IMPLEMENTATION OF 

CERTAIN LEGISLATIVE PROVISIONS 

RELATING TO THE 

INTERNATIONAL MONETARY FUND 

A Report to Congress 

in accordance with 

Sections 1503 and 1705(a) of the 

International Financial Institutions Act, 

Section 801(c)(1)(B) of the 

Foreign Operations, Export Financing, and Related Programs 

Appropriations Act, 2001 

and 

Section 605(d) of the 

Foreign Operations, Export Financing, and Related Programs 

Appropriations Act, 1999 

United States Department of the Treasury 

October 2009 
Table of Contents 

Introduction ............................................................................................................................... 1 

International Financial Institutions Act, Section 1503 Provisions, by Subsection 

1. Exchange Rate Stability .................................................................................................2 

2. Independent Monetary Authority, Internal Competition, Privatization, 

Deregulation, Social Safety Nets, Trade Liberalization ................................................3 

3. Strengthened Financial Systems ....................................................................................6 

4. Bankruptcy Laws & Regulations ...................................................................................8 

5. Private Sector Involvement ............................................................................................8 

6. Good Governance ........................................................................................................12 

7. Channeling Public Funds Toward Productive Purposes ..............................................13 

8. Individual Economic Prescriptions .............................................................................14 

9. Core Labor Standards ..................................................................................................14 

10. Discouraging Ethnic and Social Strife .........................................................................14 

11. Environmental Protection ............................................................................................15 

12. Greater Transparency ...................................................................................................15 

13. Evaluation ....................................................................................................................16 

14. Microenterprise Lending ..............................................................................................16 

15. Anti-Money Laundering and Combating the Financing of Terrorism .........................17 

Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2001, Section 

801(c)(1)(B) Provisions, by Subsection 

I. Suspension of Financing for Diversion of Funds ........................................................18 

II. IMF Financing as Catalyst for Private Sector Financing .............................................19 

III. Conditions for Disbursement .......................................................................................19 

IV. Trade Liberalization .....................................................................................................19 

V. Focus on Short-Term Balance of Payments Financing ................................................20 

VI. Progress toward Graduation from Concessionary Financing ......................................20 

Text of Legislative Provisions 

Annex 1: New IMF lending arrangements, per section 605(d) of the Foreign Operations, Export 

Financing, and Related Programs Appropriations Act, 1999 
1

Introduction 

This report is prepared in accordance with Sections 1503 and 1705(a) of the 

International Financial Institutions Act (IFI Act), codified at 22 U.S.C. §§ 262o-2 & 262r4(a).1

 This report also covers policies set forth in Section 801(c)(1)(B) of the Foreign 

Operations, Export Financing, and Related Programs Appropriations Act, 2001,2 as 

required by Section 1705(a) of the IFI Act. The report reviews actions taken by the United 

States to promote these legislative provisions in International Monetary Fund (“IMF” or the 

“Fund”) country programs. Annex 1 covers new IMF lending arrangements per section 

605(d) of the Foreign Operations, Export Financing, and Related Programs Appropriations 

Act, 1999.3 Earlier reports under these provisions are available on the Department of the 

Treasury’s website (www.treas.gov/press/reports.html). 

 

 Treasury and the Office of the United States Executive Director (“USED”) at the IMF 

consistently endeavor to build support in the IMF’s Executive Board for the objectives set 

out in this legislation. These endeavors include meetings with IMF staff and other Board 

members on country programs and IMF policies, formal statements by the USED in the 

IMF Board, and USED votes in the Board. Treasury’s objective is to support strengthened 

commitments in IMF programs, policy actions by program countries, and policy decisions 

at the IMF itself. Treasury’s IMF task force is charged with increasing awareness among 

Treasury staff about legislative mandates and identifying opportunities to influence IMF 

decisions in line with broader U.S. international economic policy objectives. 

This report is submitted in the context of responding to the global financial and 

economic crisis that began in 2007 and is the worst economic crisis since the Great 

Depression. The United States has been a leader throughout this period through its own 

economic policies, as well as collaborating closely with the Group of 20 countries (“G-20”) 

and the international institutions, including the IMF. In late 2008, G-20 leaders called upon 

the IMF to continue to act swiftly to play a key role in crisis response. The IMF’s response 

– including new and more flexible lending programs to ensure members’ needs are met, 

enhanced surveillance to help strengthen individual countries’ economic policies and the 

international system, and greater resources for the poorest to mitigate the impacts of the 

crisis – has contributed to a much more stable system and to much improved global 

economic and financial conditions. Stresses in financial markets have declined, investor 

and consumer confidence has improved, international trade is recovering, and economic 

growth has resumed in most countries and globally. 

 

 

1

 These provisions were enacted in Sections 610 and 613 of the Foreign Operations, Export Financing, and 

Related Programs Appropriations Act, 1999 (Public Law 105-277, division A, § 101(d), title VI, §§ 610 & 

613). Section 1503 was amended by Section 7703 of the Intelligence Reform and Terrorism Prevention Act 

of 2004 (Public Law 108-458, title VII, § 7703). Section 1705(a) was amended by Section 803 of the Foreign 

Operations, Export Financing, and Related Programs Appropriations Act, 2001 (Public Law 106-429, title 

VIII, § 803). 

2

 Public Law 106-429, title VIII, § 801(c)(1)(B). 

3

 Public Law 105-277, title VI, § 605(d). 
2

Report on specific provisions 

I. Section 1503(a)

(1) Exchange rate stability 

Article I of the IMF’s Articles of Agreement states that one of the purposes of the IMF 

is “to promote exchange stability, to maintain orderly exchange arrangements among 

members, and to avoid competitive exchange depreciation.” In June, 2007, the IMF 

Executive Board adopted a new Decision on Bilateral Surveillance over Members’ Policies

(“Decision”), replacing the 1977 Decision on Surveillance over Exchange Rate Policies as 

the guiding document on surveillance. The new decision was strongly backed by the U.S. 

Treasury Department in an effort to refocus the Fund on its core mandate. 

Since the Decision, IMF surveillance of exchange rates has improved in both breadth 

and quality. The IMF’s Independent Evaluation Office found that only 63 percent of 

Article IV reports from 1995-2005 included a clear assessment of the exchange rate’s value 

in relation to economic fundamentals.4

 In contrast, the 2008 Triennial Surveillance Review 

found that 92 percent had done so after the Decision.5 Selected Issues papers 

accompanying Article IV staff reports have been increasingly devoted to exchange rate 

issues and the sophistication of exchange rate assessments has improved as econometric 

assessments of the exchange rate’s equilibrium value have become more common. Despite 

these improvements, the IMF’s bilateral exchange rate surveillance still needs improvement 

in its candor, consistency, and transparency, and Treasury continues to advocate for these 

further improvements. 

 In light of the global economic crisis, the IMF’s multilateral surveillance mission has 

taken on increasing importance. Enhanced multilateral surveillance by the IMF is crucial 

both for recovery from this crisis and prevention of future economic instability. As part of 

the Framework for Strong, Sustainable, and Balanced Growth agreed to at the Pittsburgh 

G-20 Summit, the IMF will play a key advisory role in the G-20 mutual assessment 

mechanism. The IMF has been asked to develop a forward-looking analysis of whether 

policies pursued by individual G-20 countries are collectively consistent with more 

sustainable and balanced trajectories for the global economy, and report regularly to both 

G-20 Finance Ministers and the International Monetary and Financial Committee 

(“IMFC”). 

Examples of United States activities with regard to these issues include: 

• In the February 2009 Article IV review for India, the USED welcomed the Reserve 

Bank of India’s policy to allow exchange rate flexibility and observed that allowing 

greater exchange rate flexibility would help clarify monetary policy objectives. 

 

4

 Independent Evaluation Office of the International Monetary Fund, “An IEO Evaluation of IMF Exchange 

Rate Policy Advice, 1999-2005,” 2007. 

5

 International Monetary Fund, “2008 Triennial Surveillance Report – Overview Paper,” September 2, 2008. 
3

• In its Board statement for South Africa’s August 2009 Article IV review, the USED 

observed that South Africa’s flexible exchange rate was an interesting case study of 

how a very flexible exchange rate mediates adjustment to sharp shifts in capital 

inflows. 

• In the July 2009 Article IV review for Indonesia, the USED emphasized that Bank 

Indonesia’s flexible exchange rate and inflation targeting regime have helped shield the 

economy from external volatility in capital flows and demand for exports. 

• In the February 2009 Article IV review of Mexico, the USED commended authorities 

for their commitment to exchange rate flexibility and for very clearly limiting 

discretionary intervention to rare cases where large but temporary shocks threaten 

orderly functioning of foreign exchange markets. 

(2) Policies to increase the effectiveness of the IMF in promoting market-oriented 

reform, trade liberalization, economic growth, democratic governance, and social 

stability through: 

(A) Establishment of an independent monetary authority 

 With the support of the United States, the IMF has been a consistent advocate of greater 

independence of monetary authorities across a range of countries. IMF conditionality 

frequently includes measures to strengthen central bank autonomy and accountability. The 

IMF also provides technical assistance to help countries achieve these goals. In addition, 

the Fund promotes these objectives through assessments of compliance with 

internationally-agreed upon standards and codes, as well as rules for safeguarding the use 

of IMF resources. Examples of United States activities with regard to these issues include 

the following: 

• In the August 2009 Board review of Pakistan’s Stand-By Arrangement, the USED 

called for authorities to legislate policies to strengthen the operational independence of 

the State Bank of Pakistan. 

• In an April 2009 discussion of the Costa Rica Stand-By Arrangement, the USED 

encouraged the strengthening of the capital position and the independence of the central 

bank in order to enable less reliance on the exchange rate anchor, allowing for more 

cushion against external shocks. 

• In the July 2008 ex post review of the IMF’s engagement with Turkey, the USED 

strongly supported the review’s view that central bank independence was critical to 

addressing Turkey’s vulnerabilities and essential to the inflation targeting regime. 

(B) Fair and open internal competition among domestic enterprises 

Although the World Bank has the lead mandate on these issues, the IMF, with United 

States support, encourages member countries to pursue policies that improve internal 
4

economic efficiency. These measures may include ending directed lending (or other 

relationships between government and businesses based on favoritism), improving antitrust enforcement, and establishing a sound and transparent legal system. For example, 

• In the July 2008 Article IV review of Brazil, the USED encouraged authorities to 

remove structural barriers that impede market-based lending and suggested that they 

consider a long-term plan to phase out credit quotas to specific sectors and redefine the 

role of the state-owned development bank toward market-oriented lending. 

• In the Nicaragua Poverty Reduction and Growth Facility (“PRGF”) review in 

September 2008, the USED agreed with the staff’s caution against actively managing 

domestic market conditions through the state-owned food marketing board and 

discouraged directed lending to the sector. 

(C) Privatization 

 The IMF has made privatization a component of country programs where significant 

distortions and government ownership of business enterprises have created substantial 

inefficiencies in the allocation of resources and the production of goods. Collaborating 

with the World Bank, the Fund has supported the use of competitive and transparent means 

of privatization so that borrowing countries might achieve gains in economic efficiency and 

improve their fiscal positions. Examples of IMF programs and surveillance discussions in 

which the USED has advocated privatization include the following: 

• At the May 2009 Article IV review for Thailand, the USED advocated a reduction in 

the size of specialized financial institutions (“SFIs”) and an acceleration of SFI 

privatization. 

• In the February 2009 Article IV review of Guyana, the USED advocated increased 

private sector participation and productivity in key industries, like the sugar industry, 

which would support fiscal and debt sustainability as well as longer-term growth. 

• In the January 2009 review of Burundi’s PRGF, the USED urged Burundi to implement 

its plan for divestiture of the government-owned coffee washing sector, a major step 

toward privatizing the sector. 

• In the September 2008 statement on Bangladesh’s Article IV review, the USED 

highlighted that the financial sector would be strengthened by divestment of remaining 

state-owned commercial banks. 

(D)Economic deregulation and strong legal frameworks 

Markets are distorted and entrepreneurship is stifled without strong property rights, 

enforcement of contracts, and fair and open competition. While these issues are often 

addressed as part of the World Bank’s mandate, the IMF periodically includes such policy 

advice in its programs or surveillance on measures considered critical to the member 
5

country’s macroeconomic performance. Examples of United States’ efforts to encourage 

these reforms include the following: 

• In the January 2009 Article IV review of Bolivia, the USED noted Bolivia’s poor 

investment climate and high degree of state involvement in economic activity. Given 

reports that government expropriations had triggered demands for international 

arbitration, the USED strongly urged Bolivia to respect investor rights and engage in 

constructive negotiations with investors to reach agreement on disputed contracts. 

• For India’s January 2008 and February 2009 Article IV reviews, the USED urged the 

removal of restrictions on participation of foreign banks, insurance firms, and pension 

providers; the passage of pension and insurance bills to help develop the corporate bond 

market; and further actions to liberalize foreign direct investment and both inward and 

outward participation in debt markets. 

(E) Social safety nets 

While growth is an essential ingredient for poverty reduction, investment in human 

development and basic social services is also critical. Cost effective social safety nets can 

play an important role in building domestic support for economic reform, and in alleviating 

the direct impact of poverty. 

The IMF does not lend directly for budget support to build social safety nets. However, 

the Fund’s policy advice and its focus on macroeconomic stability encourage domestic 

policymakers to develop fiscal strategies that address the needs of the poor, within a fiscal 

framework that is sustainable over the long-term. Reducing generalized subsidies while 

protecting pro-poor spending, for example, is a common theme. In the poorest countries, 

IMF advice is developed within a country-specific poverty reduction strategy that 

encourages accountability between donors and recipients. 

In addition, debt relief under the Heavily Indebted Poor Countries (“HIPC”) Initiative is 

part of a larger effort to address low-income countries’ development needs. Before the 

HIPC Initiative, eligible countries were, on average, spending slightly more on debt service 

than on health and education combined. They have since markedly increased their 

expenditures on health, education, and other social services. As of September, 2009, such 

spending, on average, is about six times the amount of debt-service payments. For HIPCs, 

the Treasury Department carefully evaluates whether the IMF program allows for an 

increase in or maintenance of health and education expenditures. Also, the U.S. Executive 

Director’s board statements in discussions of HIPC country programs stress the importance 

of protecting health and education expenditures, as well as other poverty reduction and 

social safety net spending. 

• As part of the August 2009 Article IV review of South Africa, the USED noted that 

South Africa’s further stimulus in the FY2009/10 budget appeared appropriate and 

recommended that public infrastructure investments and safety net expenditures should 

be well-targeted and readily adjustable as the economy recovers. 
6

 

• In the final review of the Paraguay Stand-By Arrangement in May 2009, the USED 

encouraged further strengthening of the social safety net, so that targeted assistance can 

cushion the effects of rising food and fuel prices and exchange rate adjustment. 

• In the June 2009 first review of Mongolia’s Stand-By Arrangement, the USED strongly 

supported the authorities’ efforts to undertake a comprehensive reform of social transfer 

programs to ensure that fiscal restraint does not exacerbate the impact of the downturn 

on poor households. 

• In the May 2009 Article IV review of Honduras, the USED disapproved of the 

government’s fiscal choices, in particular spending on high public wages rather than 

development, and noted that such choices may not be what donors had in mind as the 

envisaged benefit of HIPC debt relief. 

(F) Opening of markets for agricultural goods through reductions in trade barriers 

The IMF encourages a multilateral, rules-based approach to trade liberalization across 

all sectors of the global economy, including, but not limited to, the agricultural sector. The 

IMF has played a supportive role in promoting trade liberalization, particularly in the 

context of the WTO trade negotiations under the Doha Development Agenda (“DDA”). 

The IMF is prepared, along with the World Bank, to provide transitional assistance to 

member countries experiencing payment imbalances arising from the passage of trade 

reform. In recent years, the IMF has stepped up its in-depth trade policy work in 

consultations with currency unions, such as the Monetary and Economic Community of 

Central Africa (“CEMAC”), the European Monetary Union (“EMU”), and West African 

Economic and Monetary Union (“WAEMU”), and in other Board papers for some African 

and Western Hemisphere groupings.6

(3) Strengthened financial systems and adoption of sound banking principles and 

practices 

The joint IMF-World Bank Financial Sector Assessment Program (“FSAP”) has 

emerged as a critical instrument for financial sector surveillance and advice. As of endSeptember 2009, 125 countries have completed FSAP assessments and 55 countries have 

completed FSAP update assessments. Sixteen reviews are underway or planned. The U.S. 

agreed to undertake an FSAP in 2006, which is currently underway and to be completed in 

2010. 

 In September 2009, the USED supported proposed reforms to the FSAP intended to 

improve the frequency and country coverage of these reviews. The USED urged the IMF 

to work closely with international standard setting bodies when developing criteria that will 

inform implementation of partial updates of the Reports on the Observance of Standards 

and Codes (“ROSC”) and to ensure consistent application of the criteria. The USED 

6 IMF Involvement in International Trade Policy Issues: IMF’s Independent Evaluation Office, June 16, 

2009. 
7

welcomed plans to reconsider the publication policy for these reports in the upcoming 

review of the Fund’s Transparency Policy, with a view to increasing transparency of the 

Fund’s financial sector assessments. 

 During discussion of the Seventh Review of the Fund’s Data Standards Initiatives in 

December 2008, the USED reiterated support for inclusion of financial indicators in the 

Fund’s Special Data Dissemination Standard (“SDDS”), noting it “would significantly 

facilitate the monitoring of macro-financial conditions and the evaluation of economic and 

financial sector policies.” The Board reached agreement that the Fund should provide it 

with a proposal for integrating financial soundness indicators into SDDS. Also during that 

December 2008 review, the USED recommended that the Fund explore the possibility of a 

study in conjunction with the Bank for International Settlements and the Financial Stability 

Forum (now, the Financial Stability Board or “FSB”) to review and identify gaps in data 

disclosure and recommend how international data reporting could be improved. In April 

2009, the G-20 called for a joint IMF/FSB assessment of data gaps in the context of the 

recent financial crisis, with a report due to G-20 Finance Ministers and Central Bank 

Governors in November 2009. 

 

 Results from the FSAP are used to generate assessments of compliance with key 

financial sector standards such as the Basel Committee’s Core Principles for Effective 

Banking Supervision, the International Organization of Securities Commission’s Objectives 

and Principles of Securities Regulation, and the IMF’s own Code of Good Practices on 

Transparency in Monetary and Financial Policies. The FSAP assessment results are 

summarized in Financial System Stability Assessments (“FSSA”) which are often provided 

to the public. Some key examples of where the USED has supported the strengthening of 

financial systems are: 

• As part of the August 2009 Article IV review of South Africa, the USED welcomed the 

enhanced supervision of financial conglomerates in South Africa, noting that this could 

contribute to regional as well as domestic financial stability given the increased role of 

South African banks on the continent. 

• In the May 2009 Article IV review of Canada, the USED highlighted the role Canada’s 

strong regulatory and supervisory regime has played in helping to cushion the local 

financial system amidst recent global turbulence. 

• In the first review of Romania's Stand-By Arrangement in September 2009, the USED 

welcomed progress made to address weaknesses in the financial sector, but urged 

further steps to implement the deposit insurance scheme, address the deposit insurance 

funding issues, complete the reforms on Romania's bank resolution regime, and raise 

financial accounting standards to international standards. 

• In the July 2009 Article IV review of Brazil, the USED commended improvements in 

the supervisory and regulatory framework of the financial sector, but emphasized the 

importance of maintaining rigorous credit standards at public financial institutions as 

their balance sheets expand. 
8

(4) Internationally acceptable domestic bankruptcy laws and regulations 

While the World Bank normally leads reviews of domestic insolvency laws, the IMF 

actively supports this agenda. The UN Commission on International Trade Law 

(“UNCITRAL”) and the World Bank have worked to compile recommendations in this 

area covering, respectively, insolvency law and sound insolvency/creditor rights regimes. 

At the urging of the United States, staff from the World Bank, IMF, and UNCITRAL 

worked together to develop a standardized, unified assessment methodology to assess 

implementation of those recommendations. 

 The IFIs provide technical assistance to help emerging market economies develop 

efficient insolvency regimes. The IMF and the World Bank have supported adoption of the 

Model Law on Cross-Border Insolvency developed by the UN (the UNCITRAL Model 

Law) to facilitate the resolution of increasingly complex cases of insolvency where 

companies have assets in several jurisdictions. With the support of the United States, the 

IMF has worked with the World Bank to promote improved insolvency regimes in a 

number of countries. 

• In its February 2009 Article IV Statement on India, the USED highlighted the 

importance of improving the bankruptcy law and securing passage of the Companies 

Law to modernize the corporate regulatory framework. 

• In the October 2008 Article IV review of Uruguay, the USED praised the authorities’ 

commitment to their structural reform agenda, specifically the expected approval of the 

bankruptcy law. 

(5) Private sector involvement

The United States continues to work to ensure that the private sector plays an 

appropriate role in the resolution of financial crises. Over the past several years, the IMF, 

with the support of the United States, has taken important steps towards strengthening 

crisis prevention and resolution. The IMF has strengthened its surveillance of member 

countries and instilled more discipline in the use of official sector financing, especially 

through the establishment of rules and procedures governing exceptional access to Fund 

resources. Additionally, the use of collective action clauses, supported by the IMF as an 

accepted contractual, market-based approach to sovereign debt restructurings, should help a 

sovereign restructure its debt when under financial distress. 

The IMF recognizes the need to preserve the fundamental principles that (a) creditors 

should bear the consequences of the risks they assume, and (b) debtors should honor their 

obligations. Furthermore, the IMF has closely coordinated with other international 

financial institutions and relevant country regulatory authorities. In the context of Fund 

lending programs, for example, the IMF secured voluntary commitments from the major 

foreign banks to maintain their overall exposure levels in Hungary, Romania, Serbia, 

Latvia, and Bosnia. In each case, the banks issued a public statement of their 
9

commitments, which are essential to maintaining financial stability in the affected 

countries. Local regulators will monitor the banks’ exposures. In particular, the United 

States has advocated policies that include: 

(A)Increased crisis prevention through improved surveillance and debt and reserve 

management 

The United States has urged the IMF to strengthen further its surveillance function and 

crisis prevention capabilities. The United States, along with other G-20 members, 

reaffirmed the central role of the IMF as a critical forum for multilateral consultation and 

cooperation on monetary and financial issues as well as in promoting international financial 

and monetary stability. In November 2008, G-20 Leaders called on the IMF, in 

collaboration with the expanded FSF and other bodies, to work to better identify 

vulnerabilities, anticipate potential stresses, and act swiftly to play a key role in crisis 

response. They also called on the IMF, given its universal membership and core macrofinancial expertise, to take a leading role in drawing lessons from the current crisis, 

consistent with its mandate and in close coordination with the FSB and others. G-20 

Leaders agreed that the IMF should conduct vigorous and even-handed surveillance 

reviews of all countries, as well as give greater attention to their financial sectors and better 

integrate the reviews with the joint IMF/World Bank financial sector assessment programs. 

As noted earlier, reforms to the FSAP process have since been approved to enhance the 

frequency and country coverage of assessments and better integrate them into countries’ 

Article IV reviews. 

 The United States has joined with other G-20 members in calling on the IMF to play a 

key role in the mutual assessment mechanism under the recently agreed Framework for 

Strong, Sustainable, and Balanced Growth. The IMF has been asked to develop a forwardlooking analysis of whether policies pursued by G-20 countries are collectively consistent 

with sustainable and balance trajectories for the global economy. In addition, the United 

States has worked consistently to promote global rebalancing and the IMF has increased its 

attention to this issue. For economies running large current account surpluses, the USED 

has called for stronger and sustainable domestic demand. 

As part of its overhaul of its non-concessional lending framework in early 2009, the 

IMF created the Flexible Credit Line (“FCL”), which makes it easier for strong-performing 

member countries to access resources by raising access limits, streamlining conditionality, 

and simplifying cost and maturity structures. In spring 2009, the IMF board approved 

FCLs for Mexico, Poland, and Colombia. Combined with responsive policy actions by 

country authorities, the FCL instrument is credited with supporting a reduction in risk 

perception and contributing to stabilization in financial market conditions. 

Other examples of instances where the United States has advanced these issues include: 

• In a May 2009 discussion of the Colombia Flexible Credit Line, the USED highlighted 

the need to closely monitor the evolution of loan portfolios and non-performing loan 
10

• In China’s July 2009 Article IV review, the USED observed that sustaining China’s 

impressive growth will require a fundamental rebalancing of the economy, with a very 

substantial and durable shift from external to internal demand, and from investmentand export-intensive growth to growth led by domestic household consumption.

 

• At the May 2009 Article IV review for Thailand, the USED highlighted the need to 

remove debt issuance limits that constrain the government’s ability to raise funds 

quickly and implement its planned expenditures. 

• In a discussion of the Guatemala Stand-By Arrangement in April, 2009, the USED 

observed that the rapid increase of foreign currency debt to the non-tradable sector 

raises vulnerabilities and agreed that the expected deceleration of economic activity 

will likely put some pressures on the banking system. 

• In the February 2009 Article IV review of Mexico, the USED praised the prudent steps 

taken to protect the budget from swings in oil prices; specifically, when oil prices were 

high, the authorities increased domestic prices charged by PEMEX, while expanding 

targeted transfers to protect real incomes of the most vulnerable in a cost-effective way. 

(B) Strengthening of emerging markets' financial systems

The IMF continues to work with other IFIs to promote stronger financial systems in 

emerging market economies (also see Section 3). The 2007 Malan Report concluded that 

both the IMF and the World Bank play an important role in helping emerging economies 

address the challenges of globalization and obtain its benefits. It also recommended that 

their cooperation in this area be based on their comparative expertise, with the IMF taking 

the lead in instances where there are significant issues of domestic or global economic 

stability, and the World Bank leading in instances where financial sector development 

issues are paramount. 

The IMF is also actively involved with the World Bank in monitoring the 

implementation of the Basel Core Principles for Effective Banking Supervision. The IMF, 

with United States support, has increased its cooperation with the World Bank in this area, 

through the joint FSAP and in assessing countries’ observance of other standards and 

codes. 

In November 2008, G-20 Leaders called on advanced economies, the IMF, and other 

international organizations to provide capacity-building programs for emerging market 

economies and developing countries on the formulation and the implementation of new 

major regulations, consistent with international standards. About 90 per cent of IMF 

technical assistance goes to low-income and lower middle income countries. Technical 

assistance is provided in the Fund’s areas of core expertise, including financial sector 

sustainability. Countries have asked for Fund assistance to address weaknesses identified 
11

in FSAPs, to adopt and adhere to international standards and codes, implement 

recommendations from off-shore financial center assessments, and strengthen measures to 

combat money laundering and the financing of terrorism. To meet the rising demand for 

Fund capacity building programs as well as to better coordinate assistance delivery, the 

Fund is seeking to strengthen its partnerships with donors by engaging them on a broader, 

longer-term, and more strategic basis. Towards this end, the Fund is proposing to pool 

donor resources in multi-donor trust funds that would supplement the Fund’s own 

assistance. The funding model will operate by region and topic. 

Some key examples of where the USED has supported a strengthening of emerging 

market financial systems are: 

• As part of the March 2009 review of Georgia’s Stand-By Arrangement, the USED 

welcomed the authorities’ close monitoring of the banking system, adding that stress 

testing, bank-by-bank assessments, and the development of a contingency plan would 

assist the authorities in rapidly responding to signs of instability should they emerge. 

• In the March 2009 Board review of Pakistan’s Stand-By Arrangement, the USED 

encouraged the Fund to work with authorities to make progress on deposit insurance, 

and to develop contingency plans to resolve banking distress should such conditions 

arise. 

• The USED’s statement for the July 2009 Article IV review of Kazakhstan called for 

bank restructuring and resolution to be transparent and managed in such a way that 

depositors face limited or no constraints on access to their deposits, noting that 

rebuilding depositor confidence will be critical to securing a new source of financing 

for bank credit. 

• In its statement on Brazil’s Article IV review in July 2009, the USED lauded the 

country’s improvements in its supervisory and regulatory framework, crediting these 

measures with Brazil’s stability throughout the crisis. The USED urged authorities to 

be aware of asset quality and liquidity risks and pressed for continued efforts to reduce 

lending spreads, increase the efficiency of financial intermediation, and expand access 

to credit by smaller enterprises and consumers. 

• In the third review of Hungary's Stand-By Arrangement in September 2009, the USED 

urged the authorities to strengthen their bank remedial and resolution framework as 

well as adopt crucial reforms in the areas of prompt corrective action, supervisory 

authority, monitoring, intensified examinations, and stress testing. 

(C) Strengthened crisis resolution mechanisms 

The IMF’s actions since the crisis began have stabilized markets and boosted 

confidence, winning broad support and underscoring the Fund’s central role in crisis 

response. A critical component of the response was ensuring that the IMF has adequate 

resources to address the needs of members hard hit by the global crisis. To this end, 
12

 

countries delivered on commitments to renew and expand the IMF’s New Arrangements to 

Borrow (“NAB”) by over $500 billion to backstop the IMF. The IMF also took action to 

supplement members’ reserves and boost global liquidity through allocations of Special 

Drawing Rights (“SDRs”) equivalent to $283 billion. 

The United States, in cooperation with the IMF and the broader international financial 

community, has promoted a strengthened framework for crisis resolution by overhauling 

the IMF’s non-concessional lending framework in early 2009, including creating the 

Flexible Credit Line noted above to make it easier for strong-performing member countries 

to access resources by raising access limits, streamlining conditionality, and simplifying 

cost and maturity structures. More broadly, since August 2008, the IMF’s nonconcessional lending commitments have increased by more than $160 billion. 

In addition, the IMF approved a package of extraordinary measures to sharply increase 

the resources available to low-income countries. Resources from the planned sale of IMF 

gold and other internal sources will more than double the Fund’s medium-term 

concessional lending capacity and frontload these resources over the next two years. 

(6) Good governance 

The IMF places great importance on good governance when providing its policy 

advice, financial support, and technical assistance to its member countries. Its commitment 

to promoting good governance is outlined in its 1996 Declaration on Partnership for 

Sustainable Global Growth and its 1997 Guidelines on Good Governance. The IMF 

supports good governance through its emphasis on transparency, strong fiduciary 

diagnostics, and its promotion of market-based reforms.7

 The IMF has actively promoted 

good governance through its efforts to protect against abuse of the financial system and to 

fight corruption. 

The Fund’s involvement has focused on those governance aspects that are generally 

considered part of the IMF’s core expertise, such as improving public administration, 

increasing government transparency, enhancing data dissemination, and implementing 

effective financial sector supervision. The IMF promotes best practice principles through 

its codes and standards, including the Code of Good Practice on Transparency in Monetary 

and Financial Policies. The IMF also collaborates with the World Bank to strengthen the 

capacity of HIPC countries to develop essential public financial management (“PFM”) 

systems and track public sector spending. The IMF is also an active participant in the 

Public Expenditure and Financial Accountability (“PEFA”) initiative which aims to support 

integrated and harmonized approaches to assessment and reform in the field of public 

expenditure, procurement, and financial accountability.

Examples of U.S. efforts to encourage good governance include the following: 

7

 IMF financing is provided to central banks to address balance of payments difficulties. The IMF does not 

lend to fund specific projects in member countries aimed at improving procurement and financial 

management controls. 
13

• In two 2008 Board statements for the two final reviews of Iraq’s Stand-By 

Arrangement, the USED urged authorities to reform public financial systems to 

enhance accountability and transparency, complete a public employee census, and 

reform the Public Distribution System to reduce fiscal inefficiencies and corruption. 

• In the September 2008 statement on Bangladesh’s Article IV review, the USED called 

for bolder governance reforms, including: ensuring the judiciary’s independence; 

strengthening the anti-corruption commission; and lifting administrative burdens. 

• In an August 2009 Board Statement on Libya’s Article IV review, the USED urged 

authorities to implement a more transparent and robust regulatory regime to improve 

the business climate and increase international investment. 

• In the January 2008 Article IV review of Ecuador, the USED urged authorities to make 

earnest use of Ecuador’s resource base and remaining window of opportunity to 

achieve reforms that ultimately will strengthen the business environment and investor 

confidence in both the oil and non-oil private sectors. 

(7) Channeling public funds away from unproductive purposes, including large “show 

case” projects and excessive military spending, and toward investment in human and 

physical capital to protect the neediest and promote social equity 

 The Fund’s Code of Good Practices on Fiscal Transparency, updated in 2007, 

identified principles and practices to enhance fiscal policy transparency, promote quality 

audit and accounting standards, and reduce or eliminate off-budget transactions, which are 

often the source of unproductive government spending. Supplementing this is the Fund's 

Guide to Resource Revenue Transparency, also updated in 2007, a complement to the 

Fiscal Report on Standards and Codes (“FISC ROSC”) for use in resource (oil-gas-mining) 

rich countries. The guide is being used increasingly in diagnostic work in extractive 

industry intense economies. The IMF has also been a strong supporter of the Extractive 

Industries Transparency Initiative (“EITI”), by providing policy and technical support to 

the EITI Secretariat and Implementing Countries. Numerous countries have had resource 

revenue and extractive industries issues covered in their ROSCs, including: Gabon; 

Indonesia; Kyrgyz Republic; and Namibia. 

Examples of how the U.S. promoted better channeling of public resources follow: 

• During the August 2009 Article IV review of South Africa, the USED encouraged 

the authorities to focus on improving public service delivery at the provincial and 

local levels, which would help address pressing social needs in a fiscally 

responsible manner. 

• In the July 2009 review of Sri Lanka’s request for a Stand-By Arrangement, the 

USED called for fiscal consolidation and improved revenue mobilization, and 

recommended shifting high defense spending towards investments in human capital 

and infrastructure. 
14

 

• In the July 2009 Article IV review of Kazakhstan, the USED noted that the last 

EITI Implementation report underscored Kazakhstan’s good progress and 

commended the authorities for their commitment to meet all validation indicators of 

the EITI. 

(8) Economic prescriptions appropriate to the economic circumstances of each country

The United States has supported flexibility in Fund programs, while emphasizing the 

need to focus conditionality on issues critical to growth and macroeconomic stability using 

measurable results. Partly as a result of U.S. efforts, program conditions have focused 

increasingly on debt and financial vulnerability in middle-income countries and 

macroeconomic management in low-income countries. 

• During the March 2009 Article IV review for Vietnam, the USED welcomed the 

IMF’s well-targeted report and its close advisory work to help Vietnam face a 

particularly challenging period in its transition to a more open and market-driven 

economy. 

• In the fourth review of Peru’s Stand-By Arrangement, the USED commented that 

strong performance by countries such as Peru, and the market confidence they have 

helped to support, raised questions regarding management’s rationale that a 

precautionary SBA must carry exceptional access in order to signal policy strength 

and continuity to markets. 

• In the March 2008 Article IV review for the Philippines, the USED commended the 

staff for its appropriate focus on the fiscal and financial sectors to reduce 

vulnerabilities, and provide a durable foundation for growth. 

(9) Core labor standards (“CLS”)

 

 Core labor standards provide a useful benchmark for assessing countries’ treatment of 

workers against internationally agreed-upon standards. The State Department monitors 

labor standards in all IFI borrower countries and Treasury is mandated to submit a separate 

report to Congress assessing progress made with respect to internationally recognized 

worker rights. The most recent report was submitted in November 20088

. 

 The IMF and International Labor Organization (“ILO”) continue to collaborate, as 

evidenced by the IMF Managing Director’s meeting with the ILO’s Governing Body in 

March 2009 to discuss the adequacy of crisis response measures. In addition, the IMF, the 

World Bank, the United Nations and the ILO are strengthening their cooperation to help 

least developed countries build basic social protection floors that are adapted to local 

realities and fiscally sustainable. 

(10) Discouraging practices that may promote ethnic or social strife 

8

 2008 Report to Congress on Labor Issues and the International Financial Institutions, November 21, 2008. 
15

 

By helping to create the conditions for a sound economy, IMF assistance facilitates the 

reduction of ethnic and social strife to the extent such strife is driven in part by economic 

deprivation. For example, with United States support, the IMF has increasingly 

encouraged the strengthening of social safety nets. The IMF also encourages consultation 

with various segments of society in the development of programs so that these segments 

have an opportunity to participate in the implementation of national priorities. IMF 

assistance has helped to free up resources for more productive public investment by 

contributing to a reduction in country military expenditures. 

(11) Link between environmental and macroeconomic conditions and policies 

With respect to individual lending operations, the IMF does not itself evaluate positive 

or negative linkages between economic conditions and environmental sustainability. 

Rather, the IMF coordinates with the World Bank which, unlike the IMF, possesses the 

internal expertise to address such linkages. To the degree that environmental issues raise 

economic or financial vulnerabilities, however, the U.S. has raised concerns, as in the cases 

below: 

• In the June 2009 review of Burkina Faso’s PRGF, the USED appreciated that the 

Samendeni dam project could reduce vulnerability in the agriculture sector, but urged 

the authorities to seek concessional finance, carefully analyze the project’s costs and 

benefits, and resist arrangements that could exacerbate already elevated debt risks. 

• In the April 2008 request from Bangladesh for emergency assistance after Cyclone 

Sidr, the USED commended the authorities' recovery efforts, adding that weatherrelated economic disruption is a fact of life in Bangladesh, and urged the IMF to assist 

the authorities in planning for macroeconomic contingencies. 

(12) Greater transparency 

The IMF continues to encourage, with strong United States support, member countries 

to make their economic and financial conditions more transparent. In recent years, the IMF 

has increased significantly the amount of information on its programs that it has made 

available to the public. The United States has stressed the need to build on this progress 

and expand the number of publications and IMF practices open to public scrutiny. As a 

result of earlier efforts, publication of all Article IV and Use of Fund Resources staff 

reports is presumed unless a country objects. In addition, all exceptional access reports 

will generally be published as a pre-condition to the Board’s approval of such an 

arrangement.9

 The USED consistently encourages countries to publish the full Article IV 

staff report on the IMF's public website. The percentage of staff reports published 

increased from 78 percent in 2004 to 87 percent in 2008. Moreover, Public Information 

Notices are now produced in 97% of Article IV discussions, up from 82%. Every current 

IMF borrower has publicized its Staff report. The Board will consider its next review of 

the IMF transparency policy late in 2009 and the IMF is currently seeking input on the 

9

 “Exceptional access” refers to financing arrangements in amounts that exceed the Fund's normal limits. 
16

 

transparency policy from civil society organizations, financial market participants, and 

academics.10

In addition to urging countries to publish their Article IV assessments, countries are 

urged to provide additional information to private market participants by regularly 

releasing data consistent with the IMF’s Special Data Dissemination Standard (“SDDS”). 

Fund members subscribing to either the General or Special Data Dissemination Standards 

increased from 75% of all members in 2005 to 85% in 2008. 

• In the February 2008 Article IV review of Guyana, the USED welcomed the work 

underway to improve national accounts and exchange rate data, noting that such 

improvements in data coverage and quality are key to support macroeconomic policy. 

• In the August 2009 Article IV Review of Libya, the USED urged the authorities to 

continue moving forward with reforms to improve fiscal governance and transparency, 

such as by providing more timely and detailed reporting. 

• In the July 2009 Article IV review of Chile, the USED expressed concern with Chile’s 

efforts to reform its bank secrecy laws after the OECD placed Chile on a “grey list” of 

countries that agreed to improve transparency standards, but had not yet signed the 

necessary international accords. 

(13) Greater IMF accountability and enhanced self-evaluation 

 In 2000, with the strong urging of the USED, the Executive Board established an 

Independent Evaluation Office (“IEO”) to supplement existing internal and external 

evaluation activities. The IEO provides objective and independent evaluation on issues 

related to the IMF and operates independently of Fund management and at arm's length 

from the IMF Board. On average, the IEO concludes two or three evaluations per year, and 

each evaluation normally takes about 18 months to complete. Recent evaluations include 

IMF Involvement in International Trade Policy Issues (June 2009);11 Governance of the 

IMF: An Evaluation (May 2008);12 Structural Conditionality in IMF-Supported Programs

(January 2008);13 IMF Exchange Rate Policy Advice, 1999-2005 (May 2007);14 and The 

IMF and Aid to Sub-Saharan Africa (March 2007).15 All reports are publicly available on 

the IEO’s website at (http://www.imf.org/external/np/ieo/index.htm). 

(14) Structural reforms which facilitate the provision of credit to small businesses, 

including microenterprise lending 

10 http://www.imf.org/external/np/pdr/trans/2009/index.htm 11 http://www.ieo-imf.org/eval/complete/pdf/06162009/Full_Text_of_the_main_report.pdf 12 http://www.ieo-imf.org/eval/complete/pdf/05212008/CG_main.pdf 13 http://www.ieo-imf.org/eval/complete/pdf/01032008/SC_main_report.pdf 14 http://www.ieo-imf.org/eval/complete/pdf/05172007/ERP_main_report.pdf 15 http://www.ieo-imf.org/eval/complete/pdf/03122007/report.pdf 
17

The lack of financial services available to the poor is a significant obstacle to growth 

for many developing countries. The IMF does not have the lead role in microeconomic 

reforms to benefit small businesses; however, the Treasury Department engages with the 

IFIs to promote structural reforms that encourage the provision of credit to small and micro 

enterprises. The microfinance sector is frequently reviewed in the context of the FSAP in 

developing countries. 

• In the July 2009 Article IV review of Chile, the USED encouraged authorities to

continue to simplify regulatory procedures for micro and small- and medium-sized 

enterprises (“SMEs”) to foster policies that encourage innovation and productivity 

gains. The USED also commended the financial incentives for private investment and 

small business in the stimulus plans. 

• In the September 2008 Article IV review of Korea, the USED observed that investment 

growth could be spurred by broadening access to market-based financing for SMEs and 

giving them stronger incentives to restructure. 

• In the Nicaragua PRGF review in September 2008, the USED expressed concern that 

the Usura Cero practice of offering credit to households at subsidized rates was having 

a distortionary impact on the much-needed and still-developing microfinance sector. 

(15) Anti-Money Laundering and Combating the Financing of Terrorism (“AML/CFT”) 

Comprehensive integration of the efforts of the IMF and the other IFIs as part of the 

effort to fight terrorism worldwide has been a consistent policy priority for the United 

States and its partners. We have encouraged collaboration between the IFIs and the 

Financial Action Task Force (“FATF”) to assess global compliance with the anti-money 

laundering (“AML”) and countering the financing of terrorism (“CFT”) standards based on 

the FATF 40 Recommendations on Money Laundering and the Nine Special 

Recommendations on Terrorist Financing. 

In April 2007, largely as a result of U.S. and G-7 leadership, the IMF Board reiterated 

the importance of AML/CFT standards to strengthening the integrity of financial systems 

and deterring financial abuse, and affirmed the collaborative arrangements presently in 

place with the FATF and FATF-style regional bodies (“FSRBs”) for assessing AML/CFT 

regimes in the context of the IMF's financial sector work. The Board also encouraged 

greater transparency by calling for the publication of comprehensive country evaluations. 

 Collaboration by the IMF, FATF, and FSRBs with the assessors, using the same 

common methodology, institutionalizes the global fight against terrorist financing and 

money laundering, and helps countries identify shortfalls in their AML/CFT regimes and 

implement reforms. As of September 2009, the IMF had conducted 29 assessments of 

country compliance with AML/CFT as part of a third round of mutual evaluations, in 

cooperation with the FATF, FSRBs, and the World Bank. 
18

 The IMF is also a substantial source of funding for countries’ efforts to strengthen their 

own AML/CFT regimes – an activity that Treasury has supported and has joined in to 

leverage Treasury’s own bilateral AML/CFT assistance. The IMF has provided substantial 

technical assistance (“TA”) on a bilateral and regional basis. Since May 2009, the IMF has 

been working with donor nations to establish a technical assistance trust fund to finance 

further TA and research activities in the area of AML/CFT. 

 The USED/IMF office played a crucial role in mobilizing the IMF Board’s support for 

this initiative, as well as ensuring that note is taken of AML/CFT issues in Article IV 

reviews and reports, IMF programs, and other regular reviews of country progress. 

• In its statement on Mozambique’s June 2009 Request for Exogenous Shocks Facility, 

the USED welcomed the improvements in supervisory powers for implementing AML 

measures and encouraged Mozambique to pass a counter terrorist financing law with an 

adequately resourced financial intelligence unit. 

• In the January 2008 and January 2009 Article IV reviews for India, the USED urged the 

incorporation of AML/CFT into financial sector oversight and urged authorities to 

address remaining deficiencies in India’s AML/CFT framework as identified by the 

FATF and the Asia/Pacific Group. 

• In the April 2009 Article IV review for Kuwait, the USED observed that Kuwait was 

the only Gulf Cooperation Council country without a terrorist financing law and urged 

the authorities to address the situation wherein little meaningful progress had been 

made to bring Kuwait into compliance with international standards. 

• In the April 2009 Article IV review of Malaysia, the USED recognized the authorities’ 

efforts to strengthen their AML/CFT regime, and urged them to address remaining 

deficiencies, including improving regulation and oversight in Labuan. 

II. Section 801(c)(1)(B)

(I) Suspension of IMF financing if funds are being diverted for purposes other than the 

purposes for which the financing was intended

 With strong United States support, the IMF has taken steps to ensure that IMF 

resources are used solely for the purposes for which they are intended. One of the IMF’s 

most effective tools against corruption is the Safeguards Assessment to prevent possible 

misuse of IMF resources and misreporting of information.16 All countries that request a 

loan from the IMF must agree to undergo a Safeguards Assessment. Its purpose is to 

identify vulnerabilities in a central bank’s control systems. IMF staff carry out this 

diagnostic exercise to consider the adequacy of five key areas of control and governance 

within a central bank: (i) the external audit mechanism; (ii) the legal structure and 

independence; (iii) the financial reporting framework; (iv) the internal audit mechanism; 

 

16 http://www.imf.org/external/np/tre/safegrds/2002/review.htm
19

and (v) the internal controls system. The framework was introduced in March 2000 and 

reviewed in April 2005. As of mid-June 2009, 169 Safeguard Assessments have been 

completed. Recent examples include: 

• The National Bank of Tajikistan (NBT) provided guarantees covering $77 million (20%) 

of its foreign currency reserves to foreign banks to secure financing for the cotton sector. 

The NBT concealed this fact from the IMF until it was discovered in late 2007. This 

illicit use of reserves violated IMF program conditions in place, so the IMF required early 

repayment of Tajikistan's outstanding IMF debt, completed in February 2009. 

• In late 2008, IMF Staff uncovered budgetary slippages and misreporting equal to 5% of 

GDP in Senegal. Although the Senegalese authorities agreed to address the slippages 

through budget cuts and steps to strengthen public financial management, the USED 

argued that that further Senegalese steps to strengthen public financial management 

should be required before a positive PSI review. 

(II) IMF financing as a catalyst for private sector financing 

The IMF recognizes that, if structured effectively, official financing can complement 

and attract private sector flows. The Fund promotes policy reforms that catalyze private 

financing and, in cases of financial crisis, allow countries to regain access to international 

private capital markets as quickly as possible. (See Section 5 above for a more in-depth 

discussion of private sector involvement.) 

(III) Financing must be disbursed (i) on the basis of specific prior reforms; or (ii) 

incrementally upon implementation of specific reforms after initial disbursement 

IMF disbursements are made in tranches based on a country’s performance against 

specified policy actions, both prior to and during the program. Together with the rest of the 

IMF’s Executive Board, the USED plays a strong oversight role in ensuring that 

management only brings forward new programs or releases a new tranche of funds after 

such targets have been met. 

• In the July 2008 ex post assessment of IMF’s engagement with Turkey, the USED 

observed that staggering the disbursements into tranches provided external incentives 

for the authorities to complete reform measures, and offered useful signals for market 

participants of the authorities’ continued policy discipline. 

(IV) Open markets and liberalization of trade in goods and services

The IMF has consistently advocated for open markets and trade liberalization. The Fund 

also recognizes that trade adjustments can cause temporary balance of payments problems 

and has developed the Trade Integration Mechanism (“TIM”) to provide transitional 

financial assistance to countries if needed. During the recent economic downturn, the IMF 

has advised countries that protectionism is not a solution to economic recovery. 
20

• In the May 2009 discussion of an Independent Evaluation Office review of IMF 

involvement in trade policy issues, the USED confirmed the IMF’s important role as an 

advocate for trade liberalization and critic of protectionism. The USED called upon the 

IMF to reinvigorate cooperation among international institutions involved in trade such 

as the WTO, and noted that the TIM helped allay the concerns of textiles/apparel 

producers, preference beneficiaries, and net food importers on their capacity to adjust to 

multilateral trade liberalization, in particular to future results of the Doha Round. 

• In India’s Article IV review of January 2009, the USED stressed that while there are 

protectionist pressures due to the recent downturn in the world economy, trade restrictions 

would be highly counterproductive. The USED also expressly sought the authorities’ 

support for an ambitious conclusion to the Doha Round of trade talks. 

(V) IMF financing to concentrate chiefly on short-term balance of payments financing 

In 2000 and again in 2009, with strong United States support, the IMF agreed to 

reorient IMF lending to discourage continued or prolonged use of IMF funds and provide 

incentives for quick repayment. As a result, IMF shortened the repayment periods for both 

Stand-By and Extended Arrangements, introduced a time-based surcharge to promote early 

repayment, and raised commitment fees for higher levels of access. 

Partly in response to United States advocacy, the IMF established the Standby Credit 

Facility (“SCF”) in July 2009 as a new instrument for concessional financing to lowincome countries. The SCF will fill a long-standing gap in the IMF concessional facilities 

architecture by providing low-income countries with a facility specifically designed for 

intermittent use in response to short-term balance of payments financing gaps. The SCF 

also carries a shorter repayment period than the IMF’s other concessional facilities. The 

United States also continues to be a strong advocate for the non-borrowing Policy Support 

Instrument (“PSI”) which provides a framework for IMF policy advice and donor signaling 

without the need for IMF lending. The United States has discouraged low-income 

countries from pursuing serial PRGF programs. The United States urges those countries 

without a clear balance of payments need to opt for a PSI, in which case they would retain 

the option of seeking SCF financing in the event of sudden adverse developments. 

(VI) Graduation from receiving financing on concessionary terms 

The United States supports comprehensive growth strategies to help countries graduate 

from concessional to market-based lending. The United States works closely with the IMF 

and World Bank to promote a growth-oriented agenda in developing countries based on 

strong macroeconomic and structural policies. The IMF extends concessional credit 

through the PRGF Trust. Eligibility is based principally on a country's per capita income 

and eligibility under the International Development Association (“IDA”), the World Bank's 

concessional window. (The current operational cutoff point for IDA eligibility is a 2007 per 

capita GNI level of $1,095.) While there had been progress with more developing 

countries graduating from concessional finance in the mid 2000s (notably Ghana’s 

Eurobond issuance in 2007), the global credit tightening resulting from the global financial 

crisis has greatly reduced these countries’ nascent access to credit. 
1

Legislative Provisions 

Section 1503 of the International Financial Institutions Act, as amended 

(originally passed as Section 610 of the 

Foreign Operations, Export Financing, and 

Related Programs Appropriations Act, 1999, and amended in 2004) 

 

The Secretary of the Treasury shall instruct the United States Executive Director of the 

International Monetary Fund to use aggressively the voice and vote of the Executive Director to 

do the following: 

(1) Vigorously promote policies to increase the effectiveness of the International Monetary Fund 

in structuring programs and assistance so as to promote policies and actions that will 

contribute to exchange rate stability and avoid competitive devaluations that will further 

destabilize the international financial and trade systems. 

(2) Vigorously promote policies to increase the effectiveness of the International Monetary Fund 

in promoting market-oriented reform, trade liberalization, economic growth, democratic 

governance, and social stability through – 

(A) Establishing an independent monetary authority, with full power to conduct monetary 

policy, that provides for a non-inflationary domestic currency that is fully convertible in 

foreign exchange markets; 

(B) Opening domestic markets to fair and open internal competition among domestic 

enterprises by eliminating inappropriate favoritism for small or large businesses, 

eliminating elite monopolies, creating and effectively implementing anti-trust and antimonopoly laws to protect free competition, and establishing fair and accessible legal 

procedures for dispute settlement among domestic enterprises; 

(C) Privatizing industry in a fair and equitable manner that provides economic opportunities 

to a broad spectrum of the population, eliminating government and elite monopolies, 

closing loss-making enterprises, and reducing government control over the factors of 

production; 

(D)Economic deregulation by eliminating inefficient and overly burdensome regulations and 

strengthening the legal framework supporting private contract and intellectual property 

rights; 

(E) Establishing or strengthening key elements of a social safety net to cushion the effects on 

workers of unemployment and dislocation; and 

(F) Encouraging the opening of markets for agricultural commodities and products by 

requiring recipient countries to make efforts to reduce trade barriers. 

(3) Vigorously promote policies to increase the effectiveness of the International Monetary 

Fund, in concert with appropriate international authorities and other international financial 

institutions (as defined in Section 1701(c)(2)), in strengthening financial systems in 

developing countries, and encouraging the adoption of sound banking principles and 

practices, including the development of laws and regulations that will help to ensure that 

domestic financial institutions meet strong standards regarding capital reserves, regulatory 

oversight, and transparency. 

(4) Vigorously promote policies to increase the effectiveness of the International Monetary 

Fund, in concert with appropriate international authorities and other international financial 

institutions (as defined in Section 1701(c)(2)), in facilitating the development and 

implementation of internationally acceptable domestic bankruptcy laws and regulations in 

developing countries, including the provision of technical assistance as appropriate. 
2

(5) Vigorously promote policies that aim at appropriate burden-sharing by the private sector so 

that investors and creditors bear more fully the consequences of their decisions, and 

accordingly advocate policies which include – 

(A) Strengthening crisis prevention and early warning signals through improved and more 

effective surveillance of the national economic policies and financial market development 

of countries (including monitoring of the structure and volume of capital flows to identify 

problematic imbalances in the inflow of short and medium term investment capital, 

potentially destabilizing inflows of offshore lending and foreign investment, or problems 

with the maturity profiles of capital to provide warnings of imminent economic 

instability), and fuller disclosure of such information to market participants; 

(B) Accelerating work on strengthening financial systems in emerging market economies so 

as to reduce the risk of financial crises; 

(C) Consideration of provisions in debt contracts that would foster dialogue and consultation 

between a sovereign debtor and its private creditors, and among those creditors; 

(D)Consideration of extending the scope of the International Monetary Fund’s policy on 

lending to members in arrears and of other policies so as to foster the dialogue and 

consultation referred to in subparagraph (C); 

(E) Intensified consideration of mechanisms to facilitate orderly workout mechanisms for 

countries experiencing debt or liquidity crises; 

(F) Consideration of establishing ad hoc or formal linkages between the provision of official 

financing to countries experiencing a financial crisis and the willingness of market 

participants to meaningfully participate in any stabilization effort led by the International 

Monetary Fund; 

(G)Using the International Monetary Fund to facilitate discussions between debtors and 

private creditors to help ensure that financial difficulties are resolved without 

inappropriate resort to public resources; and 

(H)The International Monetary Fund accompanying the provision of funding to countries 

experiencing a financial crisis resulting from imprudent borrowing with efforts to 

achieve a significant contribution by the private creditors, investors, and banks which 

had extended such credits. 

(6) Vigorously promote policies that would make the International Monetary Fund a more 

effective mechanism, in concert with appropriate international authorities and other 

international financial institutions (as defined in Section 1701(c)(2)), for promoting good 

governance principles within recipient countries by fostering structural reforms, including 

procurement reform, that reduce opportunities for corruption and bribery, and drug-related 

money laundering. 

(7) Vigorously promote the design of International Monetary Fund programs and assistance so 

that governments that draw on the International Monetary Fund channel public funds away 

from unproductive purposes, including large “show case” projects and excessive military 

spending, and toward investment in human and physical capital as well as social programs 

to protect the neediest and promote social equity. 

(8) Work with the International Monetary Fund to foster economic prescriptions that are 

appropriate to the individual economic circumstances of each recipient country, recognizing 

that inappropriate stabilization programs may only serve to further destabilize the economy 

and create unnecessary economic, social, and political dislocation. 
3

(9) Structure International Monetary Fund programs and assistance so that the maintenance 

and improvement of core labor standards are routinely incorporated as an integral goal in 

the policy dialogue with recipient countries, so that – 

(A) Recipient governments commit to affording workers the right to exercise internationally 

recognized core worker rights, including the right of free association and collective 

bargaining through unions of their own choosing; 

(B) Measures designed to facilitate labor market flexibility are consistent with such core 

worker rights; and 

(C) The staff of the International Monetary Fund surveys the labor market policies and 

practices of recipient countries and recommends policy initiatives that will help to ensure 

the maintenance or improvement of core labor standards. 

(10) Vigorously promote International Monetary Fund programs and assistance that are 

structured to the maximum extent feasible to discourage practices which may promote ethnic 

or social strife in a recipient country. 

(11) Vigorously promote recognition by the International Monetary Fund that 

macroeconomic developments and policies can affect and be affected by environmental 

conditions and policies, and urge the International Monetary Fund to encourage member 

countries to pursue macroeconomic stability while promoting environmental protection. 

(12) Facilitate greater International Monetary Fund transparency, including by enhancing 

accessibility of the International Monetary Fund and its staff, foster a more open release 

policy toward working papers, past evaluations, and other International Monetary Fund 

documents, seeking to publish all Letters of Intent to the International Monetary Fund and 

Policy Framework Papers, and establishing a more open release policy regarding Article IV 

consultations. 

(13) Facilitate greater International Monetary Fund accountability and enhance 

International Monetary Fund self-evaluation by vigorously promoting review of the 

effectiveness of the Office of Internal Audit and Inspection and the Executive Board’s 

external evaluation pilot program and, if necessary, the establishment of an operations 

evaluation department modeled on the experience of the International Bank for 

Reconstruction and Development, guided by such key principles as usefulness, credibility, 

transparency, and independence. 

(14) Vigorously promote coordination with the International Bank for Reconstruction and 

Development and other international financial institutions (as defined in Section 1701 (c)(2)) 

in promoting structural reforms which facilitate the provision of credit to small businesses, 

including microenterprise lending, especially in the world’s poorest, heavily indebted 

countries. 

(15) Work with the International Monetary Fund to 

(A) foster strong global anti-money laundering (AML) and combat the financing of terrorism 

(CFT) regimes; 

(B) ensure that country performance under the Financial Action Task Force anti-money 

laundering and counterterrorist financing standards is effectively and comprehensively 

monitored; 

(C) ensure note is taken of AML and CFT issues in Article IV reports, International Monetary 

Fund programs, and other regular reviews of country progress; 
4

(D) ensure that effective AML and CFT regimes are considered to be indispensable elements 

of sound financial systems; and 

(E) emphasize the importance of sound AML and CFT regimes to global growth and 

development. 
5

Legislative Provisions 

Section 801(c)(1)(B) 

Foreign Operations, Export Financing, and 

Related Programs Appropriations Act, 2001 

 

Treasury should report on the extent to which the IMF is implementing – 

I. Policies providing for the suspension of financing if funds are being diverted for 

purposes other than the purpose for which the financing was intended; 

II. Policies seeking to ensure that financing by the Fund normally serves as a catalyst for 

private sector financing and does not displace such financing; 

III. Policies requiring that financing must be disbursed (i) on the basis of specific prior 

reforms; or (ii) incrementally upon implementation of specific reforms after initial 

disbursement; 

IV. Policies vigorously promoting open markets and liberalization of trade in goods and 

services; 

V. Policies providing that financing by the Fund concentrates chiefly on short-term balance 

of payments financing; 

VI. Policies providing for the use, in conjunction with the Bank, of appropriate qualitative 

and quantitative indicators to measure progress toward graduation from receiving 

financing on concessionary terms, including an estimated timetable by which countries 

may graduate over the next 15 years. 
6

Legislative Provisions 

Section 605(d) of the Foreign Operations, Export Financing, and 

Related Programs Appropriations Act, 1999 

On a quarterly basis, the Secretary of the Treasury shall report to the appropriate committees on 

the standby or other arrangements of the Fund made during the preceding quarter, identifying 

separately the arrangements to which the policies described in section 601(4) of this title apply 

and the arrangements to which such policies do not apply. 
ANNEX 1 

Report to Congress on International Monetary Fund Lending 

October 1, 2007 – September 30, 2009 

October 1, 2007 – March 31, 2008 

Board 

Approval Date Country Amount Type* U.S. Position 

10/05/2007 Nicaragua SDR 71.5 million 

(US$111.3 million) 

PRGF Support 

12/19/2007 Iraq SDR 475.36 million 

(US$744 million) 

SBA Support 

12/21/2007 Guinea SDR 48.195 million 

(US$75.2 million) 

PRGF Support 

Board 

Approval Date Country Amount Type* U.S. Position 

01/28/08 GuineaBissau SDR 1.775 million 

($2.8 million) 

EPCA Abstain 

(Military 

Audit) 

02/04/08 Dominica SDR 2.05 million 

($3.3 million) 

Emergency 

Assistance 

Support 

03/14/08 Liberia SDR 239.02 million 

($391 million) 

PRGF 

Support SDR 342.77 million 

($561 million) 

EFF 

*Notes: 

1. PRGF: Poverty Reduction and Growth Facility; SBA: Stand-By Arrangement; EPCA: 

Emergency Post-Conflict Assistance; EFF: Extended Fund Facility 

2. The policies described in section 601(4) of the Foreign Operations, Export Financing, and 

Related Programs Appropriations Act 1999 did not apply to any of the programs above. 

7
 

April 1 – June 30, 2008 

Board 

Approval Date Country Amount Type 

U.S. Position 

 (Reason) 

04/02/08 Bangladesh SDR 133 million 

($217.7 million) 

Emergency 

Assistance 

Support 

04/04/08 Côte d’Ivoire SDR 40.6 million 

($66.2 million) 

EPCA Support 

04/07/08 Honduras SDR 38.8 million 

($63.5 million) 

Stand-By 

Arrangement 

Support 

04/21/08 Togo SDR 66.06 million 

($108.4 million) 

PRGF Abstain 

(Military Audit) 

05/28/08 Niger SDR 23.03 million 

($37.5 million) 

PRGF Support 

05/28/08 Mali SDR 27.99 million 

($45.7 million) 

PRGF Abstain 

(Program Design)

06/04/08 Zambia SDR 48.91 million 

($79.2 million) 

PRGF Support 

06/16/08 Benin SDR 9.29 million 

($15 million) 

PRGF 

Augmentation 

Abstain 

(Program Design)

06/18/08 Central 

African Rep. 

SDR 8.355 million 

($13.5 million) 

PRGF 

Augmentation 

Support 

06/20/08 Haiti SDR 16.38 million 

($26.5 million) 

PRGF 

Augmentation 

Support 

* Notes: 

1. EPCA: Emergency Post-Conflict Assistance; PRGF: Poverty Reduction and Growth 

Facility. 

2. The policies described in section 601(4) of the Foreign Operations, Export Financing, and 

Related Programs Appropriations Act 1999 did not apply to any of the programs above. 

8
July 1 – September 30, 2008 

Board 

Approval 

Date 

Country Amount Type* U.S. Position 

(Reason) 

07/02/08 Republic of 

Madagascar 

SDR 18.33 million 

($29.9 million) 

PRGF 

Augmentation 

Support 

07/07/08 Burundi SDR 46.2 million 

($75.6 million) 

PRGF Support 

07/07/08 Grenada SDR 1.46 million 

($2.4 million) 

PRGF 

Augmentation 

Support 

07/14/08 Malawi SDR 10.41 million 

($16.9 million) 

PRGF 

Augmentation 

Support 

07/28/08 Guinea SDR 21.42 million 

($34.9 million) 

PRGF 

Augmentation 

Support 

09/10/08 Nicaragua SDR 6.5 million 

($10 million) 

PRGF 

Augmentation 

Support 

09/15/08 Georgia SDR 477.1 million 

($750 million) 

SBA Support 

09/17/08 Djibouti SDR 12.72 million 

($20 million) 

PRGF Support 

09/22/08 Togo SDR 18.35 million 

($29 million) 

PRGF 

Augmentation 

Abstain 

(Military Audit) 

* Notes: 

1. PRGF: Poverty Reduction and Growth Facility; SBA: Stand-By Arrangement 

2. The policies described in section 601(4) of the Foreign Operations, Export Financing, and 

Related Programs Appropriations Act 1999 did not apply to any of the programs above. 

9
October 1 – December 31, 2008

Board 

Approval Date Country Amount Type* 

U.S. Position 

(Reason) 

11/05/08 Ukraine SDR 11 billion 

($16.4 billion) 

SBA Support 

11/06/08 Hungary SDR 10.5 billion 

($15.7 billion) 

SBA Support 

11/14/08 Seychelles SDR 17.6 million 

($26.1 million) 

SBA Support 

11/14/08 Lebanon SDR 25.375 

million 

($37.6 million) 

EPCA Support 

11/17/08 Armenia SDR 9.2 million 

($13.6 million) 

PRGF Support 

11/19/08 Iceland SDR 1.4 billion 

($2.1 billion) 

SBA Support 

11/24/08 Pakistan SDR 5.169 billion 

($7.6 billion) 

SBA Support 

12/03/08 Malawi SDR 52.05 million 

($77.1 million) 

ESF Support 

12/08/08 Republic of 

Congo 

SDR 8.46 million 

($12.53 million) 

PRGF Support 

12/10/08 Kyrgyz 

Republic 

SDR 66.6 million 

($100 million) 

ESF Support 

12/15/08 Comoros SDR 1.1 million 

($1.7 million) 

EPCA Support 

SDR 2.2 million 

($3.4 million) 

ESF Abstain 

(Program Design) 

12/19/08 Senegal SDR 48.54 million 

($75.6 million) 

ESF Support 

12/22/08 Sierra Leone SDR 10.4 million 

($16.1 million) 

PRGF 

Augmentation 

Support 

12/23/08 Latvia SDR 1.52 billion 

($2.35 billion) 

SBA Support 

*Notes: 

1. EPCA: Emergency Post-Conflict Assistance; ESF: Exogenous Shocks Facility; PRGF: 

Poverty Reduction and Growth Facility; SBA: Stand-By Arrangement 

2. The policies described in section 601(4) of the Foreign Operations, Export Financing, and 

Related Programs Appropriations Act 1999 did not apply to any of the programs above. 

10
January 1 – March 31, 2009 

Board 

Approval Date Country Amount Type* 

U.S. Position 

(Reason) 

01/12/09 Belarus SDR 1.62 billion 

($2.46 billion) 

SBA Voted No 

(Program Design)

01/16/09 El Salvador SDR 513.9 million 

($800 million) 

SBA Support 

01/16/09 Republic of 

Serbia 

SDR 350.8 million 

($530.3 million) 

SBA Support 

01/23/09 Ethiopia SDR 33.425 million 

($50 million) 

ESF Support 

02/11/09 Haiti SDR 24.57 million 

($36.6 million) 

PRGF 

Augmentation 

Support 

02/18/09 Belize SDR 4.7 million 

($6.9 million) 

Emergency 

Assistance 

Support 

02/18/09 The Gambia SDR 6.215 million 

($9.2 million) 

PRGF 

Augmentation 

Support 

03/02/09 São Tomé & 

Príncipe 

SDR 2.59 million 

($3.8 million) 

PRGF Support 

03/06/09 Republic of 

Armenia 

SDR 368 million 

($540 million) 

SBA Support 

03/11/09 D. R. Congo SDR 133.25 million 

($195.5 million) 

ESF Support 

03/27/09 Côte d’Ivoire SDR 373.98 million 

($565.7 million) 

PRGF Support 

*Notes: 

1. EPCA: Emergency Post-Conflict Assistance; ESF: Exogenous Shocks Facility; PRGF: 

Poverty Reduction and Growth Facility; SBA: Stand-By Arrangement 

2. The policies described in section 601(4) of the Foreign Operations, Export Financing, and 

Related Programs Appropriations Act 1999 did not apply to any of the programs above. 

11
12

April 1, 2009 – June 30, 2009 

Board 

Approval Date Country Amount Type* 

U.S. Position 

(Reason) 

04/01/09 Mongolia SDR 153.3 million 

($229.2 million) 

SBA Support 

04/10/09 Costa Rica SDR 492.3 million 

($735 million) 

SBA Support 

04/17/09 Mexico SDR 31.5 billion 

($47 billion) 

FCL Support 

04/21/09 Tajikistan, 

Republic of 

SDR 78.3 million 

($116 million) 

PRGF Oppose 

04/22/09 Guatemala SDR 630.6 million 

($935 million) 

SBA Support 

05/01/09 Zambia From SDR 48.91 

million ($79.2 

million) to SDR 

220.095 million 

($329.7 million) 

PRGF 

Augmentation 

Support 

05/04/09 Romania SDR 11.4 billion 

($17.1 billion) 

SBA Support 

05/06/09 Poland, 

Republic of 

SDR 13.69 billion 

($20.58 billion) 

FCL Support 

05/11/09 Colombia SDR 6.966 billion 

($10.5 billion) 

FCL Support 

05/15/09 St. Kitts and 

Nevis 

SDR 2.225 million 

($3.4 million) 

ENDA Support 

05/15/09 St. Vincent and 

the Grenadines 

SDR 3.735 million 

($5.7 million) 

RAC-ESF Support 

05/15/09 Serbia, 

Republic of 

From SDR 350.8 

million ($530.3 

million) to 

SDR 2.62 billion 

($4 billion)

SBA 

Augmentation 

Support 

05/29/09 Kenya SDR 135.7 million 

($209 million) 

RAC-ESF Support 

05/29/09 Tanzania SDR 218.79 million 

($336 million) 

ESF Support 

06/03/09 Grenada From SDR 11.99 

million ($17.6 

million) to SDR 

16.38 million ($25.4 

million) 

PRGF 

Augmentation 

Support 
13

06/17/09 Sierra Leone From SDR 41.51 

million ($63.1 

million) to SDR 

51.88 million ($79.9 

million) 

PRGF 

Augmentation 

Support 

06/19/09 Senegal From SDR 48.54 

million ($74 million) 

to SDR 121.35 

million 

($186 million) 

ESF 

Augmentation 

Support 

06/22/09 Armenia, 

Republic of 

From SDR 368 

million ($540 

million) to SDR 

533.6 million 

($822.7 million) 

SBA 

Augmentation 

Support 

06/24/09 Benin From SDR 15.48 

million ($23.52 

million) to SDR 

24.77 million 

($38.44 million) 

PRGF 

Augmentation 

Support 

06/29/09 Belarus, 

Republic of 

From SDR 1.62 

billion ($2.51 billion) 

to SDR 2.27 billion 

($3.52 billion) 

SBA 

Augmentation 

Abstain 

06/30/09 Mozambique SDR 113.6 million 

($176 million) 

ESF Support 

*Notes: 

1. ENDA: Emergency Assistance for Natural Disasters; EPCA: Emergency Post-Conflict 

Assistance ESF: Exogenous Shocks Facility; RAC-ESF: Rapid-Access Component of the 

Exogenous Shocks Facility; FCL: Flexible Credit Line; PRGF: Poverty Reduction and Growth 

Facility; SBA: Stand-By Arrangement 

2. The policies described in section 601(4) of the Foreign Operations, Export Financing, and 

Related Programs Appropriations Act 1999 did not apply to any of the programs above. 
14

July 1, 2009 – September 30, 2009 

Board Approval 

Date Country Amount Type* 

U.S. Position 

(Reason) 

07/02/09 Cameroon SDR 92.85 million 

($144.1 million) 

RAC-ESF Support 

07/08/09 Bosnia and 

Herzegovina 

SDR 1.01 billion 

($1.57 billion) 

SBA Support 

07/10/09 Dominica SDR 3.28 million 

($5.1 million) 

RAC-ESF Support 

07/15/09 Ghana SDR 387.45 million 

($602.6 million) 

PRGF Support 

07/24/09 Sri Lanka SDR 1.65 billion 

($2.6 billion) 

SBA Abstain 

07/27/09 St. Lucia SDR 6.89 million 

(US$10.7 million) 

RAC-ESF Support 

08/06/09 Georgia From SDR 477.1 

million ($750 

million) to SDR 

747.1 million ($1.2 

billion) 

SBA 

Augmentation 

Support 

08/07/09 Pakistan From SDR 5.169 

billion ($7.6 billion) 

to SDR 7.236 billion 

($11.3 billion) 

SBA 

Augmentation 

Support 

08/26/09 Ethiopia SDR 153.755 million 

($240.6 million) 

ESF Support 

09/21/09 Comoros SDR 13.57 million 

($21.5 million) 

PRGF Support 

*Notes: 

1. EPCA: Emergency Post-Conflict Assistance; ESF: Exogenous Shocks Facility; RAC-ESF: 

Rapid-Access Component of the Exogenous Shocks Facility; FCL: Flexible Credit Line 

PRGF: Poverty Reduction and Growth Facility; SBA: Stand-By Arrangement 

2. The policies described in section 601(4) of the Foreign Operations, Export Financing, and 

Related Programs Appropriations Act 1999 did not apply to any of the programs above.