A conversation with IMF
WHAT IS THE OCCASION?
THE DEPARTMENT of Economics at the University of the West Indies (UWI), Mona, in association with the Caribbean Policy Research Institute (CAPRI), will host the managing director of the International Monetary Fund (IMF), Madame Christine Lagarde, in a town hall question and answer session with students on Friday at UWI’s Medical Sciences Faculty Lecture Room 3 from 10:15 a.m. to 12:15 p.m.
The Q&A will be followed by the launch of the IMF’s recent book, Unleashing Growth and Strengthening Resilience in the Caribbean Region. The event will stream live on capricaribbean.org. The IMF will also be announcing the winners of the recent IMF Student Essay Competition that required students to articulate the three most pressing challenges to economic growth in the Caribbean region.
WHAT IS THE ROLE OF THE IMF?
The IMF’s primary aim is to maintain stability of the international monetary system, which includes the system of exchange rates and international payments that allow countries and their citizens to trade with each other. The IMF is governed by its accountability to its 189 members and aims also to promote sustainable economic growth and employment.
The IMF was conceived in 1944 as a framework designed to maintain economic cohesion in an attempt to alleviate economic depressions caused by competitive currency devaluations, such as the Great Depression of the 1930s. In order to maintain this global monetary cohesion, the IMF performs several roles, including surveillance, capacity development, financial assistance, and facilitate the supply of loans through special drawing rights, extended fund facilities and other agreements.
WHAT IS THE IMF SURVEILLANCE?
In order to prevent crisis and maintain stability, the IMF monitors the policies of member countries as well as local, regional and global economic developments through surveillance. The IMF oversees the international monetary system by monitoring the economic and financial policies implemented by its 189 member countries.
During this surveillance process, the IMF identifies potential global, regional and country-specific risks to stability and recommends the requisite policy action needed to sustain economic growth and promote economic and financial stability. In this surveillance process, the IMF consults with member countries through annual visits where the IMF discusses risk and domestic and global stability with government and central bank officials. The discussions are centred on exchange rates, monetary policy, fiscal policy, regulatory policies and macro-critical structural reforms.
To corroborate their efforts, the IMF also attempts to get feedback from other key stakeholders, including members from the legislature, the business community, labour unions and civil society. The information received is analysed and discussed with the IMF’s executive board, who then make recommendations to the respective country authorities. Where necessary, the IMF will provide capacity building.
HOW DOES THE IMF PROMOTE CAPACITY DEVELOPMENT?
The IMF provides support to assist member countries improve their technical capacity to develop more robust economic institutions and strengthen related human capacities through training. This includes helping countries increase public revenue earnings, modernise their banking system, develop strong legal framework, enhance the reporting of macroeconomic and financial statistics, and improve economic analysis and forecasting.
Through hands-on advice, peer-learning workshops and policy-oriented training, the IMF assists the finance ministry and the central bank of member countries to strengthen their capacities. Countries receive capacity development support through short-term staff missions from the IMF headquarters, long-term in-country placement of resident advisers, regional capacity development centres, and global thematic funds. The IMF provides balance of payment support to member countries as well.
WHAT TYPE OF FINANCIAL SUPPORT DOES THE IMF PROVIDE?
The IMF provides balance of payments support to member countries who encounter difficulties. This is done through various instruments designed to suit the needs of the country at a specific point in time.
The IMF has established the Poverty Reduction and Growth Trust to provide concessional lending terms to low-income countries. The vast majority of IMF’s assistance offered to emerging markets and lowincome countries is done in the form of standby arrangements (SBAs) in an attempt to mitigate potential short-term balance of payments problems. Jamaica is currently operating on a precautionary SBA. The standby credit facility offered to low-income countries is similar to the SBA, but is done at zero interest rates.
Countries needing mediumterm support as well as countries encountering lengthened balance of payments difficulties are offered the extended fund facility like that which was offered to Jamaica back in 2013. The corresponding extended credit facility is offered to low-income countries.
Dr Andre Haughton is a lecturer in the Department of Economics on the Mona Campus of the University of the West Indies. Follow him on Twitter @DrAndreHaughton; or email editorial@gleanerjm.com