## Press Briefing by IMF First Deputy Managing Director Stanley Fischer on the 1998 IMF Annual Report

_IMF News, September 11, 1998_

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## Bibliographic details
- Published: September 11, 1998

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### Key statistics and Fund liquidity position
- Member countries borrowed US$26 billion from the Fund in the past financial year (nearly four times the previous year).
- Disbursements from end-April through end-August: US$11 billion (amount drawn).
- Amount committed in financial year 1997/98: US$43 billion (some committed amounts not drawn).
- Additional committed since end of financial year: US$10 billion.
- Stock of net uncommitted usable resources fell to US$30 billion at end of the financial year from about US$59 billion a year earlier; that US$30 billion has now become about US$28 billion.
- Liquidity ratio (net uncommitted usable resources / liquid liabilities):
  - At end of fiscal year: 45 percent
  - Now: about 36 percent
  - Compared with: 121 percent at the end of fiscal year 1996-97
  - Historical average: 70 percent
- Management regard 30 percent (possibly 25 to 30) as a lower reserve/liquidity bound; 25 to 30 corresponds to around US$19 billion to US$23 billion in usable resources.
- Implied immediately available lending capacity under that reserve view: US$5 billion to US$9 billion.
- Management could consider temporarily going below the 30 percent liquidity ratio only if there were a clear prospect that additional resources would be available soon.

### Lending activity, commitments, and resource needs
- Record level of Fund lending driven by the Asian crisis and global reverberations.
- Large sums committed/drawn are “very large sums relative to the base, the lending base, of the IMF.”
- Emphasis on the need to strengthen financial resources through:
  - Approval of the quota increase
  - Approval of the NAB
- Management’s appeal for rapid action (including by the U.S. Congress) so the Fund can meet ongoing demands.

### Annual Report scope, transparency, and Board process
- Annual Report characteristics:
  - Executive Board publication, not a staff publication.
  - Four sections: overview; summary of Board discussions (non-country-specific); description of activities in the financial year (surveillance, financial support for members, the ESAF, the HIPC Initiative, capital account liberalization); staffing, organization and budgets.
  - Chronology of developments updated through July to supplement Board discussion summaries.
  - PINs (Press/Public Information Notices) and Article IV consultation summaries are published more rapidly on the IMF Website and collected in hard copy three times a year in IMF Economic Reviews.
  - Annual Report was made slimmer by excluding selected Article IV summaries to avoid large lags (e.g., a report could be 16 months out of date).
- Board decision process:
  - 24-member Board reviews and approves the report on a page-by-page basis.
  - Typical Board discussion of the report takes 8 to 10 hours and can run into the next day.
- Trend toward greater transparency: increasing reporting about Board deliberations and operations.

### Lessons and policy themes from crises
- Recurring lessons emphasized by the Board and Fund:
  - Importance of timely and accurate information (reserves, off-balance-sheet transactions of central banks and banking systems).
  - Broadening Fund reviews of individual economies to include financial sector issues.
  - Contagion and interdependence: Asian crisis and subsequent Russian devaluation raise systemic concerns.
  - Transparency: balancing transparency with the need to obtain sensitive information.
  - Effectiveness of surveillance depends on member countries taking Fund advice seriously and implementing recommended measures.
- Strengthening the international financial architecture:
  - Expected convergence of various reports (G-10, G-22, staff reports) toward themes:
    - Strengthening members’ financial systems
    - Improved surveillance
    - Better information disclosure
    - Addressing moral hazard from official financing
    - Defining private sector roles in crisis resolution
  - Trade-off identified: involving the private sector in crisis resolution versus avoiding increased volatility in capital movements.

### Capital account liberalization and Articles amendment
- Ongoing discussion of a possible amendment to the Articles of Agreement to make orderly liberalization of capital flows one of the Fund’s purposes and possibly extend Fund jurisdiction.
- Controversial and complex issues highlighted:
  - Whether freer capital flows are desirable
  - Feasibility and necessity of legal jurisdiction for the Fund
  - Preconditions for liberalization: improved banking/supervisory standards and overall quality of banking systems
- Management stance (Stanley Fischer): amendment could help accomplish capital account liberalization properly; not an endorsement of hasty or partial liberalization (e.g., opening the short end and keeping the long end closed).

### Activities for low-income countries and debt relief
- ESAF (concessional lending) review:
  - Internal and external assessments undertaken.
  - Summary of staff lessons posted on the IMF Website with an electronic mailbox for feedback.
- HIPC Initiative:
  - Process of providing debt relief begun for six heavily-indebted, low-income countries, in cooperation with the World Bank and other lenders.

### Surveillance and governance
- Clarification of IMF role on governance issues.
- Guidance to members on transparency in fiscal policy making.
- Further work on principles of monetary policymaking.
- Continued effort to help members strengthen financial systems.

### Questions and country-specific remarks (highlights)
- U.S. Congressional ratification of quota increase and NAB:
  - Management urged rapid Congressional action; quota increase requires 85 percent support (thus the U.S. must accede).
- Use of Fund gold or market borrowing:
  - Management view: prudential and technical reasons constrain use of gold or similar measures for rapid crisis response; holding reserves preserves members’ confidence in the institution.
- Brazil:
  - IMF in close contact with Brazilian policymakers.
  - Market responses described: initial hesitations, then interest rate raised to 30 percent and later to 50 percent.
  - Fiscal action: announced strong cut in fiscal spending in 1998 at an annual rate of 1.5 percentage points of GDP; plan to announce shortly a medium-term program with fiscal reforms to stabilize public debt in relation to GDP within the next 3 years.
  - IMF stands ready to provide financial assistance if requested.
- Malaysia:
  - Reimposition of controls viewed as unlikely to help in the long run; risks reducing foreign investment and access to global markets if sustained.
- Hong Kong:
  - Changes by the Hong Kong Monetary Authority described as technical improvements to broaden the monetary base eligible and to make the currency board operate more transparently and smoothly; measures include a transparent mechanism for setting discounting interest rates.
- Latin America:
  - Majority of IMF programs are outside Asia, including low-income members.
  - IMF stands ready to help countries willing to pursue appropriate policies; consideration of access to GAB resources mentioned (General Arrangements to Borrow totals US$15 billion).
  - High interest rates pose fiscal pressures; if sustained, would require further fiscal tightening.
- Russia and political changes:
  - Early days; IMF will judge by policies rather than personalities; Moscow office kept abreast of developments.
- Institutional support and public debate:
  - Management recognizes need to improve the IMF’s public image and to make the institutional case; relies also on member governments (e.g., U.S. Treasury) to make the case for Fund support.

*Press Briefing by IMF First Deputy Managing Director Stanley Fischer on the 1998 IMF Annual Report, September 11, 1998 — edited transcript*

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## References

- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2015/09/28/04/54/tr980911_