Since 1992, the central banks of the Baltic states and the Commonwealth of Independent States have undertaken comprehensive reform of their monetary and exchange arrangements in support of their stabilization efforts. Their efforts have been supported by extensive technical assistance provided by the IMF and 23 central banks. This book edited by V. Sundararajan, Arne B. Peterson, and Gabriel Sensenbrenner, contains the background papers prepared for the second joint coordinating meeting of participants. That meeting focused on the progress of structural reforms in central banking and bank restructuring and identified priorities for the deepening of reforms. The book documents the remarkable progress achieved by the Baltic and CIS central banks and the catalytic role they have played in financial market development.

Central Bank of Reform in the Transition Economies

Background papers for the Joint Coordinating Meeting of the Baltic, CIS, and Cooperating Central Banks and International Organizations, Basle, May 1996


V. Sundararajan, Arne B. Petersen,

and Gabriel Sensenbrenner

International Monetary Fund

© 1997 International Monetary Fund

Cover design by IMF Graphics Section

Library of Congress Cataloging-in-Publication Data

Central bank reform in transition economies / editors V. Sundararajan, Arne B. Petersen, and Gabriel Sensenbrenner.

  • p. cm.

  • ISBN 1-55775-608-2

1. Banks and banking, Central—Former Soviet republics. I. Sundararajan, Vasundevan. II. Petersen, Arne B. III. Sensenbrenner, Gabriel.

HG3126.C46 1997




Price: $25.00

Address orders to:

International Monetary Fund, Publication Services

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



Under a Group of Seven mandate, 23 central banks agreed to cooperate with the International Monetary Fund to provide intensive central banking technical assistance to the Baltic states and the Commonwealth of Independent States (CIS) beginning in 1992.1 The Monetary and Exchange Affairs Department of the IMF has served as the coordinating agency for this program, with the support of the Bank for International Settlements (BIS). Under this arrangement, the cooperating central banks2 routinely release their professional staff to participate in technical assistance missions in central banking topics assigned to them. Other multilateral, regional, and national institutions have also participated in specific technical assistance projects. Coordinating meetings of donors were initially held twice a year at the BIS in Basle and are now held yearly; they are attended by senior officials of the cooperating central banks and other agencies and chaired by the First Deputy Managing Director of the IMF. These meetings serve to review progress of reforms supported by the technical assistance program, assess its effectiveness, agree on practice for future technical assistance, and coordinate its delivery.

As part of the coordination process the Monetary and Exchange Affairs Department organized a special Joint Meeting on Central Banking Technical Assistance in St. Petersburg, Russia, on April 13–15, 1994. The joint meeting brought together, for the first time, representatives of the cooperating central banks, the central banks of the Baltic states and the CIS, and the major multilateral and regional financial institutions. They were chaired by the then Deputy Managing Director of the IMF, Richard D. Erb, and were hosted by the Central Bank of the Russian Federation. Those meetings were the first occasion on which both the donors and recipients of central banking technical assistance met to review the progress and effectiveness of technical assistance and to plan for further assistance.3

The experience with those meetings was very positive and accordingly it was decided to organize a second joint coordinating meeting in Basle on May 13–14, 1996, chaired by Stanley Fischer, First Deputy Managing Director of the IMF. Whereas the first joint meetings focused broadly on the role of central banks and technical assistance, the 1996 meetings concentrated on the progress of structural reforms in central banking and bank restructuring and the priorities ahead. The main body of this volume is based on background papers prepared by Fund staff for the meetings.

The joint meetings provided a forum for the central banks of the CIS to share their thoughts, strategies, and experiences, not only with the cooperating central banks but most important also among themselves.4 The meetings sought to assess progress in macroeconomic stabilization and complementary structural reforms in the financial sectors in the regions, drawing on country experiences with modernizing central banking functions, bank-restructuring strategies, and market-based monetary and exchange arrangements. The discussions elicited active participation of the CIS representatives. There was general recognition that dramatic advances have been made in central banking and monetary reforms. It was also agreed that further progress in these areas and the consolidation of gains in stabilization called for the adopting of appropriate bank-restructuring strategies and pursuing more specialized reforms to support the deepening of key financial markets.

Participants agreed that the progress and proceedings of the meetings be published after suitable editing. This publication documents the remarkable progress achieved in the CIS and Baltic central banks and the catalytic role they played in financial market development.

* * *

The editors of this volume would like to express their thanks to the central banks and international institutions that participated in the meetings for their comments and for the information that they made available to the IMF for this book. Ms. Rose Sario deserves much of the credit for making the production of the initial manuscript as smooth and efficient as possible. Ms. Nadia Malikyar helped in revising the manuscript for publication. Juanita Roushdy of the External Relations Department edited the manuscript and coordinated its publication.


  • Preface

  • 1 Overview

    • V. Sundararajan, Arne B. Petersen, and Gabriel Sensenbrenner

  • 2 Macroeconomic Developments in 1995 and Early 1996

    • Henri Lorie

  • 3 Main Issues and Challenges in Designing Bank-Restructuring Strategies

    • Ceyla Pazarbaşioğlu and Jan Wiliem van der Vossen

  • 4 Monetary Operations, Money Markets, and Public Debt Management

    • Loreno Zamalloa

  • 5 Foreign Exchange Operations, Markets, and Reserve Management

    • Dimitri Menchikov

  • 6 Payments System Reform

    • Jean-Marc Destresse and Nicholas Roberts

  • 7 Central Bank Accounting and Internal Audit

    • John Dalton

  • Appendix: Statements by Delegations

The following symbols have been used in this book:

… to indicate that data are not available;

— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

– between years or months (e.g., 1995–96 or January–June) to indicate the years or months covered, including the beginning and ending years or months; and

/ between years (e.g., 1996/7) to indicate a fiscal (financial) year.

“Billion” means a thousand million.

Minor discrepancies between constituent figures and totals are due to rounding.