Press Release: IMF Interim Work Program Builds on Reform Progress, Focuses on Global Financial Stability
December 19, 2007
On December 14, 2007, the Executive Board of the International Monetary Fund (IMF) discussed the IMF's interim work program for the coming months. The program reflects the imperative of accelerating the process of reform that has progressed over the past 2½ years and underscores that, as the global economy and financial system evolve, the Fund is adapting to meet the needs of its members individually and as a whole.
"Enhancing the Fund's relevance and legitimacy and ensuring the Fund's financial soundness are our two critical priorities in the period ahead," IMF Managing Director Dominique Strauss-Kahn told the Board. "Addressing these challenges concurrently will provide an opportunity to re-establish the Fund as a focused, lean, and responsive organization."
Given the immediacy of work to refocus the IMF, the work program considered by the Executive Board provides an interim plan for the period through April 2008 that, by the time of the 2008 Spring Meetings, will provide a solid basis for taking stock of progress and priorities.
Surveillance. Recent events in advanced country credit markets have shown that domestic and international financial stability cannot be taken for granted. The Fund has a key role to play in helping members limit the impact of the recent credit market crisis, and in drawing lessons from this episode, which has slowed world growth and exposed weaknesses in the global financial infrastructure. The objective of making surveillance more effective at the country, regional and global level will be within reach provided the recently updated surveillance framework is implemented in a consistent and evenhanded manner and that issues are framed in a global context, in order to make better use of the Fund's unique advantage—its universal reach and macro-financial expertise.
During the coming months, Fund staff, working with other institutions, will address issues relating to off-balance sheet instruments, including their transparency, valuation, and accounting. Other issues to be addressed include the risk management practices and incentive structures related to complex structured products, the treatment of complex products by ratings agencies, the principles of prudential oversight for regulated financial entities, and liquidity management.
Assessment of current economic and financial market developments and prospects will be provided in the spring 2008 World Economic Outlook (WEO) and the Global Financial Stability Report (GFSR). The topics planned for WEO are economic cycles; monetary policy; globalization and low-income countries; and macroeconomic effects of climate change on the global economy. The GFSR's focus will on the potential repercussions of the ongoing financial market turbulence. Interim updates on World Economic and Market Developments and Financial Markets will be provided in late January. The Executive Board will also discuss issues for investors and recipients related to Sovereign Wealth Funds, including a dialogue on identifying best practices.
Quota and Voice. There is agreement that enhancing the legitimacy of the Fund will require emerging market and developing countries as a whole to have a more effective representation in the Fund. The Executive Board will continue the discussions held at end-October with the aim to move towards agreement on the package of reforms, including a new quota formula, the modalities for the second round of quota increases, and the increase in basic votes.
Income and Expenditure. Work on the technical aspects of a new income model is continuing with the aim to submit specific proposals to the membership for the necessary broad approval. Over the coming months, the Executive Board will discuss these issues, including the modalities for gold sales; further governance consideration regarding the Fund's investment activities; and the role of a dividend policy. Parallel to the work on a new income model, the Fund will take steps to improve efficiency and reduce administrative expenditures, including agreement on a new and detailed medium-term budgetary envelope.
Low-Income Members. The Fund will remain active in low-income countries, and work in this area will need to adapt to the changing needs of these members. The Executive Board will review Fund assistance to post-conflict countries and fragile states and consider the scope for more flexible and longer-term support with greater emphasis on capacity building.
Capacity Building. The Fund's efforts in aligning capacity building will require a more integrated approach that combines the objectives of member countries and the expertise of Fund departments with particular focus on the financial sector, public finance, and statistics. The Executive Board will consider the work on prioritizing, monitoring, costing, and evaluating technical assistance and explore options for expanding its financing.
Crisis Prevention. The Fund's support for crisis prevention has to consider developments in international capital flows and market access, which entails greater emphasis on financial and capital market issues, as well as continued country focus in the context of the Financial Sector Assessment Program and the Fund's work on standards and codes. The Executive Board will discuss the conclusions of a working group on future financial crises and their implications for the Fund's role in crisis prevention and resolution. Discussions will also continue on a new liquidity instrument for market access countries.