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• IMF at a
Glance
What Is the IMF?
• Factsheets on September 30, 2006
the Work of Ordering Information
the IMF
• Annual Report Contents
• IMF History, What does the International Monetary Fund do?
1979-1989 Why was it created?
• Glossary of How does the IMF serve its member countries?
Selected How does the IMF help poor countries?
Financial Who runs the IMF?
Terms
Where does the IMF get its money?
• IMF
Terminology:
Highlights in the Evolution of IMF Lending
A Multilingual Boxes
Directory
Exchange rate stability
• IMF Material The IMF and the World Bank have different mandates
for Students Crisis prevention
Crisis resolution
The IMF's main business: macroeconomic and financial sector policies
Terminology
IMF lending facilities
The IMF provides technical assistance and training mainly in four areas
Collaborating with other institutions
UN Millennium Development Goals
Evaluating the IMF's operations
What is the SDR?
Crisis prevention
Since the Mexican crisis of 1994–95 and the Asian crisis of 1997–98, the
IMF has intensified its efforts to help countries prevent financial crises. It
has emphasized the importance of countries' incorporating "shock
absorbers" into their policies—such as adequate foreign exchange
reserves, efficient and diversified financial systems, social safety nets,
and a fiscal policy that allows governments to run higher deficits during
difficult times, if necessary. And it has introduced several initiatives
designed to make countries less vulnerable to crisis.
• In collaboration with the World Bank, the IMF conducts in-depth
assessment of countries' financial sectors under the Financial
Sector Assessment Program.
• It has developed, sometimes in cooperation with other
organizations like the World Bank and the Bank for International
Settlements, standards and codes of good practice in economic
policymaking, financial sector regulation and supervision, statistical
collection and dissemination, and other areas. It issues reports on
its members' observance of these standards and codes (known as
ROSCs). The IMF's Data Standards Initiatives encourage members
to make reliable, timely, and comprehensive statistics available to
the public, thereby enabling investors to make well-informed
decisions, improving the functioning of financial markets, and
reducing the likelihood that shocks will precipitate crises. The IMF
launched the Special Data Dissemination Standard (SDDS) in 1996
to provide guidance to member countries that have, or wish to
gain, access to international capital markets on the dissemination
of data. The General Data Dissemination System (GDDS) was
established in 1997 to help countries that are not yet in a position
to subscribe to the SDDS and need to improve their statistical
systems. Participation in both systems is voluntary.
• It has developed vulnerability indicators and early warning system
models to improve its ability to identify countries at risk.
• It has stepped up its efforts to promote good governance,
particularly in the public and financial sectors.
• It participates in international efforts to combat money laundering
and the financing of terrorism.
Box 4
Crisis resolution
By far the greater part of international financial flows are private flows.
This points to the importance of the role that the private sector can play
in helping to prevent and resolve financial crises.
Crises may be prevented, and the volatility of private flows reduced, by
improved risk assessment and closer and more frequent dialogue
between countries and private investors. Dialogue can also foster greater
private sector involvement in the resolution of crises when they do
occur, including through the restructuring of private debt, benefiting
both creditors and debtors.
And the involvement of the private sector in crisis prevention and
resolution should help limit "moral hazard"—that is, the possibility that
the private sector may engage in risky lending if it believes that potential
losses will be limited by official rescue operations.
The IMF has strengthened its dialogue with market participants, for
example, through the establishment of the Capital Markets Consultative
Group in 2000. The Group provides a forum for regular communication
between international capital market participants and IMF management
and senior staff on matters of common interest, including world
economic and market developments and measures to strengthen the
global financial system.
In some crises, coordinated debt restructuring by private creditors may
be needed. To facilitate debt restructuring, the IMF has promoted the
inclusion of Collective Action Clauses in international bond issues. The
use of these clauses, which is the norm under U.K. law and has become
the market standard for bonds issued under New York law, is designed
to prevent a small minority of creditors from blocking a restructuring
deal to which the majority of creditors agree. The IMF also supports the
Principles for Stable Capital Flows and Fair Debt Restructuring drafted by
the Institute for International Finance in 2004, and the Paris Club's Evian
Approach to debt relief for countries that have unsustainable debt but
that do not qualify for assistance under the HIPC Initiative.
Global surveillance entails reviews by the IMF's Executive Board of global economic
trends and developments. The main reviews are based on World Economic Outlook reports
and the Global Financial Stability Report, which covers developments, prospects, and policy
issues in international financial markets; both reports are normally published twice a year.
In addition, the Executive Board holds more frequent informal discussions on world
economic and market developments.
In 2006, the IMF introduced a new tool, multilateral consultations, designed to bring small
groups of countries together to discuss a specific international economic or financial
problem that directly involves them and to settle on a course of action to address it.
Regional surveillance involves examination by the IMF of policies pursued under regional
arrangements such as currency unions—for example, the euro area, the West African
Economic and Monetary Union, the Central African Economic and Monetary Community,
and the Eastern Caribbean Currency Union.
The growing interdependence of national economies, and the potential impact of national
economic policies on the world economy and vice versa, have prompted the IMF
increasingly to integrate the three levels of surveillance. Through its Article IV
consultations, the IMF pays close attention to the impact of the larger economies' policies
on smaller economies. It also studies the impact of global economic and financial
conditions on the economic performance of individual countries and the repercussions of
national policies at the regional level.
Box 5
Terminology
Technically, countries do not receive loans from the IMF—they
"purchase" foreign exchange from the IMF's reserve assets, paying with
their own currency. The loan is considered repaid when the borrower
"repurchases" its currency from the IMF in exchange for reserve assets.