U.S. dollars)

(Note 1)

article image
The accompanying notes are an integral part of the financial statements.
Notes to the Financial Statements as at April 30, 1999 and 1998
Description of the Plan
General

The Supplemental Retirement Benefit Plan ("the SRBP") is a defined-benefit pension plan covering all participants of the Staff Retirement Plan of the International Monetary Fund ("the Employer") and operates as an adjunct to that Plan. All assets and income of the SRBP are the property of the Employer and are held and administered by it separately from all its other property and assets and are to be used solely for the benefit of participants and retired participants and their beneficiaries.

Benefits

The Staff Retirement Plan has adopted limits to pensions payable from that Plan. The SRBP provides for the payment of any benefit that would otherwise have been payable if these limits had not been adopted.

In financial year 1999, 76 pensioners received benefits from the SRBP (56 in financial year 1998).

Contributions

Before retirement, the Employer partially prefunds the SRBP for non-U.S. citizens who plan to retire in the United States, so that the taxable income of the participant is approximately equal to, but not more than, such income that would have accrued if the entire benefit had been payable from any of the prefunded assets of the Staff Retirement Plan. The prefunded amounts are used to pay any of the benefits payable, whether for U.S. or non-U.S. staff. Should the assets of the SRBP be exhausted, benefits are paid from current contributions by the Employer.

SRBP Termination

In the event of the termination of the SRBP by the Employer, the assets of the SRBP shall be used to satisfy all liabilities to participants, retired participants and their beneficiaries, and all other liabilities of the SRBP.

1. Accounting Practices
Accumulated SRBP Benefits

The actuarial present value of accumulated SRBP benefits is stated as at the date of the most recent actuarial valuation, which was April 30, 1999. The actuarial value of benefits is presented for two categories. The vested benefits relate to retired participants, and the amount presented equals the present value of the benefits expected to be paid over the future lifetime of the pensioner and, if applicable, of the surviving spouse of the pensioner.

The nonvested benefits relate to active participants, and the amount presented equals the present value of the supplemental deferred pension earned to the valuation date for a participant, taking into account the estimated effect of projected salary increases. For the purpose of determining the actuarial value of the benefits at the end of the period, it is assumed that the SRBP will continue to exist, but that participants will not accumulate further contributory service beyond the date of the calculation.

Income Recognition

The SRBP maintains its accounts on the accrual basis; accordingly, income is recognized as it is earned, and expenses are recorded as they are incurred. Further discussions of specific accounting principles and isclosure practices have been included in other notes.

2. Actuarial Valuation and Bunding Policy

Under the actuarial valuation used for funding purposes, it is assumed that the Plan will continue to exist and that active participants will continue to earn pension benefits beyond the date of the valuation until the date of withdrawal, disability, death, or retirement, but that no new participant will join the Plan (the “closed method").

The IMF contributes on an annual basis the difference between the benefits paid and the participants’ contributions. Funding by the Employer is based on a valuation method, known as the “aggregate cost method,” that expresses liabilities and contribution requirements as single consolidated figures that include provision for experience gains and losses and cost of living increases. Required Employer contributions are expressed as a percentage to be applied to the gross remuneration of participants and are based on the valuation completed 12 months previously. The Employer contribution rate for the year beginning May 1, 1997 was set at 5 percent of pensionable gross remuneration. Of this amount, 0.05 percent represented a current contribution and 4.95 percent represented a deferred contribution (equal to $0.06 million). For financial year 1999, the entire amount represents a deferred contribution (equal to $0.12 million). The deferred contribution represents the Employer’s prepayment of future contributions.

The actuarial assumptions used in the valuation to determine the Employer’s contributions include (1) life expectancy based on the 1984 and 1982 United Nations mortality tables for men and women, respectively; (2) withdrawal or retirement of a certain percentage of staff at each age, differentiated by gender; (3) an average rate of return on investments of 8.5 percent a year; (4) a discount rate of 8.5 percent; (5) an average inflation rate of 5 percent a year; (6) salary increase percentages that vary with age; and (7) valuation of assets using a five-year moving-average method.

3. Assets

Assets are maintained in a money market deposit account.

Glossary of Abbreviations

AsDB

Asian Development Bank

BIS

Bank for International Settlements

CCFF

Compensatory and Contingency Financing Facility

CCL

Contingent Credit Lines

DSBB

Dissemination Standards Bulletin Board

EBRD

European Bank for Reconstruction and Development

ECB

European Central Bank

ecu

European currency unit

EFF

Extended Fund Facility

EMU

European Economic and Monetary Union

EMS

European Monetary System

ERM

Exchange rate mechanism (of the EMS)

ESAF

Enhanced Structural Adjustment Facility

ESCB

European System of Central Banks

EU

European Union

GAB

General Arrangements to Borrow

GDDS

General Data Dissemination System

GDP

Gross domestic product

GNP

Gross national product

GRA

General Resources Account

HIPCs

Heavily indebted poor countries

IDA

International Development Association

IFC

International Finance Corporation

ILO

International Labor Organization

LIBOR

London interbank offered rate

Mercosur

Sectoral Community for the Common Market of the South

NAB

New Arrangements to Borrow

ODA

Official development assistance

OECD

Organization for Economic Cooperation and Development

PFP

Policy framework paper

PIN

Public Information Notice

RSBIA

Retired Staff Benefits Investment Account

SAF

Structural Adjustment Facility

SCA

Special Contingent Account

SDA

Special Disbursement Account

SDDS

Special Data Dissemination Standard

SDR

Special drawing right

SFD

Saudi Fund for Development

SRBP

Supplemental Retirement Benefit Plan

SRF

Supplemental Reserve Facility

STF

Systemic Transformation Facility

UN

United Nations

UNCTAD

United Nations Conference on Trade and Development

UNDP

United Nations Development Program

VAT

Value-added tax

WAEMU

West African Economic and Monetary Union

WTO

World Trade Organization

1

Official monetary authorities comprise central banks and also currency boards, exchange stabilization funds, and treasuries, to the extent that they perform monetary authorities’ functions.

2

During 1999, the remaining component of ecu reserves is expected to be replaced by instruments denominated in euros.

1

See Selected Decisions, Twenty-Third Issue (June 30, 1998), page 258.

2

Ibid, pages 256 and 257.

3

Ibid., page 258.

4

Ibid.

5

Ibid., page 256.

6

Ibid., pages 256 and 257.

7

Ibid., pages 192–220.

8

Ibid., pages 232 and 233.

9

Ibid., page 55

10

Ibid., pages 381 and 382.

11

Ibid.

12

Ibid., pages 28–46.

13

Ibid., pages 135–37.

14

Ibid., pages 184–91.

15

Ibid., pages 243–46.

16

Ibid., pages 57 and 58.

17

Ibid., pages 243–46.

18

Ibid., pages 474–76.

19

Ibid., pages 279 and 280.

20

Ibid., pages 273–75.

21

Ibid., pages 523 and 524.

22

Ibid., pages 524 and 525

23

Ibid., pages 348 and 349.

24

As February 21, 1999 is a Sunday, the last day for payment will be the next business day, that is, February 22, 1999.

25

Ibid., page 495.

1

In 1998/99, 66 press releases, 68 News Briefs, and 91 PINs were issued.

2

To better respond to its critics, the IMF established a News and External Communications Division within the External Relations Department. During 1998/99, 17 letters to the editor and 42 articles by IMF management and senior staff appeared in major newspapers and journals.

1

Mr. James D. Wolfensohn, President of the World Bank, Mr. Michel Camdessus, Managing Director of the International Monetary Fund, Mr. Abdelkrim Harchaoui, Minister of Finance of Algeria and Chairman of the Group of Twenty-Four, addressed the plenary session. Observers from a number of international and regional organizations also attended.

2

Mr. Renato Ruggiero, Director-General of the World Trade Organization, Mr. James D. Wolfensohn, President of the World Bank, Mr. Michel Camdessus, Managing Director of the International Monetary Fund, and Mr. G.L. Peiris, Minister of Justice and Constitutional and Ethnic Affairs and Deputy Minister of Finance of Sri Lanka, Chairman of the Group of Twenty-Four, addressed the plenary session. Observers from a number of international and regional organizations also attended.

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Cover International Monetary Fund Annual Report 1999
International Monetary Fund Annual Report 1999
ISBN:
9781451945232
ISSN:
2227-8915
Publication Date:
08 Sep 1999
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781451945232.011
Pages:
278