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Business and Economics > Finance: General

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Cover Policy Papers
Review Of Charges And The Surcharge Policy— A Possible Reform Package
International Monetary Fund. Finance Dept.
and
International Monetary Fund. Policy Development and Review Dept.
On October 11, 2024, the IMF’s Executive Board concluded the Review of Charges and the Surcharge Policy. The review is part of a broader ongoing effort to ensure that the IMF’s lending policies remain fit for purpose to meet the evolving needs of the membership. Charges and surcharges are important elements of the IMF’s cooperative lending and risk-management framework, where all members contribute and all can benefit from support when needed. Together, they cover lending intermediation expenses, help accumulate reserves to protect against financial risks, and provide incentives for prudent and temporary borrowing. This provides a strong financial foundation that allows the IMF to extend vital balance of payments support on affordable terms to member countries when they need it most.



Against the backdrop of a challenging economic environment and high global interest rates, the Executive Board reached consensus on a comprehensive package of reforms that substantially reduces the cost of borrowing for members while safeguarding the IMF's financial capacity to support countries in need. The approved measures will lower IMF borrowing costs by about US$1.2 billion annually or reduce payments on the margin of the rate of charge as well as surcharges on average by 36 percent. The number of countries subject to surcharges in fiscal year 2026 is expected to fall from 20 to 13.



Key reforms include a reduction in the margin for the rate of charge, an increase in the threshold for level-based surcharges, a reduction in rate for time-based surcharges, an alignment of thresholds for commitment fees with annual and cumulative access limits for GRA lending facilities, and institution of regular reviews of surcharges.



The series of three papers informed the Executive Board’s first and second informal engagements (July and September 2024) and the formal meeting (October 2024) on this review.
Keywords:
General Resources Account; Charges; Margin for the basic rate of charge; Surcharges; Commitment Fees; Precautionary Balances; Income; reform package; transparency policy; EMBIG market spread; IMF's transparency policy; Fund credit; desk survey; Credit; SDR interest rate; Credit risk; Return on investment; Global
Cover Technical Assistance Reports
Sri Lanka: Technical Assistance Report-Liquidity Monitoring and Monetary Operations
International Monetary Fund. Asia and Pacific Dept
The IMF South Asia Regional Training and Technical Assistance Center (SARTTAC) provided technical assistance (TA) to the Central Bank of Sri Lanka (CBSL) focusing on modernizing monetary operations framework and improving liquidity monitoring. Macroeconomic crisis, compounded by the pandemic, has created significant challenges for conducting monetary policy in Sri Lanka. Considering this, the mission proposed a phased approach for modernizing monetary policy instruments and operations, contingent on progress in ongoing debt restructuring, reducing financial stability risks, achieving macroeconomic stabilization, and improving CBSL’s balance sheet. A transitory model for monetary operations was recommended, centered on one week liquidity operations, while still envisaging a certain level of market segmentation. Key recommendations included introducing a single policy rate to strengthen monetary policy signaling, modifying Statutory Reserve Ratio, and operationalizing Standing Facilities to form an Interest Rate Corridor (IRC). In the later stages, when the CBSL can target aggregate liquidity, liquidity management should return to a mid-corridor system with Open Market Operations (OMO)s calibrated based on liquidity forecasts. These recommendations are designed to enhance monetary policy transmission, support the achievement of CBSL’s primary mandate of price stability, a prerequisite for macroeconomic stability and sustainable economic growth.
Keywords:
Sri Lanka; Monetary policy; international organization.; IMF South Asia Regional Training and Technical Assistance Center; liquidity monitoring; IMF's Monetary; liquidity Assistance facility; weakening monetary policy transmission; Liquidity; Special resolution regime; Open market operations; Liquidity forecasting; Central bank policy rate; Global
Cover IMF Working Papers
Fiscal Discourse and Fiscal Policy
Yongquan Cao
,
Era Dabla-Norris
, and
Enrico Di Gregorio
We study the supply of fiscal ideas leveraging thousands of electoral platforms from 65 countries in the Manifesto Project to link how political parties discuss fiscal policy with fiscal outcomes. We provide three sets of results. First, fiscal discourse has become increasingly favourable to higher government spending since at least the 1990s in advanced and emerging economies and across the political spectrum. This pattern does not track survey trends in voter preferences, suggesting that parties have played a role in shifting the focus of political campaigns to fiscal issues to win over voters. Second, fiscal discourse turns conservative under more adverse fiscal conditions, including in the aftermath of debt surges and after the adoption of fiscal rules, but only to a limited extent. Third, over the medium-run, relative discourse changes in favor of government expansion and away from fiscal restraint are followed by higher fiscal deficits. Together, our results suggest that adverse shifts in the supply of fiscal ideas could add to fiscal pressures over time.
Keywords:
Fiscal Discourse; Fiscal Policy; Elections; Manifesto; trend increase; IMF working paper No. 2024/194; survey trend; expansion discourse; Government debt management; Fiscal rules; Emerging and frontier financial markets; Global
Cover IMF Working Papers
The Role of IMF Arrangements in Restoring Access to International Capital Markets
Joseph Kogan
,
Romina Kazandjian
,
Shijia Luo
,
Moustapha Mbohou
, and
Hui Miao
Using a database of emerging market fundamentals and bond index spreads across 56 frontier and emerging market countries rated below investment grade during the period 2002-22, we assess whether IMF arrangements can restore access to international capital markets (ICM) for countries in distress through liquidity and conditionality channels. We find that global financial conditions and debt/GDP are the most important determinants of access to ICM within the horizon of a typical IMF arrangement. Using an event study methodology, we show that spreads increase prior to the start of an IMF arrangement and then decrease gradually. By exploiting different characteristics of IMF arrangements, we find evidence that the reforms implemented under the IMF arrangement, as measured by rounds of successful IMF reviews, matter more in the medium term than the IMF’s role as a liquidity provider. These results are consistent with our analysis of 55 credit rating upgrades to ICM access levels, which suggests that debt reduction plays the largest role and that IMF arrangements lend credibility to reforms.
Keywords:
International capital markets; market access; IMF; debt crisis; debt rescheduling; default; sovereign debt; sovereign debt restructuring; sovereign bonds; Eurobonds; IMF arrangement; IMF review; IMF working paper 2024/173; capital markets department; IMF effect; Credit ratings; Bonds; Current account balance; Global
Cover IMF Working Papers
Reported Social Unrest Index: August 2023 Update
Mr. Philip Barrett
and
Euihyun Bae
This paper is the second update of the Reported Social Unrest Index (Barrett et al. 2022), outlining developments in global social unrest since March 2022. It shows that the fraction of countries experiencing major social unrest events has been stable. Reasons for social unrest can be broadly categorized as stemming from sdebate over constitutional issues, protests connected to specific policies, and other generalized disorder.
Keywords:
attempts to proxy; fraction of country; copyright page; update of the Reported Social Unrest Index; IMF surveillance; Pension spending; Machine learning; Pension reform; Stock markets; COVID-19; Global
Cover IMF Staff Country Reports
Sierra Leone: Sixth and Seventh Reviews Under the Extended Credit Facility, Requests for Waivers of Nonobservance of Performance Criteria, Extension of the Arrangement, Rephasing of Disbursements, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for Sierra Leone
International Monetary Fund. African Dept.
This paper presents Sierra Leone’s Sixth and Seventh Reviews under the Extended Credit Facility (ECF), Requests for Waivers of Nonobservance of Performance Criteria, Extension of the Arrangement, Rephasing of Disbursements, and Financing Assurances Review. The IMF Executive Board completed the sixth and seventh reviews under the ECF Arrangement for Sierra Leone, which allows for an immediate disbursement of funds. Sierra Leone’s economic challenges have intensified. Inflation has continued to rise; the currency has depreciated sharply; and debt related risks have increased. The authorities have requested an extension of the program to November 2023 to continue building on recent reforms and achieve program objectives. Building resilience and laying the foundations for stronger growth by consolidating public finances and addressing debt vulnerabilities, while supporting the most vulnerable, remains key to the success of the program. Structural reforms will be essential to reduce vulnerabilities to corruption and foster private sector development.
Keywords:
Sierra Leonean authorities; inflation-depreciation spiral; Policy implementation risk; FX intervention; government paper; expenditure transparency; Arrears; Debt sustainability; Global
Cover Finance & Development
Finance & Development, March 2021
International Monetary Fund. Communications Department
Finance & Development, March 2021
Keywords:
FD; F&D; data bias; data economy; big data analytics; Afordable internet access; location data; digital ID; expansionary monetary policy; community currency; government policy; COVID-19; Cyber risk; Migration; Financial inclusion; Global; Africa; Sub-Saharan Africa; Europe; Asia and Pacific; IMF economist; inflation revival; private sector innovation; cash use; Consumer credit
Cover IMF Working Papers
Capital Flow Data – A Guide for Empirical Analysis and Real-time Tracking
Mr. Robin Koepke
and
Simon Paetzold
This paper provides an analytical overview of the most widely used capital flow datasets. The paper is written as a guide for academics who embark on empirical research projects and for policymakers who need timely information on capital flow developments to inform their decisions. We address common misconceptions about capital flow data and discuss differences between high-frequency proxies for portfolio flows. In a nowcasting “horse race” we show that high-frequency proxies have significant predictive content for portfolio flows from the balance of payments (BoP). We also construct a new dataset for academic use, consisting of monthly portfolio flows broadly consistent with BoP data.
Keywords:
WP; flow data; portfolio flow; debt flow; flow proxy; IMF balance of payments statistic; portfolio flows; fund flows; balance of payments; coincident indicators; IIF data; IMF balance of payments data; Capital flows; Stocks; Balance of payments statistics; Flow of funds; Emerging and frontier financial markets; Africa; Global
Cover IMF Working Papers
Does Going Tough on Banks Make the Going Get Tough? Bank Liquidity Regulations, Capital Requirements, and Sectoral Activity
Ms. Deniz O Igan
and
Ali Mirzaei
Whether and to what extent tougher bank regulation weighs on economic growth is an open empirical question. Using data from 28 manufacturing industries in 50 countries, we explore the extent to which cross-country differences in bank liquidity and capital levels were related to differences in sectoral activity around the period of the global financial crisis. We find that industries which are more dependent on external finance, in countries where banks had higher liquidity and capital ratios, performed relatively better during the crisis, with regard to investment rates and the creation of new enterprises. This relationship, however, exists only for bank-based systems and emerging market economies. In the pre-crisis period, we find only a marginal link to bank capital. These findings survive a battery of robustness checks and provide some solid support for the tighter prudential measures introduced under Basel III.
Keywords:
WP; capital level; economic activity; capital requirement; capital position; investment rate; liquidity level; return on equity; capital standard; net income; Liquidity requirements; Liquidity; Capital adequacy requirements; Basel III; Global; Bank liquidity; bank capital; Financial stability; Sectoral activity; external finance dependence
Cover IMF Working Papers
Monetary Policy Transmission in Emerging Markets and Developing Economies
Mr. Luis Brandao Marques
,
Mr. R. G Gelos
,
Mr. Thomas Harjes
,
Ms. Ratna Sahay
, and
Yi Xue
Central banks in emerging and developing economies (EMDEs) have been modernizing their monetary policy frameworks, often moving toward inflation targeting (IT). However, questions regarding the strength of monetary policy transmission from interest rates to inflation and output have often stalled progress. We conduct a novel empirical analysis using Jordà’s (2005) approach for 40 EMDEs to shed a light on monetary transmission in these countries. We find that interest rate hikes reduce output growth and inflation, once we explicitly account for the behavior of the exchange rate. Having a modern monetary policy framework—adopting IT and independent and transparent central banks—matters more for monetary transmission than financial development.
Keywords:
WP; exchange rate; inflation targeting; interest rate; monetary policy shock; reaction function; monetary policy transmission; exchange rate channel; interest-rate-based monetary policy; interest rate shock; unit monetary policy shock; nominal exchange rate; transmission mechanism; monetary policy rate; dummy variable; IT framework; Financial sector development; Exchange rates; Monetary policy frameworks; Central bank policy rate; Consumer price indexes; Global; Africa; Monetary Policy; Emerging markets; Financial structure; monetary policy framework; monetary policy channel