IMPLEMENTATION OF 

CERTAIN LEGISLATIVE PROVISIONS 

RELATING TO THE 

INTERNATIONAL MONETARY FUND 

A Report to Congress 

in accordance with 

Section 1503 of the 

International Financial Institutions Act, and 

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

Foreign Operations, Export Financing, and Related Programs 

Appropriations Act, 2001, as required by 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 2013
1

Table of Contents 

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

International Financial Institutions Act, Section 1503(a) Provisions, by Subsection 

1. Exchange Rate Stability ................................................................................................ 3

2. Independent Monetary Authority, Internal Competition, Privatization, 

 Deregulation, Social Safety Nets, Trade Liberalization ................................................4 

3. Strengthened Financial Systems ....................................................................................7

4. Bankruptcy Laws and Regulations ................................................................................9

5. Private Sector Involvement ..........................................................................................10

6. Good Governance ........................................................................................................13

7. Channeling Public Funds Toward Productive Purposes ..............................................14

8. Individual Economic Prescriptions ..............................................................................15

9. Core Labor Standards ..................................................................................................15

10. Discouraging Ethnic and Social Strife......................................................................... 16

11. Environmental Protection ............................................................................................16

12. Greater Transparency ...................................................................................................17

13. Evaluation ....................................................................................................................18

14. Microenterprise Lending ..............................................................................................18

15. Anti-Money Laundering and Combating the Financing of Terrorism..........................18

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 ................................................... .....21 

II. IMF Financing as Catalyst for Private Sector Financing .......................................... ...21

III. Conditions for Disbursement .......................................................................................21 

IV. Trade Liberalization .....................................................................................................21 

V. Focus on Short-Term Balance of Payments Financing .................................................22 

VI. Progress toward Graduation from Concessionary Financing ......................................23 

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 

The report reviews actions taken by the United States to promote legislative provisions in 

International Monetary Fund (IMF or the Fund) country programs. This report is prepared in 

accordance with Section 1705(a) of the International Financial Institutions Act (IFI Act”.

1

 

Annex 1 also covers new IMF lending arrangements per section 605(d) of the Foreign 

Operations, Export Financing, and Related Programs Appropriations Act, 1999. Earlier reports 

pursuant to these provisions are available on the Department of the Treasury’s website: 

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

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 by this legislation 

and other legislative mandates. 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 

implementation of IMF country programs and sound policy decisions within the Fund. 

Treasury’s IMF task force is charged with increasing awareness among Treasury staff about 

legislative mandates and with identifying opportunities to influence IMF decisions in line with 

broader U.S. international economic policy objectives. 

This report is submitted in the context of ongoing recovery from the global financial and 

economic crisis that began in 2007 and, more recently, the sovereign debt crisis in Europe. The 

United States has been a leader in the international crisis response efforts throughout this period, 

and has collaborated closely with the Group of 20 countries (G-20) and the international 

financial institutions, including the IMF. The IMF played a key role in responding to recent 

crises and continues to address remaining vulnerabilities in the global economy – for instance, by 

providing financing, in partnership with the European Union, for distressed euro area members. 

At the G-20 Leaders’ Summit in Los Cabos, Mexico in June 2012, members called on the IMF to 

provide stronger surveillance over members’ policies, including with regard to exchange rate 

misalignments, global liquidity, and capital flows. At the most recent G-20 Leaders’ Summit in 

St. Petersburg, Russia, members reaffirmed their commitment to implement the 2010 quota and 

governance reform, which will enhance the IMF’s legitimacy, relevance, and effectiveness and 

enable the United States to continue to preserve its veto power and leadership position without 

making new financial commitments to the IMF. 

 

1

Section 1705(a), as codified at 22 U.S.C. § 262r-4(a), requires the Secretary of the Treasury to submit a report on 

the progress made to adopt the policies and reforms described in section 1503 of the IFI Act (22 U.S.C. 262o-2(a)) 

as well as the policies set forth in section 801(c)(1)(B) of the Foreign Operations, Export Financing, and Related 

Programs Appropriations Act, 2001. The text of these legislative provisions is found at the back of this report.
3

Report on specific provisions of the legislation

I. Section 1503(a) 

(1) Exchange rate stability 

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 United States strongly supported this 

decision, viewing it as a way to refocus the Fund on its core mandate, as established in Article IV

of the IMF’s Articles of Agreement “to promote exchange stability, to maintain orderly exchange 

arrangements among members, and to avoid competitive exchange depreciation.” 

Since the 2007 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.2 In contrast, both the 2008 and 2011 Triennial Surveillance Reviews 

found that over 90 percent had done so after the Decision.3 Selected Issues papers 

accompanying Article IV staff reports have been increasingly devoted 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. In July 2012, the IMF adopted 

the Integrated Surveillance Decision, which updates the June 2007 legal framework to reflect the 

already existing increased focus by the IMF on multilateral surveillance, while retaining all of 

the critical elements in exchange rate surveillance from the 2007 Decision. 

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 capital flows and 

measures. Treasury has pressed for increased candor, transparency, and evenhandedness of IMF 

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

that Fund staff take tougher ultimate judgments on members’ exchange rate management 

practices. The United States has been engaged in a careful multilateral effort in the G-20, 

supported by the IMF, to establish stronger norms for exchange rate policy and to identify and 

mitigate sources of future economic imbalances.

The Framework for Strong, Sustainable, and Balanced Growth agreed to at the Pittsburgh G-20 

Summit calls on the IMF to play a key advisory role in the G-20 Mutual Assessment Process 

(MAP). Through the MAP, the IMF develops a forward-looking analysis of whether policies 

 

2

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

Policy Advice, 1999-2005,” 2007.

3

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

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

pursued by individual G-20 countries, including exchange rate policies, are collectively 

consistent with more sustainable and balanced trajectories for the global economy. The IMF 

reports regularly on its analysis to both G-20 Finance Ministers and the International Monetary 

and Financial Committee (IMFC). The IMF carried out such an assessment ahead of the June 

2012 G-20 Summit in Los Cabos, Mexico, and provided an update to this analysis prior to the 

September 2013 G-20 Summit in St. Petersburg, Russia. Its recommendations included further 

rebalancing across emerging and advanced economies – tailored for deficit and surplus

economies – and greater exchange rate flexibility in key emerging market economies. The 

reports served as inputs to the Los Cabos and St. Petersburg Action Plans for Growth and Jobs 

agreed upon by Leaders.4

At the September 2013 G-20 Leaders’ Summit in St. Petersburg, members reiterated their 

commitments to move more rapidly toward more market-determined exchange rate systems and 

exchange rate flexibility to reflect underlying fundamentals. Members committed to not target 

exchange rates for competitive purposes.

The U.S. encourages the IMF to support exchange rates based on underlying fundamentals,

which are aided in part through nominal exchange rate flexibility, in IMF board statements, 

including the following examples:

 In a July 2013 board statement on China’s Article IV staff report, the USED urged China 

to increase the transparency of its actions in foreign exchange markets, including by 

publishing timely data on official foreign exchange intervention and subscribing to the 

IMF’s Special Data Dissemination Standard (SDDS). 

 In a February 2013 board statement on Malaysia’s Article IV staff report, the USED 

urged the authorities to further rebalance growth by further strengthening domestic 

demand and continuing to move toward greater exchange rate flexibility.

 In a September 2013 board statement on The Gambia’s Article IV staff report, USED 

expressed concern with the country’s efforts to target an overvalued exchange rate and 

noted the importance of the restoration of a flexible exchange rate policy to restore 

investor confidence.

(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. In addition, the Fund promotes these objectives 

 

4

Please see Jobs and Growth Action Plans in annexes to the Declarations found at

http://www.g20.utoronto.ca/summits/.
5

through assessments of compliance with internationally-agreed upon standards and codes, as 

well as rules for safeguarding the use of IMF resources. 

The U.S. encourages the IMF to support monetary authority independence, including through the 

following examples: 

 In a January 2013 review of Uganda’s Policy Support Instrument (PSI), the USED

welcomed the authorities’ intentions to further improve the independence and capacity of 

the central bank and to preserve the inflation target.

 In a February 2013 board statement on Bangladesh’s Extended Credit Facility (EFC), the 

USED urged the authorities to continue to improve central bank independence and to 

reform its operations, especially its supervisory mandate. 

(B) Fair and open internal competition among domestic enterprises 

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

support, 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 U.S. has advocated the following in support of fair and open internal competition globally: 

 In a July 2013 board statement on South Africa’s Article IV staff report, the USED 

highlighted that, in addition to investments in development, authorities must accelerate 

their work on the regulatory and market barriers to growth. Our board statement 

encouraged the authorities to address non-competitive product markets, and to liberalize 

the labor market.

 In a January 2013 board statement on Algeria, the USED advocated improvements in the 

business climate and reforms to labor and product markets to bolster private sector 

activity as well as reduce the size of the informal economy.

(C) Privatization 

The IMF has made privatization a component of those member country programs where the 

country’s 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 program countries might achieve gains in economic 

efficiency and improve their fiscal positions. 

Examples of IMF program and surveillance discussions in which the USED has advocated 

privatization include the following: 
6

 In a January 2013 review of Tanzania’s Policy Support Instrument (PSI), the USED 

emphasized that structural policies to increase privatization are macro-critical to sustain 

growth into the medium-term, and should be considered as structural benchmarks under 

the programs. 

 In the September 2013 board statement of Pakistan’s Extended Fund Facility (EFF), the 

USED welcomed the authorities’ ambitious privatization plan, noting it could yield 

efficiency improvement and fiscal savings. 

(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 frequently includes such policy advice in its programs or 

surveillance on measures considered critical to the member country’s macroeconomic 

performance. 

(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 

economic downturns. 

The United States has strongly pushed the IMF to ensure that programs promote spending to 

reduce poverty. On average, countries with IMF programs increase spending for education by 

about 0.8 percentage points of GDP, and for health by about 1 percentage point of GDP, over a 

five-year period.5

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 spending slightly more, on average, on debt service than on health and 

education combined. However, following HIPC debt relief, countries have been able to increase 

spending on health and education to about five times the amount of debt-service payments, on 

average. Consistent with a legislative mandate,6Treasury carefully evaluates whether IMF 

programs in HIPC countries allow for an increase in health and education expenditures. 

 

5

IMF Discussion Note, What Happens to Social Spending in IMF-Supported Programs? August 31, 2011.

6

See text under “IMF Programs and Exemptions for Health/Education/Agriculture and Food Security in HIPCs”,

section 7029(c), Department of State, Foreign Operations, and Related Programs Appropriations Act, Division I of 

the Consolidated Appropriations Act, 2012 (signed 12/23/11), P.L. 112-74, This legislation states that that the 

Secretary of the Treasury is to instruct the USED at the IMF to use the voice and vote of the United States to oppose 

(abstain or vote NO) any loan, project, agreement, memorandum, instrument, plan, or other program of the IMF to a 

Heavily Indebted Poor Country that imposes budget caps or restraints that do not allow the maintenance of or an 

increase in governmental spending on health care or education; and to promote government spending on health care, 

education, agriculture and food security, or other critical safety net programs in all of the Fund's activities with 

respect to Heavily Indebted Poor Countries.
7

Through board statements, the USED stresses the importance of protecting health and education 

expenditures, as well as other poverty reduction and social safety net spending, including in the 

following examples:

 In Sudan’s Article IV staff report, the USED stressed that the Sudanese authorities need 

to urgently strengthen revenue collection, reduce subsidies, and prioritize social 

expenditures that protect needy populations.

 In a July 2013 board statement on Yemen’s Article IV staff report, the USED advocated 

fiscal restructuring, including subsidy reforms, to provide the fiscal space needed to boost 

overdue investments and increase much needed social spending. The USED also 

encouraged the authorities to explore options to offset the potential impacts of subsidy 

reform on vulnerable populations.

(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. 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

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

consultations with currency unions that are potentially impacted by trade liberalization, such as 

the Monetary and Economic Community of Central Africa (CEMAC) and West African 

Economic and Monetary Union (WAEMU), as well as for some other African and Western 

Hemisphere groupings. 

(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. FSAPs 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. 

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

financial stability assessments under the FSAP a regular and mandatory part of bilateral 

surveillance under Article IV of the Fund’s Articles of Agreement for 25 jurisdictions with 

systemically important financial sectors, including the United States. This decision will increase 

the coverage of financial stability issues in the Fund’s bilateral surveillance of its members with 

the largest and most interconnected financial sectors, while also preserving access to the FSAP 

on a voluntary basis for the rest of the membership. To date, twelve countries have released their 
8

FSSAs in 2013 and fifteen released FSSAs in 2012. These financial stability assessments will 

take place on a five-year cycle. 

The IMF also conducts financial sector surveillance through a semi-annual Early Warning 

Exercise (EWE) and Global Financial Stability Report (GFSR). The EWE is prepared jointly by 

the IMF and the FSB; and, the GFSR is produced by the IMF’s Monetary and Capital Markets 

Division. In November 2008, G-20 Leaders called on the IMF and FSB to undertake EWEs. 

The EWE is intended to identify the most relevant tail risks to the global economy or major 

regions, to demonstrate how the possible emergence of these risks could be recognized, and to 

specify the policy changes that would need to be implemented if they were to materialize. The 

analysis is based on consultations with policymakers, outside experts, Article IV and FSAP 

findings, and internal IMF models. 

The Standards and Codes Initiative, which was launched in 1999 to strengthen the international 

financial architecture, underwent a regular five-year review by the IMF and World Bank in early 

2011. The review paid particular attention to the need to adapt the Initiative in light of the recent 

crisis. The USED has welcomed the IMF’s active participation in the FSB process to reassess 

the existing set of standards and has expressed support for the proposals put forth by the 

Standing Committee on Standards Implementation (SCSI) Working Group to the FSB Plenary 

regarding the key standards. 

Following the G-20 Finance Ministerial in April of 2009, the FSB and the IMF formed a 

working group to explore information gaps and provide appropriate proposals for strengthening 

financial sector data collection, and report back to the Finance Ministers and Central Bank 

Governors. In October 2009, the Working Group submitted a report to Finance Ministers and 

Central Bank Governors, which included a list of recommendations to fill existing information 

gaps. The Working Group continues to provide regular progress updates; the most recent update 

was released at the October 2013 G-20 Ministerial. 

The following are key examples of the USED supporting the strengthening of financial systems: 

 In a September 2013 board statement on Italy’s Article IV staff report and FSSA staff 

report, the USED welcomed the Bank of Italy’s strengthened inspection of select banks 

and noted that expanding the inspection’s scope and publishing general findings would 

help boost market confidence and better position Italian banks for the ECB’s balance 

sheet assessment. 

 In a July 2013 board statement on Belize’s Article IV staff report, the USED welcomed 

Belize’s implementation of FSAP recommendations and progress in unifying bank 

supervision and bolstering provisioning for vulnerable financing institutions. 

Nevertheless, the USED noted that high non-performing loan levels at several banks 

underscore the importance of the timely implementation of a revised restructuring and 

resolution framework.

 In a June 2013 board statement on Ireland’s 10th Extended Fund Facility (EFF) review, 

the USED welcomed the agreement reached on the timing of the bank stress tests, noting 
9

that such assessments are critical for getting a clearer picture of banking sector health. 

The USED also commended the preparatory work undertaken by the government to 

strengthen financial stability and facilitate Ireland’s entry into the single supervisory 

mechanism (SSM). 

 In a June 2013 board statement on Ghana’s Article IV staff report, the USED noted the 

risks of increasing non-performing loans and the deterioration of asset quality in 

Ghanaian banks, and urged authorities to make progress implementing recommendations 

from the 2011 FSAP, including those on strengthening supervision and capital.

 In a September 2013 board statement on Thailand’s Article IV staff report, the USED 

noted the expanding role of Specialized Financial Institutions (SFIs) and non-commercial 

banks and recommended that such institutions should be brought into the central bank’s 

regulatory remit to prevent regulatory arbitrage, improve monitoring of asset prices, and 

ensure a level playing field in the financial sector between commercial banks, noncommercial banks, non-bank financial institutions, and SFIs. 

(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 international financial institutions 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 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. 

With the strong support of the United States, the FSB developed a new international standard, 

the Key Attributes of Effective Resolution Regimes for Financial Institutions (“Key Attributes”), 

which specifies the core elements of national regimes that would allow authorities to resolve 

financial institutions in an orderly manner. The Key Attributes standard is now one of the 

international financial standards and codes used in the FSAP process. Along with officials from 

the United States and other national authorities, IMF and World Bank staffs continue to work 

with the FSB to develop an assessment methodology. 

The following is an example of the USED supporting development of domestic bankruptcy laws 

and regulations:

 In a June 2013 board statement on Vietnam’s IMF Article IV staff report, the USED 

urged Vietnamese authorities to adopt the recommendations of Vietnam’s Financial 
10

System Stability Assessment by strengthening and modernizing the supervisory regime 

and reforming bankruptcy, bank resolution, and property laws.

(5) Private sector involvement in crisis resolution

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. 

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

financial sector development

The United States continues to encourage the IMF to further strengthen its surveillance function 

and crisis prevention capabilities. Along with other G-20 members, the U.S. has reaffirmed the 

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

monetary and financial issues, particularly in promoting international financial and monetary 

stability. 

Key examples of the USED supporting better surveillance to prevent crisis include the following: 

 In the February 2013 Board statement for Canada’s Article IV, the USED noted the 

staff’s analysis that Canada’s housing market may be overheating and could require 

greater attention, and concurred with the staff’s recommendations for developing regional 

level fiscal frameworks to insulate regional economies from the volatility of commodity 

prices. The USED encouraged Canadian authorities to consider developing such 

frameworks as global economic conditions normalize. 

 In the USED’s statement in March 2013 regarding the Eastern Caribbean Currency 

Union, the USED endorsed plans to establish a Fiscal Council to evaluate country 

policies and economic projections. The proposed council was considered a first step in 

efforts to improve fiscal policy in the sub-region and prevent crises that could spread 

from island to island.

(B) Strengthening of emerging markets' financial systems 

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

market economies. The IMF is actively involved with the World Bank in monitoring the 

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

U.S. 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. The Fund also 

provides technical assistance to low- and lower-middle-income countries in the area of financial 
11

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

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.

In 2012, the G-20 authorities moved ahead with the October 2011 action plan to support the 

development of local currency bond markets (LCBMs), particularly in emerging market and 

developing countries. The action plan aims to bolster the role that LCBMs play in domestic and 

global financial stability, helping to expand the range of financial instruments available to 

manage volatile short-term flows. In accordance with the plan, the International Organizations 

(IOs) provided an update on implementation at the July 2013 meeting of G-20 finance ministers 

and central bank governors. Following on the commitment made at the November 2012 

meeting, the authorities created a study group on long-term financing for infrastructure 

investment, approved the group’s Terms of Reference, and established a work plan centered 

around six key themes.

Some key examples of the USED supporting a strengthening of emerging market financial 

systems are the following: 

 In a July 2013 board statement on China’s Article IV staff report, the USED encouraged 

liberalization of interest rates, along with strengthened financial regulation and oversight, 

establishment of a crisis management framework, and introduction of formal deposit 

insurance as key elements of a strategy to mitigate financial sector risks. The USED also 

highlighted potential systemic risk that could evolve from China’s shadow banking 

sector, if remedial measures are not taken.

 In a January 2013 board statement on India’s Article IV staff report, the USED welcomed 

publication of India’s financial systems stability assessment (FSSA), and urged Indian 

authorities to publish the detailed assessment reports (DARs), which is an obligation of 

all Financial Stability Board members. The USED also encouraged India to increase the 

investor caps on foreign direct investment (FDI) in the financial sector, in particular the 

insurance and pension sector, which would attract more external investment and also help 

deepen India’s financial markets. The USED noted that reducing the statutory liquidity 

ratio (SLR) would increase financial sector efficiency and lower borrowing costs for the 

private sector, which would, in turn, reduce Indian companies’ reliance on foreign debt.

 In a September 2013 board statement on Thailand’s Article IV staff report, the USED 

noted that rapid expansion of credit and of household debt merit increased supervisory 

vigilance, but may indicate both financial deepening and the success of efforts to promote 

financial inclusion. The USED expressed concern over the expanding role of Specialized 

Financial Institutions (SFIs) and non-commercial banks, and recommended that such 

institutions should be brought into the central bank’s regulatory remit to prevent 

regulatory arbitrage, improve monitoring of asset prices, and ensure a level playing field 

in the financial sector between commercial banks, non-commercial banks, nonbank 

financial institutions, and SFIs. 
12

 In a February 2013 board statement on Namibia’s Article IV staff report, the USED 

emphasized that in light of the rapid increases in house prices and household debt, as well 

as increased exposures of banks to the property market, we concurred with the staff that 

the authorities should be cautious about developments in the housing sector. To safeguard 

financial stability, judicious use of macro prudential tools, such as tightening loan-tovalue ratios, may be warranted. The USED also supported staff’s recommendation to 

adopt bank stress testing techniques to better monitor these and other financial sector 

vulnerabilities.

(C-H) Strengthened crisis resolution mechanisms 

The IMF’s actions since the outset of the global financial 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, the G-20 and IMF membership 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 in 2009 to supplement members’ reserves and boost global liquidity through 

allocations of Special Drawing Rights (SDRs) equivalent to $283 billion. As global financial 

conditions eased in 2010, the G-20 and IMF membership decided on a set of quota and 

governance reforms designed to enhance IMF effectiveness. The reforms included a doubling of 

total quotas (with a corresponding rollback of the NAB) to restore the primacy of the Fund’s 

quota-based financial structure and realign relative quota shares to better reflect global economic 

realities, while ensuring the Fund has adequate resources to play its central role in promoting 

global financial stability.

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

community, promoted a strengthened framework for crisis resolution by overhauling the IMF’s 

non-concessional lending framework in early 2009. The United States supported the creation of 

facilities, including the Flexible Credit Line (FCL) and the Precautionary and Liquidity Line 

(PLL) to help members prevent financial crisis and respond to external vulnerabilities and risks. 

The United States has been a strong advocate for enhanced IMF support for low-income 

countries. In 2009, the IMF membership approved a package of reforms to increase the 

resources available to low-income countries (LICs), more than doubling the Fund’s mediumterm concessional lending capacity to $17 billion. These reforms allowed the Fund to 

dramatically expand its lending capacity during the crisis, with new Fund commitments for LICs 

totaling roughly $10.2 billion, or five times the historical average, since the beginning of 2009. 

In addition, in 2010, the IMF created the Post-Catastrophe Debt Relief (PCDR) Trust to provide 

debt relief for very poor countries hit by the most catastrophic of natural disasters. The PCDR 

financed the elimination of Haiti’s entire debt stock to the IMF (about $268 million) following 

the 2010 earthquake. In 2012, with strong U.S. leadership, the IMF Board agreed to use all $3.8 

billion of the IMF’s windfall gold sales profits to support LICs through the Poverty Reduction 

and Growth Trust. Treasury has also strongly supported the IMF Board’s decision to reduce
13

interest rates to zero for all concessional lending through end-2014, to support low-income 

countries. 

In April 2013, the IMF released a paper discussing recent developments in sovereign debt 

restructuring and listing four areas for further exploration by staff to: (1) improve the 

effectiveness of sovereign debt restructuring in restoring sustainability; (2) change contractual 

clauses in sovereign bonds to better overcome collective action problems; (3) clarify the 

framework for official sector involvement; and (4) review the Lending Into Arrears (LIA) policy 

in light of the growing complexity of the creditor base. The United States supports the IMF’s 

efforts to consider its role in facilitating orderly debt restructurings when they are needed, and 

supports further work on market-based solutions. 

An example of the U.S. supporting sound crisis resolution mechanisms: 

 In a July 2013 board statement on the Euro Area Policies staff report, the USED urged 

swift work to establish a robust banking union that would help support growth throughout 

the euro area. The USED welcomed the recent progress in creating a single bank 

supervisor and encouraged timely decisions on setting up a centralized bank resolution 

process, identifying a common backstop for boosting bank capital where private capital is 

lacking, and creating a common deposit insurance scheme.

(6) Good governance 

The IMF places great importance on good governance when providing policy advice, financial 

support, and technical assistance to member countries. The Fund’s commitment to promoting 

good governance is outlined in the 1996 Declaration on Partnership for Sustainable Global 

Growth and the 1997 Guidelines on Good Governance. The IMF supports good governance 

through an emphasis on transparency, strong fiduciary diagnostics, and its promotion of marketbased reforms. The IMF has actively promoted good governance through 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. 

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

 In a February 2013 board statement on Nigeria’s Article IV staff report, the USED 

welcomed the authorities’ commitment to operating their Sovereign Wealth Fund to 

manage oil revenues in line with best international practices, and encouraged them to 

follow the Santiago Principles.
14

 In a May 2013 board statement on Libya’s Article IV staff report, the USED encouraged 

the authorities to take further steps towards improving public financial management to 

make better use of oil revenues and to make a commitment to implement the Extractive 

Industries Transparency Initiative (EITI).

 In a January 2013 board statement on the 5

th review of Uganda’s Policy Support

Instrument (PSI), the USED urged the authorities to strengthen governance, improve 

public financial management systems, and step up the fight against corruption. 

 In a December 2012 board statement on the 1st review of Bosnia’s Standby Arrangement

(SBA) the USED noted the program’s focus on fostering better coordination among 

national institutions and the sub-national entities, a key issue in promoting growth, fiscal 

sustainability and good governance in a country still divided on ethnic lines.

(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, updated in 2007,7identified 

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 Code is the Fund's Guide to 

Resource Revenue Transparency, also updated in 2007, a complement to the Fiscal Report on 

Standards and Codes (Fiscal ROSC) for use in resource-rich (oil/gas-mining) countries. The 

IMF also strongly supports the Extractive Industries Transparency Initiative (EITI) by providing 

policy and technical support to the EITI Secretariat and implementing countries. 

The USED is promoting improved channeling of public resources in the following ways: 

 In a July 2013 board statement on Oman’s Article IV staff report, the USED advocated 

for the phasing out of energy subsidies that disproportionately advantage the wealthy, 

noting that the saving generated from these reforms could be used to finance social and 

capital spending to boost growth and productivity.

 In a January 2013 board statement on Equatorial Guinea’s Article IV staff report, the 

USED noted that public expenditures were being directed towards the financing of 

“prestige projects” and concurred with IMF staff’s determination that authorities should 

be more critical in selecting projects.

 In a September 2013 board statement on Romania’s request for a Stand-By Arrangement 

(SBA), the USED welcomed the program’s emphasis on improving public financial 

management and called for better prioritization of investment projects and budgetary 

planning to help address the country’s infrastructure deficit.

 

7

Fund staff are currently preparing a revised code for board review in 2014.
15

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

The United States has emphasized the need to focus policy prescriptions and conditionality using 

measurable results on issues critical to growth and macroeconomic stability. 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. 

The U.S. supports appropriate economic prescriptions in the following ways:

 In a May 2013 7th review of Seychelles’ Extended Fund Facility (EFF), the USED 

emphasized that reserve coverage, while on an upward trend and in the context of a 

floating exchange rate, remains lower than preferable for a small island economy with 

very large external imbalances and high exposure to exogenous shocks. 

 In an April 2013 board statement on Jordan’s Article IV staff report, the USED supported 

a new investment law – intended to raise the potential growth rate and ensure that the 

benefits of economic growth are shared across the population – that was well-targeted, 

focusing on the areas where Jordan’s business environment is perceived as particularly 

difficult for both domestic and foreign firms.

 In a September 2013 board statement on Ireland’s 11th review of its Extended Fund 

Facility, the USED acknowledged that there might be some leeway to relax the pace of 

fiscal consolidation if the outlook tracked to the downside. The USED welcomed the 

IMF recommendation that automatic stabilizers be allowed to operate fully, and the 

decision of the Troika and Irish authorities to defer the establishment of a firm 

consolidation target for 2014 pending further information on growth prospects and the 

2013 budget outturn.

 In a June 2013 board statement on the 7th review of Portugal’s Extended Fund Facility,

the USED noted that the proposed modification of fiscal targets is appropriate in light of 

the weaker economic outlook and the Portuguese authorities’ strong track record. At the 

time of the review, Portuguese economic growth remained low, and contribution of net 

exports deteriorated with weak euro area demand.

(9) Core labor standards (“CLS”) 

Treasury works toward integrating core labor standards into the development agenda of the IFIs, 

including the IMF. To this end, Treasury encourages enhanced cooperation among the IFIs and 

the International Labor Organization (ILO) to establish best practices on CLS policies, and 

monitors and takes appropriate action on individual lending and non-lending programs that come 

before the respective Boards of Directors for decision. The State Department monitors labor 

standards in all IFI borrower countries, and, since 1994, Treasury has fulfilled a legislative 

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

internationally recognized worker rights. 

The U.S. supports improved labor standards, including through the following example:
16

 In a May 2013 board statement on Bangladesh’s Extended Credit Facility (ECF), the 

USED urged the authorities to take 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 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. In some countries, IMF assistance has helped to free up 

resources for more productive public investment by recommending conditions that led to a 

reduction in the country’s military expenditures. 

The U.S. continues to discourage practices that may promote ethnic or social strife such as 

through the following example:

 In a September 2013 board statement on Sudan’s Article IV staff report, the USED urged 

the authorities to strengthen revenue collection, reduce subsidies, and prioritize social 

expenditures that protect needy populations, reduce the regional inequities of fiscal 

policy, and lower the burden of security expenditures. The USED agreed with staff 

recommendations for Sudan to increase the allocation of budget resources to neglected 

areas to begin a virtuous cycle of stability and growth. 

(11) Link between environmental and macroeconomic conditions and policies 

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

negative linkages between economic conditions and environmental sustainability. Rather, the 

IMF coordinates with the World Bank which, unlike the IMF, has the mandate and internal 

expertise to address such linkages. Where environmental issues pose fiscal, financial, and 

macroeconomic challenges, the IMF provides advice in line with its mandate and expertise. 

There is ongoing coordination among the IFIs to assess the magnitude of pollution and other 

major environmental side effects associated with fossil fuel use, and to provide actionable 

guidance on energy tax reforms for a broad range of developed and developing countries. 

The U.S. supports policies that increase macroeconomic stability while reducing negative 

environmental impacts including through the following examples: 

 In February and May 2013 board statements on reviews of Bangladesh’s Extended Credit 

Facility (ECF), the USED urged the authorities to move toward an automatic fuel price 

adjustment mechanism in order to reduce the fiscal (and environmental) cost of energy 

subsidies.
17

 In a February 2013 board statement on Malaysia’s Article IV staff report, the USED 

underscored the importance of faster progress to reduce fossil fuel subsidies.

 In an April 2013 board statement on Sri Lanka’s Article IV staff report, the USED 

encouraged authorities to take a comprehensive approach to energy sector reform, 

including a sequenced transition to automatic, full cost recovery pricing.

(12) Greater transparency 

Transparency is critical for improving the quality of the IMF’s surveillance and the effectiveness 

of its policy advice, and enhances its legitimacy with members. With strong United States 

support, the IMF continues to encourage member countries to make their economic and financial 

policies more transparent. In recent years, the IMF has increased significantly the amount of 

information that is 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. 

The USED consistently encourages countries to publish the full Article IV staff report on the 

IMF's public website. The Board completed its latest review of IMF transparency in June 2013, 

which continued the presumption favoring publication to include all Article IV and Use of Fund 

Resources documents. The review introduced additional measures to increase the amount and 

timeliness of publications, protect the integrity of IMF documents, and enhance the 

accountability and legitimacy of the IMF.

In addition to pressing 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 Standards (SDDS). Over 90 percent of 

Fund members subscribe to either General Data Dissemination Standards or SDDS. In 2012, 

SDDS Plus was created to include nine additional data categories. These data categories cover: 

sectoral balance sheets; general government operations and general government gross debt; the 

other financial corporations’ survey, financial soundness indicators, and debt securities; and 

participation in the Coordinated Portfolio Investment Survey, the Coordinated Direct Investment 

Survey, and the Currency Composition of Official Foreign Exchange Reserves exercises.

The U.S. encourages greater transparency through the IMF, including in the following examples: 

 The USED’s board statement for the 2013 Transparency Policy Review urged shorter lag

periods before publication of board minutes and earlier release of archival material.

 In a July 2013 board statement on Brazil’s Article IV staff report, the USED called on 

Brazilian authorities to consent to the report’s publication.

 In a February 2013 board statement on Malaysia’s Article IV staff report, the USED 

encouraged the authorities to make its FSAP related documents and Article IV staff 

report publicly available.

 In a February 2013 board statement on the Bahamas’s Article IV staff report, the USED 

emphasized the need to address the lack of data regarding the Bahamas’s offshore 
18

financial sector, which prevents stress tests. That lack of transparency, the USED 

emphasized, is particularly troublesome given the sector’s significant size, seventy-five 

times GDP.

(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 the following, which are publicly available on 

the IEO’s website8: 

 The Role of the IMF as a Trusted Advisor (February 2013)

 International Reserves: IMF Concerns and Country Perspectives (December 2012)

 Research at the IMF: Relevance and Utilization (June 2011) 

 IMF Performance in the Run-up to the Financial Crisis: IMF Surveillance in 2004-07 

(February 2011) 

 IMF Interactions with Member Countries (January 2010) 

(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 obstacle to growth for many 

developing countries. Treasury engages with all the IFIs to promote structural reforms that 

encourage the provision of credit to small and micro enterprises. The IMF does not have the lead 

role among IFIs in microeconomic reforms to benefit small businesses, but the IMF frequently 

reviews the microfinance sector in the context of FSAPs for developing countries. 

 In a September 2013 board review of Botswana’s Article IV staff report, the USED urged 

the authorities to adopt the staff’s recommendations on improving Botswana’s business 

environment to help spur economic diversification, including the development of a 

stronger SME sector. High public sector employment and wage growth have spurred 

Botswanan banks’ disproportionate focus on the household sector at the expense of 

potentially more productive lending to firms and SMEs.

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

Incorporating the work of the IMF and the other IFIs into the global effort to fight illicit finance 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 FATF 40 Recommendations, which are the international standards on combating 

 

8

http://www.imf.org/external/np/ieo/index.htm
19

money laundering and the financing of terrorism and proliferation. 

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. 

Coordination between the IMF, World Bank, FATF, and FSRBs in assessing compliance with the 

international AML/CFT standards, including the 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 2013, the IMF had conducted 

over 70 assessments of country compliance with the FATF Recommendations. 

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. In late 2009, the IMF established a multi-donor TA trust fund to 

finance further TA and research activities in the area of AML/CFT. In coordination with the 

establishment of the multi-donor fund on AML/CFT, the IMF has also worked toward opening 

regional TA centers in Latin America, Central Asia, and Southern and Western Africa to strengthen 

its delivery of assistance to recipient countries. 

Treasury and the USED played a 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. Below are several examples: 

 In a March 2013 board statement on the Philippines Article IV staff report, the USED 

welcomed the passage of amendments to the New Central Bank Act and bills to 

strengthen the AML/CTF regime in line with FATF recommendations.

 In a December 2012 board statement on Cambodia’s Article IV staff report, the USED 

noted that Cambodia’s progress in implementing high priority recommendations from the 

FSAP had been slow, particularly with respect to the introduction of AML/CFT measures 

and the delineation of supervisory responsibilities among domestic government agencies.

 In a June 2013 board statement on Belize’s Article IV staff report, the USED praised the 

Belizean Central Bank’s commitment to introduce a risk-based approach to AML/CFT 

supervision, and commended the IMF for providing relevant technical assistance. The 

USED said Belizean authorities should strengthen supervision of financial services, 

particularly in the off-shore and non-bank sectors, to prevent the use of financing for 

illicit purposes.

 In a November 2012 statement on Mongolia’s Article IV staff report, the USED urged 

the authorities to address the deficiencies in their AML/CFT regime as identified by 

FATF.
20

 In a November 2012 U.S. Board statement on Turkey’s Article IV staff report, the USED

urged Turkey to expeditiously pass legislation to adequately address deficiencies in its 

AML/CFT framework in order to avoid suspension from FATF, prior to the February 

2013 FATF deadline.
21

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 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 22, 2013, 252 Safeguards Assessments 

had 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 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 

criteria and 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 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. 

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 
22

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. 

(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. 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, the November 2011 creation of the Precautionary and Liquidity Line (PLL) 

and the Rapid Credit Facility (RCF) could provide countries with shorter-term liquidity to meet 

temporary balance of payments needs. 

(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. The current operational cutoff point for IDA eligibility, for IMF fiscal year 2013, is a 

per capita GNI level of $1,195. A member will graduate and be removed from the PRGTeligibility 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 
23

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. 
24

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; 
25

(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; 
26

(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. 
27

(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; 
28

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. *** 

(1) 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—

(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. 
29

ANNEX 1 Report to Congress on International Monetary Fund Lending

October 1, 2012 – September 30, 2013

October 1 – December 31, 2012

January 1, 2013 – March 31, 2013

Board 

Approval Date Country Amount Type U.S. Position

11/19/2012 Liberia SDR 51.68 million

($78.9 million)

ECF Support

11/28/2012 Solomon Islands SDR 1.04 million

($1.59 million)

ECF Support

11/30/2012 Mexico SDR 47.292 billion 

($73 billion)

FCL Support

12/17/2012 Seychelles SDR 6.6 million 

($10.23 million)

EFF 

Augmentation

Support

Board Approval 

Date Country Amount Type

U.S. 

Position

1/18/2013 Poland SDR 22 billion

($33.8 billion)

FCL Support

1/28/2013 Mali SDR 12 milloin

($18.4 million)

RCF Support
30

April 1, 2013 – June 30, 2013

July 1, 2013 – September 30, 2013

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

5/01/2013 Jamaica SDR 615.38 million 

($932.3 million)

EFF Support

5/15/2013 Cyprus SDR 891 million

($1.33 billion)

EFF Support

5/15/2013 Samoa SDR 5.8 million

($8.6 million)

RCF Support

6/07/2013 Tunisia SDR 1.146 billion

($1.74 billion)

SBA Support

6/10/2013 Mali SDR 10 million

($15.1 million)

RCF Support

6/24/2013 Colombia SDR 3.87 billion 

($5.84 billion)

FCL Support

6/24/2013 Republic of 

Mozambique

NCV PSI Support

6/28/2013 Uganda NCV PSI Support

Board 

Approval Date Country Amount Type U.S. 

Position

9/4/2013 Pakistan SDR 4.393 billion

($6.64 billion)

EFF Support

9/27/2013 Romania SDR 1.75 billion

($2.68 billion)

SBA Support