IMF Finances

Public Information Notice: IMF Board Completes Review of Fund Financial Facilities
November 30, 2000

Review of Fund Facilities -- Decisions
November 28, 2000

Summing Up by the Acting Chairman of the IMF Executive Board Contingent Credit Lines
November 17, 2000

Review of Fund Facilities Proposed Decisions and Implementation Guidelines Prepared by the Legal, Policy Development and Review, and Treasurers Departments
November 2, 2000

Where Does the IMF Get its Money? -- A Factsheet

Public Information Notice (PIN) No. 00/79: IMF Board Agrees on Changes to Fund Financial Facilities - September 18, 2000

Glossary of Selected Financial Terms

Statement by the Staff on
Review of Fund Facilities
Proposed Decisions and Implementations Guidelines
IMF Executive Board Meeting

November 17, 2000

1. At the question and answer session on November 9, 2000, some Executive Directors raised concerns about two aspects of the proposed policy on time-based repurchase expectations: the criteria to be used in granting extension requests, and publication policy. This staff statement considers each of these issues in turn.

A. Criteria for the Operation of Repurchase Expectations

2. The staff has proposed that the granting of extensions of repurchase expectations be based on criteria relating to the absolute strength of the member's external position, and not to developments in the external position relative to what had been programmed.1 The basis for this proposal is that Fund-supported programs may target a varying degree and pace of strengthening of the external position. As stated in the staff paper,2 in the presence of the new policy on repurchase expectations, the minimum adjustment required in a Fund-supported program will continue to be guided by the requirement that the member should be able to meet repurchase obligations; there is no need to program more or faster adjustment in order that the member be able to meet the repurchase expectations. However, especially in the context of the globalization of private capital markets, there will be members for which recovery from an external shock can be expected from the outset, and hence will be programmed, to take place quickly. If these projections are realized (or even, perhaps, if recovery is a little slower than originally projected), these are certainly members from which the Fund would expect early repayment. Conversely, in some other cases where the recovery was from the outset expected to be relatively slow, even a stronger than programmed external position may not be strong enough for the member to comfortably meet repurchase expectations.

3. Nevertheless, because Fund-supported programs will continue to be guided by the requirement that the member should be able to meet repurchase obligations, the meeting of repurchase expectations should be taken and presented as a good sign, rather than their extension taken and presented as a bad sign. The meeting of expectations signals that a member's external position is stronger, at a given point in time, than would have been needed for it to be in a position to meet repurchase obligations. Moreover, because Fund-supported programs will not generally target adjustment sufficiently rapid for members to meet repurchase expectations, in most cases the external position of members meeting expectations will be stronger than had been programmed, and this fact may be expected to exert an important influence on the connotations extensions of expectations will come to carry in public perception.

    B. Publication Policy for Repurchase Expectations

4. Some Executive Directors have asked for additional information regarding the proposed policy on publication of requests of extensions of time-based repurchase expectations. The following paragraphs lay out in more detail the proposed procedures when members meet expectations, when members request extensions, and when members miss repurchase expectations. It should be noted that these procedures are expected to be first used in early 2003, when the first repurchase expectations in the credit tranches would fall due, and may need to be adapted in light of possible future changes to the Fund's publication policy.

Financial information provided on the Fund's external website

5. The background to the proposed decisions on publication in these cases is that complete information about the Fund's financial relations with individual members is already provided on the Fund's external website. The information currently provided includes the history of purchases made, the member's outstanding credit, repurchase obligations falling due, and repurchases completed. The schedule of repurchase expectations will also be posted on the website. The information is updated monthly. From this information, it will be possible for knowledgeable observers to derive whether a member has met repurchase expectations or not, and whether a member has been granted an extension or not.

Meeting repurchase expectations

6. When a member meets repurchase expectations, the staff proposes that recognition be given to the member by publicizing the event in the context of Article IV or post-program monitoring (PPM) discussions in the Public Information Notice (PIN). The statement would be limited to factual reporting that the member will be repaying ahead of the obligation schedule, as the specific circumstances of the member would be provided in the rest of the PIN. Further detail on the member's circumstances would be available in the Board documents, should the member choose to have them published.

Extensions of repurchase expectations

7. When a member requests and is granted an extension of repurchase expectations, the staff proposes that a brief factual statement to this effect be posted on the member's country-specific page on the Fund's website, and that the granting of the request be noted in the next weekly update of "Fund Financial Activities: Week at a Glance" on the website.3 Directors expressed some concern that markets may misunderstand the meaning of extensions of repurchase expectations, and that any publicity that a member is not on the expectation schedule, no matter how low key, could raise concerns about the member's external position. There are several important reasons to publicize the Board's decision to extend early repurchase expectations:

  • Lack of a notification by the Fund that the member is no longer adhering to the expectations schedule could undermine the credibility of the Fund's commitment to transparency.

  • The absence of clear information on the status of members' repurchase expectations could suggest that the Fund itself views the extensions of early repurchase expectations in a negative light.

  • There is a need to ensure that the Fund would not be engaged in misinformation. A member could be in a position to meet repurchase expectations on the date of an Article IV consultation or PPM discussion, which would be recognized in the PIN following this discussion. However, the same member could request an extension soon thereafter. This would lead to a situation where the Fund had publicized a member's meeting of repurchase expectations but was not able to notify the public of the change in that member's status until the occasion of the next Article IV or PPM discussion, which could be some way off.

8. At the same time, the staff would not propose that additional attention be drawn to extensions of repurchase expectations through the release of a PIN or a Chairman's statement. This course of action would be consistent with the position that the fact that a member is supposed to meet its repurchase obligations is not news.

9. The staff would propose that the statement posted on the website be along the following lines: "With respect to the arrangement for country x approved by the Fund on [mm, dd, yy], the Executive Board approved on [mm, dd, yy] country x's request to amend the repurchase expectation schedule and country x will accordingly adhere instead to the repurchase obligation schedule [for all repurchase expectations arising from [mm, dd, yy] to [mm, dd, yy]] / [for all remaining expectations under the arrangement]." A link would take the reader to a description of the Fund's policy as regards repurchase expectations and obligations, which would emphasize that Fund-supported programs are formulated in such a way as to allow the member to meet repurchase obligations, rather than repurchase expectations, and that an extension of repurchase expectations is granted if a member's external position does not turn out sufficiently strong to allow it to repay early.

10. The staff would not propose to make additional statements clarifying the events. If the member thinks that it is desirable to provide additional information, it could consent to the publication of the Board paper supporting the request for extension.

Missing repurchase expectations

11. When a member misses repurchase expectations without the Board's having granted an extension, the staff proposes publication after a period of six months. This would ensure that missed expectations are not made public earlier than arrears to the Fund. The Fund's arrears strategy, including its transparency aspects, will be reviewed in June 2001, and the policy on the publication of missed expectations could be reconsidered at that time. In any event, cases of missed expectations without the Board having granted an extension are likely to be very rare. A missed expectation would in the first instance lead to intensified contacts of staff and management with the member concerned. The Executive Board would be notified one month after the missed expectation, and the issue would be considered by the Board after three months. The process of consultation would give the member ample opportunity either to meet the expectation or, if its external position is not strong enough for it to do so, to request a postponement expeditiously. Publication of missed expectations would thus occur only in the very rare cases where the issue was not resolved within six months.

1 See "Review of Fund Facilities-Follow Up" (EBS/00/187, Box 2, and Supplement 1, paragraph 2) and "Review of Fund Facilities-Proposed Decisions and Implementation Guidelines" (EBS/00/216, paragraphs 22-23 and Box 3). The summing up of the last facilities discussion ("Summing Up by the Acting Chairman-Review of Fund Facilities, Supplementary Information, EBM/00/96, September 15, 2000", BUFF/00/153) states that "the Fund could extend [repurchase expectations] on request by the member, if the Board agreed that the member's external position had not improved sufficiently for repurchases to be made." (While the statement in the summing up is phrased in terms of improvement in the external position, the improvement is not relative to what had been programmed, but rather relative to the member's position when it was making drawings.)
2 EBS/00/216, paragraph 23.
3 See EBS/00/216, paragraphs 27-28.