Selected Decisions and Selected Documents of the IMF, Thirty- Eighth Issue -- The Chairman’s Summing Up—The Role of the Fund in Low-Income Countries, Executive Board Meeting 08/6, July 23, 2008

Prepared by the Legal Department of the IMF
As updated as of February 29, 2016

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ARTICLE V, SECTION 3(a), (b), AND (c)
Use of Fund Resources

The Chairman’s Summing Up—The Role of the Fund in Low-Income Countries

Executive Board Meeting 08/6, July 23, 2008

This has been a useful and constructive discussion. It has allowed us to take stock of the valuable contribution that the Fund has made to the progress of many low-income countries (LICs) toward macroeconomic and financial stability, which is central to sustained growth and poverty reduction. Our discussion has reconfirmed a broadly shared vision on the need for a continued close Fund engagement with its low-income member countries that is tailored to their changing needs and emerging new challenges. The Fund’s work on LICs will be shaped by its broader refocusing, and build on close collaboration with partner institutions.

Most Directors considered that the proposed mission statement outlines useful guiding principles for the Fund’s engagement in LICs. The statement affirms that the Fund aims to help LICs achieve the macroeconomic and financial stability needed to raise sustainable growth and have a durable effect on poverty reduction. While recognizing that the Fund’s mandate is similar in all member countries, many Directors suggested that the mission statement should better reflect the fact that at times different instruments and approaches are required when working with LICs given the particular characteristics of this group of countries. Many Directors considered that the objective of achieving strong, sustained growth should be an integral part of the policies which the Fund is helping LICs put in place, while others felt that the emphasis should rather be on stability as the platform upon which sustainable growth can be achieved. Directors agreed that the main channels for the Fund’s engagement will continue to be macroeconomic policy advice, capacity-building assistance, and concessional balance of payments support. On the latter, some Directors noted that the Fund is not a donor agency, and that its financing is relatively less concessional. A few Directors reiterated the view that LICs should not have to pay for capacity building assistance. As in other member countries, the Fund will focus on its core areas of expertise, namely, macroeconomic stabilization and fiscal, monetary, financial, and exchange rate policies, and the underlying institutions and closely related structural policies. The Fund’s work will draw on country-owned development strategies, and its advice and engagement will be tailored to the specific characteristics of countries. We will need to reflect further on how to take forward the issuance of a mission statement in light of the comments as well as suggestions for further refinement that were made today.

Directors welcomed the planned reviews of the Fund’s instruments to ensure that they continue to meet the evolving needs and priorities of LICs. The immediate priority will be to modify the Exogenous Shocks Facility (ESF), which has so far not been used, to make it a more effective instrument in helping LICs cope with shocks, including those arising from food and fuel price increases. Today’s discussion has raised a number of complex issues, on which we need to reflect further as we seek to adapt our instruments. This will involve careful examination of the merits of increasing the flexibility of the PRGF as the primary instrument for Fund financial engagement with LICs facing protracted balance of payments problems, including with respect to repayment schedules and the possibility of creating a precautionary window. The review of Fund facilities will also address proposals for increasing the fungibility of concessional resources across the Fund’s toolkit, and for a possible Stand-By-type instrument to support short-term stabilization in LICs. Most Directors did not see a role for Fund financing to offset shortfalls in aid.

BUFF/08/127,

August 1, 2008

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