Policy Papers
2022
October 14, 2022
Development Committee: The Managing Director's Written Statement October 2022
Description: Several simultaneous shocks are weighing on the global economic outlook and complicate policymaking. Inflationary pressures are on the rise and increasingly broad based. Russia’s war in Ukraine continues to send shockwaves through the global economy, including by disrupting commodity markets and contributing to higher sovereign risk spreads. Lower growth in China as a result of lockdowns and a weaker housing market curtails global demand, while climate change is generating increasingly costly extreme weather events. The combination of lower growth and high prices squeezes household budgets, especially in low-income developing countries (LIDCs) where hard-to-replace spending items, such as food, account for a large share of consumption. Central banks face difficult policy trade-offs, as both over- and under-tightening the monetary stance would come with significant costs. Emerging and Developing Economies (EMDEs) need to cope with less favorable financial conditions and weaker currencies that raise the domestic currency value of foreign debt—a constellation that contains potential for wider debt distress. Policymakers should focus on gaining control over inflation, preserving financial stability, and using focused and well-targeted fiscal interventions to support those most in need. Global cooperation is more important than ever, but it is also under acute threat from geopolitical developments.
October 13, 2022
Progress Report To The IMFC On The Activities Of The Independent Evaluation Office Of The IMF: October 7, 2022
Description: Since the 2022 Spring Meetings, the IEO has completed two evaluations—on IMF engagement with small developing states and capacity development. We have also made significant progress on a third evaluation on the IMF’s emergency response to the COVID pandemic. In addition, a list of new evaluation topics has been drawn up for discussion with the Executive Board later this year.
October 13, 2022
The Managing Director's Global Policy Agenda, Annual Meetings 2022: Act Now, Act Together for a More Resilient World
Description: Reeling from multiple shocks, the global economic outlook looks increasingly difficult. Since last October, we have downgraded global growth and revised up inflation projections four times. Two years of pandemic, followed by the war in Ukraine, have taken a heavy toll on activity and global trade, exhausting both policy buffers and people’s patience. Now, a ‘cost-of-living crisis’ threatens livelihoods everywhere, with the most vulnerable hit the hardest, and acute food insecurity is an unbearable hardship in too many parts of the world. Multi-decade inflation highs, tightening financing conditions, rising food and energy insecurity, capital flow disruptions, and record high debt levels point to a particularly difficult and uncertain period ahead—especially in the context of slowing growth in the US, Europe, and China. The increasing frequency and intensity of climate-related disasters—devastating floods, droughts, and wildfires—adds to these challenges. While the ongoing digital revolution brings new opportunities, the recent turmoil in crypto asset markets is a reminder of the risks of unfettered digitalization.
October 6, 2022
Annual Update on SDR Trading Operations
Description: This paper provides an update on the status of the SDR trading market and operations one year after the historic fourth general allocation of SDRs. In the reporting period, SDR trading has been dominated by SDR sales due to the 2021 SDR allocation. The VTAs continue to have ample capacities to meet the demand for exchange of SDRs into currencies. Staff has made significant progress in further strengthening the SDR trading market. Since the SDR allocation, eight new VTA members have been welcomed to the SDR trading market and many existing VTA members provided additional operational flexibilities. Discussions with a number of potential new entrants continue in the broader context of SDR channeling, which encourages contributors to have VTAs.
October 5, 2022
Proposal for a Food Shock Window Under the Rapid Financing Instrument and Rapid Credit Facility
Description: Russia’s war in Ukraine has exacerbated global economic pressures, including through a food shock. The war and food-related spillovers—higher import prices for food and fertilizer and disruptions in supply lines for food importers, and a loss of revenue for some food exporters—add to urgent balance-of-payments (BOP) needs of many Fund members. They have also exacerbated acute food insecurity, now affecting 345 million people. While the best response to address BOP pressures would generally involve an Upper Credit Tranche-quality program, such a program may not be feasible in some cases or necessary in others. This paper proposes a time-bound food shock window under the Rapid Financing Instrument (RFI) and the Rapid Credit Facility (RCF) to provide support to members in such situations. The new window would be temporary and provide low-access emergency financing that increases the amounts currently available under the RFI/RCF. Members would need to demonstrate urgent BOP needs and meet a set of qualification criteria related to the global food shock. The window would be available for 12 months from the date of Board approval of the window. Countries requesting financing under the window would also need to meet the standard qualification criteria under the RFI/RCF.
October 5, 2022
Proposal for a Staff-Monitored Program with Executive Board Involvement
Description: This paper proposes an amendment to the policy on Staff-Monitored Programs (SMPs) that would allow for limited Executive Board involvement in opining on the robustness of a member’s policies to meet their stated objectives under an SMP and monitoring its implementation. To differentiate from regular SMPs, such SMPs would be called “Program Monitoring with Board Involvement” or “PMBs”. Their use would be only available to those (requesting) members who, in addition to seeking to build or rebuild a track record for Upper Credit Tranche (UCT) Use of Fund Resources (UFR), would benefit from targeted Executive Board involvement because of either (i) an ongoing concerted international effort by creditors or donors to provide substantial new financing or debt relief to the member or (ii) significant outstanding Fund credit under emergency financing instruments at the time new emergency financing is received. Members meeting criterion (i) or (ii) above would be strongly encouraged to request such a PMB. The PMB would support members in designing, implementing, and monitoring policies under often complex circumstances.
October 4, 2022
Statement by the Managing Director on the Independent Evaluation Office Report on The IMF and Capacity Development Executive Board Meeting September 12, 2022
Description: The IEO evaluation contains a wealth of analysis and background material that will be invaluable as staff embarks on the preparation of the 2023 CD Strategy Review. The overall assessment is very positive, highlighting the achievements authorities have made with the help of Fund CD and the value they continue to place on this area of Fund work. The report also acknowledges the significant strides that have been made in improving governance and management of CD in recent years.
August 8, 2022
Staff Guidance Note on the Sovereign Risk and Debt Sustainability Framework for Market Access Countries
Description: This note provides operational guidance for the use of the Sovereign Risk and Debt Sustainability Framework (SRDSF), which replaces the Debt Sustainability Framework for Market Access Countries. The SRDSF introduces improvements in organization, methodology, transparency, and communication when analyzing public debt issues in countries that mainly finance themselves with market-based debt. After its phased adoption beginning [June 2022], it will become the Fund’s principal tool for assessing public debt sustainability.
August 8, 2022
The Acting Chair’s Summing Up Review of the Fund’s Policy on Multiple Currency Practices—Proposals for Reform Executive Board Meeting July 1, 2022
Description: Executive Directors welcomed the opportunity to complete the review of the Fund’s Policy on Multiple Currency Practices (MCPs). They observed that MCPs can be distortionary, create unfair competitive advantage among countries, and hamper trade and investment, particularly over the medium and long term. They agreed that the MCP policy should remain a cornerstone of the Fund’s legal and policy framework to ensure orderly exchange arrangements and a stable system of exchange rates. They welcomed the adjustments to the policy to reflect developments since the last review in the 1980s so that it does not discourage good practices in FX markets and is better aligned with the Fund’s other policies (including the policy on exchange restrictions and the Institutional View on the Liberalization and Management of Capital Flows (IV)), while ensuring that it continues to address policy actions that are considered impermissible under the new policy.
July 29, 2022
Review of the Method of Valuation of the SDR— Amendment to Rule O-1
Description: This paper seeks Executive Board approval of an amendment to Rule O-1 of the IMF’s Rules and Regulations, which specifies the currency amounts in the SDR valuation basket In accordance with Decision No. 17247-(22/44), adopted May 11, 2022, on the method of valuation of the SDR and Decision No. 16033-(16/17), adopted July 20, 2016 on the guidelines for the calculation of currency amounts in the SDR valuation basket, the amounts of each currency included in the SDR valuation basket, effective August 1, 2022, have been determined. These currency amounts are calculated in accordance with long-standing principles of continuity and stability of the SDR value in terms of currencies. The calculations ensure that on the transition day (today), the value of the SDR in U.S. dollars is the same under the new and the prevailing SDR valuation baskets. Moreover, at the average exchange rates for the three-month period ending today (May 2 through July 29, 2022), the share of each currency in the value of the SDR corresponds to the weight approved by the IMF Executive Board on May 11, 2022.