Annual Report of the Executive Board for the Financial Year Ended April 30, 2004
Annual Report of the Executive Board, September 30, 2004
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- Published: September 30, 2004
- Series: Annual Report of the Executive Board
Global economic backdrop and IMF role
- Reviews IMF activities, resources, and policies during the financial year (May 1, 2003 through April 30, 2004).
- The IMF's work in FY2004 took place during a welcome recovery in the world economy after the slowdown of 2001–02.
- Global GDP growth in 2003 almost reached its long-term trend rate of 4 percent, while inflation remained subdued.
- World trade growth picked up, and net private capital flows to emerging market and developing countries increased, as emerging market bond spreads narrowed.
- Strengthening recovery led by the United States and a number of Asian economies, including China.
- Contributing factors noted: continuing low interest rates in the advanced economies, more credible monetary policies, expansionary fiscal policies in several countries, and improved flexibility and resilience in many emerging market economies.
Surveillance
- Executive Board conducted twice-yearly comprehensive assessments of the world economic outlook and global financial stability in August 2003 and March 2004.
- By March 2004, recovery had strengthened and broadened; Directors emphasized medium-term measures to underpin sustainability of growth and rebuild room for maneuver.
- Managing the transition to a higher interest rate environment identified as a key challenge.
- Benign conditions provided a window to focus on structural reforms.
- Article IV (country) consultations completed with 115 members.
- Financial sector surveillance emphasized:
- Under the FSAP (introduced in 1999), over 100 countries have either undertaken an FSAP exercise or formally committed to do so; 58 assessments have been completed.
- During the 2003 FSAP exercises in Germany and Japan, the Fund contributed to domestic debates on financial sector reform.
- Significant reforms related to FSAP exercises under way in several developing countries, including Tanzania and Tunisia.
- Reports on the Observance of Standards and Codes (ROSCs): as of end-April, 524 ROSCs completed for 106 economies across 12 areas of interest.
Crisis prevention and resolution
- Analytical tool strengthening:
- Sharpened debt sustainability assessments and balance sheet analysis.
- Completed draft guidelines on financial soundness indicators.
- AML/CFT and OFC assessments:
- After a 12-month pilot (completed October 2003), AML/CFT assessment work to be included in all FSAP reports and OFC assessments.
- Board endorsed the 40 + 8 Recommendations of the Financial Action Task Force as the new, expanded standard for AML/CFT assessments.
- OFC assessment program reviewed; 41 of the 44 jurisdictions contacted by the IMF have undergone initial assessments to date.
- Data provision:
- Board expanded, effective January 2005, the categories of data members are obliged to provide under Article VIII, Section 5, and set a procedural framework for enforcing this obligation.
- Collective action clauses (CACs):
- Number of emerging market countries including CACs in New York law sovereign bonds grew to 18 as of end-April 2004.
- Sovereign bonds containing CACs accounted for more than 70 percent of the total volume of sovereign bonds issued during the second half of 2003 and early 2004.
Lending policies, instruments, and program design
- Contingent Credit Lines expired unused on November 30, 2003; Fund began exploring adapting precautionary arrangements for crisis prevention.
- Reviewed exceptional access policy (financing in amounts that exceed normal limits).
- Introduced ex post assessments of IMF-supported programs based on IEO recommendations.
- IEO issued two reports:
- On the role of the Fund in capital account crises in Brazil, Indonesia, and Korea.
- On fiscal adjustment in IMF-supported programs; the latter found that common criticisms (a "one-size-fits-all" approach, inflexibility, declines in social spending) were not supported by the evidence.
Support for low-income countries and poverty reduction
- Objective: deep and lasting poverty reduction as elaborated in the UN's Millennium Development Goals (MDGs).
- Instruments and collaboration:
- Policy advice, technical assistance, concessional loans under the Poverty Reduction and Growth Facility (PRGF), and grants under the Heavily Indebted Poor Countries (HIPC) Initiative.
- Collaboration with the World Bank; IMF and World Bank produced the first Global Monitoring Report on Policies and Actions for Achieving the MDGs and Related Outcomes (discussed April 2004).
- PRGF activity in FY2004:
- 36 countries received disbursements totaling SDR 865 million ($1.3 billion) under their PRGF arrangements.
- Ten new PRGF arrangements approved, with IMF loan commitments totaling SDR 955 million ($1.4 billion).
- As of April 30, 2004, 36 member countries' adjustment and reform programs were being supported by PRGF arrangements with total commitments of SDR 4.4 billion ($6.4 billion).
- HIPC activity as of April 30, 2004:
- Fund had committed SDR 1.8 billion ($2.6 billion) in grants and disbursed SDR 1.2 billion ($1.7 billion) in HIPC assistance.
- By end-April, 27 countries had reached their decision points under the enhanced HIPC Initiative, and Ethiopia, Guyana, Nicaragua, Niger, and Senegal had reached their completion points, bringing the total to 13 countries.
- Other policy work:
- Staffs of the IMF and World Bank proposed a debt sustainability framework to guide borrowing decisions and official creditors' lending and grant-allocation decisions.
- Fund working on donor harmonization with the OECD's Development Assistance Committee and the multilateral development banks.
- Emergency assistance subsidy discussion:
- In March 2004, the Executive Board discussed subsidizing the rate of charge for emergency assistance to PRGF-eligible countries hit by natural disasters and asked staff to prepare specific proposals.
Trade and integration
- After Cancún stalemate (September 2003), IMF Managing Director and World Bank President jointly urged completion of Doha Round, stressing agricultural liberalization and flexibility for poor countries.
- In April 2004, Board approved a new financing policy, the Trade Integration Mechanism, to help countries suffering temporary balance of payments shortfalls from trade liberalization by other countries.
- Technical assistance and analysis provided on customs, tax and tariff reform, Integrated Framework for Trade-Related Technical Assistance, risks and benefits of international integration, and studies of trade reform impact.
Technical assistance and training
- Technical assistance increased to 367 person-years in FY2004, from 356 in FY2003.
- Regional distribution:
- Sub-Saharan Africa remained largest recipient region.
- Increased assistance in Asia-Pacific (post-conflict Cambodia and Timor-Leste; increased assistance to China, Indonesia, Mongolia).
- Central and eastern Europe received assistance related to EU accession preparation for May 1, 2004.
- Regional center expansion:
- May 2003: opened second regional technical assistance center in Africa—West AFRITAC in Bamako, Mali—serving Benin, Burkina Faso, Côte d'Ivoire, Guinea, Guinea-Bissau, Mali, Mauritania, Niger, Senegal, and Togo.
- External financing accounted for 29 percent of total assistance delivered by the IMF in FY2004.
Governance, transparency, and voice
- IMFC communiqué at April 2004 IMF-World Bank meetings called for enhanced capacity of developing countries to participate more effectively in IMF decision making and for continued work on quotas, voice, and representation; Development Committee circulated a proposed road map on procedures and next steps.
- Board reviewed transparency policy:
- Publication of Article IV country reports increased in FY2004—nearly three-fourths of member countries agreed to publish at least one country report.
- Nearly all documents summarizing countries' policy intentions were published.
- Established a policy of presumed but still voluntary publication for all reports on the use of Fund resources and post-program monitoring, as well as Article IV reports.
Financial operations, liquidity, and lending volumes
- Improvement in global conditions and increased resilience of emerging markets reflected in reduced demand for IMF lending.
- New commitments under regular loan facilities:
- Dropped from SDR 29.4 billion ($42.7 billion) in FY2003 to SDR 14.5 billion ($21.1 billion) in FY2004.
- Argentina and Brazil accounted for more than 90 percent of total new commitments.
- Stand-By Arrangements approved or augmented: Dominican Republic, Guatemala, Paraguay, and Ukraine.
- Post-conflict emergency assistance: Burundi received SDR 9.6 million ($13.9 million).
- IMF outstanding credit:
- Reached an all-time high of SDR 70 billion ($101.6 billion) in September 2003.
- Declined to SDR 62.2 billion ($90.3 billion) by end of the financial year, SDR 3.5 billion ($5.1 billion) less than a year earlier, mostly owing to large net repayments by Brazil, and to a lesser extent, Russia and Turkey.
- One-year forward commitment capacity:
- Declined to SDR 58 billion ($84 billion) at end-April 2004 from SDR 61 billion ($89 billion) a year earlier, primarily because of the Fund's large commitments to Argentina and Brazil.
Human resources, organization, and administration
- Senior personnel changes:
- Managing Director Horst Köhler resigned in March 2004 to accept nomination for the Presidency of Germany (elected May); succeeded in June 2004 by Rodrigo de Rato.
- Deputy Managing Director Eduardo Aninat left in June 2003; succeeded by Agustín Carstens.
- Deputy Managing Director Shigemitsu Sugisaki retired in January 2004; succeeded by Takatoshi Kato.
- Raghuram G. Rajan succeeded Kenneth Rogoff as Economic Counsellor and Director of the Research Department in October 2003.
- Departmental changes:
- European II Department dissolved; responsibilities transferred partly to the European Department and partly to the Middle East and Central Asia Department.
- African Department reorganized to increase effectiveness.
- Net administrative expenses:
- IMF's net administrative expenses in FY2004 were $747.6 million, a 3.8 percent increase over last year's expenditure outturn—the lowest such increase since FY1997.
- Expenditures were well under budget due to efficiency gains, lower-than-projected personnel and travel costs, higher-than-forecast reimbursements, and unused contingencies.
Appendixes and supporting materials (listed)
- Appendixes I–IX included topics such as International Reserves; Financial Operations and Transactions; Principal Policy Decisions of the Executive Board; Relations with Other International Organizations; External Communications; Press Communiqués of the IMFC and Development Committee; Executive Directors and Voting Power on April 30, 2004; Changes in Membership of the Executive Board; Financial Statements, April 30, 2004; Acronyms and Abbreviations.
Annual Report of the Executive Board for the Financial Year Ended April 30, 2004
Content in this bundle
- IMF Annual Report 2004--file 1 of 5
- IMF Annual Report 2004--file 2 of 5
- IMF Annual Report 2004--file 3 of 5
- IMF Annual Report 2004--file 4 of 5
- IMF Annual Report 2004--file 5 of 5