## _file13pdf - 109.6 percent to achieve a net ## Source details **Canonical URL:** [_file13pdf - 109.6 percent to achieve a net](https://www.imf.org/-/media/websites/imf/imported-flagship-issues/external/pubs/ft/ar/98/pdf/_file13pdf.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-flagship-issues/external/pubs/ft/ar/98/pdf/_file13pdf.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-flagship-issues/external/pubs/ft/ar/98/pdf/_file13pdf.pdf.json) --- ### Main Developments in the World Economy — Japan and Asia-Pacific advanced economies - Activity in Japan: - Picked up in early 1997 but "declined sharply in the second quarter and picked up only weakly during the remainder of the year." - Causes of the pre-midyear loss of growth: "domestic factors, including an increase in the consumption tax in April 1997, cuts in public spending, and financial sector fragility." - Latter part of 1997: "concerns about the Asian crisis and about the domestic financial sector, together with a renewed softening of equity prices, contributed to continued weakness in domestic spending." - For the year as a whole, "GDP grew by #/4of 1 per-cent." - Japanese policy responses: - Announced "a large fiscal stimulus package in April 1998." - Made "public money available to strengthen deposit insurance and boost bank capital." - Uncertainties remained "about how the banking sector measures would be implemented." - In July 1998, a "Comprehensive Plan for Financial Revitalization" announced measures including a "bridge bank” facility and steps "to strengthen bank supervision and increase transparency." - Other advanced Asia-Pacific economies were generally in stronger cyclical positions than Japan when the Asian crisis erupted. ### Main Developments in the World Economy — Developing countries: overview and regional impacts - Aggregate growth: "In the developing countries as a group, economic growth slowed to 5#/4percent in 1997 from about 6!/2percent in 1996." - Slowdown patterns: - "The slowdown was significant in Asia, but most marked in Africa." - Western Hemisphere developing countries: "growth in 1997 was actually stronger than in the previous two years but weakened in the first quarter of 1998." - Causes of slower growth in many developing countries: "spillovers from the Asian crisis and policy measures to reduce vulnerability to adverse shifts in investor sentiment and to widening current account deficits," together with "loss of competitiveness, lower commodity prices, and domestic and external imbalances." ### Asia — country highlights - China: - "Financial markets in China remained relatively immune to the contagion effects of the crisis." - Reasons cited: "appropriate macro-economic policies undertaken since 1993," capital inflows "mainly of direct investment with limited vehicles for financial speculation," and "large foreign exchange reserves." - "While China’s real exchange rate appreciated somewhat as a result of the currency depreciations of its Asian trading partners, its trade position remained strong and the current account continued in surplus." - Authorities "remained committed to not devaluing the renminbi." - "Inflation remained low following the sharp drop in 1997." - India: - "Output growth declined to about 6 percent in 1997 from about 7!/2percent in 1996." - "The rupee weakened against the dollar in late 1997, partly because of spillovers from the regional crisis, but its exchange value was little changed on a real multilateral basis." - Pakistan: Government "adopted a program to strengthen macroeconomic policies and implemented structural reforms following the widening of macroeconomic imbalances and the threat of a foreign exchange crisis in late 1996 and early 1997." ### Latin America — country highlights - Brazil: "Consumer price inflation declined ... to 4!/4percent in 1997, while output growth at 3 percent remained much the same as in the previous year." Authorities tightened policies in October–November 1997 in response to Asian spillovers. - Argentina: "Output grew by a robust 8!/2 percent, while prices remained broadly stable"; financial pressures emerged in October with "a significant stock market correction and widening spreads on sovereign debt." - Mexico: "The Asian crisis led to a marked increase in exchange market and inter-est rate volatility." A substantial temporary increase in interest rates helped stabilize the exchange rate, but "the peso fell against the dollar in February 1998." - Chile: "The peso came under pressure in December but stabi-lized by late January after moderate foreign exchange market intervention and a sizable increase in interest rates." ### Middle East, Europe, and Africa — country highlights - Middle East and Europe region: "Direct spillovers from the Asian crisis were limited, with temporary declines in equity prices in some countries and a widening of interest spreads on internationally traded debt." - Islamic Republic of Iran: "Real GDP growth slowed to 3!/4percent in 1997 from 4#/4percent in 1996," reasons include "stagnant non-oil exports, cutbacks in government capital expenditure associated with a decline in oil revenue, and delays in structural reforms." - Turkey: "Growth continued close to 7 percent in 1997." - Egypt: "Growth pick up to 5 percent" following macroeconomic stabilization and structural reform. - Jordan: "Continued robust growth in output, further declines in inflation, and a narrowing current account deficit." - Africa: "Economic growth in Africa in 1997 was just 3!/4 percent." The disappointing outcome reflected "poor weather, declines in commodity prices, and, in a few cases," other shocks. ### Initiative for Heavily Indebted Poor Countries (HIPC) — structure and stages - First Stage: - Paris Club: "flow rescheduling on Naples terms, that is, rescheduling of debt service on eligible debt falling due during the three-year consolidation period (up to 67 percent reduction on eligible maturities on a net present value basis)." - "Other bilateral and commercial creditors provide at least comparable treatment." - "Multilateral institutions continue to provide adjustment support in the framework of World Bank– and IMF-supported adjustment programs." - Country establishes "first three-year track record of good performance." - Decision Point: - If Paris Club stock-of-debt operation "judged not sufficient for the country’s overall debt to become sustainable by the completion point—country requests additional support under the HIPC Initiative and IMF and World Bank Boards determine eligibility." - Eligible Exit: - If Paris Club operation "judged adequate for the country to reach sustainability by the completion point—country not eligible for HIPC Initiative." - Borderline cases: - Receive "further flow reschedulings under Naples terms." - If completion point outcome is worse than projected, "the country could receive additional support under the HIPC Initiative." - Second Stage: - "Paris Club goes beyond Naples terms to provide more concessional debt reduction of up to 80 percent in present value terms." - "Other bilateral and commercial creditors provide at least comparable treatment." - "Donors and multilateral institutions provide enhanced support through interim measures." - Country establishes "a second track record of good performance under IMF- and Bank-supported programs." - Completion Point: - "All creditors take coordinated action to provide sufficient assistance to reduce the country’s debt to a sustainable level." - Paris Club provides "deeper stock-of-debt reduction of up to 80 percent in present value terms on eligible debt." - "Multilateral institutions take action to reduce the net present value of their claims, taking into account the assistance provided by nonmultilateral creditors and their own preferred creditor status." ### Technical assistance and training - Member demand for IMF technical assistance and training "remained strong in 1997/98." - Focus areas: "monetary and fiscal aspects of macroeconomic management," "statistics, financial law, IMF financial organization and operations, and information technology." - Delivery: "IMF staff and the assignment of short- and long-term advisors"; coordination by the Technical Assistance Committee. - IMF Institute programs (1997/98) included: - "Basic, intermediate, and advanced courses on financial programming and policies." - "Shorter courses on such specialized topics as exchange rate policies and monetary and inflation targeting." - "A high-level seminar on trade reform and regional integration in Africa." - Other departments (Fiscal Affairs, Monetary and Exchange Affairs, Policy Development and Review, and Statistics) conducted seminars and courses in collaboration with the Institute. - Overseas training "continued to focus on issues related to the formulation and implementation of economic adjustment programs." - Figure 5 composition of technical assistance, 1997/98 (percent of total resources in effective person-years): "Monetary and exchange affairs (39), Fiscal affairs (34), Statistics (14), IMF Institute (4), Legal (4), Other (5)." ### IMF financial operations, resource use, and credit outstanding (1997/98 highlights) - Members’ purchases from the GRA (excluding reserve tranche purchases) in 1997/98: "amounted to SDR 19.0 billion, nearly four times the 1996/97 level of SDR 4.9 billion." - Composition: "SDR 16.1 billion under Stand-By Arrangements (compared with SDR 1.8 billion in 1996/97) and SDR 2.8 billion under Extended Arrangements (SDR 2.8 billion in 1996/97)." - Purchases under emergency postconflict assistance: "SDR 30 million"; "no purchases were made under the Compensatory and Contingency Financing Facility (CCFF) (SDR 0.3 billion in 1996/97)." - Largest users of IMF resources in 1997/98: - Korea: "drew SDR 11.2 billion, including SDR 7.1 billion under the SRF." - Indonesia: "SDR 2.2 billion." - Thailand: "SDR 2.0 billion." - Russia: "SDR 1.5 billion." - Other significant purchasers: "the Philippines (SDR 0.8 billion), Algeria (SDR 0.3 billion), Argentina (SDR 0.2 billion), Bulgaria (SDR 0.2 billion), and Ukraine (SDR0.2 billion)." - By region: "purchases by Asian countries amounted to SDR 16.2 billion and purchases by European countries (including the Baltic States, Russia, and other countries of the former Soviet Union) amounted to SDR 2.0 billion. Purchases by Latin American, Middle Eastern, and African countries combined totaled SDR 0.7 billion." - Repurchases in the GRA during 1997/98: "SDR 3.8 billion, compared with SDR 6.7 billion in the previous financial year." - Largest repurchases: "Argentina (SDR 0.5 billion); India, Mexico, and Russia (roughly SDR 0.4 billion each); and Algeria, South Africa, and Venezuela (roughly SDR 0.3 billion each)." - Actual repurchases were higher than scheduled (scheduled level "SDR 3.5 billion") due to "a repurchase by Algeria as a result of CCFF overcompensation (SDR 0.2 billion) and a voluntary advance repurchase by Hungary (SDR 0.1 billion)." - Special Reserve Facility (SRF): - Designed "to respond to a large short-term financing need resulting from a sudden and disruptive loss of market confidence." - SRF drawings "are made within the context of a Stand-By or Extended Arrangement" and repurchases under the SRF are "expected within 1–1!/2years of each purchase, although the Board may extend this period by up to one year." - SRF net operational income generated during 1997/98: "SDR 65 million (after meeting the expenses of administering the ESAF Trust)"; amount placed to the General Reserve. ### ESAF, ESAF-HIPC Trust, and concessional financing - ESAF Trust: - Enlarged and extended ESAF Trust target for total loan resources: "SDR 10.1 billion." - "Total effective commitments by lenders to the ESAF Trust amounted to SDR 9.7 billion as of April 30, 1998." - Commitment period for loans runs "through December 31, 2000, with disbursements to be made through the end of 2003." - Subsidy Account enables loans at concessional rate "currently 0.5 percent a year." - "The total value of bilateral subsidy contributions is estimated at SDR 3.7 billion." - IMF transferred "SDR 0.4 billion from the SDA to the Subsidy Account in early 1994" (valued at "SDR 0.6 billion" including interest). - Availability of resources in the Subsidy Account, net of subsidies already paid, rose "from SDR 1,562 million as of April 30, 1997, to SDR 1,629 million as of April 30, 1998." - ESAF Trust made interest payments of "SDR 172 million to lenders in 1997/98, of which SDR 23 million was financed by payments of interest by borrowers from the Trust and the balance of SDR 149 million was drawn from the resources of the Subsidy Account." - ESAF-HIPC Trust: - "Established in February 1997 to make grants or loans, or both, to eligible members that qualify for assistance under the Initiative for Heavily Indebted Poor Countries (HIPC) and to subsidize the interest rate on interim ESAF operations to ESAF-eligible members." - Contributions to the Trust received from six countries. - Board actions to support HIPC implementation: - Amended ESAF Trust Instrument to permit transfer "of up to SDR250 million from the Reserve Account of the ESAF Trust to the SDA for financing special ESAF operations." - Board forgone reimbursement to the GRA of ESAF administration costs in 1997/98 and transferred "SDR 40.7 million from the ESAF Trust Reserve Account to the ESAF-HIPC Trust." - Decided that "no reimbursement would be made to the GRA in 1998/99 and authorized quarterly transfers totaling an estimated SDR 45 million from the ESAF Trust Reserve Account to the ESAF-HIPC Trust." - April 1998: "Uganda reached its completion point under the HIPC Initiative and SDR 51.5 million was disbursed in the form of a grant," placed in an administered account to service part of Uganda’s IMF debt. - "Resources available to the ESAF-HIPC Trust from bilateral contributions (including accrued interest) amounted to SDR 3.6 million at the end of April 1998." ### Income targets, rate of charge, and 1997/98 adjustments - Target net income: "SDR 99 million (or 5 percent of the IMF’s reserves at the beginning of the financial year)." - Initial proportion of the rate of charge to the SDR interest rate set at "109.6 percent to achieve the target." - Midyear review adjustment: proportion reduced retroactively to "107.0 percent for 1997/98"; "SDR 31 million returned to members that had paid charges through the third quarter of the financial year." - End-of-year adjustment: actual income exceeded target by "SDR22 million; excess returned to members that paid charges during the year"; proportion of the rate of charge to the SDR interest rate reduced retroactively to "105.6 percent for 1997/98." - Average rate of charge on the use of IMF resources in 1997/98: "4.41 percent (before adjustments for burden sharing)." ### Supplemental Reserve Facility (SRF) surcharge schedule and income - SRF surcharge schedule: - First year from date of approval of financing under the SRF: surcharge set at "300 basis points above the basic rate of charge." - At the end of the first year, and every six months thereafter, surcharge increases by "50 basis points" until it reaches "500 basis points." - Net operational income generated from SRF use during 1997/98: "SDR 65 million (after meeting the expenses of administering the ESAF Trust)"; this amount was placed to the General Reserve. ### Remuneration on member holdings and rates - Remuneration paid to a member on the amount by which its norm for remuneration exceeds the IMF’s holdings of its currency (excluding holdings reflecting the member’s use of IMF credit). - Norm for remuneration calculation: - For members with quota on April 1, 1978: sum of "75 percent of the member’s quota on April 1, 1978, plus any increases in quota consented to and paid after that date." - For members joining after April 1, 1978: sum of "(1) a percentage of the member’s quota equal to the weighted average of the norms of all existing members relative to quota on the date of admission, and (2) any increases in quota consented to and paid after that date." - Rate of remuneration (before burden-sharing adjustments): set at "100 percent of the SDR interest rate, which averaged 4.18 percent in 1997/98." ### Measures to strengthen the IMF’s financial position and burden sharing - Two principal measures: - Annual target amount of net income determined to be added to IMF reserves to protect against administrative deficits and losses of a capital nature. - Debtor and creditor members share equally—through adjustments to the rate of charge and the rate of remuneration—the financial costs to the IMF of deferred overdue charges and of the allocation to the first Special Contingent Account (SCA-1). - SCA-1 specifics for 1997/98: - Set at "5 percent of reserves at the beginning of the year (SDR 99 million)." - Burden-sharing adjustments cannot reduce the rate of remuneration to less than "85 percent of the SDR interest rate." - Purpose: established as a precautionary measure to protect the IMF against the risks associated with overdue obligations. - SCA-1 balances as of April 30, 1998: "SDR 884 million." - Burden-sharing procedures extended by the Board through 1998/99. ### Staffing, administrative budget, and response to the Asian financial crisis - 1998/99 Administrative Budget includes an increase of "32.5 positions in the authorized staffing level" to: - Meet the "very heavy workload associated with the financial crisis in Asia that was not anticipated in the previous medium-term plan." - Address other priority work activities. - Increase the number of participants in the IMF’s Economist Program. - Intended effects of the increase in authorized staffing: - Attend to priority work activities. - Reduce the very high level of uncompensated overtime being worked by many staff. - Reduce accumulated leave balances. - Medium-term staffing strategy: - Additional positions authorized to carry out work on the Asian crisis will be eliminated once the crisis has abated and work returns to more normal levels. - One-time increase in intake of economists into the Economist Program intended to expand IMF flexibility over the medium term and rebuild economist ranks. - Budgetary consolidation policy: - Despite the increase in authorized staffing, the 1998/99 budget maintains the existing policy of budgetary consolidation by keeping administrative expenses relatively flat in real terms compared with the 1997/98 budget. - Capital Budget: continuation of plans for completing major building projects, replacing older facilities and electronic data-processing equipment, and other medium-term programs. ### Building projects and occupancy - Addition to the headquarters building (Phase III) essentially completed; in March 1998 staff began moving out of leased space into the building. - PEPCO building (Phase IV) adjacent to headquarters will be ready for occupancy after the current tenant vacates and renovations are completed. - Completion of Phase IV will result in staff housed in two immediately adjacent buildings owned by the IMF and will reduce overall occupancy costs and realize the IMF’s long-term space and budget strategies. *Excerpted content unit from the IMF Annual Report 1998 (selected pages).* ### 1997. But activity declined sharply in the second quar- ### Main Developments in the World Economy (excerpt) ### Japan and Asia-Pacific advanced economies - Activity in Japan picked up in early 1997 but "declined sharply in the second quar-ter and picked up only weakly during the remainder of the year." - Causes of the pre-midyear loss of growth: "domestic factors, including an increase in the consumption tax in April 1997, cuts in public spending, and financial sector fragility." - Latter part of 1997: "concerns about the Asian crisis and about the domestic financial sector, together with a renewed softening of equity prices, contributed to continued weakness in domestic spending." - For the year as a whole, "GDP grew by #/4of 1 per-cent." - Japanese policy responses: - "announcing a large fiscal stimulus package in April 1998" - "making public money available to strengthen deposit insurance and boost bank capital" - Uncertainties remained "about how the banking sector measures would be implemented." - In July 1998, a "Comprehensive Plan for Financial Revitalization" announced measures including a "bridge bank” facility and steps "to strengthen bank supervision and increase transparency." - Other advanced Asia-Pacific economies were generally in stronger cyclical positions than Japan when the Asian crisis erupted. ### Developing countries — overview and regional impacts - Aggregate growth: "In the developing countries as a group, economic growth slowed to 5#/4percent in 1997 from about 6!/2percent in 1996." - The slowdown was "significant in Asia, but most marked in Africa." - Western Hemisphere developing countries: "growth in 1997 was actually stronger than in the previous two years but weakened in the first quarter of 1998." - Causes of slower growth in many developing countries: "spillovers from the Asian crisis and policy measures to reduce vulnerability to adverse shifts in investor sentiment and to widening current account deficits," together with "loss of competitiveness, lower commodity prices, and domestic and external imbalances." ### Asia — country highlights - China: - "financial markets in China remained relatively immune to the contagion effects of the crisis" - Reasons: "appropriate macro-economic policies undertaken since 1993," capital inflows "mainly of direct investment with limited vehicles for financial speculation," and "large foreign exchange reserves." - "While China’s real exchange rate appreciated somewhat as a result of the currency depreciations of its Asian trading partners, its trade position remained strong and the current account continued in surplus." - Authorities "remained committed to not devaluing the renminbi." - "inflation remained low following the sharp drop in 1997." - India: - "output growth declined to about 6 percent in 1997 from about 7!/2percent in 1996." - "The rupee weakened against the dollar in late 1997, partly because of spillovers from the regional crisis, but its exchange value was little changed on a real multilateral basis." - Pakistan: government "adopted a program to strengthen macroeconomic policies and implemented structural reforms following the widening of macroeconomic imbalances and the threat of a foreign exchange crisis in late 1996 and early 1997." ### Latin America — country highlights - Brazil: "consumer price inflation declined ... to 4!/4percent in 1997, while output growth at 3 percent remained much the same as in the previous year." Authorities tightened policies in October–November 1997 in response to Asian spillovers. - Argentina: "output grew by a robust 8!/2 percent, while prices remained broadly stable"; financial pressures emerged in October with "a significant stock market correction and widening spreads on sovereign debt." - Mexico: "the Asian crisis led to a marked increase in exchange market and inter-est rate volatility." A substantial temporary increase in interest rates helped stabilize the exchange rate, but "the peso fell against the dollar in February 1998." - Chile: "the peso came under pressure in December but stabi-lized by late January after moderate foreign exchange market intervention and a sizable increase in interest rates." ### Middle East, Europe, and Africa — country highlights - Middle East and Europe region: "direct spillovers from the Asian crisis were limited, with temporary declines in equity prices in some countries and a widening of interest spreads on internationally traded debt." - Islamic Republic of Iran: "real GDP growth slowed to 3!/4percent in 1997 from 4#/4percent in 1996," reasons include "stagnant non-oil exports, cutbacks in government capital expenditure associated with a decline in oil revenue, and delays in structural reforms." - Turkey: "growth continued close to 7 percent in 1997." - Egypt: "growth pick up to 5 percent" following macroeconomic stabilization and structural reform. - Jordan: "continued robust growth in output, further declines in inflation, and a narrowing current account deficit." - Africa: "Economic growth in Africa in 1997 was just 3!/4 percent." The disappointing outcome reflected "poor weather, declines in commodity prices, and, in a few cases," other shocks. ### Initiative for Heavily Indebted Poor Countries (HIPC) — structure and stages - First Stage: - Paris Club: "flow rescheduling on Naples terms, that is, rescheduling of debt service on eligible debt falling due during the three-year consolidation period (up to 67 percent reduction on eligible maturities on a net present value basis)." - "Other bilateral and commercial creditors provide at least comparable treatment." - "Multilateral institutions continue to provide adjustment support in the framework of World Bank– and IMF-supported adjustment programs." - Country establishes "first three-year track record of good performance." - Decision Point: - If Paris Club stock-of-debt operation "judged not sufficient for the country’s overall debt to become sustainable by the completion point—country requests additional support under the HIPC Initiative and IMF and World Bank Boards determine eligibility." - Eligible Exit: - If Paris Club operation "judged adequate for the country to reach sustainability by the completion point—country not eligible for HIPC Initiative." - Borderline cases: - Receive "further flow reschedulings under Naples terms." - If completion point outcome is worse than projected, "the country could receive additional support under the HIPC Initiative." - Second Stage: - "Paris Club goes beyond Naples terms to provide more concessional debt reduction of up to 80 percent in present value terms." - "Other bilateral and commercial creditors provide at least comparable treatment." - "Donors and multilateral institutions provide enhanced support through interim measures." - Country establishes "a second track record of good performance under IMF- and Bank-supported programs." - Completion Point: - "All creditors take coordinated action to provide sufficient assistance to reduce the country’s debt to a sustainable level." - Paris Club provides "deeper stock-of-debt reduction of up to 80 percent in present value terms on eligible debt." - "Multilateral institutions take action to reduce the net present value of their claims, taking into account the assistance provided by nonmultilateral creditors and their own preferred creditor status." ### Technical assistance and training - Member demand for IMF technical assistance and training "remained strong in 1997/98." - Focus areas: "monetary and fiscal aspects of macroeconomic management," "statistics, financial law, IMF financial organization and operations, and information technol-ogy." - Delivery: "IMF staff and the assignment of short- and long-term advisors"; coordination by the Technical Assistance Committee. - IMF Institute programs (1997/98) included: - "basic, intermediate, and advanced courses on financial programming and poli-cies" - "shorter courses on such specialized topics as exchange rate policies and monetary and inflation tar-geting" - "a high-level seminar on trade reform and regional integration in Africa" - Other departments (Fiscal Affairs, Monetary and Exchange Affairs, Policy Development and Review, and Statistics) conducted seminars and courses in collaboration with the Institute. - Overseas training "continued to focus on issues related to the formulation and imple-mentation of economic adjustment programs." - Figure 5 composition of technical assistance, 1997/98 (percent of total resources in effective person-years): "Monetary and exchange affairs (39), Fiscal affairs (34), Statistics (14), IMF Institute (4), Legal (4), Other (5)." ### IMF financial operations, resource use, and credit outstanding (1997/98 highlights) - Members’ purchases from the GRA (excluding reserve tranche purchases) in 1997/98: "amounted to SDR 19.0 billion, nearly four times the 1996/97 level of SDR 4.9 billion." - Composition: "SDR 16.1 billion under Stand-By Arrangements (compared with SDR 1.8 billion in 1996/97) and SDR 2.8 billion under Extended Arrangements (SDR 2.8 billion in 1996/97)." - Purchases under emergency postconflict assistance: "SDR 30 million"; "no purchases were made under the Compensatory and Contingency Financing Facility (CCFF) (SDR 0.3 billion in 1996/97)." - Largest users of IMF resources in 1997/98: - Korea: "drew SDR 11.2 billion, including SDR 7.1 billion under the SRF" - Indonesia: "SDR 2.2 billion" - Thailand: "SDR 2.0 billion" - Russia: "SDR 1.5 billion" - Other significant purchasers: "the Philippines (SDR 0.8 billion), Algeria (SDR 0.3 billion), Argentina (SDR 0.2 billion), Bulgaria (SDR 0.2 billion), and Ukraine (SDR0.2 billion)." - By region: "purchases by Asian countries amounted to SDR 16.2 billion and purchases by European countries (including the Baltic States, Russia, and other countries of the former Soviet Union) amounted to SDR 2.0 billion. Purchases by Latin American, Middle Eastern, and African countries combined totaled SDR 0.7 billion." - Repurchases in the GRA during 1997/98: "SDR 3.8 billion, compared with SDR 6.7 billion in the previous financial year." - Largest repurchases: "Argentina (SDR 0.5 billion); India, Mexico, and Russia (roughly SDR 0.4 billion each); and Algeria, South Africa, and Venezuela (roughly SDR 0.3 billion each)." - Actual repurchases were higher than scheduled (scheduled level "SDR 3.5 billion") due to "a repurchase by Algeria as a result of CCFF overcompensation (SDR 0.2 billion) and a voluntary advance repurchase by Hungary (SDR 0.1 billion)." - Special Reserve Facility (SRF): designed "to respond to a large short-term financing need resulting from a sudden and disrup-tive loss of market confidence." SRF drawings "are made within the context of a Stand-By or Extended Arrangement" and repurchases under the SRF are "expected within 1–1!/2years of each purchase, although the Board may extend this period by up to one year." ### ESAF, ESAF-HIPC Trust, and concessional financing - ESAF Trust: - Enlarged and extended ESAF Trust target for total loan resources: "SDR 10.1 billion." - "Total effective commitments by lenders to the ESAF Trust amounted to SDR 9.7 billion as of April 30, 1998." - Commitment period for loans runs "through December 31, 2000, with disbursements to be made through the end of 2003." - Subsidy Account enables loans at concessional rate "currently 0.5 percent a year." - "The total value of bilateral subsidy contributions is estimated at SDR 3.7 billion." - IMF transferred "SDR 0.4 billion from the SDA to the Subsidy Account in early 1994" (valued at "SDR 0.6 billion" including interest). - Availability of resources in the Subsidy Account, net of subsidies already paid, rose "from SDR 1,562 million as of April 30, 1997, to SDR 1,629 million as of April 30, 1998." - ESAF Trust made interest payments of "SDR 172 million to lenders in 1997/98, of which SDR 23 million was financed by payments of interest by borrowers from the Trust and the balance of SDR 149 million was drawn from the resources of the Subsidy Account." - ESAF-HIPC Trust: - "established in February 1997 to make grants or loans, or both, to eligible members that qualify for assistance under the Initiative for Heavily Indebted Poor Countries (HIPC) and to subsidize the interest rate on interim ESAF operations to ESAF-eligible members." - Contributions to the Trust received from six countries. - Board actions to support HIPC implementation: - Amended ESAF Trust Instrument to permit transfer "of up to SDR250 million from the Reserve Account of the ESAF Trust to the SDA for financing special ESAF operations" - Board forgone reimbursement to the GRA of ESAF administration costs in 1997/98 and transferred "SDR 40.7 million from the ESAF Trust Reserve Account to the ESAF-HIPC Trust." - Decided that "no reimbursement would be made to the GRA in 1998/99 and authorized quarterly transfers totaling an estimated SDR 45 million from the ESAF Trust Reserve Account to the ESAF-HIPC Trust." - April 1998: "Uganda reached its completion point under the HIPC Initiative and SDR 51.5 million was disbursed in the form of a grant," placed in an administered account to service part of Uganda’s IMF debt. - "Resources available to the ESAF-HIPC Trust from bilateral contributions (including accrued interest) amounted to SDR 3.6 million at the end of April 1998." *Excerpted content unit from the IMF Annual Report 1998 (selected pages).* ### 109.6 percent to achieve a net ### _file13pdf - 109.6 percent to achieve a net ### Income targets, rate of charge, and 1997/98 adjustments - Target net income: SDR 99 million (or 5 percent of the IMF’s reserves at the beginning of the financial year). - Initial proportion of the rate of charge to the SDR interest rate set at 109.6 percent to achieve the target. - Midyear review adjustment: proportion reduced retroactively to 107.0 percent for 1997/98; SDR 31 million returned to members that had paid charges through the third quarter of the financial year. - End-of-year adjustment: actual income exceeded target by SDR22 million; excess returned to members that paid charges during the year; proportion of the rate of charge to the SDR interest rate reduced retroactively to 105.6 percent for 1997/98. - Average rate of charge on the use of IMF resources in 1997/98: 4.41 percent (before adjustments for burden sharing). ### Supplemental Reserve Facility (SRF) and surcharges - SRF surcharge schedule: - First year from date of approval of financing under the SRF: surcharge set at 300 basis points above the basic rate of charge. - At the end of the first year, and every six months thereafter, surcharge increases by 50 basis points until it reaches 500 basis points. - Net operational income generated from SRF use during 1997/98: SDR 65 million (after meeting the expenses of administering the ESAF Trust); this amount was placed to the General Reserve. ### Remuneration on member holdings and rates - Remuneration paid to a member on the amount by which its norm for remuneration exceeds the IMF’s holdings of its currency (excluding holdings reflecting the member’s use of IMF credit). - Norm for remuneration calculation: - For members with quota on April 1, 1978: sum of 75 percent of the member’s quota on April 1, 1978, plus any increases in quota consented to and paid after that date. - For members joining after April 1, 1978: sum of (1) a percentage of the member’s quota equal to the weighted average of the norms of all existing members relative to quota on the date of admission, and (2) any increases in quota consented to and paid after that date. - Rate of remuneration (before burden-sharing adjustments): set at 100 percent of the SDR interest rate, which averaged 4.18 percent in 1997/98. ### Measures to strengthen the IMF’s financial position and burden sharing - Two principal measures: - Annual target amount of net income determined to be added to IMF reserves to protect against administrative deficits and losses of a capital nature. - Debtor and creditor members share equally—through adjustments to the rate of charge and the rate of remuneration—the financial costs to the IMF of deferred overdue charges and of the allocation to the first Special Contingent Account (SCA-1). - SCA-1 specifics for 1997/98: - Set at 5 percent of reserves at the beginning of the year (SDR 99 million). - Burden-sharing adjustments cannot reduce the rate of remuneration to less than 85 percent of the SDR interest rate. - Purpose: established as a precautionary measure to protect the IMF against the risks associated with overdue obligations. - SCA-1 balances as of April 30, 1998: SDR 884 million. - Burden-sharing procedures extended by the Board through 1998/99. ### Staffing, administrative budget, and response to the Asian financial crisis - 1998/99 Administrative Budget includes an increase of 32.5 positions in the authorized staffing level to: - Meet the very heavy workload associated with the financial crisis in Asia that was not anticipated in the previous medium-term plan. - Address other priority work activities. - Increase the number of participants in the IMF’s Economist Program. - Intended effects of the increase in authorized staffing: - Attend to priority work activities. - Reduce the very high level of uncompensated overtime being worked by many staff. - Reduce accumulated leave balances. - Medium-term staffing strategy: - Additional positions authorized to carry out work on the Asian crisis will be eliminated once the crisis has abated and work returns to more normal levels. - One-time increase in intake of economists into the Economist Program intended to expand IMF flexibility over the medium term and rebuild economist ranks. - Budgetary consolidation policy: - Notwithstanding the increase in authorized staffing, the 1998/99 budget maintains the existing policy of budgetary consolidation by keeping administrative expenses relatively flat in real terms compared with the 1997/98 budget. - Capital Budget: continuation of plans for completing major building projects, replacing older facilities and electronic data-processing equipment, and other medium-term programs. ### Building projects and occupancy - Addition to the headquarters building (Phase III) essentially completed; in March 1998 staff began moving out of leased space into the building. - PEPCO building (Phase IV) adjacent to headquarters will be ready for occupancy after the current tenant vacates and renovations are completed. - Completion of Phase IV will result in staff housed in two immediately adjacent buildings owned by the IMF and will reduce overall occupancy costs and realize the IMF’s long-term space and budget strategies. *Source: _file13pdf - 109.6 percent to achieve a net* --- _Source: https://www.imf.org/-/media/websites/imf/imported-flagship-issues/external/pubs/ft/ar/98/pdf/_file13pdf.pdf_