Since the onset of the global economic crisis in 2008, the IMF
has mobilized on many fronts to support its 188 member countries. It
increased and deployed its lending firepower, used its cross-country
experience to offer policy solutions, and introduced reforms that
made it better equipped to respond to countries' needs.
Creating a crisis firewall. To meet ever increasing
financing needs of countries hit by the global financial crisis and help
strengthen global economic and financial stability, the Fund has greatly
bolstered its lending capacity since the onset of the global crisis. It
has done so both by obtaining commitments to increase
quota subscriptions of member countries—the IMF's main source of
financing—and securing large temporary borrowing agreements from member
countries, including recent pledges of $461 billion.
Stepping up crisis lending. The IMF has overhauled
its
lending framework to make it better suited to country needs giving
greater emphasis on crisis prevention, and has streamlined conditions
attached to loans. Since the start of the crisis, it has committed well
over $600 billion in loans to its member countries.
Helping the world’s poorest. The IMF undertook an
unprecedented reform of its policies toward
low-income countries and quadrupled resources devoted to
concessional lending.
Sharpening IMF analysis and policy advice.
IMF monitoring, forecasts, and policy advice, informed by the Fund’s
global perspective and experience from previous crises, have been in
high demand as the crisis evolved. The IMF is also contributing to the
ongoing effort to draw lessons for the reform of the global financial
architecture, including through its work with the Group of Twenty (G-20)
industrialized and emerging market economies.
Reforming the IMF’s governance. To strengthen its
legitimacy, in November 2010, the IMF agreed on
wide-ranging governance reforms to reflect the increasing importance
of emerging market countries. The reforms, which are not yet effective,
would also ensure that smaller developing countries retain their
influence in the IMF.
Reforming the IMF’s lending framework
To better support countries during the global economic crisis, the
IMF beefed up its lending capacity and
approved a major overhaul of how it lends money by offering higher
amounts and tailoring loan terms to countries’ varying strengths and
circumstances.
Credit line for strong performers. The
Flexible Credit Line (FCL), introduced in April 2009 and further
enhanced in August 2010, is a lending tool for countries with very
strong fundamentals that provides large and upfront access to IMF
resources, mainly as a form of insurance for crisis prevention. There
are no policy conditions to be met once a country has been approved for
the credit line.
Colombia,
Mexico, and
Poland have been provided combined access of over $100 billion under
the FCL (no drawings have been made under these arrangements). FCL use
has been found to lead to lower borrowing costs and increased room for
policy maneuver.
Access to liquidity on flexible terms. Heightened
regional or global stress can affect countries that would not likely be
at risk of crisis. Providing rapid and adequate short-term liquidity to
such crisis bystanders during periods of stress could bolster market
confidence, limit contagion, and reduce the overall cost of crises. The
Precautionary and Liquidity Line (PLL) is designed to meet the
liquidity needs of member countries with sound economic fundamentals but
with some remaining vulnerabilities—Macedonia and Morocco have used the
PLL.
Reformed terms for IMF lending.
Structural performance criteria have been discontinued for all IMF
loans, including for programs with low-income countries. Structural
reforms will continue to be part of IMF-supported programs, but have
become more focused on areas critical to a country’s recovery.
Emphasis on social protection. The IMF is helping
governments to
protect and even increase social spending, including social
assistance. In particular, the IMF is promoting measures to increase
spending on, and improve the targeting of, social safety net programs
that can mitigate the impact of the crisis on the most vulnerable in
society.
Helping the world’s poorest
In response to the global financial crisis, the IMF undertook an
unprecedented reform of its policies toward low-income countries. As a
result, IMF programs are now more flexible and tailored to the
individual needs of low-income countries—with streamlined
conditionality, higher concessionality and more emphasis on safeguarding
social spending.
Increase in resources. Resources available to
low-income countries through the Poverty Reduction and Growth Trust over
the period 2009–14 were boosted, consistent with the call by G‑20
leaders in April 2009 of doubling the IMF’s concessional lending
capacity and providing $6 billion additional concessional financing over
the next two to three years. The IMF’s concessional commitments to
low-income countries amounted to $3.8 billion in 2009, an increase of
about four times the historical levels. Concessional commitments from
2009 to 2013 totaled about $10 billion.
Establishment of a
Post-Catastrophe Debt Relief (PCDR) Trust.
This allows the IMF to join international debt relief efforts for very
poor countries that are hit by the most catastrophic of natural
disasters. PCDR-financed debt relief amounted to $268 million in 2010.
Creating a crisis firewall
As a key part of efforts to overcome the global financial crisis, the
Group of Twenty industrialized and emerging market economies (G-20)
agreed in April 2009 to increase borrowed
resources available to the IMF (complementing its quota resources)
by up to $500 billion (which tripled the total pre-crisis lending
resources of about $250 billion) to support growth in emerging market
and developing countries.
In April 2010, the Executive Board adopted a proposal on an expanded
and more flexible New Arrangements to Borrow (NAB), under which the NAB
grew to about SDR 367.5 billion (about $560 billion), with 13 new
participating countries and institutions, including a number of emerging
market countries that made significant contributions to this large
expansion. On November 15, 2011, the National Bank of Poland joined the
NAB as a new participant, bringing the total to about SDR 370 billion
(about $570 billion) and the number of new participants to 14. The
expanded NAB has been activated six times starting in April 2011,
providing key financial resources to the Fund.
In April 2012, the IMFC and G20 Finance Ministers and Governors
jointly agreed to further enhance IMF resources through a new round of
bilateral borrowing. Pledges were made by 38 members or their central
banks, currently amounting to $461 billion. As of end-February 2014, 33
agreements for a total of $436 billion have been finalized. These
borrowing agreements serve as a second line of defense after quotas and
NAB resources.
The
14th General Review of Quotas, approved in December 2010, will
double the IMF’s permanent resources to SDR 477 billion (about $737
billion). There will be a rollback in the NAB credit arrangements from
SDR 370 billion to SDR 182 billion which will become effective when
participants pay for their 14th Review quota increases.
In addition to increasing the Fund’s own lending capacity, in 2009,
the membership agreed to make a general allocation of
SDRs equivalent to $250 billion, resulting in a near ten-fold
increase in SDRs. This represents a significant increase in own reserves
for many countries, including low-income countries.
Sharpening IMF analysis and policy advice
In the wake of the 2011 Triennial Surveillance Review (TSR), the IMF
has undertaken major initiatives to strengthen surveillance to respond
to a more globalized and interconnected world. These initiatives include
revamping the legal framework for surveillance to cover spillovers (how
economic policies in one country can affect others), deepening analysis
of risks and financial systems, stepping up assessments of members’
external positions, and responding more promptly to concerns of the
membership.
As part of broader efforts to make progress on this action plan, in
July 2012, the Executive Board adopted a new
Integrated Surveillance Decision to strengthen the underlying legal
framework for surveillance. It also discussed a
Pilot External Stability Report that presented a broad and
multilaterally consistent analysis of the external sector for the
world’s largest economies. In September 2012, the Executive Board
endorsed a new
Financial Surveillance Strategy that proposes concrete and
prioritized steps to further strengthen financial surveillance, for
which
a progress report was prepared in September 2013. In response to the
growing importance of capital flows in the international monetary
system, the Board endorsed an
institutional view on the liberalization and management of capital
flows to guide Fund surveillance and advice to member countries.
Moreover, risk analysis has been enhanced, including by taking a
cross-country perspective, and early warning exercises are being
carried out jointly with the Financial Stability Board. Analyses on
linkages between the real economy, the financial sector, and external
stability are being strengthened. Work has also been done on mapping and
understanding the implications of rising
financial and
trade interconnectedness for surveillance (including
spillover reports) and for lending to strengthen the
global financial safety net.
With more than 200 million people unemployed across the world, and
income inequality on the rise in many countries, the Fund has set up an
internal
“Working Group on Jobs and Growth,” which has
recommended steps to enhance the Fund’s effectiveness in helping
member countries achieve their goals regarding growth, employment
creation, and income distribution.
Reform of IMF governance to better reflect the global economy
A top priority for the IMF’s legitimacy and effectiveness has been
the completion of
governance reform.
On December 15, 2010, the Board of Governors approved far-reaching
governance reforms under the
14th General Review of Quotas. The package includes a doubling of
quotas, which will result in more than a 6 percentage point shift in
quota share to dynamic emerging market and developing countries while
protecting the voting shares of the poorest member countries. The reform
will also lead to a more representative, fully-elected Executive Board.
To become effective, an amendment to the Articles of Agreement must
be accepted by three-fifths (or 113) of the member 188 countries having
85 percent of the total voting power and members having no less than
70 percent of total quotas on November 5, 2010, must consent to their
quota increases. At present,more than
a sufficient number of countries has accepted the amendments to the
Articles, but they do not represent enough of the fund’s voting
power—accounting for only 76 percent of the 85 percent needed. Member
countries having more than 78 percent of total quotas have consented to
their quota increases.
The agreed package builds on
quota and voice reforms agreed in April 2008 and became effective on
March 3, 2011. Under these reforms, 54 members received an increase in
their quotas—with China, Korea, India, Brazil, and Mexico as the largest
beneficiaries. Another 135 members, including low-income countries, saw
an increase in their voting power as a result of the increase in basic
votes, which will remain a fixed percentage of total votes. Combined
with the 14th Review, the shift in quota share to dynamic emerging
market and developing countries will be 9 percentage points.