Technical assistance: Conference focuses on financial stability and prudential regulation in the Pacific

The IMF’s Executive Board on May 15 approved an augmentation of Turkey’s three-year Stand-By Arrangement by SDR 6.4 billion (about $8 billion), bringing the total to SDR 15 billion (about $19 billion). The full text of Press Release 01/23, including details of Turkey’s economic program, is available on the IMF’s website (


The IMF’s Executive Board on May 15 approved an augmentation of Turkey’s three-year Stand-By Arrangement by SDR 6.4 billion (about $8 billion), bringing the total to SDR 15 billion (about $19 billion). The full text of Press Release 01/23, including details of Turkey’s economic program, is available on the IMF’s website (

Aconference entitled Financial Sector Stability and Development: The Case of the Pacific Island Countries was held in late February in Apia, Samoa. The conference was cosponsored by the IMF’s Office in Tokyo and the Pacific Financial Technical Assistance Centre (PFTAC)—a United Nations Development Program (UNDP) regional project executed by the IMF with cofinancing from Australia, New Zealand, the Asian Development Bank, the Pacific Forum, and Japan—in collaboration with the Samoan authorities. It brought together senior financial officials from the 12 Pacific island countries and representatives of the multilateral and bilateral donors active in the region.

Participants exchanged views on financial sector issues confronting the region and familiarized themselves with the recently introduced international standards, codes, and best practices, as well as the IMF’s Financial Sector Assessment Programs (FSAP) and Reports on Standards and Codes (ROSC) exercises. The conference was timely, because a number of Pacific island countries have experienced problems with various financial institutions in their jurisdiction, and some have been urged by the international community to strengthen the supervision of offshore banks and take measures against money laundering and related crimes. The conference thus provided an opportunity to develop a better mutual understanding of how these objectives might be achieved.

Financial sector

Participants emphasized the importance of better policy coordination between governments and central banks and early restructuring of weak banks, including through equity sales to foreign partners, as some Pacific island countries had done recently. Most participants agreed that reform of provident funds and development banks should also be expedited. More generally, participants reaffirmed that sustaining financial sector soundness and stability is essential for economic development in Pacific island countries.

Prudential and regulatory issues

Participants underscored the need for improved prudential regulation and supervision, complemented by better self-regulation and internal governance. These improvements are needed especially for financial institutions other than banks, because most banks in Pacific island countries are now foreign owned and supervised from abroad. Given limited resources, participants called for closer cooperation between supervisory bodies in the region and argued that the Pacific Islands Prudential Regulation and Supervision Initiative should be made operational. This issue will be discussed further during the 2001 Forum Economic Ministers Meeting in June in the Cook Islands. PFTAC, which has been promoting this initiative and serves as its Secretariat, will be assisting the group in preparing discussion points and developing agendas.

Offshore banking and money laundering

This topic sparked a particularly lively discussion. Financial officials from Pacific island countries with offshore financial centers generally accepted the need to meet international standards of regulation and supervision, including taking decisive action against money laundering and other illicit financial activities. However, they strongly objected to being “blacklisted” without being consulted and called for a more transparent and participatory discussion of their “wrongdoings,” in which they would be treated as equal partners in international arrangements. A representative of the Asia Pacific Group on Money Laundering helped explain the background to the “blacklisting” process and the roles of different organizations in this area.

Standards and codes

An IMF presentation reviewed FSAPs, ROSCs, and related international codes, standards, and best practices. This was the first opportunity for many officials from the Pacific island countries to hear about these initiatives in detail and to consider the implications for their countries. While they generally supported the objectives of the initiatives, they indicated they would need greatly increased levels of technical assistance to understand the implications of these standards for their countries and to adhere to them.

Review of technical assistance

The conference was followed by a one-day meeting to launch the Strategic Review of Technical Assistance in Economic and Financial Management in the Pacific. This review will assess the adequacy and appropriateness of current and planned economic and financial technical assistance to the region from all sources. Its findings will, among other things, help define the future responsibilities of PFTAC, for which all participants expressed strong support and which they see as playing a critical role in the prioritization and coordination of technical assistance in the region. At its January 5 meeting, the IMF’s Executive Board strongly supported the IMF’s intention to expand the use of regional arrangements as a means of better prioritizing technical assistance, fostering greater ownership of technical assistance operations, and ensuring more effective planning and implementation of technical assistance in coordination with others.

Members drawing on the IMF “purchase” other members’ currencies or SDRs with an equivalent amount of their own currency.

IMF Survey, Volume 30, Issue 10
Author: International Monetary Fund. External Relations Dept.