## THE MANAGING DIRECTOR’S Spring 2018 UPDATE: The Window of Opportunity Remains Open

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**Canonical URL:** [THE MANAGING DIRECTOR’S Spring 2018 UPDATE: The Window of Opportunity Remains Open](https://www.imf.org/-/media/files/publications/pp/gpa/2018/pdf/sm2018-gpa-041918.pdf)

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### Global setting
- Momentum behind the cyclical global expansion "remains strong" but "escalating trade conflicts and financial market volatility highlight downside risks beyond the next several quarters."
- Recent developments and risks:
  - Broad-based upswing aided by a rebound in global trade and investment.
  - Escalating trade conflicts could threaten momentum.
  - Procyclical fiscal policies in some countries with excess current account deficits, combined with persistent excess current account surpluses in others, "will likely widen global imbalances, posing a medium-term risk."
  - Population aging and sluggish reforms are "dampening potential growth in advanced economies."
  - Structural challenges delay income convergence of many emerging and developing economies toward advanced economies.
  - Income disparities have widened and "growth also needs to become more inclusive."
  - Financial market vulnerabilities from "stretched valuations and rising leverage" could be exposed by a sudden adjustment in market expectations about the future path of monetary normalization.
  - Countries with limited room to maneuver, including due to high debt, could be hit hardest if market conditions turn.
  - Many low-income countries (LICs) and fragile states are affected by conflicts and natural disasters.

### Policy advice and economic analysis
- Macroeconomic policy priorities to sustain the upswing:
  - "Enhance financial sector resilience, rebuild policy space, and undertake necessary structural reforms."
  - Fiscal policy: rebuild buffers, improve government balances, and anchor public debt while addressing infrastructure needs, investing in workforce skills, and supporting medium-term growth.
  - Monetary policy: "Monetary policy stimulus should be gradually withdrawn where inflation looks set to return to the central bank’s target."
  - Financial regulation: fill gaps in macroprudential toolkits to complement microprudential measures to counter financial market risks, including from prolonged low interest rates.
- Structural reform focus:
  - Raise medium-term growth prospects, combat slowing income convergence, support diversification, and ensure technology and global integration benefits are widely shared.
  - Continue discussions on governance with analysis of the growth effects of governance and corruption.
  - Assess the impact of demographics on pension system sustainability.
  - Study how gender diversity and higher female labor force participation impact structural change and growth.
  - Highlight robust fiscal policies for climate change mitigation and adaptation.
- Digitalization and technological change:
  - Develop a comprehensive work program to assess opportunities and challenges of technological progress and digitalization, including effects on productivity, labor and financial markets, fiscal policy, and the effectiveness of monetary policy.
  - Plan significant collaboration with other international and national institutions, as well as the private sector.
- Analytical work forthcoming:
  - Forthcoming analysis will "help illustrate remaining crisis legacies and policy gaps ten years after the global financial crisis."

### Contributions to global stability
- Trade and global imbalances:
  - Countries should "promote an open and rules-based multilateral trade system that works for all, and to durably reduce excess global imbalances."
  - The Fund will conduct an assessment of excess global imbalances and exchange rates in the 2018 External Sector Report based on an updated External Balance Assessment methodology.
- International cooperation and standards:
  - Continue to learn from experience with the Institutional View on capital flows to offer guidance on its application.
  - Foster cooperation with Regional Financing Arrangements.
  - Analyze challenges for the international monetary system and the global financial safety net (GFSN).
  - Support standard setters to complete the global financial regulatory reform agenda and leverage expertise on financial technology, crypto assets, and cyber threats.
  - Continue engagement in the international tax debate following discussions of corporate taxation.
- Debt transparency and LIC support:
  - Adopt a multi-pronged approach to enhance debt transparency and address LIC debt problems, including supporting domestic resource mobilization.
  - Monitor developments in correspondent banking relationships and "promote practical solutions" with other stakeholders.
  - Establish a framework to guide Fund engagement in social protection issues with other institutions.
- Multilateral engagement:
  - Provide diagnostics and policy recommendations on the G-20’s progress toward strong, sustainable, balanced and inclusive growth.
  - Support the Argentinean Presidency on topical issues including the future of work.
  - Support progress toward the 2030 sustainable development goals (SDGs) by analyzing fiscal implications of health, education and infrastructure reforms; work with the UN, OECD, and World Bank on the Platform for Collaboration on Tax; support the G-20’s Compact with Africa; and strengthen support for countries vulnerable to natural disasters.

### Fund policies
- Surveillance and risk monitoring:
  - Building on the Interim Surveillance Review, the Fund will "improve its surveillance to enhance traction and adapt to emerging challenges."
  - Work with the FSB on the G-20 Data Gaps Initiative and implement the Fund’s strategy for data and statistics for surveillance to strengthen risk monitoring.
  - Continue efforts to enhance financial integrity and resilience, including review of the Fund’s AML/CFT program.
- Policy frameworks and program design:
  - Analyze how to manage risks to public sector balance sheets.
  - Study the effectiveness of macroprudential policies in mitigating financial risks.
  - Review the debt sustainability framework for countries with market access.
  - Consider refinements to policies on multiple currency practices.
  - Review conditionality and the design of Fund-supported programs to "enhance traction and performance."
  - Implement the LIC Debt Sustainability Framework and consider modifications to the Fund’s LIC facilities, including enhanced support for small and fragile states.
- Capacity development:
  - Further strengthen CD activities, benefit from strategic partnerships with a wider group of donor countries, and integrate CD with surveillance and policy advice in a results-based framework to help members meet the SDGs and other challenges.
  - Operationalize a new China-IMF CD center.

### Governance and internal organization; financing
- 15th General Review of Quotas:
  - The 15th General Review of Quotas is due to be completed in 2019.
  - Work will build on discussions of the size and composition of Fund resources and the quota formula to maintain a strong, quota based and adequately resourced Fund at the center of the GFSN, realigning quota shares with members’ relative positions in the world economy while protecting the share of our poorest member countries.
  - Aim to complete the 15th Review "by the Spring Meetings, and no later than the Annual Meetings, of 2019."
- Institutional modernization:
  - Develop a new human resource strategy for an agile, diverse, and inclusive workforce focused on modern performance management and career development.
  - Implement a new knowledge management strategy to better leverage institutional experience.
  - Strengthen internal risk management and progress toward a digital platform to facilitate policy consistency, cross-country work, and enhance process and operational efficiency.

### Annex — Key IMF Activities since the Fall 2017 GPA
- Examined drivers and prospects of labor force participation in advanced economies.
- Investigated the implications for poverty and inequality of declining manufacturing jobs.
- Examined Second Generation Fiscal Rules.
- Studied the impact of globalization on international technology diffusion.
- Investigated the potential impact of digitalization on fiscal policy.
- Explored whether the riskiness of credit allocation is a source of financial vulnerability.
- Examined the role for financial factors in international house price synchronization.
- Continued work on measurement issues in a digital economy.
- Examined trade-offs in bank resolution.
- Studied inequality and poverty across generations in Europe.
- Held the 18th Annual Research Conference on The Global Financial Cycle.
- Held the Opportunity for All Conference to promote inclusive growth in the Arab World.
- Presented methodological and presentational refinements to external assessments.
- Delivered a paper for the G-20 on the Future of Work.
- Discussed trends in, and the impact of digitalization for, international taxation.
- Discussed trends in correspondent banking relationships.
- Considered the role of the SDR in the international monetary system.
- Published a database on macroprudential measures.
- Conducted the Interim Surveillance Review.
- Updated and clarified the role of the Fund in governance issues.
- Discussed a framework for the use of third party indicators in Fund reports.
- Set out an overarching strategy for data and statistics at the Fund in the digital age.
- Reviewed the Flexible Credit Line and Precautionary and Liquidity Line.
- Discussed program design in Currency Unions.
- Issued guidance on the new LIC debt sustainability framework.
- Continued work on the 15th General Review of Quotas.
- Initiated work on the Fund’s digital strategy, including an internal digital platform.
- Progressed work on human resource and knowledge management strategies.

*Source: THE MANAGING DIRECTOR’S Spring 2018 UPDATE — The Window of Opportunity Remains Open (sm2018-gpa-041918).*

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_Source: https://www.imf.org/-/media/files/publications/pp/gpa/2018/pdf/sm2018-gpa-041918.pdf_