## _100616 - Sections 1–2

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---

### Current Conjuncture
- Global growth remains subdued despite signs of recovery and resilience in some economies.
- Advanced economies:
  - Demand is low and post-crisis recovery is uneven across countries; output gaps are still negative.
  - Productivity growth has not recovered; likely hindered by factors that reduce investment, including debt overhangs and low and uncertain prospects of future demand.
- Emerging economies:
  - Overall growth improved, driven by robust activity in emerging Asia and large stressed economies showing some signs of improvement.
  - Vulnerabilities persist, especially in the corporate sector of some large countries.
- Low-income countries (LICs):
  - Low commodity prices continue to weigh on growth.
- Financial sector risks:
  - In the short term, risks have declined: banks’ balance sheets are generally stronger and financial markets stabilized after the UK referendum result.
  - In the medium term, uncertainty remains high and risks are rising due to new challenges.
- Structural and distributional trends:
  - Slow adjustment to technological change and globalization has reduced wage growth for middle and low skilled workers while increasing returns to capital and for highly educated workers.
  - Slower growth has weakened fiscal balances, limiting resources for supportive adjustment measures.
  - Demographic challenges are more difficult to address in a low-growth environment.
  - Low commodity prices have exposed the need for many EMDCs to make difficult adjustments and diversify.

### Concerns about Globalization and Technology
- Globalization and technological change delivered large welfare gains and helped lift millions out of poverty in EMDCs.
- Insufficient attention to those adversely affected has created social tensions and political backlash.
- Political climate favoring inward-looking policies risks hindering reforms and jeopardizing productivity gains from globalization and technological change.

### Policy Challenges and Priorities
- Implement a three-pronged approach to revive demand, raise productivity, expand opportunities, and strengthen international cooperation to avoid a “new mediocre.”
- Use all policy levers to revive demand and raise growth:
  - With monetary policy stretched, continue the Spring 2016 GPA three-pronged approach.
  - Fiscal and monetary policies should support short-term growth where demand is lacking while accelerating the impact of structural reforms.
  - Fiscal policy has a vital role where policy rates are near effective lower bounds:
    - Include additional public investment where there is fiscal space.
    - Make tax-benefit structures more efficient and equitable.
    - Address private sector debt overhangs and balance sheet problems.
  - Implementation must be anchored by strong and consistent policy frameworks to ensure debt sustainability.
  - EMDCs hit hard by the commodity price shock need accelerated, comprehensive, and internally consistent adjustment.
- Sequence and prioritize structural reforms:
  - Implementation needs to be stepped up, sequenced, and prioritized based on country-specific performance, structural gaps, fiscal space, and cycle position.
- Equip people to thrive:
  - Ensure innovation and skills are rewarded while sharing gains broadly.
  - Provide education and skills development for workers displaced by offshoring/outsourcing.
  - Prioritize policies addressing youth and female unemployment and integration of migrants.
- Step up international cooperation:
  - Multilateral agreements remain valuable despite multipolar challenges.
  - Coordinate policies to exploit synergies and positive cross-border spillovers.
  - Continue efforts toward greater trade integration and coordinated action to reduce external imbalances and manage spillovers.
  - Complete global financial regulatory reform and implement a level-playing field in international taxation.
  - Make progress toward a stronger international monetary system, including an adequately-resourced Fund.

### How the Fund Will Help the Membership
- Help policymakers identify policy space:
  - Finalize and use the fiscal space framework in Article IV consultations.
  - Continue developing and applying a framework to identify high-priority structural reforms tailored to country circumstances; integrate priorities step-by-step in Article IV consultations.
  - Provide analysis of synergies and tradeoffs of policies, including short-term fiscal costs/benefits of structural reforms and implications of negative policy rates.
- Support members to enhance resilience:
  - Reform the debt sustainability framework for LICs (jointly with the World Bank) to better assess risks.
  - Review the institutional view on liberalization and management of capital flows to address gaps.
  - Bring together work streams on capital flow management and macroprudential policies to provide tailored, consistent advice on macroeconomic and financial stability risks from capital flows.
  - Explore macro-financial approaches to bilateral surveillance and analyze financial sector linkages drawing on pilot cases.
  - Analyze how tax systems magnify macroeconomic stability risks by favoring debt finance.
  - Take up macro-critical climate change issues in the next wave of countries and lay out a policy framework for small states affected by natural disasters and climate change.
- Assist policymakers in tackling low productivity growth:
  - Continue work to examine drivers of the productivity slowdown and provide policy recommendations.
  - Improve measures of productivity and reflect on measurement of the digital economy.
  - Expand the infrastructure policy support initiative to more pilot countries.
  - Update policy on governance and corruption issues and pair with capacity development in public financial management and AML/CFT.
- Help members implement the regulatory reform agenda:
  - Continue collaboration with international standard setters and the Financial Stability Board.
  - Provide technical assistance and macrofinancial surveillance and Financial Sector Assessment Programs to evaluate and support implementation.
- Support low-income countries:
  - Provide tailored policy advice and significant financial and technical assistance.
  - Integrate post-2015 Development Agenda deliverables into Fund work: enhance domestic revenue mobilization; build fiscal capacity in small and fragile states; support investment needs; advise on balancing financing development with preserving debt sustainability.
  - Help countries hardest-hit by the commodity shock design consistent policies for diversification and growth rebound.
  - Examine countries’ access to precautionary financial support and clarify practices on blending resources between the General Resources Account and the Poverty Reduction and Growth Trust (PRGT).
- Focus capacity development on supporting the SDGs:
  - Strengthen CD for Financing for Development, revenue mobilization, and financial sector deepening; build a resilient CD framework in fragile states.
  - Complete existing CD delivery architecture, including regional centers and global thematic funds, and enhance focus on results and flexibility.
  - Make operational the South Asia Regional Technical Assistance and Training Center (SARTTAC) as the Fund’s first combined technical assistance and training center.
  - Ramp up CD support to revenue mobilization and public financial management; launch a new CD fund on Financial Sector Stability.
  - Strengthen external partnerships and reach out to new CD partners.
- Collaborate with other institutions to expand opportunities:
  - Continue bilateral surveillance focus on education, skills development, and safety nets.
  - Operationalize work on inequality in pilot countries and deepen analysis of policy tradeoffs between efficiency and equity.
  - Integrate gender analysis in surveillance and examine factors enhancing financial inclusion, including digitization.
  - Work with partners to mitigate negative spillovers from withdrawal of correspondent banking relationships by intensifying AML/CFT and supervisory CD, clarifying international standards, and promoting industry solutions.
  - Expand work on international taxation through the Platform for Collaboration on Tax (IMF, OECD, UN, WBG) and help countries tackle illicit financial flows.
  - Continue assisting countries facing epidemics or refugee crises.

### Keeping the Fund Strong
- A strong, quota-based, and adequately resourced Fund is critical.
- Continue work toward maintaining overall lending capacity, securing adequacy of concessional lending resources, and completing the 15th General Review of Quotas, including a new quota formula.
- Resource and organizational priorities:
  - Fund’s budget largely unchanged in real terms over past five years; delivered priorities through strategic reallocation and careful budget management, but earlier buffers have largely eroded.
  - HQ1 renewal project: more than 55 percent of the project now completed.
  - Improve knowledge management via a new unit to make information easier for staff to find.
  - TransformIT program to increase IT agility and reduce operational costs.
  - Promote more diverse staff and greater gender diversity in the Executive Board.
  - Develop an HR strategy to enhance the Fund’s agility, integration, and member focus.

### Monetary policy and exchange rates (Section 2)
- In Emerging Market Economies, monetary policy must grapple with the impact of weaker currencies on inflation and private sector balance sheet.
- All countries should use exchange rate flexibility to cushion the impact of terms of trade shocks.
- Summary assessments:
  - Advanced Economies: Monetary policy remains accommodative in all countries. Exchange rate flexibility is fully used in all countries to cushion terms of trade shocks.
  - Emerging Market Economies: Monetary policy eased in countries with low inflation. Most countries used the exchange to absorb the terms of trade shock.
  - Low Income Developing Countries: Exchange rates were allowed to adjust in some countries.

### Financial sector policy — Spring 2016 Policy Priorities (Section 2)
- Policy priorities:
  - Countries should take further steps to repair private sector balance sheets and avoid protracted deleveraging process that weakens the credit channel of monetary policy, while compensating for procyclical effects.
  - In G20 countries, further progress is needed in implementing and complementing the global regulatory framework, including policies to transform the shadow banking sector into a stable source of market-based finance, and enhancing the resilience of market liquidity.
  - The EU banking union should be completed by putting the last pillar (common deposit guarantee scheme) in place together with efforts to reduce risks in banking systems.
- Assessment by country group:
  - Advanced Economies:
    - Sound private sector balance sheets in many countries and prudential measures are being introduced.
    - Progress in strengthening the regulatory framework.
    - Efforts toward the EU banking union has stalled.
  - Emerging Market Economies:
    - Slow or partial progress in tackling excessive debt levels in the corporate sector.
    - Ongoing efforts to strengthen the financial supervisory and regulatory frameworks in G20 countries.
  - Low Income Developing Countries:
    - Continued, albeit uneven, efforts in strengthening financial supervisory and regulatory frameworks.

### Structural reforms — Spring 2016 Policy Priorities (Section 2)
- Policy priorities:
  - Delivery on the commitments made on structural reforms to improve productivity and potential output must be pulled forward.
  - Countries with fiscal space should take advantage of the synergies between demand support and structural reforms, such as reducing labor tax wedge, increasing spending on R&D, implementing active labor market policies.
  - Structural reform priorities should be sequenced according to stages of economic development and strength of institutions.
  - Commodity exporters and low income countries should promote economic diversification and structural transformation.
- Assessment by country group:
  - Advanced Economies:
    - Uneven progress in undertaking labor market reforms, providing better incentives for innovation and removing product market barriers.
    - Limited progress in delivering infrastructure investments.
    - The use of fiscal space, when available, could be more supportive of structural reforms.
    - Sequencing of reforms is broadly appropriate.
  - Emerging Market Economies:
    - Partial delivery on improving business conditions, and implementing labor and product market reforms.
    - Some progress in the elimination of subsidies.
    - The sequencing of reforms is broadly appropriate, but strategies need more careful coordination, and implementation is often lagging.
  - Low Income Developing Countries:
    - Ongoing efforts in improving business conditions, addressing energy infrastructure bottlenecks, implementing education and labor market reforms.
    - Reform sequencing is broadly appropriate.
    - Partial progress on economic diversification, delays in budget approvals, and improvements needed to the business climate.

### Annex II — Key IMF Activities since the Spring Meetings
- Financial assistance provided (selected approvals and disbursements):
  - New arrangements approved: Iraq and Suriname (SBA); Bosnia and Herzegovina, Jordan, Sri Lanka and Tunisia (EFF); Rwanda (SCF); Afghanistan, Central African Republic, and Madagascar (ECF).
  - New disbursements under the Rapid Financing Instrument: Ecuador.
- Major policy reviews and analytical work:
  - Explored considerations on how to assess fiscal space.
  - Began systematically highlighting domestic revenue mobilization and international tax issues in surveillance.
  - Deepened work on stability risks posed by tax distortions.
  - Initiated the review of members’ experience in dealing with capital flows to identify emerging issues.
  - Issued a reference note on the Trans-Pacific Partnership to assist relevant Fund teams integrate TPP in surveillance.
  - Initiated the review of LICs’ debt sustainability framework.
  - Described the evidence and drivers of the withdrawal of correspondent banking relationships and proposed steps to mitigate potential negative spillovers.
  - Prepared, with the FSB Secretariat, the First Progress Report of the Second Phase of the G-20 Data Gaps Initiative.
- Emerging issues analyzed:
  - Analyzed the impact of intense conflicts and human displacement and discussed how economic policies can mitigate the economic costs.
  - Studied the experience of emigration from Central, Eastern, and Southeastern Europe and proposed policies to mitigate the adverse impact in sending countries.
  - Analyzed the impact of corruption on economic performance and the elements in designing and implementing an anti-corruption strategy.
- A more resilient IMS:
  - Maintained access to bilateral borrowing and began informally consulting on the NAB.
  - Initiated the process of analyzing gaps in the lending toolkit of the Fund.
  - Made progress on the technical work and test run of Fund-CMIM collaboration.
  - Initiated the exploration of the role of state-contingent financial instruments in preventing and resolving sovereign debt crises.
  - Consulted with stakeholders on modalities of debtor-creditor engagement in sovereign debt restructurings.
  - Strengthened the Fund’s policy on Post-Program Monitoring to capture major risks to the Fund’s balances sheet, while streamlining the process.
  - Began work exploring broader use of the SDR, particularly whether the SDR could address gaps in the international monetary system and complement the GFSN.
  - Implemented the new SDR basket.
- Capacity development:
  - Nearly half of all technical assistance going to low-income developing countries and over half of training to emerging market economies.
  - Online learning now accounting for about 30 percent of all training participation; largest users are in Sub-Saharan Africa and the Western Hemisphere.
  - Enhanced synergies among surveillance, lending, TA and training, including through the newly created South Asia Regional Training and Technical Assistance Center.
  - Continued development of capacity in financial sector related issues, with Africa as the main recipient.
  - Continued to develop a capacity building framework for fragile states.
  - Established the Platform for Collaboration on Tax with the OECD, UN, and World Bank.

### Annex III — Implementation of IMF Deliverables (April–October 2016)
- Provide Financial Support (board papers/reports scheduled beyond the horizon indicated by "1"):
  - Low-Income Countries Debt Sustainability Framework: 1
  - Medium-Term Debt Management Strategy: 1
  - State-Contingent Financial Instruments: 1
  - Debtor-Creditor Engagement in Sovereign Debt Restructuring: 1
  - Fund governance and resources: 1
  - Financial Safety Net for Developing Countries: 1
  - Eligibility to Use the Fund’s Facilities for Concessional Financing: 1
  - Social Objectives in PRGT Supported Programs: 1
  - Transition on the New SDR Basket: 1
  - New Facilities:
    - Review of PRGT Interest Rate Structure: 1
    - Strengthening the Framework for Post-Program Monitoring: 1
    - Role of the SDR: 1
- Identify Available Policy Space:
  - Fiscal:
    - Fiscal Space: 1
    - Containing Leverage: 1
    - Infrastructure Policy Support: 1
    - Domestic revenue mobilization in developing countries: (no numeric entry in source)
    - Fiscal Management in Fragile States: 1
  - Monetary, Exchange Rate, and Financial Sector Policies:
    - Unconventional monetary policies: (no numeric entry in source)
    - External balances and exchange rates: 1
    - Capital flow management: 1
    - Macro-financial analysis: 1
    - Private sector balance sheets: 1
    - Data gaps: 1
    - Financial Stability: 1
    - Withdrawal of Correspondent Banking Relationships: 1
    - Global regulatory reforms: 1
    - Managing systemic risks: 1
  - Structural Reforms:
    - Macro-structural reforms: 1
    - Revitalizing trade: 1
    - Capacity development: 1
    - Governance: 1
    - Entity transparency: (no numeric entry in source)
    - Standards and codes: 1
- Address New Challenges:
  - Climate change: 1
  - Demographic transitions and migration: (no numeric entry in source)
  - Gender and Inclusion: 1
  - Technology: 1
- Note: "1" indicates Board papers/reports scheduled to be delivered beyond the horizon under consideration; ongoing work.

*Source: _100616 - Sections 1–2*

### Section 1

### _100616 - Section 1

### Current Conjuncture
- Global growth remains subdued despite signs of recovery and resilience in some economies.
- Advanced economies:
  - Demand is low and post-crisis recovery is uneven across countries; output gaps are still negative.
  - Productivity growth has not recovered; likely hindered by factors that reduce investment, including debt overhangs and low and uncertain prospects of future demand.
- Emerging economies:
  - Overall growth improved, driven by robust activity in emerging Asia and large stressed economies showing some signs of improvement.
  - Vulnerabilities persist, especially in the corporate sector of some large countries.
- Low-income countries (LICs):
  - Low commodity prices continue to weigh on growth.
- Financial sector risks:
  - In the short term, risks have declined: banks’ balance sheets are generally stronger and financial markets stabilized after the UK referendum result.
  - In the medium term, uncertainty remains high and risks are rising due to new challenges.
- Structural and distributional trends:
  - Slow adjustment to technological change and globalization has reduced wage growth for middle and low skilled workers while increasing returns to capital and for highly educated workers.
  - Slower growth has weakened fiscal balances, limiting resources for supportive adjustment measures.
  - Demographic challenges are more difficult to address in a low-growth environment.
  - Low commodity prices have exposed the need for many EMDCs to make difficult adjustments and diversify.

### Concerns about Globalization and Technology
- Globalization and technological change delivered large welfare gains and helped lift millions out of poverty in EMDCs.
- Insufficient attention to those adversely affected has created social tensions and political backlash.
- Political climate favoring inward-looking policies risks hindering reforms and jeopardizing productivity gains from globalization and technological change.

### Policy Challenges and Priorities
- Implement a three-pronged approach to revive demand, raise productivity, expand opportunities, and strengthen international cooperation to avoid a “new mediocre.”
- Use all policy levers to revive demand and raise growth:
  - With monetary policy stretched, continue the Spring 2016 GPA three-pronged approach.
  - Fiscal and monetary policies should support short-term growth where demand is lacking while accelerating the impact of structural reforms.
  - Fiscal policy has a vital role where policy rates are near effective lower bounds:
    - Include additional public investment where there is fiscal space.
    - Make tax-benefit structures more efficient and equitable.
    - Address private sector debt overhangs and balance sheet problems.
  - Implementation must be anchored by strong and consistent policy frameworks to ensure debt sustainability.
  - EMDCs hit hard by the commodity price shock need accelerated, comprehensive, and internally consistent adjustment.
- Sequence and prioritize structural reforms:
  - Implementation needs to be stepped up, sequenced, and prioritized based on country-specific performance, structural gaps, fiscal space, and cycle position.
- Equip people to thrive:
  - Ensure innovation and skills are rewarded while sharing gains broadly.
  - Provide education and skills development for workers displaced by offshoring/outsourcing.
  - Prioritize policies addressing youth and female unemployment and integration of migrants.
- Step up international cooperation:
  - Multilateral agreements remain valuable despite multipolar challenges.
  - Coordinate policies to exploit synergies and positive cross-border spillovers.
  - Continue efforts toward greater trade integration and coordinated action to reduce external imbalances and manage spillovers.
  - Complete global financial regulatory reform and implement a level-playing field in international taxation.
  - Make progress toward a stronger international monetary system, including an adequately-resourced Fund.

### How the Fund Will Help the Membership
- Help policymakers identify policy space:
  - Finalize and use the fiscal space framework in Article IV consultations.
  - Continue developing and applying a framework to identify high-priority structural reforms tailored to country circumstances; integrate priorities step-by-step in Article IV consultations.
  - Provide analysis of synergies and tradeoffs of policies, including short-term fiscal costs/benefits of structural reforms and implications of negative policy rates.
- Support members to enhance resilience:
  - Reform the debt sustainability framework for LICs (jointly with the World Bank) to better assess risks.
  - Review the institutional view on liberalization and management of capital flows to address gaps.
  - Bring together work streams on capital flow management and macroprudential policies to provide tailored, consistent advice on macroeconomic and financial stability risks from capital flows.
  - Explore macro-financial approaches to bilateral surveillance and analyze financial sector linkages drawing on pilot cases.
  - Analyze how tax systems magnify macroeconomic stability risks by favoring debt finance.
  - Take up macro-critical climate change issues in the next wave of countries and lay out a policy framework for small states affected by natural disasters and climate change.
- Assist policymakers in tackling low productivity growth:
  - Continue work to examine drivers of the productivity slowdown and provide policy recommendations.
  - Improve measures of productivity and reflect on measurement of the digital economy.
  - Expand the infrastructure policy support initiative to more pilot countries.
  - Update policy on governance and corruption issues and pair with capacity development in public financial management and AML/CFT.
- Help members implement the regulatory reform agenda:
  - Continue collaboration with international standard setters and the Financial Stability Board.
  - Provide technical assistance and macrofinancial surveillance and Financial Sector Assessment Programs to evaluate and support implementation.
- Support low-income countries:
  - Provide tailored policy advice and significant financial and technical assistance.
  - Integrate post-2015 Development Agenda deliverables into Fund work: enhance domestic revenue mobilization; build fiscal capacity in small and fragile states; support investment needs; advise on balancing financing development with preserving debt sustainability.
  - Help countries hardest-hit by the commodity shock design consistent policies for diversification and growth rebound.
  - Examine countries’ access to precautionary financial support and clarify practices on blending resources between the General Resources Account and the Poverty Reduction and Growth Trust (PRGT).
- Focus capacity development on supporting the SDGs:
  - Strengthen CD for Financing for Development, revenue mobilization, and financial sector deepening; build a resilient CD framework in fragile states.
  - Complete existing CD delivery architecture, including regional centers and global thematic funds, and enhance focus on results and flexibility.
  - Make operational the South Asia Regional Technical Assistance and Training Center (SARTTAC) as the Fund’s first combined technical assistance and training center.
  - Ramp up CD support to revenue mobilization and public financial management; launch a new CD fund on Financial Sector Stability.
  - Strengthen external partnerships and reach out to new CD partners.
- Collaborate with other institutions to expand opportunities:
  - Continue bilateral surveillance focus on education, skills development, and safety nets.
  - Operationalize work on inequality in pilot countries and deepen analysis of policy tradeoffs between efficiency and equity.
  - Integrate gender analysis in surveillance and examine factors enhancing financial inclusion, including digitization.
  - Work with partners to mitigate negative spillovers from withdrawal of correspondent banking relationships by intensifying AML/CFT and supervisory CD, clarifying international standards, and promoting industry solutions.
  - Expand work on international taxation through the Platform for Collaboration on Tax (IMF, OECD, UN, WBG) and help countries tackle illicit financial flows.
  - Continue assisting countries facing epidemics or refugee crises.

### Keeping the Fund Strong
- A strong, quota-based, and adequately resourced Fund is critical.
- Continue work toward maintaining overall lending capacity, securing adequacy of concessional lending resources, and completing the 15th General Review of Quotas, including a new quota formula.
- Resource and organizational priorities:
  - Fund’s budget largely unchanged in real terms over past five years; delivered priorities through strategic reallocation and careful budget management, but earlier buffers have largely eroded.
  - HQ1 renewal project: more than 55 percent of the project now completed.
  - Improve knowledge management via a new unit to make information easier for staff to find.
  - TransformIT program to increase IT agility and reduce operational costs.
  - Promote more diverse staff and greater gender diversity in the Executive Board.
  - Develop an HR strategy to enhance the Fund’s agility, integration, and member focus.

### Annex I. Implementation of Policy Priorities by the Membership (excerpt)
- Fiscal Policy (Spring 2016 priorities): Countries with high debt, elevated sovereign spreads, low public sector savings need to implement fiscal consolidation; countries with fiscal space should ease fiscal policy further. All countries should aim for more growth-friendly composition of revenue and expenditure, particularly increasing infrastructure spending where needed.
  - Advanced Economies: Analysis of fiscal space continues. Some progress toward a more growth friendly composition of fiscal policy. Slow fiscal consolidation efforts in relevant countries. Credible medium-term fiscal adjustment paths have yet to emerge in some countries.
  - Emerging Market Economies: Analysis of fiscal space continues. Some notable ongoing efforts on fiscal rebalancing towards growth friendly measures. Partial or limited consolidation efforts in some countries.
  - Low Income Developing Countries: Analysis of fiscal space continues. Ongoing efforts in growth-friendly fiscal rebalancing, including through tax reforms and expenditure prioritization. Slow fiscal consolidation efforts in relevant countries.
- Monetary Policy (Spring 2016 priorities): In Advanced Economies, monetary policy needs to remain accommodative in countries with negative output gaps or too low inflation. Accommodative monetary policy should be accompanied by other policies to provide demand support.

*Source: _100616 - Section 1*

### Section 2

### _100616 - Section 2

### Monetary policy and exchange rates
- In Emerging Market Economies, monetary policy must grapple with the impact of weaker currencies on inflation and private sector balance sheet.
- All countries should use exchange rate flexibility to cushion the impact of terms of trade shocks.
- Summary assessments:
  - Advanced Economies: Monetary policy remains accommodative in all countries. Exchange rate flexibility is fully used in all countries to cushion terms of trade shocks.
  - Emerging Market Economies: Monetary policy eased in countries with low inflation. Most countries used the exchange to absorb the terms of trade shock.
  - Low Income Developing Countries: Exchange rates were allowed to adjust in some countries.

### Financial sector policy — Spring 2016 Policy Priorities
- Policy priorities:
  - Countries should take further steps to repair private sector balance sheets and avoid protracted deleveraging process that weakens the credit channel of monetary policy, while compensating for procyclical effects.
  - In G20 countries, further progress is needed in implementing and complementing the global regulatory framework, including policies to transform the shadow banking sector into a stable source of market-based finance, and enhancing the resilience of market liquidity.
  - The EU banking union should be completed by putting the last pillar (common deposit guarantee scheme) in place together with efforts to reduce risks in banking systems.
- Assessment by country group:
  - Advanced Economies:
    - Sound private sector balance sheets in many countries and prudential measures are being introduced.
    - Progress in strengthening the regulatory framework.
    - Efforts toward the EU banking union has stalled.
  - Emerging Market Economies:
    - Slow or partial progress in tackling excessive debt levels in the corporate sector.
    - Ongoing efforts to strengthen the financial supervisory and regulatory frameworks in G20 countries.
  - Low Income Developing Countries:
    - Continued, albeit uneven, efforts in strengthening financial supervisory and regulatory frameworks.

### Structural reforms — Spring 2016 Policy Priorities
- Policy priorities:
  - Delivery on the commitments made on structural reforms to improve productivity and potential output must be pulled forward.
  - Countries with fiscal space should take advantage of the synergies between demand support and structural reforms, such as reducing labor tax wedge, increasing spending on R&D, implementing active labor market policies.
  - Structural reform priorities should be sequenced according to stages of economic development and strength of institutions.
  - Commodity exporters and low income countries should promote economic diversification and structural transformation.
- Assessment by country group:
  - Advanced Economies:
    - Uneven progress in undertaking labor market reforms, providing better incentives for innovation and removing product market barriers.
    - Limited progress in delivering infrastructure investments.
    - The use of fiscal space, when available, could be more supportive of structural reforms.
    - Sequencing of reforms is broadly appropriate.
  - Emerging Market Economies:
    - Partial delivery on improving business conditions, and implementing labor and product market reforms.
    - Some progress in the elimination of subsidies.
    - The sequencing of reforms is broadly appropriate, but strategies need more careful coordination, and implementation is often lagging.
  - Low Income Developing Countries:
    - Ongoing efforts in improving business conditions, addressing energy infrastructure bottlenecks, implementing education and labor market reforms.
    - Reform sequencing is broadly appropriate.
    - Partial progress on economic diversification, delays in budget approvals, and improvements needed to the business climate.

### Annex II — Key IMF Activities since the Spring Meetings
- IMF provided financial assistance to members in need:
  - New arrangements were approved for Iraq and Suriname (SBA); Bosnia and Herzegovina, Jordan, Sri Lanka and Tunisia (EFF); Rwanda (SCF); Afghanistan, Central African Republic, and Madagascar (ECF).
  - New disbursements under the Rapid Financing Instrument were approved for Ecuador.
- Major policy reviews and analytical work:
  - Explored considerations on how to assess fiscal space.
  - Began systematically highlighting domestic revenue mobilization and international tax issues in surveillance.
  - Deepened work on stability risks posed by tax distortions.
  - Initiated the review of members’ experience in dealing with capital flows to identify emerging issues.
  - Issued a reference note on the Trans-Pacific Partnership to assist relevant Fund teams integrate TPP in surveillance.
  - Initiated the review of LICs’ debt sustainability framework.
  - Described the evidence and drivers of the withdrawal of correspondent banking relationships and proposed steps to mitigate potential negative spillovers.
  - Prepared, with the FSB Secretariat, the First Progress Report of the Second Phase of the G-20 Data Gaps Initiative.
- Emerging issues analyzed:
  - Analyzed the impact of intense conflicts and human displacement and discussed how economic policies can mitigate the economic costs.
  - Studied the experience of emigration from Central, Eastern, and Southeastern Europe and proposed policies to mitigate the adverse impact in sending countries.
  - Analyzed the impact of corruption on economic performance and the elements in designing and implementing an anti-corruption strategy.
- A more resilient IMS:
  - Maintained access to bilateral borrowing and began informally consulting on the NAB.
  - Initiated the process of analyzing gaps in the lending toolkit of the Fund.
  - Made progress on the technical work and test run of Fund-CMIM collaboration.
  - Initiated the exploration of the role of state-contingent financial instruments in preventing and resolving sovereign debt crises.
  - Consulted with stakeholders on modalities of debtor-creditor engagement in sovereign debt restructurings.
  - Strengthened the Fund’s policy on Post-Program Monitoring to capture major risks to the Fund’s balances sheet, while streamlining the process.
  - Began work exploring broader use of the SDR, particularly whether the SDR could address gaps in the international monetary system and complement the GFSN.
  - Implemented the new SDR basket.
- Capacity development:
  - Continued to grow activities, with nearly half of all technical assistance going to low-income developing countries and over half of training to emerging market economies.
  - Continued to expand the reach of Fund training through online learning, now accounting for about 30 percent of all training participation. The largest users are in Sub-Saharan Africa and the Western Hemisphere.
  - Enhanced synergies among surveillance, lending, TA and training, including through the newly created South Asia Regional Training and Technical Assistance Center.
  - Continued to develop capacity in financial sector related issues, with Africa as the main recipient.
  - Continued to develop a capacity building framework for fragile states to support institution building goals, strengthen outcome monitoring, and enhance coordination with other partners in a more programmatic fashion.
  - Established the Platform for Collaboration on Tax with the OECD, UN, and World Bank as the central vehicle.
  - Worked with partners on tackling the challenges laid out in the post-2015 development agenda, including by supporting countries’ efforts for revenue mobilization by renewing and expanding the Revenue Mobilization Trust Fund and the Managing Natural Resource Wealth Trust Fund; addressing the particular issues of fragile states; and providing hands-on, field-based follow-up support through the IMF’s global network of regional technical assistance centers.

### Annex III — Implementation of IMF Deliverables (April–October 2016)
- Provide Financial Support:
  - Low-Income Countries Debt Sustainability Framework: 1
  - Medium-Term Debt Management Strategy: 1
  - State-Contingent Financial Instruments: 1
  - Debtor-Creditor Engagement in Sovereign Debt Restructuring: 1
  - Fund governance and resources: 1
  - Financial Safety Net for Developing Countries: 1
  - Eligibility to Use the Fund’s Facilities for Concessional Financing: 1
  - Social Objectives in PRGT Supported Programs: 1
  - Transition on the New SDR Basket: 1
  - New Facilities:
    - Review of PRGT Interest Rate Structure: 1
    - Strengthening the Framework for Post-Program Monitoring: 1
    - Role of the SDR: 1
- Identify Available Policy Space:
  - Fiscal:
    - Fiscal Space: 1
    - Containing Leverage: 1
    - Infrastructure Policy Support: 1
    - Domestic revenue mobilization in developing countries: (no numeric entry in source)
    - Fiscal Management in Fragile States: 1
  - Monetary, Exchange Rate, and Financial Sector Policies:
    - Unconventional monetary policies: (no numeric entry in source)
    - External balances and exchange rates: 1
    - Capital flow management: 1
    - Macro-financial analysis: 1
    - Private sector balance sheets: 1
    - Data gaps: 1
    - Financial Stability: 1
    - Withdrawal of Correspondent Banking Relationships: 1
    - Global regulatory reforms: 1
    - Managing systemic risks: 1
  - Structural Reforms:
    - Macro-structural reforms: 1
    - Revitalizing trade: 1
    - Capacity development: 1
    - Governance: 1
    - Entity transparency: (no numeric entry in source)
    - Standards and codes: 1
- Address New Challenges:
  - Climate change: 1
  - Demographic transitions and migration: (no numeric entry in source)
  - Gender and Inclusion: 1
  - Technology: 1
- Note: "1" indicates Board papers/reports scheduled to be delivered beyond the horizon under consideration; ongoing work.

*Source: _100616 - Section 2 (Spring 2016 Global Policy Agenda assessments, Annexes II–III).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2016/_100616.pdf_