The IMF's financial resources are made available to its members under a variety of facilities and policies, depending on the circumstances, especially the nature of the macroeconomic and structural problems to be addressed.
The IMF makes resources available under both its general resources and its concessional financing facilities. Member countries use the general resources of the IMF by making a purchase (drawing) of other members' currencies or SDRs with an equivalent amount of their own currencies. The IMF levies charges on these drawings and requires that members repurchase (repay) their own currencies from the IMF with other members' currencies or SDRs over a specified time. Concessional financing under the structural adjustment and enhanced structural adjustment facilities is made available in the form of loans.
Regular facilities include: Reserve tranche, Credit tranches, Standby Arrangements, Extended Fund Facility. In providing financial support to any member country, the IMF must be assured that the member is pursuing policies that will ameliorate or eliminate its external payments problem. The requirement that members make a commitment to a set of policy measures aimed at correcting economic and financial imbalances within a reasonable period in return for IMF financial support is known as "conditionally". "Conditionally" is designed to ensure that members using IMF resources will be able to repay the IMF in a timely manner.
IMF-supported programmes emphasize certain key aggregate economic variables, including domestic credit, the public sector deficit, international reserves, and external debt. They also emphasize crucial elements of the pricing system – including the exchange rate, interest rate, and, in some cases, commodity prices – that significantly affect the country's public finances and foreign trade.
A successful adjustment programme must elicit an adequate response from the supply side of the economy. Interest rates and exchange rates are particularly important, since they influence savings and investment decisions and, therefore, a member country's growth prospects.
Adjustment programmes, typically, have an impact on income distribution, employment and social services. While the promotion of sound macroeconomic policies and structural reforms contributes to sustained growth and employment, adjustment may also involve short-term social costs to vulnerable groups. The IMF staff analyse the implications of reform measures for vulnerable groups and advise the authorities on how best to integrate social safety nets and their financing into programmes.
Words you may need:
facilityn (зд.) схема кредитования, механизм финансирования
addressv обращаться (к чему-л.)
concessional financing facilityмеханизм льготного финансирования
regular facilitiesобычные механизмы финансирования
reserve trancheрезервный транш
amelioratev улучшать
external payments problemпроблема внешних платежей
"conditionality"n (зд.) обусловленность кредитов (МВФ)
timelyadj своевременный
aggregate economic variablesсовокупные экономические переменные (величины)
crucialadj решающий
elicitv извлекать, выявлять
sound policyразумная политика
vulnerableadj уязвимый
implicationn смысл, значение (событии)
Ex. 13. Read the dialogue, sum up its content and act it out:
Fiscal Issues Are a Growing Concern of the IMF
(Interview with the IMF's Fiscal Affairs Department Head)
Interviewer: Fiscal discipline is a vital element of the IMF's macroeconomic policy advice to member countries. How would you describe your department's role in IMF surveillance and policy advice?
Head: Since the early 60s when the department was created, we have been largely involved with technical assistance, with helping countries in Africa and elsewhere create fiscal institutions. Recently, the role of technical assistance has broadened.
Int.: Has it been connected with the movement of the economies in transition to market-oriented systems?
Head: Yes, with regard to economies in transition we had to help to create institutions as well as to reform policies. We have been much involved in setting up tax administrations, treasuries, budget offices, as well as creating and reforming customs policies.
Int.: Your role in trying to make tax systems more efficient and equitable is well known.
Head: Thank you. Besides, we have done a lot to improve public expenditure management systems, in other words, all activities that allow a country to gain better control over its expenditure. Work on social safety nets has also become an important activity of our department. And the first reason for this is the major economic policy changes in the transition economies.
Int.: Oh, it is quite understandable, the changes were accompanied by very high inflation that dramatically reduced the income of some groups, such as pensioners, right?
Head: Also, disposable incomes on the whole fell sharply. So, it was necessary to help these countries reform policies to protect the people. The other reason why we became more active in the safety net area was to provide some sort of targeted protection for particularly vulnerable population groups in countries engaged in major macroeconomic adjustment efforts that were accompanied by large withdrawals of subsidies.
Int.: So, your department has become involved in several new areas. I mean poverty, social safety, income distribution, and others. What is the nature of the work in these areas, and how would you assess its relevance to the IMF's main macroeconomic work and its value to members?
Head: Our interest in poverty and social problems has much to do with strengthening the political sustainability of reforms. When a country undertakes a major reform, the distribution of income often deteriorates in the short run. If it deteriorates too much and large groups become impoverished in the process, they may become supporters of populist policies that would defy the reform. We pay attention to poverty to help sustain reform and achieve macroeconomic stability and thereby to expand economic activity and income.
Int.: What future directions and roles do you envisage for FAD?
Head: FAD has been a demand-driven department to a large extent. The pressures on this department are enormous. I take pride in this department's role as one of the world's main fiscal observatories. We have one of the best concentrations of fiscal economists in the world. We try to anticipate fiscal problems and provide intellectual leadership for their solution. I hope, I've made myself clear, haven't I?
Words you may need:
fiscal issuesвопросы бюджетно-налоговой политики
customs policyтаможенная политика
public expenditure management systemсистема управления государственными расходами
disposable incomeрасполагаемый доход
targeted protectionадресная защита
relevancen уместность
impoverishedadj обнищавший
populist policyпопулистская политика
defyv выступать (против)
envisagev предусматривать
to a large extentв значительной степени
enormousadj громадный
to take pride (in)гордиться (чём-л.)
I hope, I've made myself clear.Надеюсь, я ясно все объяснил.
Ex. 14. Give extensive answers to these discussion questions:
1. What is the international monetary system?
2. When did the system emerge?
3. What institutions does it comprise?
4. What functions does the IMF perform? What powers does it have?
5. What international reserve asset has been created by the IMF? How is the SDR value determined?
6. Under what financing facilities does the IMF offer resources to its members?
7. What is "conditionally" designed to ensure?
8. Is Russia (other former republics of the USSR) an IMF's member?
9. What role does the World Bank play?
10. What organizations help reschedule debts?
In order to get prepared for participation in the class discussion of the questions, write a short essay on:
a) The World Bank.
(Use: purpose, to promote, progress, to carry out, to lend, to provide services, to stimulate investments, to borrow, subscription, funds)
b) The IDA.
(Use: to provide assistance, per capita income, favourable terms, to share the same staff)
c) The IMF.
(Use: association, to set up, goals, to promote, to facilitate, balanced trade, to establish, payment system, exchange stability, to correct maladjustments, quota, voting power, to consult, mission, to train)
Ex. 15. Prepare a talk on the following:
a) In what ways are individuals affected by international monetary developments?
b) Relations between Russia and international institutions such as GATT, OECD, BIS, UNCTAD, IMF. In what ways do countries benefit from the membership in these organizations?
c) Your opinion on Russia's borrowings from the IMF. Is it the only way to cover the budget deficit?
d) Your opinion on Russia's relations with the Paris Club and the London Club. Do you think that the nation's Soviet-era foreign depts should be written off?