Guidance Note for the Fund's Policy on Multiple Currency Practices
Policy Papers, December 20, 2023
Source details
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- Guidance Note for the Fund's Policy on Multiple Currency Practices
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Bibliographic details
- Published: December 20, 2023
- Series: Policy Papers
- DOI: https://doi.org/10.5089/9798400264474.007
Overview
- Purpose: Provides operational guidance to staff on implementation of the new Fund’s policy on multiple currency practices (MCPs).
- Effective date of MCP policy: February 1, 2024.
- Context: MCP policy is a key element of the Fund’s jurisdiction on exchange rates; the Fund’s Articles of Agreement prohibit member countries from engaging or permitting their fiscal agencies (as defined in the Articles) to engage in MCPs unless authorized under the Articles or approved by the Fund.
- Review context: Comprehensive review of the policy in 2022 to reflect developments in FX policy and FX markets since the last policy review in the 1980s and to align with other relevant Fund’s policies.
Key changes to the MCP policy
- Definition and triggers:
- An MCP will arise due to an official action that segments foreign exchange (FX) markets or increases or subsidizes the cost of certain FX transactions (e.g., exchange taxes) and the resulting exchange rate spreads exceed the permissible margins.
- Identification rule:
- MCPs will be identified on the basis of a new country-specific market-based rule.
- Policy alignment:
- The new policy ensures better alignment of the MCP policy with other relevant IMF’s policies.
Guidance to staff: scope and process
- Coverage:
- Guidance applies to all stages of the process: from identification of an MCP to its approval or removal.
- Roles and actions:
- Clarifies treatment of MCPs in surveillance and Fund-supported programs.
- Guides staff engagement with the authorities on MCP issues and guidance on coverage of MCP issues in country documents.
Subject areas and keywords
- Subject: Currency markets, Exchange rates, Exchange restrictions, Financial markets, Foreign exchange, Monetary policy, Multiple currency practices, Political economy
- Keywords: Currency markets, Exchange rates, Exchange restrictions, exchange transaction, Financial markets, Foreign exchange, Global, IMF's transparency policy, Institutional View, MCP Approval criteria, MCP policy, Monetary policy, Multiple currency practices, segments foreign exchange, transparency policy
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- Policy Paper