IMF Financial Operations 2016

194 Pages·2017·4.141 MB·English

by  International Monetary Fund

IMF
Financial Operations
2016
International Monetary Fund
©International Monetary Fund. Not for Redistribution
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Third Edition, © 2016 International Monetary Fund
First Edition 2014
Cataloging-in-Publication Data
Joint Bank-Fund Library
IMF Financial operations / Finance Department, International Monetary
Fund. – Washington, D.C. : International Monetary Fund, 2016.
p. ; cm.
Includes bibliographic references.
1. International Monetary Fund. 2. International finance. 3. Financial
organization and operations of the IMF. I. International Monetary Fund.
Finance Department.
HG3881.5.I58 F48 2015
ISBN: 978-1-47553-219-7 (Paper)
Disclaimer: The analysis expressed in this publication is that of the IMF staff and does not
represent IMF policy or the views of the IMF, its Executive Board, or IMF management.
Recommended citation: International Monetary Fund, IMF Financial Operations
(Washington, October 2016).
Please send orders to:
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P.O. Box 92780, Washington, DC 20090, U.S.A.
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www.imfbookstore.org
©International Monetary Fund. Not for Redistribution
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Preface vii 2.1.1 Quotas 13
Acknowledgments ix 2.1.2 Th e Quota Formula 14
Abbreviations xi
2.1.3 Quota Increases under General Reviews 15
2.1.4 Ad Hoc Quota Increases 16
1. Overview of the IMF as a
2.1.5 Recent Quota, Voice, and Governance
Financial Institution 1 Reforms 18
1.1 Role and Purposes of the IMF 2 2.1.6 Borrowing by the IMF 19
1.2 Evolution of the IMF’s Financial Structure 4 2.2 Th e IMF’s Financing Mechanism 22
1.3 Measures Taken since the Onset of the 2.2.1 Th e Financial Transactions Plan 24
Financial Crisis 4 2.2.2 NAB Resource Mobilization Plan 26
1.3.1 Borrowing 4 2.3 Th e Asset Side 26
1.3.2 Quotas 5 2.3.1 Financial Policies and Facilities:
1.3.3 SDRs 5 Th e GRA Lending Toolkit 26
1.3.4 General Lending Framework 5 2.3.2 Credit Outstanding 30
1.3.5 Resources and Lending to Low-Income 2.3.3 Gold Holdings 33
Countries 5 2.4 Th e IMF’s Balance Sheet and Income Statement 35
1.4 Th e IMF’s Financial Structure and Lending 2.4.1 Th e Balance Sheet 35
Mechanisms 6
2.4.2 Operational Income 36
1.4.1 Nonconcessional Financing (Chapter 2) 6
2.4.3 Operational Expenses 36
1.4.2 Concessional Financing (Chapter 3) 6
2.4.4 Administrative Expenses 36
1.4.3 Th e SDR (Chapter 4) 8
2.4.5 Net Income 37
1.4.4 Income Generation (Chapter 5) 8
2.4.6 Valuation of Currencies 37
1.4.5 Financial Risk Management (Chapter 6) 8
2.5 Special Disbursement Account 37
1.5 Information Sources on IMF Finances 9
2.6 IMF Accounts in Member Countries 37
1.5.1 IMF Website 9
2.6.1 Disclosure of Financial Position
1.5.2 Contacts in the Finance Department 9 with the IMF by Member Countries 38
Additional Reading 12 Additional Reading 45
2. Nonconcessional Financial 3. Financial Assistance for Low-Income
Operations 13 Countries 47
2.1 Financing Nonconcessional Lending 3.1 Th e Evolution of Concessional Lending 47
Operations: Resources and Liabilities 13 3.2 Poverty Reduction and Growth Trust 49
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apter Cont 3.2.1 PRGT Terms 51 6.1.1 Credit Risks 124
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3.3 Heavily Indebted Poor Countries Initiative 54 6.1.3 Income Risk 127
3.3.1 HIPC Eligibility and Qualifi cation Criteria 54 6.2 Overdue Financial Obligations 130
3.3.2 Provision of Debt Relief 55 6.2.1 Overview 130
3.4 Catastrophe Containment and Relief Trust 55 6.2.2 Cooperative Strategy on Overdue
3.5 Financing Concessional Assistance and Financial Obligations 130
Debt Relief 57 6.2.3 Arrears Clearance Modalities 134
3.5.1 Financing Structure 57 6.2.4 Special Charges 134
3.5.2 Framework for Concessional Lending 57 6.3 Safeguards Assessments of Central Banks 135
3.5.3 Resources for Concessional Lending 59 6.3.1 History and Objectives 135
3.5.4 Self-Sustained PRGT 61 6.3.2 Conceptual Framework: Governance
3.5.5 Framework for Debt Relief 62 and Controls 135
3.5.6 Resources for Debt Relief 63 6.3.3 Modalities 136
Additional Reading 81 6.3.4 Safeguard Risks beyond Central Banks 137
6.4 Audit Framework 137
4. Special Drawing Rights 83 6.5 Financial Reporting and Risk Disclosure 138
Additional Reading 154
4.1 Background and Characteristics of the SDR 83
4.2 Valuation of the SDR 84
4.2.1 SDR Basket 85 Appendix 1 IMF Membership: Quotas, and
4.2.2 Current SDR Valuation Method 85 Allocations and Holdings of SDRs 155
Appendix 2 Special Voting Majorities for Selected
4.3 Th e SDR Interest Rate 87
Financial Decisions 159
4.4 Allocations and Cancellations of SDRs 87
Appendix 3 Administered Accounts 160
4.5 Operation of the SDR Department 89
Appendix 4 Disclosure of Financial Position with
4.5.1 Participants and Prescribed Holders 89 the IMF in the Balance Sheet of a Member’s
4.5.2 Flows of SDRs and the Central Role Central Bank 163
of the IMF 89 Glossary 165
4.5.3 IMF SDR Holdings 91 Index 173
4.5.4 Voluntary SDR Trading Arrangements 91
4.6 Financial Statements of the SDR Department 93 Figures
Additional Reading 104 1.1 Financial Structure of the IMF 7
2.1 Th e Size of the IMF 20
5. The IMF’s Income Model 105 2.2 Th e IMF Lending Mechanism: An Exchange of Assets 23
5.1 Lending Income 106 2.3 Member Positions in the General
Resources Account 25
5.2 Th e New Income Model 108
2.4 Outstanding IMF Credit by Facility, 1990–2016 29
5.2.1 Features of the New Income Model 108
2.5 Median and Interquartile Range for Annual
5.3 Investment Income 110
Average Access under Stand-By and Extended
5.3.1 Subaccounts 110
Arrangements 32
5.3.2 Th e Use of Investment Income 112
2.6 Distribution of Average Annual Access under
5.4 Reimbursements to the General Resources
Stand-By and Extended Arrangements, 1990–2016 32
Account 113
3.1 PRGT-Eligible Countries: GRA Purchases and
Additional Reading 121
Concessional Loan Disbursements, 1987–2016 49
3.2 Outstanding Concessional Credit by Facility,
6. Financial Risk Management 123 1977–2016 50
6.1 Financial Risk: Sources and Mitigation 3.3 IMF Debt Relief to Low-Income Countries,
Framework 123 1998–2016 54
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3.4 Concessional Financing Framework 58 3.4 HIPC Th resholds for the Present Value of s
3.5 Flow of Funds in the Poverty Reduction and External Debt 54
Growth Trust 58 3.5 Implementation of the HIPC Initiative 56
3.6 Poverty Reduction and Growth Trust Reserve 3.6 PRG-HIPC Financing Requirements and Sources 57
Account Coverage, 1988–2016 62 3.7 Cumulative Commitments of Lenders to the Poverty
3.7 Debt Relief Framework 63 Reduction and Growth Trust Loan Accounts 60
3.8 Financial Structure of the Poverty Reduction and 3.8 Heavily Indebted Poor Countries and Poverty
Growth-Heavily Indebted Poor Countries Trust 64 Reduction and Growth-HIPC Trust Resources 65
4.1 Actual Currency Weights in the SDR Basket, 2000–16 86 3.9 PCDR/CCR Trust Debt Relief and Sources
4.2 Interest Rates on the SDR and Its Financial of Financing 65
Instrument Components, 2005–16 88 4.1 Currency Weights in the SDR Basket 86
4.3 SDR Allocations: General and Special 89 4.2 Balance Sheet of the SDR Department 93
4.4 Circulation of SDRs 90 4.3 Income Statement of the SDR Department 93
4.5 Selected SDR Transactions, 2006–16 91 5.1 Investment Account Subaccounts 111
4.6 IMF SDR Holdings, 2006–16 91 6.1 Level of Precautionary Balances in the General
4.7 SDR Sales: Participation by Market Makers Resources Account 125
by Region, September 1, 2009–April 30, 2016 92 6.2 Th e IMF’s Liquidity, 2010–16 129
5.1 Snapshot of the IMF Income Statement 106 6.3 History of Protracted Arrears to the IMF 131
5.2 Weekly Interest Rates and Margins, 2004–16 107 6.4 Arrears to the IMF of Countries with Obligations
5.3 Th e IMF’s New Income Model 109 Overdue by Six Months or More, by Type
and Duration 131
5.4 Earnings of the Investment Account 113
6.1 Forward Commitment Capacity: How the IMF
Augments Quota Resources through Borrowing, Boxes
December 1994–April 2016 128
1.1 Th e Decision-Making Structure of the IMF 10
6.2 Overdue Financial Obligations to the IMF, 1980–2016 132
2.1 GRA Balance Sheet Snapshot 39
6.3 IMF Credit Outstanding and Overdue Obligations,
2.2 Quota Payment Procedures 40
1984–2016 132
2.3 Th e Quota Formula 41
6.4 Safeguards Analytical Framework and
2.4 Th e Reserve Tranche Position 42
Governance Focus 135
2.5 Th e Evolution of Conditionality 43
6.5 Safeguards Assessments by Region 137
2.6 Key Gold Transactions 44
3.1 Concessional Lending Timeline 66
Tables 3.2 Subsidization of Emergency Assistance and
Its Financing 67
2.1 General Reviews of Quotas 16
3.3 Exogenous Shocks Facility 68
2.2 Agreed Changes in IMF Quotas 17
3.4 Policy Support Instrument 69
2.3 Countries Eligible for the Ad Hoc Quota Increases
3.5 Interest Rate Regime for Concessional Facilities 70
Agreed under the 2008 Quota and Voice Reforms 18
3.6 Poverty Reduction Strategies 71
2.4 General and New Arrangements to Borrow 21
3.7 Debt Relief Timeline 72
2.5 Financial Terms under IMF General Resources
Account Credit 27 3.8 Th e HIPC Sunset Clause 73
2.6 Balance Sheet of the General Department 35 3.9 Topping Up HIPC Assistance 74
2.7 Income Statement of the General Department 36 3.10 Liberia’s Debt Relief 75
3.1 Concessional Lending Facilities 48 3.11 Th e Multilateral Debt Relief Initiative (MDRI) 76
3.2 Access Limits and Norms for Poverty Reduction 3.12 Trust Assets: Investments in Support of
and Growth Trust Facility 52 Concessional Financing 77
3.3 Countries Eligible for the Poverty Reduction and 3.13 Th e 2009 Fundraising Exercise 78
Growth Trust and the Heavily Indebted Poor 3.14 Reimbursement of Administrative Expenses
Countries Initiative 53 Associated with Concessional Lending Operations 79
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apter Cont 3.15 Making the Poverty Reduction and Growth 6.1 Financial Risks Management in the IMF 139
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4.1 Creation of the SDR 94 6.3 Th e Burden-Sharing Mechanism: Capacity
4.2 Broad Principles Guiding SDR Valuation Decisions 95 and Implications for Arrears 141
4.3 Criteria for the Composition of the SDR Basket 96 6.4 Composition of the IMF’s Precautionary Balances 143
4.4 Currency Amounts and Actual Daily Weights 98 6.5 Financial Reporting of Credit Losses under
4.5 SDR Interest Rate Calculation 99 International Financial Reporting Standards 144
4.6 Borrowing SDRs for Payment of the Reserve 6.6 Th e Forward Commitment Capacity 145
Asset Portion of a Quota Increase 100 6.7 Overdue Financial Obligations to the IMF 146
4.7 Voluntary Trading Arrangements of Special 6.8 Overdue Financial Obligations to the General
Drawing Rights 101 Department and the SDR Department:
4.8 Timeline to Buy or Sell SDRs under the Voluntary Timetable of Remedial Measures 147
Trading Arrangements 102 6.9 Overdue Financial Obligations to the Poverty
4.9 Designation Mechanism 103 Reduction and Growth Trust: Timetable
5.1 Setting the Margin for the Basic Rate of Charge 114 of Remedial Measures 148
5.2 Evolution of Surcharges 116 6.10 Policy of De-escalation of Remedial Measures 149
5.3 Commitment Fees 118 6.11 Th e IMF’s Safeguards Assessments Policy 150
5.4 Committee of Eminent Persons’ Proposal for 6.12 Misreporting Framework 151
Increasing IMF Income 120 6.13 Th e IMF’s External Audit Arrangements 153
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Preface
T
he International Monetary Fund was conceived in July or external debt redemptions). This financial assistance enables
1944, at a United Nations conference in Bretton Woods, countries to rebuild their international reserves, stabilize their
New Hampshire, United States. Th e 44 participating gov- currencies, continue paying for imports, and restore conditions
ernments sought to build a framework for economic coopera- for strong economic growth, while undertaking policies to cor-
tion that would forestall any repetition of the disastrous policies, rect underlying problems. Chapter 2 reviews IMF lending made
including competitive devaluations, that contributed to the Great at market rates (that is, nonconcessional lending facilities), and
Depression of the 1930s and, ultimately, to World War II. Chapter 3 describes the various concessional facilities by which
The IMF now has 189 member countries and has evolved the IMF lends to low-income member countries at favorable rates
over time as the global economy has expanded, become more (currently, a zero interest rate).
integrated, and endured both boom and bust. But the IMF’s mis- Chapter 4 reviews the SDR mechanism; Chapter 5 outlines the
sion has remained the same: to ensure the stability of the inter- sources of income for the IMF; and Chapter 6 outlines the insti-
national monetary system—the system of exchange rates and tution’s approach to financial risk management. The publication
international payments that enables countries (and their citizens) also includes a list of common abbreviations, a glossary, and an
to transact with one other and that is essential for promoting index.
sustainable economic growth, increasing living standards, and
reducing poverty. What’s New
This publication provides a broad introduction to how the IMF
fulfills this mission through its financial activities. It covers the Th is publication updates a previous report entitled Financial
financial structure and operations of the IMF and also provides Organization and Operations of the IMF, fi rst published in 1986
background detail of the financial statements for the IMF’s activ- and last issued in 2001 (the sixth edition). Th at 2001 report
ities during the most recent financial year. Making such financial refl ected the seismic shift s in the global economy and in the
information publicly available is part of the IMF’s overarching IMF’s structure and operations that occurred aft er the fall of the
commitment to transparency. Transparency in economic policy Soviet Union and the various currency and fi nancial crises of the
and the availability of reliable data on economic and financial 1990s. Th is revised and updated report covers more recent devel-
developments is critical for sound decision-making and for the opments, including reform of the IMF’s income model, measures
smooth functioning of the international economy. Toward that taken in response to the global fi nancial crisis of 2007–09, and
end, this publication also contains numerous links to other pub- the institutional reforms aimed at ensuring that the IMF’s gover-
licly available information on IMF finances, including on the nance structure evolves in line with developments in the global
IMF’s website, www.imf.org. economy.
Chapter 1 reviews the evolution of the IMF’s financial struc- The IMF significantly bolstered its lending capacity in the
ture and operations, its role and functions, governance structure, wake of the global financial crisis. This was done to meet the
and the nature of recent reforms. Chapters 2 and 3 explain how unprecedented financing needs of a number of countries hit hard
the IMF provides lending to member countries experiencing by the crisis and to help strengthen global economic and finan-
actual or potential balance of payments problems, meaning that cial stability. IMF lending capacity was expanded in several ways,
the country cannot find sufficient financing on affordable terms including through borrowing, completion of a general quota
to meet its net international payments (for example, for imports review that resulted in a doubling of its quota resources (with a
IMF Financial Operations 2016 vii
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ap corresponding rollback of previously increased resources under Digital technology and the Internet make it easier to create
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SDR allocations. Moreover, the IMF refined its general lending also to keep it up to date. This publication will be updated on an
framework to better meet member country needs and, in partic- annual basis, and in line with the IMF’s financial year on April
ular, to emphasize measures to prevent crises in the future. 30, and it will be available in multiple digital and print formats,
The IMF also reformed its policies toward low-income coun- including print copies, PDF files available for online viewing
tries and significantly increased the resources available to the and print-on-demand, and formats for eReaders (eBook, iBook,
world’s poorest countries. In January 2016, IMF member coun- Mobi, Kindle, Nook, and more).2 We will update individual chap-
tries ratified a historic governance reform that creates a more ters more regularly if there are significant changes to IMF struc-
representative, all elected Executive Board and increases the vot- tures or lending facilities or if we uncover errors in the published
ing power of emerging market and developing economies, while edition. These updates will be available online and will note the
simultaneously preserving the voice of the low-income members. date of the last revision. The version of record will be the latest
electronic version published on the IMF’s website and eLibrary.
How to Use This Document We invite your feedback and comments. This publication is
meant to answer your questions about the IMF. If some of your
Th is publication includes descriptions of the IMF’s fi nancial questions remain unanswered, please contact us at publicaffairs@
organization, its policies and lending arrangements, and details imf.org.
on its fi nancial statements. Th ese are meant only to explain and
synthesize offi cial IMF documents, records, and agreements. For Andrew Tweedie
authoritative versions of these materials, readers should directly Director, Finance Department
consult the offi cial institutional records, which are available at
www.imf.org/external/fi n.htm.1
1 In addition, a complete archive of the Annual Reports issued by the 2 For web PDF files, visit www.imf.org; for other digital formats, visit
Executive Board is available on the IMF eLibrary at www.elibrary.imf.org. www.elibrary.imf.org.
viii IMF Financial Operations 2016
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Acknowledgments
T
his publication was prepared by staff members of the Sun-Wang, Olaf Unteroberdoerster, Riaan van Greuning, Barry Yuen,
Finance Department under the direction of Chris Geiregat. and Ruifeng Zhang. Comments and suggestions were also received
Christine Kadama served as project manager and also pro- from the Legal Department. Th e initial edition was prepared by staff
vided outstanding research and information technology support. members of the Finance Department under the direction of Susan
Vanessa Ince provided exceptional administrative support for the Prowse, with principal contributors including Elena Budras, Lia
project. From the IMF Communications Department, Linda Griffi n Cruz, Joanna Grochalska, Curtis Hatch, Lodewyk Erasmus, Lukas
Kean and Michael Harrup led the editorial eff ort and managed pro- Kohler, Sergio Rodriguez, and Fang Yang.
duction of this publication, with copyediting support from Linda IMF Financial Operations (now in its third edition) provides a
Long. In addition, valuable contributions were provided by Mariel summary of financial operations and policies of the International
Acosta, Maria Albino-War, Dannah Al-Jarbou, Alexander Attie, Monetary Fund. It represents a thorough updating of a previous
Rina Bhattacharya, Elena Budras, Sonja Davidovic, Chris Faircloth, report entitled Financial Organization and Operations of the IMF,
Khawaja Farhan, Gilda Fernandez, Elodie Goirand, Joanna Gro- first published in 1986 and last issued in 2001. Many descriptions
chalska, Ivetta Hakobyan, Heikki Hatanpaa, Janne Hukka, Hideaki have been simplified in a reader-friendly manner and should not
Imamura, Lukas Kohler, Sandra Marcelino, Diana Mikhail, Diviesh be treated as authoritative statements on IMF policies. The views
Nana, Amadou Ndiaye, Anne Oeking, Ceyda Oner, Ezgi Ozturk, expressed in this publication are those of IMF staff and do not
Jean-Guillaume Poulain, Sergio Rodriguez-Apolinar, Izabela Rut- necessarily represent the views of the Executive Board or their
kowska, Rachel Saperstein, Debra Spagnola, Mariusz Sumlinski, Yan national authorities.
IMF Financial Operations 2016 ix
©International Monetary Fund. Not for Redistribution