IMPLEMENTATION OF 

CERTAIN LEGISLATIVE PROVISIONS 

RELATING TO THE 

INTERNATIONAL MONETARY FUND 

A Report to Congress 

in accordance with 

Section 1705(a) of the International Financial Institutions Act 

and 

Section 605(d) of the 

Foreign Operations, Export Financing, and Related Programs 

Appropriations Act, 1999 

United States Department of the Treasury 

December 2014
1

Table of Contents 

Introduction ............................................................................................................................... 2

International Financial Institutions Act, Section 1503(a) 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 ....................................................................................5

4. Bankruptcy Laws and Regulations ................................................................................6

5. Private Sector Involvement ............................................................................................6

6. Good Governance ..........................................................................................................7

7. Channeling Public Funds toward Productive Purposes .................................................8

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

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

10. Discouraging Ethnic and Social Strife............................................................................9

11. Environmental Protection ...............................................................................................9

12. Greater Transparency .....................................................................................................10

13. Accountability/Evaluation...............................................................................................10

14. Microenterprise Lending ................................................................................................11

15. Anti-Money Laundering and Combating the Financing of Terrorism.............................11

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 ............................................................12 

II. IMF Financing as Catalyst for Private Sector Financing ................................................12

III. Conditions for Disbursement .........................................................................................12 

IV. Trade Liberalization .......................................................................................................12 

V. Focus on Short-Term Balance of Payments Financing ...................................................13 

VI. Progress toward Graduation from Concessionary Financing ........................................13

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 
2

Introduction 

This report provides a consolidated response to two legislative provisions that require Treasury 

report to Congress on reform efforts and standby arrangements undertaken by the International 

Monetary Fund (IMF or Fund). 

IMF Policies Reform Report: Section 1705(a) of the International Financial Institutions Act (IFI 

Act), 22 U.S.C. § 262r-4(a), requires the Secretary of the Treasury to submit a report on the 

progress made by (a) the U.S. Executive Director (USED) in influencing the IMF to adopt the

policies and reforms described in section 1503 of the IFI Act, 22 U.S.C. § 262o-2(a), and (b) the 

IMF in implementing the policies set forth in section 801(c)(1)(B) of the Foreign Operations, 

Export Financing, and Related Programs Appropriations Act, 2001, P.L. 106-429. 

Treasury and the Office of the U.S. Executive Director (OUSED) at the IMF consistently 

endeavor to build support in the IMF’s Executive Board and management for these policies, 

including through 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 overarching objective is to support strengthened implementation of IMF country 

programs and sound policy decisions within the Fund. Also, Treasury’s Office of International 

Monetary Policy undertakes outreach to other Treasury offices to increase awareness among 

Treasury staff about legislative mandates and to identify opportunities to influence IMF 

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

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

Related Programs Appropriations Act, 1999, P.L. 105-277, mandates reports on IMF standby or 

other arrangements with its member countries. Annex I provides the information that responds 

to that provision.

The text of both legislative provisions is reproduced at the end of this consolidated report. 

Earlier reports pursuant to these two provisions are available on the Department of the 

Treasury’s website: 

http://www.treasury.gov/resource-center/international/int-monetary-fund/Pages/imf.aspx

I. Progress of the OUSED in Promoting Policies at the IMF Described in Section 

1503(a) 

(1) Exchange rate stability 

Since the IMF’s 2007 Decision to increase bilateral surveillance over member policies, IMF 

exchange rate surveillance has improved in both breadth and quality. The IMF’s Independent 

Evaluation Office in 2007 found that only 63 percent of Article IV reports from 1995-2005 

included a clear assessment of the respective country’s currency exchange rate’s value in relation 

to economic fundamentals.1 In contrast, both the 2008 and 2011 Triennial Surveillance Reviews 

 

1

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

Policy Advice, 1999-2005,” 2007.
3

found that over 90 percent had done so after the Decision.2 In the 2014 Triennial Surveillance 

Review staff recommended that the External Balance Assessment, which underpins the IMF’s 

analysis of exchange rate valuations, be extended to a larger group of countries. Significantly, 

staff have increasingly devoted the Selected Issues papers that accompany Article IV staff 

reports to exchange rate issues. The sophistication of exchange rate assessments has improved 

as econometric assessments of the exchange rate’s equilibrium value have become more 

common. 

The United States continues to advocate for further improvements to the IMF’s surveillance over 

exchange rates. In 2012, with strong U.S. support, the IMF produced a pilot External Sector 

Report (ESR), which represents a substantial enhancement to the IMF’s work on external 

analysis as it includes much greater in-depth coverage of IMF exchange rate assessments, as well 

as assessments of reserves; drivers of current account imbalances; and information on capital 

flows and measures. We continue to encourage staff to incorporate this analysis into other 

multilateral and bilateral surveillance products, and to elevate the ESR from a “pilot” to a 

permanent publication. 

The United States encourages countries to pursue more flexible exchange rates, based on 

underlying fundamentals, including the following examples:

 In an August 2014 board statement on Yemen’s Article IV staff report and request for an

Extended Credit Facility (ECF), the OUSED welcomed the central bank’s plan to 

modernize its monetary policy framework, which will help facilitate greater exchange 

rate flexibility. 

 In a February 2014 board statement on Nigeria’s Article IV staff report, the OUSED 

called on the government to allow the naira’s exchange rate to adjust to external 

pressures.

 In a January 2014 board statement on Korea’s Article IV staff report, the OUSED argued 

that Korea should halt reserve accumulation and allow the won to appreciate in line with 

market pressure. The OUSED underscored that the value of the won should be fully 

market-determined, with intervention strictly limited to smoothing excess volatility.

Treasury has pressed for increased candor, transparency, and even-handedness of IMF exchange 

rate surveillance as part of the G-20 agenda. In particular, we continue to advocate that Fund 

staff make tougher ultimate judgments on members’ exchange rate management practices. At the 

September 2014 G-20 Finance Minister and Central Bank Governors meeting in Cairns,

Australia, members reiterated that they would meet the G-20 exchange rate commitments. These 

include moving more rapidly toward more market-determined exchange rate systems and 

exchange rate flexibility to reflect underlying fundamentals, and not to target exchange rates for 

competitive purposes. 

 

2

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

“2011 Triennial Surveillance Review – Staff Background Studies,” August 29, 2011. 
4

(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 consistently advocates for greater monetary 

authority independence across 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. The United States encourages the IMF to 

support monetary authority independence in various ways, including through the following 

example: 

 In a September 2014 board statement on Burma’s Article IV staff report, the OUSED 

emphasized the recent passage of the Central Bank Law, which established the legal basis 

for an independent and credible monetary authority. 

(B) Fair and open internal competition among domestic enterprises 

Although the World Bank leads on this issue, the IMF encourages member countries to pursue 

policies that improve internal 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. The 

United States continues to advocate at the IMF for support of fair and open competition globally, 

including through the following example: 

 In a July 2014 board statement on China’s Article IV staff report, the OUSED 

emphasized that China’s shift to a more market-based economy should include allowing 

more foreign competition and liberalizing sectors that are dominated by state-owned 

enterprises, which should help generate needed productivity gains.

(C) Privatization 

Often collaborating with the World Bank, the IMF supports competitive and transparent 

privatization processes to promote economic efficiency and improve member country fiscal 

positions. Examples of IMF program and surveillance discussions in which the OUSED has 

advocated privatization including the following: 

 In a March 2014 board statement on Romania’s 1st and 2nd Standby Arrangement (SBA)

reviews, the OUSED welcomed the successful initial public offerings (IPOs) for 

Romania’s state-owned nuclear power generation and natural gas exploration companies,

and the Romanian authorities’ intention to use that experience to inform IPOs of other 

state-owned energy companies. 

 In a December 2013 board statement on Pakistan’s Extended Fund Facility (EFF), the 

OUSED urged the authorities to follow robust privatization or divestment plans for lossmaking state-owned enterprises. 
5

(D) Economic deregulation and strong legal frameworks 

A lack of strong property rights, fair and open competition, and contract enforcement creates

distorted markets and stifles entrepreneurship. While the World Bank often addresses these 

issues, IMF staff also provide relevant advice on measures considered critical to macroeconomic 

performance. The United States has advocated at the IMF for improved legal frameworks to 

protect property rights. 

 In a January 2014 board statement on Bolivia’s Article IV staff report, the OUSED urged 

the authorities to strengthen the institutional underpinnings for property rights and the 

rule of law to provide a stronger foundation for growing sectors beyond resource 

exploration. 

(E) Social safety nets 

Investment in human development and basic social services is important for sustained economic 

growth. Cost effective social safety nets can be important in garnering popular support for 

economic reforms and in cushioning the impact of economic downturns on the population. 

Through board statements at the IMF, the United States has stressed the importance of protecting 

social safety net spending, including in the following examples: 

 In a December 2013 board statement on Mali’s ECF request, the OUSED commended the 

Malian authorities for reforming fuel subsidies but noted that greater attention should be 

given to the impact of subsidy reform on poor and vulnerable segments of the population. 

 In a May 2014 board statement on Greece’s 5

th EFF review, the OUSED urged the 

authorities to end delays in strengthening the social safety net, particularly in light of a 

worrying divergence on social spending between Greece and the euro area. The OUSED 

welcomed a one-off “social dividend” for low-income households.

(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 the agricultural sector. The IMF is prepared, along with the 

World Bank, to provide transitional assistance to member countries experiencing payment 

imbalances arising from trade reform legislation. 

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

The joint IMF-World Bank Financial Sector Assessment Program (FSAP) is an important 

instrument for financial sector surveillance and advice. Staff use FSAPs to assess compliance 

with key financial sector standards, including 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.
6

In September 2010, the OUSED supported the adoption of IMF management’s proposal to make 

the FSAP a regular and mandatory part of bilateral surveillance for 29 jurisdictions with 

systemically important financial sectors, including the United States. The IMF also conducts 

financial sector surveillance through a semi-annual Early Warning Exercise (EWE) and Global 

Financial Stability Report (GFSR), which identify the most relevant tail risks to the global 

economy or major regions and provide relevant policy advice. Examples of the OUSED 

supporting the strengthening of financial systems include the following: 

 In an April 2014 board statement on Luxembourg’s Article IV staff report, the OUSED 

expressed support for front-loading the implementation of Basel III capital requirements, 

and the authorities’ precautionary tightening of loan-to-value (LTV) ratios and increased 

capital surcharges. The OUSED also encouraged the authorities to move quickly to set 

up the ex-ante deposit guarantee scheme and resolution fund required by European 

regulation.

 In an August 2014 board statement on Norway’s Article IV staff report, the OUSED 

welcomed the authorities’ strong progress in implementing the CRD IV/Basel III 

requirements, which will include countercyclical capital buffers and the designation of 

domestic systemically-important institutions. The OUSED also noted agreement with 

IMF staff that tight LTV limits on mortgages and other housing-related macroprudential 

policies are needed to guard against risks.

(4) Internationally acceptable domestic bankruptcy laws and regulations 

In coordination with other international financial institutions, including the World Bank, IMF 

staff provide technical assistance to member economies as they develop efficient insolvency 

regimes. Examples of the OUSED supporting the development of domestic bankruptcy laws and 

regulations include the following: 

 In a June 2014 board statement on Zimbabwe’s Article IV staff report, the OUSED called 

for urgent action to resolve troubled banks and concurred with the IMF’s 

recommendation that insolvent institutions should not have access to a proposed Lenderof-Last Resort facility. 

 In a December 2013 board statement on Cote d’Ivoire’s Article IV staff report, the 

OUSED highlighted the overly concentrated banking sector and urged authorities to 

restructure financially troubled public banks and continue efforts to reform and deepen 

the financial sector to promote improved credit access. 

(5) Private sector involvement in crisis resolution

(A) Strengthening crisis prevention through improved surveillance of economic policies and 

financial sector development

The United States encourages the IMF to further strengthen surveillance and crisis prevention 

capabilities. The United States and other G-20 members support the IMF’s central role in 
7

facilitating multilateral consultation and cooperation on monetary and financial issues. For 

example, in a September 2014 board statement on the IMF’s Triennial Surveillance Review, the 

OUSED welcomed the IMF’s efforts to enhance its macro-financial sector surveillance. The 

OUSED also welcomed further integration of risk analysis into surveillance, including through 

enhanced technical assistance and the use of balance sheet analysis.

(B) Strengthening of emerging markets' financial systems 

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

market economies. Beyond carrying out financial system surveillance functions, the Fund 

provides technical assistance to low- and lower-middle-income countries to promote financial 

sector sustainability. Examples of the OUSED supporting a strengthening of emerging market 

financial systems include the following: 

 In a July 2014 board statement on Kazakhstan’s Article IV staff report and FSAP, the 

OUSED noted banks’ over-dependence on large corporate deposits and the fact that they 

remain highly dollarized. The OUSED welcomed the government’s shift to boosting the 

resources of the Problem Loans Fund, which is necessary to resolve bad debts on the 

asset side of banks’ balance sheets. 

 In a February 2014 board statement on Barbados’s Article IV staff report and FSAP, the 

OUSED urged the government to adopt staff’s recommended measures to shore up the 

financial system, including increasing central bank independence, strengthening 

supervision, and improving loan loss provisioning. 

(C-H) Strengthened crisis resolution mechanisms 

The United States encourages appropriate private sector involvement in financial crisis 

resolution, including facilitating IMF efforts to strengthen crisis prevention and resolution 

mechanisms worldwide. Most recently, the United States has worked to improve sovereign debt 

restructuring processes. Treasury staff convened a Sovereign Debt Roundtable in 2013-14 to 

strengthen the contractual approach to sovereign debt restructuring through new model clauses 

for sovereign debt contracts. In October 2014, the IMF board endorsed a proposal for a new 

model of collective action clauses (CAC). The new model introduces a narrower equal ranking

clause that provides less scope for holdouts to block payments on new bonds that emerge from a 

restructuring. The model also provides stronger provisions for collective action that would allow 

the votes by holders of different classes of bonds to be aggregated into a single up or down vote 

on the restructuring proposal. During the board meeting, the OUSED strongly supported these 

contract revisions and underscored the IMF’s lead role in promoting adoption of the clauses. 

(6) Good governance 

The IMF emphasizes good governance when providing policy advice, financial support, and 

technical assistance to member countries. The IMF supports good governance through an 

emphasis on transparency, strong fiduciary diagnostics, and promotion of market-based reforms.

The Fund’s involvement has focused on those governance aspects that are generally considered 
8

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

transparency, enhancing data dissemination, and implementing effective financial sector 

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

 In a January 2014 board statement on Malawi’s 3

rd and 4th ECF review, the OUSED 

urged the authorities to continue to improve public financial management, including 

strengthening financial management systems, following a significant corruption crisis. 

 In a July 2014 board statement on Liberia’s 3

rd ECF review, the OUSED stressed the 

need to improve public financial management and procurement procedures to address 

weaknesses in the government’s budgetary framework. 

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

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 identified principles and practices to 

enhance fiscal policy transparency, promote quality audit and accounting standards, and reduce 

or eliminate off-budget transactions. The IMF also developed a Guide to Resource Revenue 

Transparency and a Fiscal Report on Standards and Codes (Fiscal ROSC) for use in resourcerich (oil/gas-mining) countries. The IMF strongly supports the Extractive Industries 

Transparency Initiative (EITI) by providing policy and technical support to the EITI Secretariat 

and implementing countries. Examples of the OUSED promoting improved channeling of public 

resources include the following: 

 In an April 2014 board statement on the IMF’s Baltic Cluster Report, the OUSED called 

for adequate fiscal resources to be allocated to social assistance in Latvia, and for better 

targeting of social assistance to low-income Latvians, given that the richest quintile of the 

population receives nearly 30 percent of the social assistance benefits. 

 In a September 2014 board statement on Yemen’s ECF request, the OUSED urged the 

authorities to resist political pressure to reverse recent fuel price increases. The OUSED 

also encouraged timely implementation of an increase in cash transfers to the poorest 

Yemenis to offset the impact of the fuel subsidy reductions on the poor. 

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

The United States has emphasized the need to focus policy advice on issues critical to growth 

and macroeconomic stability in each country. We have supported IMF staff efforts to 

increasingly tailor policy advice to country-specific circumstances. The United States has 

supported country-relevant economic prescriptions in the following ways: 

 In a December 2013 board statement on Zambia’s Article IV staff report, the OUSED 

welcomed the implementation of fuel and agricultural subsidy reform in a way that 

protected the vulnerable populations, including the introduction of a compensatory cash 

transfer program for the poorest. 
9

 In an August 2014 board statement on Ukraine’s 1

st SBA review, the OUSED supported 

the Fund’s flexible approach on the country’s reserve targets given the volatile exchange 

rate and deposit and capital outflows resulting from the security situation, and urged staff 

to take a pragmatic approach going forward. 

(9) Core labor standards (“CLS”) 

The United States promotes integration of core labor standards into the IMF’s analysis, including 

by encouraging the Fund to cooperate with the International Labor Organization (ILO) to 

establish best practices on CLS policies. The State Department monitors labor standards in all 

IFI borrower countries, and, since 1994, Treasury has implemented a legislative mandate to 

submit a report to Congress assessing progress made by the IFIs with respect to internationally 

recognized worker rights. In addition, the OUSED advocates at the IMF for improved labor 

standards, including through the following example:

 

 In a November 2013 board statement on Bangladesh’s ECF, the OUSED noted the 

importance of further steps to address workplace safety, drawing on the assistance of 

development and private sector partners. 

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

By helping to create the conditions for a sound economy, IMF assistance can help reduce ethnic 

and social strife. The United States encourages the IMF to highlight development and 

improvement of social safety nets in member countries, including those implementing difficult 

economic reforms. The IMF increasingly consults widely throughout a population, including 

with NGOs, academics, and think tanks, to develop a strong constituency for economic reforms. 

The United States continues to discourage practices that may promote ethnic or social strife, 

including through the following examples: 

 In a September 2014 board statement, the OUSED strongly supported the provision of 

additional IMF assistance to Guinea, Liberia, and Sierra Leone to help these countries 

respond to the Ebola outbreak, noting not only the loss of life but the social disruption 

caused by the virus.

 In a May 2014 board statement on Ghana’s Article IV staff report, the OUSED 

commended the government’s transformation agenda’s focus on social inclusion. 

(11) Link between environmental and macroeconomic conditions and policies 

Where environmental issues pose fiscal, financial, and macroeconomic challenges, the IMF 

provides advice in line with its mandate and expertise. The IFIs work together to assess the 

magnitude of pollution and other major environmental side effects associated with fossil fuel use, 

and to provide guidance on energy tax reforms for a broad range of developed and developing 

countries. 
10

The United States supports policies that increase macroeconomic stability while reducing 

negative environmental impacts. For example, in a June 2014 board statement on Madagascar’s 

Rapid Credit Facility (RCF), the OUSED urged the new government to address illegal logging, 

which is devastating the country’s rain forests while undercutting the sustainable use of natural 

resources to promote economic growth. 

(12) Greater transparency 

With strong U.S. support, the IMF emphasizes the need for increased transparency in policy 

development and implementation. Part of this process includes publication of the Article IV 

staff report, which the United States urges all member economies to do. The Board completed 

its latest review of IMF transparency in June 2013, which continued to favor publication of all 

Article IV and Use of Fund Resources documents. According to the IMF, currently 80 percent 

of members agree to publication of their staff report.3 

With U.S. support, the IMF continues to urge countries to provide additional economic and 

financial information to the public by regularly releasing data consistent with the IMF’s Special 

Data Dissemination Standards (SDDS). Over 90 percent of Fund members subscribe to either 

the General Data Dissemination Standards or SDDS. In 2012, the IMF launched the SDDS Plus 

initiative, which includes nine additional data categories. The OUSED continues to urge greater 

transparency of IMF member countries, including through the following example: 

 In a July 2014 board statement on China’s Article IV staff report, the OUSED urged 

Chinese authorities to adopt greater transparency of reserve holdings and exchange 

market intervention, through subscription to the SDDS, to which President Xi Jinping 

officially agreed at the November G20 Summit; through adoption of Currency 

Composition of Official Foreign Exchange Reserves (COFER); and through disclosure, 

ex post, of actual intervention amounts.

(13) Greater IMF accountability and enhanced self-evaluation 

In 2000, with the strong urging of the OUSED, 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 the following, which are publicly available on 

the IEO’s website:

4

 IMF Response to the Financial and Economic Crisis: an IEO Evaluation (October 2014) 

 Revisiting the 2004 IEO Evaluation of the IMF's Role in PRSPs and the PRGF and the 

2007 IEO Evaluation of the IMF and Aid to Sub-Saharan Africa (August 2014)

 

3

Reports from publishing countries can be found here: http://www.imf.org/external/ns/cs.aspx?id=51.

4

http://www.imf.org/external/np/ieo/index.htm
11

 Recurring Issues from a Decade of Evaluation: Lessons for the IMF (July 2014)

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

microenterprise lending 

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

developing countries. Through the IMF, the United States promotes structural reforms that 

encourage credit provision to small and micro enterprises. For example, in a May 2014 board 

statement on Mozambique’s 2nd PSI review, the OUSED highlighted the importance of planned 

reforms to improve SME’s access to credit; reduce discrimination against small farms; and 

promote financial inclusion through mobile banking. 

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

The United States has consistently worked to incorporate the IMF’s work into the global effort to 

fight illicit finance, including by encouraging collaboration between the Fund and the Financial 

Action Task Force (“FATF”). Coordination between the IMF, World Bank, FATF, and FATF-style 

regional bodies (FSRBs) in assessing compliance with the international AML/CFT standards, 

including use of the same methodology, institutionalizes the global fight against terrorist financing 

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

implement reforms. As of September 2014, the IMF had conducted over 70 assessments of country 

compliance with the FATF Recommendations.

In March 2014, the IMF Board considered a staff review of AML/CFT issues, including a 

proposal to reduce the number of reports on the observance of standards and codes (ROSCs) 

based on FATF and FSRB mutual evaluations. Staff also proposed reserving the right to amend 

a FATF-approved mutual evaluation. Examples of OUSED support for improved AML/CFT 

frameworks include the following: 

 In a June 2014 board statement on Madagascar’s RCF, the OUSED welcomed news that 

the authorities had requested IMF technical assistance on AML/CFT issues. 

 In a November 2013 board statement on Turkey’s Article IV staff report, the OUSED 

welcomed the steps taken by Turkey to adopt CFT legislation and regulations. The 

OUSED also encouraged the authorities to take further steps to protect the financial 

sector and urged the government to continue to engage with the FATF to address 

remaining concerns. 

 In a June 2014 board statement on Cyprus’ 4th EFF review, the OUSED welcome the 

authorities’ efforts to strengthen central bank supervision and enforcement of the 

AML/CFT framework. The OUSED encouraged the government to continue to 

strengthen the AML/CFT regime in line with international standards. 

 
12

II. IMF Implementation of Six Reform Policies Described in 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 U.S. support, the IMF works 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 used to prevent possible misuse of IMF resources and misreporting 

of information. All countries that request to use IMF resources 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; and (v) the internal controls system. The framework was introduced in March 2000 

and most recently reviewed in July 2010. As of October 3, 2014, 267 Safeguards Assessments

covering 98 central banks have been completed.

(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 V 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 

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

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

only brings forward new programs or releases a new tranche of funds after such criteria and 

policy actions have been met.

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

The IMF has advocated consistently 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. The Fund also has a key responsibility in dealing with the revenue 

implications of trade liberalization, such as sequencing domestic tax reforms with the trade 

liberalization process. Throughout the financial crisis the IMF consistently advised countries 

that protectionism is not a path to economic recovery. 
13

The IMF has developed an implementation plan for international trade policy issues that calls for 

reviews of Fund work on trade policy every five years, beginning in 2014. The plan 

deemphasizes trade policy as an element of program conditionality, but still emphasizes trade 

liberalization where necessary to achieve the macroeconomic objectives of a Fund-supported 

program. The plan also calls for more frequent coverage of cross-cutting trade policy issues in 

the Fund’s multilateral and regional surveillance vehicles (such as the World Economic Outlook 

and the Regional Economic Outlooks) and closer cooperation with the WTO and World Bank on 

trade. Staff will present the report for Board review in early 2015.

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

In 2000 and again in 2009, with strong U.S. support, the IMF agreed to reorient IMF lending to 

discourage continued or prolonged use of IMF funds and provide incentives for quick repayment. 

In 2000, the IMF introduced a shorter repayment period for the Extended Arrangement, and in 

2009 initiated a time-based surcharge to promote early repayment and increased commitment 

fees for higher levels of access. 

For low-income countries, the IMF established the Standby Credit Facility (SCF) in July 2009 as 

a new instrument for concessional financing, largely in response to U.S. advocacy. 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 Poverty Reduction and Growth Trust (PRGT) 

programs. The United States urges those countries without a clear balance of payments need to 

opt for a PSI, in which case they retain the option of seeking SCF financing in the event of 

sudden adverse developments. 

Along similar lines, in 2009 the IMF created the Flexible Credit Line (FCL), the Precautionary 

and Liquidity Line (PLL) and the Rapid Credit Facility (RCF) to provide members with shorterterm liquidity to meet temporary balance of payments needs. The IMF Board completed a 

review of these arrangements in 2014, resulting in a modification of PLL assessment criteria, 

adoption of institutional capacity indicators for assessing qualification, and creation of an 

external risk index that will help guide discussions about country exit from these credit line 

arrangements. 

(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 PRGT.

Eligibility is based principally on a country's per capita income and eligibility for financing 

under the International Development Association (IDA), the World Bank's concessional window. 
14

The current operational cutoff point for IDA eligibility is a per capita GNI level of $1,195. A 

member will graduate and be removed from the PRGT-eligibility list if the following apply: (1) 

its annual per capita GNI has been above the IDA cutoff point for the past five years with an 

increasing trend, and is currently at least twice the operational IDA cutoff for most states (three 

times the cutoff for small states and six times the cutoff for microstates); and/or (2) the member 

has the ability to durably and substantially access international financial markets and has a per 

capita GNI above 80 percent of the IDA cutoff, with GNI per capita on an increasing trend for 

the past five years; and, (3) the member country faces a low risk of a sharp decline in income or 

market access and limited debt vulnerabilities, as determined by the Fund’s quantitative analysis. 

In January 2010, Albania, Angola, and Azerbaijan graduated on the basis of the income criterion, 

while India, Sri Lanka, and Pakistan graduated on the basis of the market access criterion. In 

2013, Armenia and Georgia graduated on the basis of the income criterion. While other 

countries have met the income and market access criteria for graduation, they had not been 

proposed for graduation given that they face serious short-term vulnerabilities. The next 

graduation review will take place in 2015. 
15

Legislative Provisions

Section 1705(a) of the International Financial Institutions Act, as amended

Annual report and testimony on state of international financial system, IMF reform, and 

compliance with IMF agreements

(a) Access to Materials. - Not later than October 1 of each year, the Secretary of the Treasury

shall submit to the Committees on Banking and Financial Services and on Ways and Means of 

the House of Representatives and the Committees on Finance and on Foreign Relations of the 

Senate a written report on (1) the progress (if any) made by the United States Executive Director 

at the International Monetary Fund in influencing the International Monetary Fund to adopt the 

policies and reform its internal procedures in the manner described in section 1503, and (2) the 

progress made by the International Monetary Fund in adopting and implementing the policies 

described in section 801(c)(1)(B) of the Foreign Operations, Export Financing, and Related 

Programs Appropriations Act, 2001. 

Section 1503(a) of the International Financial Institutions Act, as amended (originally 

passed as Section 610(a) 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 anti-monopoly 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; 
16

(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. 

(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; 
17

(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. 

(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. 
18

(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; 

(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. 

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; 
19

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

V. Policies providing that financing by the Fund concentrate 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. 

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. 

Section 601. *** 

(4) Policies providing that, in circumstances where a country is experiencing balance of 

payments difficulties due to a large short-term financing need resulting from a sudden and 

disruptive loss of market confidence and in order to provide an incentive for early repayment and 

encourage private market financing, loans made from the Fund’s general resources after the date 

of the enactment of this section are the following:

(A) made available at an interest rate that reflects an adjustment for risk that is not less than 

300 basis points in excess of the average of the market-based short term cost of financing of 

its largest members; and 

(B) repaid within 1 to 2 1⁄2 years from each disbursement. 
20

ANNEX 1 Report to Congress on International Monetary Fund Lending

October 1, 2013 – September 30, 2014

October 1 – December 31, 2013

January 1 – March 31, 2014

Board 

Approval Date Country Amount Type U.S. Position

10/21/2013 Sierra Leone SDR 62.22 million

($95.9 million)

ECF Support

12/2/2013 Rwanda NCV PSI Support

12/16/2013 Burkina Faso SDR 27.09 million

($41.6 million)

ECF Support

12/18/2013 Mali SDR 30 million 

($46.2 million)

ECF Support

Board Approval 

Date Country Amount Type

U.S. 

Position

2/28/2014 Albania SDR 295.42 million

($457.1 million)

EFF Support

3/7/2014 Armenia SDR 82.21 million

($127.6 million)

EFF Support
21

April 1 – June 30, 2014

July 1 – September 30, 2014

Notes: 

1. FCL: Flexible Credit Line; RCF: Rapid Credit Facility; PLL: Precautionary and Liquidity Line; 

ECF: Extended Credit Facility; SBA: Stand-By Arrangement: PSI: Policy Support Instrument; 

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. 

Date Country Amount Type

U.S. 

Position

4/30/2014 Ukraine SDR 10.976 billion

($17.01 billion)

SBA Support

5/14/2014 Central African 

Republic

SDR 8.355million

($12.9 million)

RCF 

Disbursement

Support

6/5/2014 Seychelles SDR 11.445 million

($17.6 million)

EFF Support

6/18/2014 Madagascar SDR 30.55 million

($47.1 million)

RCF 

Disbursement

Support

6/26/2014 Grenada SDR 14.04 million

($21.7 million)

ECF Support

Board 

Approval Date Country Amount Type U.S. 

Position

7/28/2014 Morocco SDR 3.235 billion

($5 billion)

PLL Support

7/31/2014 Georgia SDR 100 million

($154 million)

SBA Support

8/1/2014 Chad SDR 79.92 million

($122.4 million)

ECF Support

8/1/2014 St. Vincent and The 

Grenadines

SDR 4.15 million

($6.4 million)

RCF 

Disbursement

Support

9/2/2014 Republic of Yemen SDR 365.25 million

($552.9 million)

ECF Support