imf report chapter -1 - 2011

7/28/2019 IMF Report Chapter -1 - 2011

1/4

ovErviEw

1


2/4

the iM ems ce es ese he b ecmy

bs sse h ph. the ss k Y20111cse p pcy ce echc spp membe

ces hep chee hs , mee he fc ees ces spp he jsme es, c hh pms geece, ie, P (he e ey Y2012), p

pce sysems h sehe he ss by ey esp b ecmc sks s hey emee, k

ems h sehe he e mey sysem.

d he ye, eeme s eche me eh

he iMs ece sce. the ems b b sbs sh pe ymc eme mke

eep ces, he pec he ce he pes membe

ces, ehce he iMs emcy eeceess.

ovErviEw

1

left und governne ws mong the issues disussed

t the 2010 annul Meetings. righta womn pkges

fowers or export t rm in cot, colombi.


3/4

iM annual rEPort 2011 |

A MULTISPEED GLOBAL RECOVERY

Te global economy has continued to recover over the past year,although growth remains uneven across countries. In manyadvanced countries, growth continues to be relatively weak, heldback by high unemployment rates, weak nancial conditions,and concerns about the scal and nancial sector outlook.Diiculties in a number o European countries have beenparticularly acute. In contrast, growth in emerging markets isstrong, and with ination rising, there are growing concernsabout overheating in a number o these economies.

Given the uneven nature o global growth, policy challenges diferconsiderably across countries. In most advanced countries, the mainpolicy challenge is to sustain the recovery and reduce unemployment

while moving orward with the required scal adjustment andnancial sector repair and reorm. For most emerging market anddeveloping countries, there is a need to accelerate the unwinding

o accommodative macroeconomic policies to avoid overheatingin the ace o strong economic activity, credit growth, capital inows,and broader ination pressures, while ensuring that the poor areprotected rom the efects o higher ood and uel prices. Progressalso needs to be made in reducing risks to nancial stability romstill-large global imbalances by increasing the contribution o netexports to growth in economies with large current account decitsand, conversely, by increasing the role o domestic-demand-drivengrowth in economies with large current account surpluses. Contin-ued policy cooperation between countries will be needed to securerobust and sustainable global growth. Careul policy design at thenational level and coordination at the global level, important at thepeak o the crisis two years ago, remain equally so today.

POLICIES TO SECURE SUSTAINEDAND BALANCED GLOBAL GROWTH

During FY2011, IMF activities ocused on providing the nan-cial and other support that member countries needed to deal

with the lingering efects o the global crisis and identiying andpromoting the implementation o policies that will secure sustainedand balanced growth in the world economy going orward.

Demand or Fund resources remained high during the year, with30 nancing arrangements or augmentations o existing arrange-

ments approved by the Executive Board. High-prole programswith Greece and Ireland, in conjunction with partners in Europe,supported economic reorms to secure sustainable public sectornances so that growth and jobs can be restored. Te Greekprogram aims to boost competitiveness, while Irelands programocuses on restoring nancial sector stability. Both programs aredesigned so that the adjustment burden is shared and the mostvulnerable groups are protected. During the year, Flexible CreditLines (FCLs) were approved or Colombia, Mexico, and Poland,as was a Precautionary Credit Line (PCL) or Macedonia, while17 low-income countries had programs approved or augmented

with support rom the Poverty Reduction and Growth rust.

Te IMF also intensied its policy dialogue with countries inthe Middle East/North Arica regionnotably Egypt andunisiato assist governments in managing the economicchallenges arising rom the political developments o the ArabSpring. Additionally, a review o saeguards assessments o centralbanks armed the continued efectiveness o these assessmentsin maintaining the Funds reputation as a prudent lender.

Further steps were also taken to strengthen the IMFs surveillanceactivities. For example, agreement was reached to strengthen

work on spilloversthe situation in which economic develop-ments or policy actions in one country afect other countriesby producing pilot spillover reports or the ve most systemi-cally important economies or economic regions (China, the euroarea, Japan, the United Kingdom, and the United States). Teaim o this exercise is to improve the IMFs understanding o theinterconnected nature o the world economy, in order to supportbetter policy collaboration at the global level. Greater ocus wasalso placed on nancial sector surveillance and macronancial

linkages. Agreement was reached to make nancial stabilityassessments under the Financial Sector Assessment Program(FSAP) mandatory or countries with systemically importantnancial sectors and to integrate nancial stability assessmentsmore ully into the Funds surveillance o member countries. TeIMF continued its semiannual Early Warning Exercises, whichare undertaken in cooperation with the Financial Stability Board,to examine unlikely but plausible risks that could have an impacton the global economy. It also continued its support o the Groupo wentys (G-20s) Mutual Assessment Process (MAP) and iscoordinating work at the international level to address data gapshighlighted by the global crisis. Additionally, an analyticalramework was introduced or assessing the vulnerabilities o

low-income countries to global shocks.

A considerable amount o work was undertaken during the yearto strengthen the unctioning and stability o the internationalmonetary system. Although the system proved resilient to thecrisis, tensionsseen through large global imbalances, volatilecapital ows and exchange rate movements, and large reserveaccumulationremain a concern. During the year, the IMFlooked at policies to manage capital ows, how to assess theadequacy o international reserves held by countries, and thepotential contribution that the IMFs Special Drawing Rights(SDRs) could make to improving the long-term unctioning othe international monetary system.

REFORMING AND STRENGTHENINGTHE IMF TO BETTER SUPPORTMEMBER COUNTRIES

A undamental overhaul o the IMFs governance structure wasagreed upon in December 2010. Quota reorms and changes tothe composition o the institutions Executive Board will enhancethe Funds credibility and efectiveness by making its governancestructures more reective o todays global reality. Te quotareorms, built on those initiated in 2008, will double quotas to


4/4

| iM annual rEPort 201110

approximately SDR 476.8 billion (about US$773 billion), shitquota shares by over 6 percentage points toward dynamicemerging market and developing countries, and protect thequota shares and voting power o the poorest members. Withthis shit, Brazil, the Russian Federation, India, and China (theso-called BRIC countries) will be among the Funds 10 largestshareholders. Proposed reorms to alter the structure and compo-sition o the IMFs Executive Board, whose strength is vital tothe institutions efective unctioning, include moving to anall-elected Board and reducing the combined Board representa-tion o advanced European members by two chairs. Te proposedquota increases and the amendment to the Funds Articles o

Agreement required to enact the reorm o the Executive Boardmust now be accepted by the membership, which in many casesinvolves parliamentary approval. Members have been asked tocomplete ratication by the 2012 Annual Meetings.

In March 2011, members o the International Monetary andFinancial Committee (IMFC) selected Tarman Shanmugaratnam,

Minister or Finance and Deputy Prime Minister o Singapore,as Chairman o the Committee or a term o up to three years.Minister Tarman succeeded Yousse Boutros-Ghali, Egyptsormer Minister o Finance, who resigned the previous month.

Te IMF continued to reorm its nancing toolkit during FY2011.Te Flexible Credit Line, created in March 2009, was rened tobe more useul and efective in crisis prevention. A new Precau-tionary Credit Line was introduced and made available to a widergroup o countries than the FCL, and a Post-Catastrophe DebtRelie (PCDR) rust was established to allow the Fund to joininternational debt relie eforts when poor countries are hit bythe most catastrophic o natural disasters.

echnical assistance delivery remained at a high level in FY2011and continued to ocus on helping countries recover rom theatermath o the global nancial crisis and strengthening policyrameworks to support sustained growth. New partnerships withdonors were ormed during the year to ensure sucient resourcesto meet the continued heavy demand or technical assistance. oensure that they respond to the priorities and meet the needs omember countries, IMF training courses continued to be evalu-ated and adapted. During FY2011 additional training was oferedon macroeconomic diagnostics and nancial sector issues.

FINANCES, ORGANIZATION,

AND ACCOUNTABILITY

Substantial steps were taken in FY2011 to strengthen the resourcesavailable to the IMF and meet the potential nancing needs o itsmember countries. In addition to the quota agreement mentionedin the previous section, the 2008 quota reorm, which provides or

ad hoc quota increases or 54 members totaling SDR 20.8 billion,entered into efect in March 2011. Te IMF also negotiated asignicant expansion o its standing arrangements to borrow rommember countries through the New Arrangements to Borrow(NAB), which became efective in March 2011. Te expansion willinitially increase the NAB more than tenold to SDR 367.5 billion(about US$596 billion), although the NAB will be correspondinglyscaled back once the new quota resources become available.

As part o the revised income model or the IMF approved in2008, it was agreed that a limited portion o the IMFs goldholdings would be sold and used to und an endowment togenerate returns to provide support or the Funds ongoing budget.In July 2009, the Executive Board decided that in addition tounding this endowment, part o the gold sale proceeds wouldbe used to increase resources available or concessional lending.Te gold sales were completedthrough both on- and of-markettransactionsin December 2010.

Several key changes in the Funds management took place duringthe year or early in FY2012. Dominique Strauss-Kahn resignedas Managing Director in May 2011, and the Executive Boardinitiated the selection process or the next Managing Director,

which was completed in June 2011, with the naming o ChristineLagarde as the Funds new Managing Director. Also, DeputyManaging Director Murilo Portugal let the Fund in March 2011and was replaced by Nemat Shak.

In the area o human resources management, eforts continuedduring the year to recruit and retain the high-caliber, diverse stafthat is essential to the institutions success. A strong recruitmentdrive and the implementation o a number o important human

resources policy reormsincluding the introduction o a newsystem or salary adjustments, changes to the Medical BenetsPlan, and a new compensation and benets program or locallyhired staf in overseas oceshelped move toward these objec-tives during the year.

IMF eforts to explain its work to external audiences and strengthenengagement with the membership were stepped up during FY2011.

A major conerence that discussed Asias role in the globaleconomy (Asia 21: Leading the Way Forward) was held inDaejeon, Korea, with more than 500 high-level participants.Meetings continued with the existing Regional Advisory Groupsor Asia and the Pacic, Europe, the Middle East, Sub-Saharan

Arica, and the Western Hemisphere (and a new group was ormedduring the year or the Caucasus and Central Asia), and a jointmeeting o these advisory groups was held at the October 2010

Annual Meetings. Te IMF also broadened its interactions withtrade unions, including through a conerence in Oslo, TeChallenges o Growth, Employment, and Social Cohesion,sponsored jointly with the International Labor Organization.

imf report chapter -1 - 2011

Documents