Transcript of a Press Briefing by Thomas Dawson,
June 8, 2001
Press Release on the Managing Director's Statement on the Work Program,
Statement by the Managing Director on the
Work Program of the Executive Board Executive Board Meeting
June 6, 2001
1. I am pleased to submit this statement on the Executive Board's Work Program, which covers in detail the period up to the Fall meetings and provides an indication of items until the Spring 2002 meetings. Given the shortness of the calendar until the Fall meetings, the workload in the next few months will be particularly heavy. I propose that we discuss the Work Program on June 6, 2001.1
A. Overview of the Work Program
2. I was gratified that in the IMFC communiqué of April 29, 2001, the membership sent a clear signal of support for the process of change in the Fund on which we have been working. At our informal discussion at lunch on May 22, 2001, Directors shared my view that over the coming period, the Fund's key policy areas should be:
The following paragraphs highlight the key topics for Board consideration in these and other areas.
B. Surveillance and Crisis Prevention2
3. The IMFC agreed that we need to do more to put crisis prevention at the heart of the Fund's activities. Effective crisis prevention will require us to sharpen our analysis, reach concrete conclusions, and use these more effectively in our policy advice, in order to heighten the impact of our surveillance at the country, regional and global levels.
4. As requested by the IMFC, we are giving high priority to our work on early warning of potential crises in individual countries and international financial markets. For this, we need to combine quantitative indicators of vulnerability with judgment from the field and from markets. We will also need to take care that warnings about potential crises do not become self-fulfilling prophecies. Much of what we plan to do in these areas will revolve around changes in our internal processes, including the work program of the new international capital markets department. In addition, we will request the Board to consider papers on the analytical underpinnings.
5. On June 25, the Board will consider a policy paper on macroprudential indicators. Background papers on selected analytical aspects of macroprudential indicators, and on the results of a survey of outside users and compilers of such indicators, will be made available as supplementary information for this discussion. This will be followed in September by a broader discussion on approaches to external vulnerability assessment. For this, a staff paper will bring together tools derived from recent experience and national balance sheet perspectives, which can be used to improve our assessments of external vulnerability and the risk of contagion, and the design of preventive measures. Accompanying material for that discussion will include technical papers on early warning systems in the Fund's work and on issues in reserves adequacy and management. A paper on reserve management guidelines, also for discussion in September, will provide additional material relevant to the framework discussion.
6. An important requirement of effective crisis prevention is the availability of sound data on which analysis can be based. The wider use of the Fund's data dissemination arrangements and the provision of reliable information to the Fund for surveillance purposes are key elements for such analysis. The Board will have an opportunity to review developments in these areas during the fourth review of the Fund's data standards initiatives in July; the discussion of strengthening the application of Article VIII, Section 5 in August; and the review of data provision to the Fund for surveillance in February 2002.
7. In the area of transparency, much has already been accomplished. A further Board discussion is planned for July 16 to review the experience thus far with the application of the uniform deletions policy, adopted in January 2001, under which a member may request the deletion of highly market-sensitive material from the published version of a staff paper on that country. The Board will review the experience with the Fund's transparency and publication policy prior to the Spring 2002 meetings.
8. The IMFC has called on the Fund to stand ready to help countries that wish to proceed with an orderly liberalization of their capital accounts. A seminar in July will provide an opportunity to examine recent experience of members seeking orderly liberalization that does not threaten financial sector stability. This should help us to come up with a proposal for an operational concept, including practical suggestions on sequencing of capital account liberalization and financial sector development.
9. The Fund will as always carry out a substantial program of Article IV consultations. In addition, informal sessions on World Economic and Market Developments (WEMD) will be held in June, August, and September, with the quarterly review of emerging market financing being part of the August discussion. The Board will discuss recent developments in international capital markets on June 28. The next semiannual discussion of the World Economic Outlook (WEO) is planned for September 5.
10. The next biennial review of surveillance by the Board, and a review of transparency policies, will be scheduled just prior to the Spring 2002 meetings.
C. Crisis Resolution and Private Sector Involvement3
11. The recent cases of Turkey and Argentina provided experience in the application of the framework for private sector involvement in the resolution of crises that the membership adopted in Prague. The IMFC asked for a continuation of work on the practical application of this framework. In this Work Program period, we will examine the relative treatment of the claims of official bilateral and private creditors on July 2, and countries' prospects for regaining access to capital markets, including the issue of debt sustainability, on July 6. The staff will also bring to the Board a paper on relations between investors and sovereign debtors on the basis of the work of the Capital Markets Consultative Group (CMCG) on this subject. In view of the strong interest in a broader review of the agreed framework, we are planning a seminar in early July with officials from member countries that have raised issues in the application of the framework—especially in the context of the cases of Turkey and Argentina—and selected academic experts. Through our various discussions, I am confident that we will come to solutions that strike the right balance between a rules-based approach and judgment based on the situation in individual country cases, and address concerns about moral hazard. A progress report to the IMFC will be discussed in September.
12. Early in 2002 the Board will consider a paper on a financial policy framework for the management of systemic banking crises, and the necessary elements to avoid such crises. The paper will update the lessons learned from the Asian crisis and draw on recent experiences with the banking crises in Turkey and Ecuador.
D. Financial Sector Issues and Money Laundering4
13. Together, the Financial Sector Assessment Program, our reviews of offshore financial centers, and the enhanced effort to combat money laundering represent a comprehensive approach to strengthening financial sectors in member countries—and thus, a key element in our efforts to safeguard the stability and integrity of the international financial system. I believe that we do need to accelerate our coverage of systemically important countries under the FSAP, and I hope that advanced countries, in particular, will lead by example.
14. As regards anti-money laundering issues, the work being launched has three aspects. The first is work on developing a methodology to deepen the assessment of supervisory principles in banking, securities, and insurance that are relevant to anti-money laundering.
15. A second area is the implementation, beginning this summer, of assessments of anti-money laundering issues on a pilot basis in selected FSAP cases. These assessments will vary in scope depending on the extent that money laundering issues are considered relevant for the country in question. Drawing on the above-mentioned methodology, they will focus primarily on the supervisory aspects and build on experience in actual cases that will provide a basis for subsequent adaptations of the methodology. The Board will have the opportunity to review these assessments of individual countries in the context of their consideration of FSSAs that draw on the relevant FSAP cases.
16. The third aspect is the intensification of staff discussions with the Financial Action Task Force (FATF). These discussions will aim to ensure that revisions to the FATF 40 Recommendations draw on the views and experience of the entire Fund membership, that relevant information is exchanged readily, and that FATF procedures are reviewed and adapted to make possible the preparation of a ROSC anti-money laundering module. To come to fruition this aspect is likely to require a considerable outreach effort as well as substantial time.
17. A first progress report on these issues, which will be preliminary in nature, will be prepared for a Board discussion in August. It will include the methodology for anti-money laundering assessments being developed in cooperation with supervisory experts in the relevant fields. A further progress report focusing on the process to revise the FATF 40 Recommendations and to integrate them into the ROSC process is planned for discussion prior to the Spring 2002 meetings.
18. At its last meeting, the IMFC welcomed the extension of the Fund's financial sector work to include voluntary assessments of offshore financial centers. A note for information on offshore financial centers will be provided in July, and a discussion of the Fund's OFC initiative is planned for early 2002.
E. Access, Conditionality and Ownership5
19. The IMFC urged the Board to continue its review of Fund conditionality on the basis of experience with the application of the interim guidelines on conditionality, input received from outside the Fund, and further analysis by the staff. One key issue to be addressed is where to draw the line between structural measures that are critical to achieving a program's macroeconomic objectives—which should be included under conditionality—and those that are relevant, but not critical—for which conditionality must be applied sparingly. A second issue is the need to reinforce an efficient division of labor with the World Bank and other agencies both with regard to advice and technical support for the design of structural policies and with regard to conditionality linked to their implementation.Other issues concern the application of the tools of conditionality, such as prior actions and waivers. Given the importance of these issues and the interlinkages among them, I suggest that our work in this area be undertaken in several steps.
20. A major discussion on streamlining conditionality is planned for July 25. For this discussion, the staff will circulate an overview paper assessing the initial experience with the streamlined approach being implemented in programs since September 2000. We also hope to have a second paper, prepared jointly by the Fund and the Bank staffs for the two Boards, setting out how conditionality related to structural reform in low- and middle-income economies might be divided between the two institutions. A third paper will summarize the initial feedback from the outreach to, and interaction with, a broad external audience, both at several planned conferences including in Berlin in June and in Tokyo in July, and through comments received on the Fund's external website. It is expected that these outreach efforts will throw additional light on the crucial but complex linkages between conditionality and ownership.
21. At a further round of discussion prior to the Annual Meetings the Board will consider the modalities of conditionality, including issues such as the scope for results-based conditionality and the role of prior actions and waivers. These discussions should provide a basis for making a substantive progress report for the IMFC's Fall 2001 meeting.
22. Following the Annual Meetings, it is expected that the Board will hold one or more discussions to review and, if warranted, modify the Guidelines on Conditionality. The aim should be to have a final version of the guidelines in place before the Spring 2002 meetings.
23. Other papers under this heading will include a review of access policy under the credit tranches and the EFF. The deadline for completing this review is end-June, but a further short extension of this deadline is likely to be needed to allow the staff to reflect in the papers the conclusions of the Board discussions on crisis resolution and private sector involvement in late June and early July. We will also need to take up at an appropriate time the issue of the appropriate criteria for choosing between the use of the Stand-By Arrangement and the Supplemental Reserve Facility in crisis situations. A review of the policy on side letters is planned for December. In March 2002, the Board will review the experience with, and next steps in the area of, safeguard assessments of central banks, which were introduced in July 2000 on a pilot basis. The review will take place together with an examination of the results of an independent evaluation of safeguard assessments by a panel of experts.
F. Poverty Reduction, PRSPs and HIPC/PRGF6
24. At their meetings last month, the IMFC and the Development Committee expressed strong support for the institutions' ongoing efforts to fight poverty and make progress toward the achievement of the International Development Goals. A discussion on the progress in the implementation of PRSPs planned for September will include the issues of social impact assessments and public expenditure management systems and monitoring. A discussion on an evaluation of the PRSP approach is planned for December. Both papers will be prepared jointly by the Fund and Bank staffs. We will continue our active cooperation with the UN in the preparation of the Financing for Development Event in 2002.
25. On the basis of papers to be prepared jointly with the Bank staff, two discussions are planned in relation to the HIPC Initiative, the first on information reporting in the HIPC context, in August, and the second on completion point considerations in September. The Board will review in September the six-monthly update on financing for the HIPC/PRGF Initiatives. A joint Fund/Bank staff paper on debt management in HIPCs is planned for October. In January, the Board will consider a joint Fund/Bank staff paper on action plans to strengthen public expenditure management capacities. We will also be implementing the Board's recent decisions to strengthen our support for HIPCs emerging from conflict.
G. Additional Topics
26. The IMFC requested the Fund to pay attention to the effects of trade policy developments and to continue to encourage trade liberalization in all its activities with its members, both developed and developing. A paper on Market Access for Developing Countries' Exports was issued to the Board for information in late April, and the upcoming WEO will feature developments and issues in the world trading system. In the context of country and regional surveillance, increased emphasis is being given to trade and market access issues. The staff will look again at its previous work on the fiscal revenue impacts of trade liberalization, in response to questions raised at the IMFC, to consider whether the previous conclusions remain valid. The Fund is also working closely with the World Bank, the WTO, and other agencies to reinvigorate the Integrated Framework for Trade-Related Technical Assistance, an initiative designed to improve the overall capacity of least-developed countries to respond to the challenges and opportunities offered by the world trading system.
27. We will have an opportunity to review technical assistance activities in January in the context of a discussion of the FY 2001 Technical Assistance Annual Report and a staff paper on technical assistance resource and policy issues. The latter will review Technical Consultations (TCs) and Technical Cooperation Action Plans (TCAPs) and resource issues related to intensified technical assistance in a number of priority areas, including post-conflict assistance, standards and codes, the FSAP, HIPC, and PRGF/PRSP initiatives, the offshore financial centers initiative, and the strengthened approach to money laundering.
28. A seminar on alternative quota formulas will be held in September. This discussion will be aimed at providing further direction to our work on quotas. A first look at the issues relating to the Twelfth General Review of Quotas will be presented at a seminar in December.
Administrative and financial topics9
29. A seminar on the findings of an external evaluation team examining the Fund's budgetary practices will take place on June 22. In preparation for the annual Board discussion in April on the FY 2003 Administrative and Capital Budgets, the Budget Committee will consider a paper on medium-term resource plans in January.
30. Following on the Board's recent approval of the continuation of the design and preconstruction phase of the HQ2 building project, the Board will consider a proposed budget for the project in November, when firm estimates for the total project cost will be available. The relevant committees will examine several proposals concerning the Staff Retirement Plan, the Medical Benefits Plan, and selected aspects of the staff compensation system, such as the comparatio.
31. The periodic reviews of the Fund's income position will take place in December and April.
32. The Board will shortly consider selected proposals for reducing work pressures, which take account of the need to ensure that such measures do not weaken Fund operations and procedures. Some of these proposals will require Executive Board approval, while others will be for information.
33. With the imminent establishment of the Evaluation Office (EVO), the Board is expected to consider the work program of the EVO in the period ahead.
1 This statement should be read in conjunction with attached Charts 1 and 2, which provide an overview of the main policy items proposed for discussion, as well as Tables A through J, which detail the items in the proposed Work Program.
2 See Tables A and B. It should be noted that, in addition to the items noted in this section, informal seminars, with background documentation, will be held on the methodology for current account and exchange rate assessments (June 15); exchange rate regime choice in developing countries (December); and the methodology for measuring potential output (March 2002).
3 See Table C.
4 See Table D.
5 See Table E.
6 See Tables F and G.
7 See Table H.
8 See Table I.
9 See Table J.