Statement by the Managing Director on the Work Program of the Executive Board Executive Board Meeting November 4, 2009
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International Monetary Fund
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Publication Date:
23 Oct 2009
eISBN:
9781498335317
Language:
English
Keywords:
PP; TB2; global economy; governance Reform; Fund assistance; Fund Policy advice; IMF management
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The Fund, called on to support a global response to the global crisis, has delivered with strengthened surveillance, policy advice and financing with modernized instruments. As I noted in Istanbul, where the membership expressed its appreciation for these accomplishments, we need to focus in the months ahead on four key reform areas—the Istanbul decisions, namely our mandate, our financing role, multilateral surveillance, and governance—while supporting the consolidation of the nascent upturn and helping to establish a stronger post-crisis global economy. Building on the work that we have completed in recent months (Table 1), the noncountry work program set out in Table 2 (which leaves aside country items such as Article IVs and program reviews) aims to accomplish these objectives. This work program is no less ambitious and taxing than the one we have just completed, but I am sure that we can successfully meet this challenge.

Abstract

The Fund, called on to support a global response to the global crisis, has delivered with strengthened surveillance, policy advice and financing with modernized instruments. As I noted in Istanbul, where the membership expressed its appreciation for these accomplishments, we need to focus in the months ahead on four key reform areas—the Istanbul decisions, namely our mandate, our financing role, multilateral surveillance, and governance—while supporting the consolidation of the nascent upturn and helping to establish a stronger post-crisis global economy. Building on the work that we have completed in recent months (Table 1), the noncountry work program set out in Table 2 (which leaves aside country items such as Article IVs and program reviews) aims to accomplish these objectives. This work program is no less ambitious and taxing than the one we have just completed, but I am sure that we can successfully meet this challenge.

1. Building on recent momentum The Fund, called on to support a global response to the global crisis, has delivered with strengthened surveillance, policy advice and financing with modernized instruments. As I noted in Istanbul, where the membership expressed its appreciation for these accomplishments, we need to focus in the months ahead on four key reform areas—the Istanbul decisions, namely our mandate, our financing role, multilateral surveillance, and governance—while supporting the consolidation of the nascent upturn and helping to establish a stronger post-crisis global economy. Building on the work that we have completed in recent months (Table 1), the noncountry work program set out in Table 2 (which leaves aside country items such as Article IVs and program reviews) aims to accomplish these objectives. This work program is no less ambitious and taxing than the one we have just completed, but I am sure that we can successfully meet this challenge.

Table 1.

Implementation of the June 2009 Work Program

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Time Bands refer to Spring and Fall 2009 work programs respectively. Shaded items have not yet been completed.

Table 2.

Fall 2009 Work Program

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I. The Post-Crisis Global Economy

2. Exit strategies. The membership has committed to maintain concerted policy support until a firmer recovery is underway, and to work together in articulating and implementing exit strategies. To help achieve this, the Fund will develop orderly and cooperative exit strategies for the unwinding of accommodative fiscal, monetary and financial sector policies, to be discussed by the Board by the Spring 2010 IMFC Meetings. This work will draw on a High-Level Conference on exit strategies scheduled for early December 2009. Work in this area will include papers on:

  • Fiscal policy. A Board paper by January will propose principles for fiscal adjustment in advanced countries once the recovery is underway. It will be augmented by papers on the role of tax policy in fiscal consolidation and measures to achieve long-run fiscal sustainability given age-related spending increases (in TB2).1

  • Implementation of Strategies. A paper on Unwinding Crisis-Related Intervention Measures, in TB2, will examine tradeoffs and practical considerations that will pose challenges in the implementation of exit strategies. This examination will take into account developments since the last Board discussions, as well as issues arising from the High Level Conference on exit strategies that is scheduled for early December.

  • The Spring World Economic Outlook (WEO) will provide an updated assessment of progress made toward a more sustainable recovery, gauging the macro-economic and financial outlook, and signal potential risks to successful exits from the global crisis and associated policy responses. The WEO will also assess the challenges posed by unemployment and the lessons from past experiences of countries that switched from export-oriented to domestic-demand driven growth models. An informal briefing on the Early Warning Exercise (TB2) will address plausible risks and policy responses.

3. Reshaping policy frameworks. Papers will be considered by the Board that discuss the evolution of fiscal rules to improve fiscal policy (TB1), and reforms to central banking and monetary policy frameworks to foster macro-financial stability (TB2). The Spring Global Financial Stability Report (GFSR) will focus on—among other issues—strengthening the regulatory architecture to better account for systemic linkages and accomplish systemic regulation. The Board will also have an opportunity to discuss the legal and operational issues arising in cross-border bank insolvencies.

II. Global Architecture

A. Strengthening the International Monetary System

4. Fund mandate. While the Fund has been able to meet the crisis with a range of innovative responses, the formal mandate of the Fund may not fully capture what is now expected of an effective guardian of global macro-financial stability. I therefore welcome the IMFC’s request for a review of the Fund’s mandate to cover the full range of macroeconomic and financial sector policies that bear on global financial stability. As this undertaking is complex and affects every aspect of the Fund’s work, I propose to proceed in steps, beginning with a chapeau paper that will sketch out in broad terms a vision of what’s expected of the Fund in today’s world—in surveillance, lending, and functioning of the international monetary system—and consider how the Fund’s formal mandate may need updating. This chapeau paper, to be discussed by January, will be followed by a series of papers before the Spring Meetings delving deeper into each area warranting a rethink of the Fund’s role. I expect this work to provide broad insights to strengthening the international architecture, which could be developed further as needed after the Spring Meetings (and ahead of the IMFC’s request for a report by the next Annual Meetings):

  • Size of the Fund. In the context of the 14th review of quotas, and following the expected agreement to amend and expand the New Arrangements to Borrow by over $500 billion, this paper, to be discussed in early 2010, will reflect on the appropriate size of Fund resources and its composition between quota and borrowed resources.

  • Fund financing role. Following the deepest global liquidity crisis since the 1930s, excessive reserve accumulation will likely continue unless Fund instruments are seen as a credible alternative to self-insurance. This paper, for consideration around March, will study the future financing role of the Fund, and will consider broad approaches to strengthen our capacity to help members cope with financial volatility, building on the Flexible Credit Line and High Access Precautionary Arrangements, while preserving adequate safeguards. It will examine whether these and potential new instruments can provide credible alternatives to self-insurance.

  • International monetary system. This paper, for consideration by the Spring Meetings, will examine key sources of instability in the international monetary system. Along with possible remedies to improve the functioning of the system, the emphasis will be on reducing the demand for reserve assets as self-insurance beyond the steps discussed in the previous paper, and the scope for diversifying sources of reserves supply.

  • Surveillance. Following up on the discussion of the Fund’s mandate, this paper, to be considered around March, will elaborate on the Fund’s overall surveillance responsibilities and take a fresh look at the modalities of surveillance (e.g., the balance between bilateral and multilateral surveillance).

  • Separately, a paper for consideration before the end of the year will take up the issue of Fund membership in the Financial Stability Board.

5. Fund finances. Discussions on amending and expanding the NAB have been ongoing. As soon as agreement among current and new participants is reached, the Board will consider formally the proposed amendments.

B. Further Enhancing Fund Policy Advice

6. Traction. The request for the Fund to assist in the implementation of the G20’s Framework for Strong, Sustainable, and Balanced Growth, offers the potential to increase significantly the traction of surveillance on the Fund’s most systemic members. While the details are still being worked out, the Board will have an opportunity to discuss at an informal briefing the framework and process underlying the Fund’s role in G-20 mutual assessments. Separately, the upcoming review of the Fund’s Transparency Policy will propose enhancements to improve the speed of publication and candidness of staff reports.

7. Cross-country surveillance. Following last summer’s experiment with a paper on cross-cutting themes in the surveillance of five systemic economies, we will continue to experiment with thematic surveillance with two new topics: policies of countries with large financial sectors relative to the size of their economies; and how emerging markets have coped with the crisis (both in TB2).

C. Quota and Governance Reform

8. Quotas. The IMFC has called on the Board to meet the January 2011 target for completing the Fourteenth General Review of Quotas. This is an ambitious timeframe to agree on concrete parameters for the desired shift in quota share to dynamic emerging and developing countries of at least five percent from over-represented to under-represented countries using the current quota formula as the basis to work from. A series of papers will be provided for discussion by the Committee of the Whole in TB2, with a view to having good progress to report to the IMFC by the Spring Meetings. Meanwhile, I reiterate my call on members to ratify promptly the 2008 quota, voice, and income package.

9. Governance. In response to the IMFC’s request, the Board will discuss in TB1/TB2 a paper taking up selected issues identified in the Board’s report to the IMFC as warranting further consideration. A short report from the Board will update the IMFC on progress in governance reforms. Furthermore, in light of the IMFC’s intention to adopt at its next meeting an open and transparent process for selecting IMF management, I have consulted the Dean of the Executive Board. We agree that it would be appropriate for the Dean to form and lead a Working Group of Executive Directors on this topic, supported by a small staff secretariat.

D. Low-Income Country Agenda

10. Securing LIC positions. The recent overhaul in the IMF’s concessional lending framework was a major achievement. I also look forward to the full implementation of the new income model, including gold sales, and urge prompt contributions of loan and subsidy resources to support a doubling of the IMF’s concessional lending capacity. In addition, the Fund’s policy work on its most vulnerable members will continue to respond to their evolving needs in the wake of the crisis.

  • Debt sustainability. The outlook for debt sustainability in LICs in light of the crisis and medium-term global prospects warrants close monitoring. The Board will discuss the extent to which post-crisis policies in some LICs may need to adapt to preserve debt sustainability while supporting strong and sustainable growth (TB2).

  • Concessional eligibility and financing. The Board will discuss in December a paper on PRGF eligibility, focusing on whether and how low-income countries’ economic positions have altered over time, and whether there is scope for better targeting the Fund’s concessional resources. A review of the Fund’s concessional financing is scheduled for TB2.

III. Continuing Work of the Fund

11. Institutional soundness. Given a persistently demanding work program agenda since the start of the crisis, I have asked staff to prioritize our continuing work, with emphasis on initiatives promoting institutional strengthening and issues that are essential to the continuous smooth running and soundness of the Fund. In this regard, the Board will discuss papers relating to the following issues: (i) general policy work, including a paper on progress in the implementation of the Joint Management Action Plan on Bank-Fund Collaboration; a proposal for financial indicators that would be included in the Special Data Dissemination Standard (SDDS) on an encouraged basis (TB2) and a paper that will examine the effectiveness of the Fund’s AML/CFT program and proposals for strengthening its role in support of surveillance and capacity building (in TB3); (ii) budget, income and human resources, including an important reform of the Staff Retirement plan (TB1/TB2); (iii) Fund finances, including an initial discussion of asset allocation under the Fund’s broader investment mandate (in TB1); (iv) risk management; and (v) IEO matters, with a discussion of the Evaluation of the Fund’s Interactions with Members, and follow-up to this evaluation and the one of the Fund’s Approach to International Trade Policy.

12. In sum. This work program is ambitious but achievable and, in any case, necessary. The Fund’s ability to deliver the demanding tasks assigned to it has been a key to its resurgence and we must take care to not lose the momentum.

1

Time Bands refer to the following periods: TB1: through end-January 2010; TB2: February-April 2010; and TB3: May 2010 and after.

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Cover Policy Papers
Statement by the Managing Director on the Work Program of the Executive Board Executive Board Meeting November 4, 2009
Author:
International Monetary Fund
Volume/Issue:
Volume 2009: Issue 081
Publisher:
International Monetary Fund
ISBN:
9781498335317
ISSN:
2663-3493
Pages:
14
DOI:
https://doi.org/10.5089/9781498335317.007