AUThoR

Thomas Benjamin B. Marcelo

Mr. Marcelo is currently on secondment to the International Monetary Fund as Senior Advisor to the Executive Director, Southeast Asia Voting Group. he joined the BSP in 2001 and served as the Director of the International Relations Department prior to his secondment in november 2014. Mr. Marcelo obtained his PhD degree in Development Administration and a Master of Arts degree in Economics of Development from the Australian national University in Canberra, Australia.

*Views from Washington is a regular column on relevant issues that is contributed by BSP Officials on secondment to the International Monetary Fund in washington D.C., U.S.A.

Views from Washington

The IMF and the Post-2015Development Agenda

The Sustainable Development Goals (SDGs) are a new set of global

development targets adopted by the member countries of the United

nations (Un) in September 2015. The SDGs builds on the Millennium

Development Goals (MDGs), which covered eight anti-poverty targets that

the world committed to achieving by 2015. The SDGs will guide the global

development agenda up to 2030. The new SDGs go much further than the

MDGs by addressing the root causes of poverty and the universal need for

development. The SDGs include a set of 17 targets to end poverty, fight

inequality and injustice, and tackle climate change by 2030.

The challenges of mobilizing the financial resources needed to help meet the SDGs were discussed at the Third Un Conference on Financing for Development in Ethiopia in July 2015. The conference concluded with an agreement among the Un membership on an action agenda to increase development financing to meet the new SDGs.

Role of the International Monetary Fund (IMF) in Helping Achieve the SDGsThe IMF, with its expertise on macroeconomic and financial issues, substantial lending toolkit, and its global membership, works with member countries to support their national development efforts, while also promoting global economic and financial stability. The IMF has identified several initiatives that it could undertake to bolster its support for developing countries as they pursue their development goals. These include:

1. Increasing access to IMF resources for developing countries to provide them with a wider financial safety net to manage adverse external shocks;

2. Scaling up support for capacity building in domestic revenue mobilization and public financial management;

3. Expanding assistance for countries seeking to address large infrastructure development gaps and to boost growth—through the use of analytical tools and capacity-building measures, while safeguarding medium-term public debt sustainability;

4. Intensifying engagement on policy issues relating to financial inclusion, gender, and environmental sustainability, where they are important for growth and macroeconomic stability, drawing on the expertise of other institutions as needed;

5. Strengthening the effectiveness of the IMF’s work in fragile and conflict-affected states, assisting in policymaking and supporting capacity building;

6. Enhancing IMF technical assistance for domestic financial market development, in collaboration with other international organizations; and

7. Strengthening statistical data dissemination through greater use of new technologies.

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To mobilize resources to help meet the SDGs, the IMF in early July 2015 sought to provide developing countries with greater access to Fund resources. The IMF also worked towards better targeting access to concessional resources towards the poorest and most vulnerable countries. These included:

1. Increasing access to IMF concessional resources for all countries eligible for the IMF’s Poverty Reduction and Growth Trust (PRGT) when faced with urgent balance of payments needs;

2. Rebalancing the mix of concessional to non-concessional financing towards more use of non-concessional resources for better-off PRGT-eligible countries that currently receive “blended” financial support from the IMF;

3. Increasing access to quick-disbursing concessional and non-concessional resources for countries in fragile situations, hit by conflict or natural disasters; and

4. Setting the interest rate on loans under the Rapid Credit Facility (RCF) of the PRGT at zero percent.

During the discussions of the IMF Executive Board in July 2015 on the IMF’s role in supporting the post-2015 development agenda, Directors agreed that given the IMF’s mandate and global membership, it should be actively engaged in the dialogue on mobilizing resources in support of the new SDGs. Directors supported initiatives to enhance Fund support for developing countries as they seek to accelerate economic development on a sustainable and inclusive basis.

On proposals to enhance the access of developing countries to IMF financial support, the Board considered how the IMF could expand its direct financial support for its members. Some Directors noted that these proposals could have been more ambitious, and could have sought to mobilize additional PRGT subsidy resources, as well as go beyond focusing primarily on low-income countries. The Board decided to increase by 50 percent the amounts that member countries could borrow under the IMF’s concessional financing and emergency lending facilities and to set at zero percent the interest rate charged on lending to low-income countries hit by adverse shocks.

on access, Directors broadly agreed that PRGT access limits have eroded relative to economic indicators since these limits were last increased in 2010. Accordingly, the Board agreed to increase by 50 percent the amounts that countries could borrow under the IMF’s emergency lending facility, Rapid Credit Facility (RCF) and concessional financing facilities such as the Standby Credit Facility (SCF), and the Extended Credit Facility (ECF) under the PRGT, in line with IMF staff proposals. Higher access to these resources signals the Fund’s commitment to provide an important financial safety net to developing countries in managing adverse external shocks, in particular for small and fragile states which have limited resources and capacity to deal with these shocks. The Directors noted that access limits should not be considered an entitlement and that actual access should continue to be determined on a case-by-case basis, guided by the current policy on determination of access. A number of Directors requested that IMF staff give further thought to policy changes to more effectively assist fragile states and small member countries affected by severe natural disasters. The IMF Southeast Asia Voting Group (SEAVG) constituency, of which the Philippines is a constituency member, recommended greater flexibility in setting higher access limits on concessional lending to small and fragile states that are significantly affected by severe natural disasters.

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Directors generally supported rebalancing the funding mix of concessional and non-concessional resources provided to countries that receive IMF support from a 1:1 ratio to a 1:2 ratio. Directors agreed that such rebalancing would help conserve limited resources, is consistent with the self-sustainability of the PRGT financing framework, and is warranted in light of the significantly greater market access achieved by some member countries. Directors also highlighted the need to ensure that rebalancing the funding mix will continue to be consistent with limiting the risks of higher borrowing costs and preserving member countries’ debt sustainability.

The IMF also published a paper entitled “From Ambition to Execution: Policies in Support of Sustainable Development Goals” examining selected policy issues relevant for achieving the individual SDGs, based on recent analytical work conducted at the Fund. The paper discussed how to achieve sustainable and inclusive growth in developing countries and how to use market-based policies to promote environmental sustainability over the medium term.

With its global membership and mandate to promote economic and financial stability at both national and international levels, the IMF has an important role to play in helping developing member countries to achieve the Sustainable Development Goals. The IMF can work directly with member countries and help them in implementing sound and appropriate macroeconomic policies and structural reforms to achieve sustainable and more inclusive growth through its surveillance, technical assistance, and lending activities. After much delay, the implementation of the 2010 quota and governance reforms in 2016 will is expected to lead to a doubling of the IMF’s quota resources, further strengthening the IMF’s ability to support its membership’s drive towards achieving the SDGs. The IMF’s work on achieving the SDGs needs to continue against a low-growth environment and volatile global financial conditions. Going forward, work program priorities at the IMF can be directed towards efforts to step up the pace of SDG achievement, including completion of the 15th General Quota Review, review of Fund resources (including the future of the 2012 Borrowing Agreements and the new Arrangements to Borrow), and mobilization of additional concessional resources in the medium term to strengthen the IMF’s resource base.

ReferencesInternational Monetary Fund (IMF) (2015). Financing for development: Enhancing the financial safety for developing

countries. Retrieved from http://www.imf.org/external/ np/pp/eng/2015/061115b.pdf.

IMF (2015). From ambition to execution: Policies in support of sustainable development goals. Retrieved from http://www.imf.org/external/pubs/ft/sdn/2015/sdn1518.pdf.

IMF (2015). IMF Executive Board adopts decisions to enhance the financial safety net for developing countries. Press Release no. 15/324. Retrieved from http://www.imf.org/ external/np/sec/pr/2015/pr15324.htm.

IMF (2015). IMF Executive Board discusses “Financing for Development.” Press Release no. 15/325. Retrieved from http://www.imf.org/external/np/sec/pr/2015/pr15325.htm.

IMF (2015). Financing for development: Revisiting the Monterrey Consensus. Retrieved from http://www.imf.org/external/np/pp/eng/2015/061515.pdf.

United nations Development Program (2015). Sustainable development goals. Retrieved from http://www.undp.org/content/dam/undp/library/corporate/brochure/SDGs_Booklet_web_En.pdf.

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