Review of the Fund's Policy on Multiple Currency Practices–Proposals for Reform
Policy Papers, July 15, 2022
Source details
- Canonical URL
- Review of the Fund's Policy on Multiple Currency Practices–Proposals for Reform
Other formats
Bibliographic details
- Published: July 15, 2022
- Series: Policy Papers
- DOI: https://doi.org/10.5089/9798400212949.007
Summary of Board position and paper purpose
- In February 2019, the Executive Board considered staff’s preliminary proposals for reforming the IMF’s policy on multiple currency practices (MCPs) and supported the majority of the proposals.
- The paper outlines proposals to refocus the MCP policy, revise the methodology for identifying MCPs, address treatment of illegal parallel markets, exclude broken cross-rates from the policy scope, link the policy to the Institutional View on the Liberalization and Management of Capital Flows, and set operational considerations to address noncompliance and ensure a smooth transition.
- It is proposed to enhance the current cooperative approach to addressing noncompliance by increasing transparency and accountability.
Key proposals and methodological changes
- Re-focus the policy on official action that segments foreign exchange markets.
- Eliminate the concept of potentiality in the MCP framework.
- Replace the current fixed two-percent rule for identifying MCPs for spot transactions with:
- A country-specific market-based norm and tolerance margin.
- The new norm and margin would apply uniformly across the membership for both spot and non-spot transactions.
- Support for staff’s proposals regarding other elements of the new methodology to identify MCPs.
- Treatment of illegal parallel markets is addressed within the proposed framework.
- Broken cross-rates are proposed to be excluded from the scope of the policy.
- Establish explicit linkages with the Institutional View on the Liberalization and Management of Capital Flows.
Operational considerations and implementation
- The paper outlines operational considerations to address noncompliance and to ensure a smooth transition to the reformed policy.
- Proposed enhancements emphasize increasing transparency and accountability while retaining a cooperative approach to address noncompliance.
Subject areas and keywords (as listed in the source)
- Subject: Currency markets, Exchange rates, Exchange restrictions, Exchange taxes, Financial markets, Foreign exchange, Monetary policy, Multiple currency practices, Political economy, Taxes
- Keywords: Currency markets, Exchange rates, Exchange restrictions, Exchange taxes, exchange transaction, IMF's transparency Policy, MCP finding, MCP policy, MCP Policy, Multiple currency practices, unapproved MCP
International Monetary Fund. Monetary and Capital Markets Department, International Monetary Fund. Research Dept., International Monetary Fund. Strategy, Policy, & Review Department, and International Monetary Fund. Legal Dept. "Review of the Fund's Policy on Multiple Currency Practices–Proposals for Reform", Policy Papers 2022, 036 (2022), July 15, 2022, accessed 9/19/2026, https://doi.org/10.5089/9798400212949.007
Content in this bundle
- Policy Paper