By Phil Rose & Wendell Samuel
February 8th 2012
Antigua State College Presentation: “The New IMF”
Outline
Introduction– Organization of the IMF– Quotas
Types of IMF programs Recent changes in Fund programs Impact of IMF programs on the economy Recent IMF programs in the Caribbean Main features of Antigua and St. Kitts programs Implications for the financial sector
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Introduction
The global economic crisis has affected a broad range of countries, both developed and developing
To address the fallout, the IMF has reengineered its programs to be more flexible, to provide more financial resources and to be more tailored to individual country circumstances
To date a significant number of Caribbean countries have benefited from IMF assistance
Fund programs have generally positive effects on the economies over the medium term although the economic activity could contract in the near term
The impact on the financial services industry is generally positive3
Introduction
The International Monetary Fund was created in 1944 and currently has 187 members.
The IMF supports its membership by providing: – Technical assistance and training – Policy advice to governments and central banks– Loans to help countries overcome economic difficulties – Concessional loans to help fight poverty in developing
countries– Research, statistics, forecasts and analysis.
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Organization of the IMF
Board of Governors
International Finance and
Monetary Committee
Executive Board Managing Director
Area Departments
Functional Departments
Other Departments Offices Abroad
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Organization of the IMF
The Board of Governors is the highest decision-making authority and includes one representative from every member country.
The Board meets once a year.
Antigua and Barbuda’s representative on the board is Hon. Harold Lovell.
The Executive Board is responsible for the day-to-day decisions of the Fund and is made up of 24 Executive Directors.
They are appointed and elected by the member countries that they represent.
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Organization of the IMF
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Eight directors represent individual countries (China, France, Germany, Japan, Russia, Saudi Arabia, the United Kingdom and the United States). However, most executive directors represent country groupings called constituencies.
The constituency that Antigua and Barbuda belongs to is represented by Mr. Thomas Hockin.
The other countries in the constituency are The Bahamas, Barbados, Belize, Canada, Ireland, Jamaica, St. Vincent and the Grenadines, St. Kitts and Nevis, Dominica, Grenada and St. Lucia.
The Managing Director is Ms. Christine Lagarde.
Quotas
The bulk of the Fund’s resources comes from quotas paid in by the members.
Each member country is assigned a quota, based broadly on its position in the world economy.
Quotas serve three main purposes: Subscriptions - the maximum amount of financial resources a
member is required to provide to the Fund Voting Power Access to Financing
Quotas are reviewed every five years. Antigua and Barbuda has 13.5M SDRs (US$21M), which is
0.01percent of the total.
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Types of IMF programs
Concessional facilities for low income countries – Rapid credit facility (natural disasters and post conflict) – Stand-by credit facility (short-term)– Extended credit facility (poverty reduction and growth)
Advanced and middle income countries– ENDA (natural disasters)– Stand-by arrangement (short-term)– Extended fund facility (longer term)– Flexible credit line (precaution)– Precautionary credit line (precaution)
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Recent changes in Fund programs
Fund programs have changed to accommodate the effects of the global crisis:
More responsive to country specific circumstances More resources are available
– Normal access has been doubled in most cases– Exceptional access more frequent
Lending conditions have been streamlined Financial sector analysis has been strengthened Impact on the poor is more central
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Impact of IMF programs on the economy
In assessing the impact, the question should be: What would have happened in the absence of the program?
When countries come to Fund they are usually close to economic collapse
The policy is to first stabilize the economy and then place it on a path to growth and fiscal sustainability
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The near-term impact on economic activity is usually negative or at least not positive– Fiscal contraction– Monetary contraction– Reduction in the wage bill
Government finances improve
Balance of payments and foreign reserves also improve
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Impact of IMF programs on the economy
Over the medium term the impact is positive. If steadfastly implemented they would:– Restore macroeconomic stability (critical for growth)– Assist in achieving fiscal sustainability – Reduce public debt (and the prospect of higher taxes)– Stabilize the external sector and exchange rate
Structural reforms make the economy more flexible to adjust to external shocks
Reforms strengthen the financial system and make it more competitive
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Impact of IMF programs on the economy
All Caribbean countries suffered output losses but ECCU countries were harder hit
14-8
-6
-4
-2
0
2
4
6
1997 1999 2001 2003 2005 2007 2009
Other Caribbean 1/
Major Trade Partners
ECCU
Caribbean Business Cycles(Real growth less trend growth)
9/11 recessionGreat recession
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Recent IMF programs in the Caribbean
Recent IMF Programs in the Caribbean
Country Type of When Size of
Arrangement Granted Arrangement
(US$ m)
Antigua and Barbuda SBA Jun-10 128
Belize ENDA Feb-09 6.9
Dominica ESF Jul-09 5.1
RCF Jan-12 3.1
Grenada ECF Apr-10 13.3
Jamaica SBA Feb-10 1306.9
St. Kitts and Nevis SBA Jul-11 84.5
ENDA May-09 3.4
St. Lucia ESF Jul-09 10.7
RCF/ENDA Jan-11 8.2
St. Vincent and Grenadines ESF May-09 5.6
RCF Feb-11 3.3
RCF Jul-11 2
RCF Dec-11 3.2
Key elements of two recent programs
Antigua and Barbuda– Strong up-front fiscal
adjustment
– Comprehensive debt restructuring including Paris Club
– Structural reforms to improve fiscal systems and strengthen financial sector
– ..\Res Rep\Research\ATG Recent Economic Performance.xlsx
St. Kitts and Nevis– Strong fiscal adjustment
taken prior to program
– Comprehensive debt restructuring
– Structural reforms to strengthen fiscal systems
– Banking Sector Reserve Fund for liquidity support
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Impact on the financial sector
In the short run the impact is uncertain
– Dampening effect on economic activity reduces financial sector growth and could raise NPLs
– Restructuring of public debt could mean short-term losses …
– … but it creates fiscal space that enhances government capacity to meet its obligations
– Financial assistance to the banking sector17
Impact on the financial sector
Over the medium term the impact is positive
– Macroeconomic stability is good for growth in financial services
– Structural reforms strengthen the financial sector and make it more competitive
– Improved fiscal performance also good for growth in
financial services
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