Statement by the Managing Director on the Work Program of the Executive Board - Executive Board Meeting - June 3, 2009
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Against the backdrop of a global economic crisis, the IMFC has underscored the Fund’s central role in responding to its membership’s needs and restoring prosperity and financial stability. The Fund has acted with alacrity—by overhauling its lending framework; mobilizing strong support and firm pledges toward a tripling of its resources; and continuing to strengthen the quality of its surveillance. The work program is heavy, reflecting the responsibilities assigned to the Fund by the international community and the needs of our membership.

Abstract

Against the backdrop of a global economic crisis, the IMFC has underscored the Fund’s central role in responding to its membership’s needs and restoring prosperity and financial stability. The Fund has acted with alacrity—by overhauling its lending framework; mobilizing strong support and firm pledges toward a tripling of its resources; and continuing to strengthen the quality of its surveillance. The work program is heavy, reflecting the responsibilities assigned to the Fund by the international community and the needs of our membership.

June 3, 2009

1. Context. Against the backdrop of a global economic crisis, the IMFC has underscored the Fund’s central role in responding to its membership’s needs and restoring prosperity and financial stability. The Fund has acted with alacrity—by overhauling its lending framework; mobilizing strong support and firm pledges toward a tripling of its resources; and continuing to strengthen the quality of its surveillance. The Board has completed all of the main policy items in the November 2008 Work Program. The work program for the period until the 2009 Annual Meetings, which is comprehensively set out in Table 1, seeks to build on this progress, while advancing reforms in other key areas. In addition to these policies, we will have a full load of Article IV consultations, program reviews, and consideration of new programs. The work program is heavy, reflecting the responsibilities assigned to the Fund by the international community and the needs of our membership.

I. Crisis Response

A. Strengthening the Global Financial Safety Net

2. General Fund Resources. An immediate priority must be to take the necessary steps to boost our resources. We are working with current and potential participants toward enlarging and expanding the New Arrangements to Borrow (NAB), and making it operationally more flexible, and will bring a decision to the Board for approval by end-June. Given the uncertainties around the timing of the envisaged amendments to the NAB, however, we will work, in parallel, with members to ensure that recent pledges are turned into bilateral loan agreements, and also to bring such agreements (and the general operational guidelines for borrowing by the Fund) to the Board for approval shortly thereafter. Second, to improve the predictability of members’ access to Fund resources under SBAs, the Board will consider, in July, a paper that discusses options to mitigate blackout periods in SBAs.

3. SDR Allocation. An allocation was welcomed by the IMFC in the Spring Meetings. In this context, the Board will discuss a paper, by end-June, on the case for a general SDR allocation equivalent to US$ 250 billion and operational issues toward its implementation. Rapid approval by members of the pending amendment of the Articles for the special onetime allocation of SDRs also remains important to make the allocation of SDRs more equitable, especially for members that have not previously received an allocation.

4. Concessional Lending Capacity. We are committed to strengthening our concessional lending capacity to cover the medium-term financing needs of low-income country members. To this end, I have asked FIN and LEG to prepare a paper with specific proposals to simplify and strengthen the Fund’s concessional financing framework, scheduled for Board discussion as soon as possible.

B. Adapting the Lending Framework for Low-Income Countries

5. Beyond Access. A key focus in the run up to the Annual Meetings will be to reform our lending framework for low-income countries to ensure that the spillovers from the global crisis do not roll back the LICs’ previously hard-won gains on macroeconomic stability and poverty reduction. The recent doubling of access limits under the PRGF and ESF is already an important step forward, but more can be achieved on several fronts:

  • A new architecture of LIC facilities: Lending facilities for LICs must be made more responsive to members’ diverse needs, and provide for short-term and emergency financing. SPR, LEG, and FIN will prepare a concrete proposal for a new LIC lending architecture that will include appropriate policies on access and financing terms. Accompanying this, proposals for a more flexible and strengthened concessional financing framework will be presented in early-July.

  • Debt limits and debt sustainability framework: The changing patterns of external financing for LICs as well as the progress made by some LICs in strengthening their macroeconomic management, calls for a review of the Fund’s external debt limits policy, especially to facilitate a more targeted and systematic response to countries’ specific circumstances. As a follow-up paper to the Board discussion in March 2009, staff will propose new guidelines on external debt limits for discussion prior to the Annual Meetings. The Board will also discuss a joint Fund-Bank paper reviewing aspects of the debt sustainability framework (as a companion paper on external debt limits) at the same time.

  • PRGF eligibility: With rapid globalization over the past decade, low-income countries’ economic positions in the world economy have improved, making it important to review PRGF eligibility and ensure that the Fund’s concessional sources are well targeted. I have asked SPR to prepare a paper to consider these issues, for Board discussion after the Annual Meetings.

C. Monitoring and Policy Advice

6. Crisis Engagement. Given the large number of Fund-supported programs approved since the start of the crisis, it is crucial to ensure that these programs are as effective as possible in helping countries weather the crisis and restore stability. I have asked SPR to assess the Fund’s early experience with crisis-related program engagement, and draw lessons for an informal seminar before the Annual Meetings.

7. Restoring Stability. The Fall GFSR and WEO will respond to the IMFC s call on the Fund to continue monitoring the global economy, assessing regularly the actions taken and those still required to restore macroeconomic and financial stability, and addressing issues related to ensuring a more robust path for the global economy and the financial system once the present crisis has passed. Looking specifically at international trade policies, the availability of trade finance is essential to help pave the way to global recovery, as also stressed by the IMFC. SPR will take stock of developments in trade finances in the current crisis, and assess whether further actions may be required to boost global recovery. An informal seminar will be presented to the Board in June. Also in June, an informal Board seminar will address whether existing tax policy distortions increase macro-financial vulnerabilities and propose possible policy responses. The Board will have the opportunity to discuss, before the Annual Meetings, other key crisis-related fiscal issues, including the design and implementation of fiscal rules for sustainable public finances during crises.

8. Exit Strategies. With extensive use of measures by several countries to support the financial sector and domestic demand, it is essential—given some initial signs of near-term stabilization—to have an action plan that safeguards fiscal sustainability. FAD and MCM will examine the policy and operational issues relating to the public acquisition of crisis-related assets, their management, and possible exit strategies, for a discussion/seminar at the Board in July.

II. Building a more Robust Global Architecture

A. Enhancing Surveillance

9. The work program will include a number of key outputs to respond to the call to provide effective, candid, independent, and evenhanded surveillance:

  • Early warning: The Board will have an opportunity to consider the experience with the dry run of the joint IMF-FSB Early Warning Exercise and discuss the next steps prior to its formal launch at the Annual Meetings. In light of the broad interest in the technical details of the Vulnerability Exercise for Advanced Economies, I have also asked staff to organize a Fund-wide seminar on this topic. A restricted informal Board briefing will be held just prior to the Annual Meetings to report the results of our next 6-monthly exercise.

  • Cross-country analyses: The current crisis has revealed the concurrence of cross-cutting issues in systemically important countries, with global implications. I have asked SPR—in collaboration with the relevant area departments—to draw lessons from these Article IV consultations and present the initial findings through an informal Board seminar. This exercise will be an important step in achieving a more evenhanded dialogue with major policy makers.

  • Revamping the FSAP: FSAPs and bilateral surveillance need to be better integrated. The Board will discuss a staff paper that assesses the lessons learnt from the FSAP over the last decade, and proposes enhancements to make it more flexible, targeted and better integrated with surveillance. This paper is tentatively scheduled for September.

  • Greater transparency: The effectiveness of surveillance is boosted not just by the quality of analysis, but also its candor and traction in terms of policy follow up. In this context, the Board will have the opportunity to discuss, prior to the Annual Meetings, a review of our existing transparency policies.

10. We will also address broader reforms of the international financial system:

  • Regulatory reform: The crisis has driven home the undeniable message that continued enhancement in regulatory reform must keep up with the pace of innovations of the global financial system. In this regard, the Board will discuss a number of papers relating to regulatory reform in the period ahead: guidelines to assess “systemic importance” for markets, instruments, and institutions; best practices in regulatory cooperation related to deposit insurance, the effectiveness of the Fund’s anti-money laundering program; the legal and operational issues that arise in cross-border bank insolvencies and the progress in strengthening financial supervision and regulation (joint Fund, FSB, and FATF paper).

  • Global exchange rate system: The Board will also explore issues related to the evolution and stability of the international monetary system, including the implications of member’s choice of exchange rate regime for macroeconomic performance, international reserve currencies, and other issues related to the smooth functioning of the overall system of exchange rates.

B. Governance and Quota Reforms

11. Progress So Far. While it may appear to some that the global crisis has put governance reform on the back-burner, I firmly believe that reforming the IMF’s governance is critical not just for its legitimacy, but also to enable it to be a more effective leader in responding to unexpected global contingencies such as the current crisis. In this context, I am encouraged by the IMFC’s support for early action by national authorities to make effective as soon as possible the April 2008 agreements on quota and voice and the new income model, and its call to the Executive Board to report on broader governance reforms. In the run up to Istanbul, we need to make progress in advancing this reform agenda:

  • Quota and voice reform: As a first step toward meeting the deadline for completing the next quota review by January 2011, I have asked FIN to prepare a paper for Board discussion in September that updates the database for quota calculations and revisits issues with regard to alternative formula variables.

  • Governance structure: The informal Board discussion of the report of the Eminent Persons Group is scheduled for mid-June. I have also asked staff to prepare a Board paper that takes into consideration the whole gamut of governance reforms proposed so far—including from the G20 working group, IEO, civil society as well as the Eminent Persons Group—for discussion in mid-July. A draft report of the Executive Board to the IMFC on governance issues—as called for in the most recent IMFC communiqué—will be considered by the Board in September.

  • Diversity: The Board will discuss the 2008 Diversity Report ahead of the 2009 Annual Meetings.

III. Continuing Work of the Fund

A. Streamlining and Work Practices

12. Streamlining. As highlighted in my statement for the medium-term budget (BUFF/09/59), the pressure of competing and equally engaging priorities has stressed the importance of making an effort to streamline our internal work. Staff will propose options— in terms of policy and Board paper procedures—to help achieve the Fund’s strategic objectives in the most efficient way. The Board will discuss this paper in early-August.

13. Collaboration. The Board will be informed on the review of progress on the implementation of the Joint Management Action Plan to enhance the collaboration between the Fund and the Bank.

14. Budget. The Board will be informed of work on new IT, facilities investment benchmarks and best practices in long-term facilities budgeting, progress toward moving to a new costing system, adjustments to the Fund’s budget, and departmental business plans to address new demands.

15. External audit. The Board will be briefed informally on the results of the FY2009 external audit in July.

B. IEO Matters

16. Continued learning. I welcome the continued efforts by the IEO to conduct independent and objective evaluations of Fund policies and activities and provide constructive recommendations. In this regard, following the Board discussions of the IEO’s evaluations of the IMF’s approach to international trade policy, in June, and of the IMF’s Interactions with its member countries, before the August recess, the Board will have an opportunity to discuss the Management Implementation Plans for the related Board-endorsed IEO recommendations, in September. The IEO evaluation of interaction with member countries will be our springboard for further thinking about how to increase the traction of surveillance. Following established practice, the Periodic Monitoring Report on the status of Board-endorsed IEO recommendations and Management Implementation Plans will be circulated to the Board.

Table 1.

Spring 2009 Work Program Statement

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