Transcript of a Press Briefing on the Final Report by the Committee to Study Sustainable Long-term Financing of the IMF (Crockett Report)
IMF News, January 31, 2007
Source details
- Canonical URL
- Transcript of a Press Briefing on the Final Report by the Committee to Study Sustainable Long-term Financing of the IMF (Crockett Report)
Other formats
Bibliographic details
- Published: January 31, 2007
Background and context
- Event: Press briefing on the report on sustainable long-term financing of the IMF prepared by an Eminent Persons Committee chaired by Andrew Crockett.
- Date and location: January 31, 2007, Washington DC.
- Report authorship: Committee chaired by Andrew Crockett; members included Mohamed El-Erian, Alan Greenspan, Tito Mboweni, Guillermo Ortiz, Hamad Al-Sayari, Jean-Claude Trichet, and Zhou Xiaochuan.
- Managing Director present: Rodrigo de Rato.
- Purpose: Identify an income model aligned with members’ interests and reflecting the range of public goods the IMF provides; the Committee’s mandate focused on income (not expenditure).
Key assessments of the existing income model
- Duration in practice: "the actual income model of the institution has been in practice for 60 years."
- Core deficiencies identified:
- Concentration on a single income source: the intermediation margin between the rate at which the Fund lends and the rate at which it remunerates creditors.
- Volatility: high lending periods generate large resources; low lending periods generate little income despite ongoing non-lending missions.
- Perverse countercyclicality: when the world economy is weak and the Fund must lend in crisis situations, resources are relatively plentiful; when the Fund helps stabilize the global economy, it can be short of resources.
- Functional decomposition of IMF activities used to evaluate income sources:
- Financial intermediation (lending to countries in difficulties).
- Provision of international public goods (surveillance, statistics, research).
- Bilateral services (capacity building and technical assistance).
Committee recommendations — general principles
- Match multiple IMF functions with separate income sources; avoid concentration on a single source.
- Intermediation margin should: cover costs as a financial intermediary and accumulation of reserves against the possibility of arrears — not be used as the primary income source for public-good activities.
- View proposals as a package; interdependence among elements implies not every item must be adopted exactly as proposed but the package should be considered holistically.
- Although the Fund is in a strong financial position currently, begin process "straight away" to develop a new income model.
- If future lending generates surpluses, consider returning surpluses to members rather than accumulating reserves or funding uncosted activities.
Gold-related proposal and parameters
- Recommended sale amount: "about 400 metric tons."
- Rationale for 400 metric tons: corresponds to the gold that was sold and repurchased in an off-market transaction about six or seven years ago and which is legally in a slightly different category.
- Proceeds estimate at assumed price:
- "about 4.4 billion SDRs, or 6.6 billion dollars, at a price of 500 dollars an ounce."
- Conditions and safeguards on gold sale:
- Limit sale to the 400 tons mentioned, "without envisaging any additional sales."
- Sale should take place within the existing Central Bank Gold Agreement and be accommodated by reductions in amounts central banks might sell under that Agreement.
- Sales must be carefully staged (in terms of periodicity, amounts, and manner) "such as not to disturb the market."
- Currency of assumptions: $500-an-ounce used as an average over a period of time rather than the then-current spot price.
Investment of Fund resources and quota-related proposals
- Existing reserve investments:
- Text contains two closely related statements: "the Fund already invests its existing reserves, which amount to about 600 billion SDRs, just under 9 billion U.S. dollars" and repeated phrasing later: "The Fund already invests its existing reserves which amount to about 6 billion SDRs, just under 9 billion dollars." (Text preserved as in source.)
- Near-term improvement potential:
- Invest reserves in a manner that could generate "perhaps 50 basis points more" without compromising integrity and safety.
- Quota resources reallocation proposal:
- Release some quota resources currently used only for lending to invest in capital markets.
- Expected excess return from investing quota resources: "on average perhaps 100 basis points."
- Illustrative magnitude: "were say 10 billion SDRs to be used in this way, it could generate additional income for the Fund of approximately 100 million SDRs per year."
- Third-party asset management:
- Committee concluded weak case for the Fund acting as a third-party asset manager: lacks expertise; acquiring it would be expensive; many existing public and private providers already supply these services.
Technical assistance and capacity-building financing
- Twin considerations:
- Risks of underspecified charging: resources provided on a no-charge basis risk oversupply, overdemand, and lack of benchmarks for efficiency.
- Public-good character and developmental impact: technical assistance benefits recipient countries and international monetary system stability; many recipients are low-income and may not afford charges.
- Committee recommendations for Executive Board review:
- Preserve utility of IMF technical-assistance and capacity-building services while ensuring efficient targeting and adequate incentives.
- Consider economic mechanisms (including charging) to ration efficient use of resources, balanced against the risk of discouraging lower-income beneficiaries.
- Charging need not be borne by beneficiary countries directly; costs could be covered by donor resources or explicit budgetary attribution within the Fund.
Specific operational and governance points
- The report did not address Fund expenditures in depth; expenditure-side discussions to occur in Executive Board deliberations in the context of the Fund’s mission for the future.
- Consensus-building: report must be discussed internally with the Executive Board and membership; "the Spring Meetings will give us a very good opportunity to have a discussion with the ministers."
- Timing: no specific decision timetable provided; the next few months envisioned for Board/membership discussions; broader medium-term strategy work to continue over subsequent years (reference to past and ongoing Medium-Term Strategy).
PRGF (Poverty Reduction and Growth Facility) waiver issue
- Background: IMF had waived administrative costs it incurred in managing the PRGF in years when Fund income was strong.
- Committee observation: waiver was a discretionary choice made under income-adequacy circumstances and could be changed; donor countries might appropriately bear the administrative burden rather than the Fund generally representing both poor and middle-income countries.
Press briefing Q&A highlights
- U.S. government opposition to IMF gold sales noted; Managing Director emphasized discussion with membership and consensus-building.
- Gold price assumption: $500 per ounce chosen as a multi-year average; committee preferred averaging because sales would occur over time.
- Concern over destabilizing the gold market addressed by limiting amount, accommodating within Central Bank Gold Agreement, and careful staging.
- No urgency due to Fund’s strong financial position but emphasis on starting the process "soon."
Transcript of a press briefing, January 31, 2007 — IMF