Press Release No. 07/122

Press Release No. 07/122

On June 6, 2007, the Executive Board of the International Monetary Fund (IMF) discussed the IMF's work program for the coming months. The program contains an ambitious and comprehensive plan, including key elements of the IMF's reform agenda: modernizing its surveillance or economic oversight, bringing member countries' voting shares in line with their current weight in the world economy, developing a sustainable income model for the IMF, and better defining the role of the Fund in low-income countries.

"We face a challenging work program requiring careful prioritization and sequencing," IMF Managing Director Rodrigo de Rato told the Board. "To carry it out effectively we should give priority to the most pressing issues, while recognizing that the Medium-Term Strategy targets a substantial number of areas for progress."

During the discussion, the Executive Board took stock of the progress made in implementing the IMF's Medium-Term Strategy (MTS) and agreed on steps for the period leading to the October 2007 Annual Meetings.

Modernizing surveillance. A core responsibility of the IMF, surveillance has become increasingly important in today's global economy. Accordingly, the Fund is taking steps to strengthen its framework. A key priority is to update the 1977 Decision on Surveillance over Exchange Rate Policies. A specific proposal will be considered setting out the principles guiding the scope and operational modalities of surveillance over countries' economic conditions and policies (including exchange rate policies). Complementary work in this area includes consideration of an instrument for setting out time-bound surveillance priorities, follow up on the recent evaluation of IMF exchange rate policy advice, a review of the experience under the multilateral consultation on global imbalances, and further research and seminars on financial globalization and policies to sustain financial stability.

As part of surveillance of the global economy, the IMF's analysis will focus on key issues of importance to the global economy. Among other topics, the fall 2007 World Economic Outlook will assess how globalization has affected income distribution across countries, the changing characteristics of economic cycles, and how long the current global expansion can be expected to continue. In addition, the Global Financial Stability Report will examine how risk management techniques may have contributed to the current benign financial environment as well as the link between capital flows to emerging market countries and features of their domestic financial markets. Regarding emerging markets, the Executive Board will also discuss a new methodology for assessing vulnerabilities and crisis risks.

Emerging market engagement. As part of the Fund's strengthened engagement with emerging market economies, the Fund is developing a new liquidity instrument for market access countries that would enhance IMF support to these countries' own strong policies and ensure that substantial and timely financing will be available if needed, while safeguarding Fund resources. The Executive Board is scheduled to further discuss design issues of the new instrument before the Annual Meetings.

Aligning quotas and voice. Building on recent steps to align the IMF's quota shares with members' relative positions in the world economy and to enhance the voice of low-income countries, the Executive Board will work toward reaching consensus on a new quota formula by the 2007 Annual Meetings and no later than the 2008 Spring Meetings. An Executive Board meeting on the main elements of a formula will take place by the time of the Annual Meetings, with further discussions to be arranged as needed.

A sustainable income model. Based on the recommendations of the Eminent Persons' report on long-term financing of the IMF, the Executive Board will work on an income model consistent with the Fund's mandates and a reduced expenditure envelope. Broad support among member countries will be required to move ahead in this area, since two proposals—broadening the investment options for existing reserves and using quota resources for investment—require amendment of the IMF Articles of Agreement, while a third—the sale of gold—require an 85 percent majority of voting power. A staff paper on these issues is being prepared and an initial Executive Board meeting will take place later this month.

IMF's work in low-income countries. A number of activities are planned in the next months related to aid flows, support for post-conflict countries, collaboration between the Fund and the World Bank, and clarification of the role of the Fund. These activities are in line with the view of Fund members that the institution should remain engaged in supporting macroeconomic stability and sustainable growth in low-income countries. The upcoming work includes papers that will assess the consistency between aid flows, economic stability, and development goals; public financial management responses to additional aid; and the adequacy of Fund instruments to assist post-conflict countries. Furthermore, there will be Board discussions on the recent evaluation of the role of the Fund in Sub-Saharan Africa, Bank-Fund collaboration, and the role of the Fund in poverty reduction strategies and donor coordination.