IMF Convenes First Annual Roundtable of Sovereign Asset and Reserve ManagersPress Release No. 07/267
November 16, 2007
The International Monetary Fund (IMF) convened its first annual Roundtable of Sovereign Asset and Reserve Managers in Washington, D.C. on November 15-16, 2007. The Roundtable—which is designed to facilitate the exchange of ideas and experiences in asset and reserve management—was attended by high level delegates from central banks, ministries of finance and sovereign asset managers from 28 countries.
The purpose of the inaugural Roundtable, which was organized by the IMF's Monetary and Capital Markets Department in collaboration with other Fund departments, was to exchange ideas about how best to address the policy and operational issues faced by managers of growing reserves and sovereign assets.
The discussions covered trends in reserve accumulation and their implications for central bank balance sheets. International reserve holdings have grown dramatically in recent years. Global reserve holdings are currently around US$6 trillion compared to less than US$2 trillion a decade ago. The average ratio of reserves to short-term external debt in emerging market countries is now around 3.5 compared to a traditional benchmark of 1; in terms of import cover, emerging market countries have about 9 months of imports, which appear ample by most measures. Against this backdrop, questions about how best to manage international assets, to ensure that institutional and risk management structures are sound, and their investment objectives are clear have taken on increased importance.
In this regard, participants discussed options that countries are considering when reserve assets are ample, including: the buying back of the country's foreign currency obligations; creating an asset/liability management framework and risk sharing arrangement between the central bank and government; and the establishment of special institutional arrangements, such as sovereign wealth funds (SWFs). Sharing country experience in this area is highly relevant, as many countries are addressing these issues at present.
In regard to SWFs, the Communiqué of the International Monetary and Financial Committee issued on October 20, 2007 called on the IMF to engage in a dialogue with countries on identifying sound practice in the management of SWFs. As a step in responding to the IMFC's call for a dialogue on sound practices, discussion was held with the SWFs to learn from their experience and views.
It was decided to continue the dialogue both in terms of addressing the policy, institutional and operational issues facing reserves and sovereign wealth managers.
IMF Managing Director Dominique Strauss-Kahn, who addressed the opening session of the conference, noted that "a process is underway to define a role for the Fund on the issue of how SWFs can be managed in ways that are consistent with global financial stability." He also underlined that some form of agreement on best practices from the operations of SWFs could help maintain an open global financial system, and discourage recipient countries from imposing unilateral restrictions on capital flows. The Managing Director stressed the importance of "a candid and continuing dialogue with countries in order to get a better picture of the concerns and constraints they face."