Archived - Canada at the IMF and World Bank Group 2015–16 – Part 2 of 2

Report on Operations Under the Bretton Woods and Related Agreements Act

Table of Contents

The IMF works to safeguard the stability of the international financial and monetary system in order to facilitate international trade, promote sustainable economic growth and raise global living standards. Canada has been a central and influential member of the IMF since 1945, being one of only 29 countries that signed the original IMF Articles of Agreement. Since then, the IMF has grown to include a near-global membership of 189 member countries. Canada plays an important collaborative role with international partners to ensure that the IMF is effectively fulfilling its mandate. A healthy and stable global economy creates more jobs for Canadians, promotes stable prices for goods and services, and improves our standard of living. Canada’s participation at the IMF encourages international cooperation, sustainable economic growth and better living standards for Canadian citizens and others across the globe. Canada is engaged in all aspects of the IMF’s governance and activities.

The IMF is accountable to the governments of its member countries through a number of mechanisms, first and foremost the Board of Governors, which is tasked with taking the most important institutional decisions. Canada’s Governor to the IMF is the Minister of Finance, the Honourable William Francis Morneau, and the Alternate IMF Governor is Bank of Canada Governor Stephen Poloz. The Board of Governors can be called upon to formally vote without meeting on resolutions required by the Articles of Agreement (e.g., Special Drawing Right allocations, quota increases, admitting new members), and on resolutions that amend the Articles or By-Laws of the Fund. Below are the positions taken by the Minister in his capacity as IMF Governor during the 2015–16 reporting period.

As a result of the relatively large size of the Canadian economy and its openness to international trade, Canada’s Governor holds a sizeable voting share at the IMF of 2.22 per cent, making Canada the 11th largest member during the reporting period.

Canada’s standing within the Fund ensures the participation on behalf of our constituency of the Minister of Finance in the IMFC, an important advisory body to the IMF. The IMFC is composed of 24 member countries and reports to the Board of Governors. The IMFC usually meets twice a year, during the IMF-World Bank Annual and Spring Meetings, and produces communiqués providing direction and guidance to the IMF Managing Director and Executive Board.

The Minister of Finance also tables written statements during the Annual and Spring Meetings that outline Canada’s and our constituency’s views on the specific governance, surveillance and lending activities of the Fund. On April 16, 2016 [PDF 190 KB] and October 9, 2015 [PDF 186 KB], Canada tabled IMFC statements on behalf of Antigua and Barbuda, the Bahamas, Barbados, Belize, Canada, Dominica, Grenada, Ireland, Jamaica, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines.

The Board of Governors has delegated many of its powers to the 24-member Executive Board, chaired by the Managing Director of the IMF. The constituency system allows for all 189 member countries to be represented at a smaller table that is more conducive to overseeing the day-to-day business of the Fund. Canada currently holds one of the 24 seats on the Executive Board and represents a constituency of 12 countries. The Executive Director for Canada therefore holds a voting power, with all constituency members combined, of 3.38 per cent—the 13th largest constituency by voting power.

The Executive Board usually operates on the basis of consensus, so formal votes are rare. Canada attempts to contribute to the development of policy proposals before they are brought to the Board through informal discussions with staff and management, or through consultation with other members of the Executive Board before formal Board deliberations. The Executive Director representing Canada, Ireland and the Caribbean did not record any abstention votes in 2015–16.

To learn more about the governance, representation and accountability structures of the IMF, please visit the IMF’s Governance webpage.

IMF activities focus on three primary areas, all aimed at promoting a prosperous global economy by contributing to international monetary and financial stability and growth: surveillance, lending programs and capacity development. Canada’s engagement in all three areas is discussed below.

Bilateral Surveillance

Article IV of the IMF Articles of Agreements requires the Fund to undertake regular consultations with each member country on economic conditions and policies.

The Executive Board discusses and assesses each Article IV consultation. Canada’s Executive Director and his staff take part in each discussion, offering verbal and written statements highlighting our constituency’s view on the state of the country’s economy and posing additional questions to ensure the review is thorough and addresses important risks to the country’s outlook. The Department of Finance Canada and Bank of Canada are consulted on Article IV consultations for systemically important economies. Global Affairs Canada is also consulted when Canadian foreign policy or development priorities arise. Canada’s most recent Article IV consultation was published in June 2016 [PDF 2.45 MB] .

On occasion, an Article IV consultation is complemented by a Financial Sector Assessment Program review, which is a comprehensive assessment of a country’s financial sector. For the 25 jurisdictions with systemically important financial sectors (including Canada), mandatory FSAP reviews are completed every five years. Canada’s most recent Financial Sector Stability Assessment [PDF 1.27 MB] was published in February 2014.

Multilateral Surveillance

In addition to its bilateral consultations, the IMF produces the semi-annual World Economic Outlook, the Global Financial Stability Report and the Fiscal Monitor. These flagship reports summarize the IMF’s assessment of the global economy, financial and monetary systems and fiscal developments. The IMF also publishes Regional Economic Outlooks on a semi-annual basis, and specialized surveillance reports such as the External Sector Report [PDF 2.29 MB], which provide more technical insights into the inner workings of the global economy. Canada’s Executive Director is actively engaged in discussing these multilateral surveillance products to ensure they provide an objective overview of the state of the global economy, the key risks, and required measures to boost global growth and promote job creation. The Minister of Finance also provides views on the state of IMF surveillance and proposed reforms through his participation in the IMFC. For more information on IMF surveillance, please visit its website.

As part of its central role in the international monetary system, the IMF makes its resources available to help members finance temporary balance of payments problems while economic adjustments are underway. To provide this assistance, the IMF utilizes two types of lending arrangements: (1) non-concessional lending to countries facing balance of payments difficulties; and (2) concessional lending for low-income members facing similar challenges. The IMF’s non-concessional lending activities also include the extension of precautionary credit lines, subject to high qualifying criteria, to countries confronting elevated risks and potentially requiring ready access to financial assistance.

During its 2016 fiscal year (FY2016)—running from May 1, 2015 to April 30, 2016—the IMF approved eight new lending arrangements totalling SDR 5.4 billion (approximately $9.5 billion), while they totalled SDR 81.8 billion and SDR 24 billion in FY2015 and FY2014, respectively.^[1] This year’s decreased lending is explained by the absence of major new or renewed precautionary programs. The total amount of lending approved by the Fund this year is the lowest since 2008. Table 2 provides a summary of new IMF lending arrangements approved in FY2016. Chart 1 shows the number and size of lending arrangements approved over the past 10 years.

At end-April 2016, the IMF had SDR 20 billion in resources committed to active arrangements in 24 countries. The total rises to SDR 90 billion committed across 31 countries when precautionary arrangements are included. Ukraine still accounts for the majority (61 per cent) of resources committed to active non-precautionary arrangements. For the precautionary arrangements, the bulk of the commitments consist of precautionary credit facilities for Mexico and Poland. Chart 2 shows the distribution between active and precautionary arrangements.

Since the global financial crisis, precautionary credit lines under the Flexible Credit Line (FCL) and Precautionary and Liquidity Line have accounted for a significant share of the value of the Fund’s committed resources (75 per cent as of end-April 2016 and 72 per cent of resources committed in FY2016) and continue to have a non-negligible impact on the Fund’s available resources (accounting for 17 per cent of the IMF’s current useable resources.)^[2]

A complete list of the IMF’s active lending arrangements as of April 30, 2016 is available on the IMF’s website.

For more information on IMF lending and the facilities it uses, please visit its website and consult its Annual Report.

The IMF’s total financial resources are composed of both permanent (quotas) and temporary (multilateral borrowing agreements, bilateral borrowing) resources. Table 3 summarizes Canada’s commitments and financial position at the Fund as of April 30, 2016, whereas Table 4 shows disbursement and repayment amounts at the Fund for the past two fiscal years.

The IMF’s resources are protected by a number of financial safeguards including the institution’s preferred creditor status, encashability of creditors’ claims in certain circumstances and the Fund’s precautionary balances. The IMF has never suffered a loss on its lending activities. Funds provided to the IMF do not affect Canada’s net debt measure as they constitute financial assets of the Government of Canada. Interest is earned on these claims at the SDR interest rate when they are drawn to finance lending programs. Claims on Canadian lending to the IMF are booked as a part of the official international reserves of the Government of Canada, in line with international accounting practices, and are managed by the Bank of Canada as agent for the Crown.

For more information on the IMF’s balance sheet, see the IMF’s 2015 Annual Report, which contains an in-depth examination of the IMF’s finances. For up-to-date information on the state of IMF finances, the IMF prepares a weekly summary of its financial assistance to member countries, available IMF resources, arrears, key IMF rates, and forward commitment capacity.

Canada, mainly through Global Affairs Canada, has been a strong partner of IMF capacity development. Canada has contributed approximately US$118 million since 2002, making it the third largest donor. Canada’s support has enabled low-income and lower-middle-income countries to build their capacity in the area of public financial management, financial development, banking supervision, tax policy and administration. It has also helped to improve the capacity of member countries to promote sustainable economic growth through stronger institutions needed to achieve macroeconomic stability and boost resilience to shocks. Typical activities supported by Canada include diagnostic studies, training courses, workshops, online advice and support, and the placement of technical assistance experts and advisors. Also noteworthy, Canadians represent one of the largest groups by nationality of experts employed by the IMF for the delivery of its capacity development.

For more information on capacity development and technical assistance at the IMF, please visit its website.

The IMF has also developed a regional approach to the delivery of technical assistance and training with support from donors such as Canada. In addition to the training offered at the IMF Institute for Capacity Development in Washington, D.C., there are seven regional training institutes and nine Regional Technical Assistance Centres (RTACs) in Africa, the Caribbean, Central America, and the Pacific and the Middle East. Each centre helps deliver more accessible and regionally tailored programming to member countries across the globe.

Canada is the largest contributor to the Caribbean Regional Technical Assistance Centre (CARTAC) and second-largest to CAPTAC-DR, the RTAC for Central America, Panama, and the Dominican Republic. It supports the five RTACs in Africa, the Somalia trust fund and the Supporting Economic Management in the Caribbean program.

Canada’s experience has shown that sound economic policies play a critical role towards securing sustainable economic growth and job creation. To promote these policies and further build capacity in the Caribbean and in the Middle East and North Africa region, Canada established a $19 million Technical Assistance Sub-Account at the IMF in 2012. Canada’s funding of this sub-account supports technical assistance to developing country governments to build their capacity to address public debt, balance of payments problems and financial sector crises. In its fourth year of operations, implementation of projects funded by the Canada-IMF Sub-Account accelerated. Through seven projects, partner countries received assistance on legal and institutional reforms, bank restructuring and resolution, banking supervision, credit portfolio assessment, debt management and central bank modernization.

In 2014, in the context of the crisis in Ukraine, Canada established a separate $20 million sub-account to support monetary policy, financial sector stabilization and public financial management. The project aims to provide expert guidance and advisory support to the Government of Ukraine to help the country improve its macroeconomic stability and manage its economic transition. The IMF delivers this technical assistance in areas such as monetary policy, public expenditure management, debt management, balance of payments systems, financial sector supervision and anti-money laundering reforms. It also supports the design and implementation of sound macroeconomic and financial sector policies, which are essential to stabilize and rebuild Ukraine’s economy. This initiative complements Canada’s bilateral macroeconomic stabilization loans ($400 million) to the Government of Ukraine in support of its IMF reform program.

Some examples of results from the implementation of projects drawing on Canadian technical assistance funding over the past year include:

• In Ukraine, funding provided by Canada to support technical assistance has been used to advise the Government of Ukraine on public financial management, tax administration and tax policy. Activities were mainly directed to improving the governance of state-owned enterprises and oversight of the associated fiscal risks. Organization and governance reforms within the State Fiscal Service (SFS) were supported, and tax policy work focused on social security contributions. Notable outcomes over the past year in Ukraine include: a number of significant administrative reforms in the SFS and the National Bank of Ukraine were implemented; a dedicated division to detect suspicious transactions in the financial intelligence unit was established; the central bank law was redrafted; and anti-money laundering and anti-corruption efforts were supported.
• In the Eastern Caribbean Currency Union (ECCU), there has been region-wide approval of modern banking legislation and asset quality reviews and dynamic modelling for all domestic banks. Two failed banks in Anguilla and one in Antigua that had been in ECCU conservatorship for two to four years have been resolved.
• Also in the ECCU, after project-supported national workshops, four independent jurisdictions developed medium-term debt management strategies, and several others are currently being drafted.
• Despite political tensions emerging from the 2015 elections, Haiti made significant progress in implementing a Treasury Single Account (TSA), after identifying commercial bank accounts, and closing those that are included in the TSA. The TSA was piloted in October 2015 and full roll-out began in December.
• In Tunisia, a new draft banking law is ready to be introduced; the General Directorate of Banking Supervision is formalizing its supervisory process and preparing a procedures manual; and the central bank has formally endorsed a five-year action plan for banking supervision.
• In Morocco, the central bank Study and Research Departments have been reorganized and a new forecasting and modelling unit created. Separate teams are now working with three different models to generate macroeconomic projections.

The overarching mission of the World Bank Group is to end extreme poverty by 2030 and boost shared prosperity by fostering the income growth of the bottom 40 per cent for every country. The World Bank Group concentrates on fostering a climate conducive to investment, job creation and sustainable growth. It also seeks to empower the less fortunate, through the provision of health services, education and other social services, to enable them to participate in development. The World Bank Group is a vital source of financial and technical assistance to developing countries around the world.

The World Bank Group is governed by member countries, each of which owns shares of the agencies that make up the World Bank Group. Decision-making power is primarily exercised by countries through their Governor and Executive Director, depending on the nature of the decision, and during negotiations on capital increases and fund replenishments.

Canada is among the 10 largest shareholders at the World Bank Group, having contributed a total of US$7.2 billion in capital subscriptions to IBRD, IFC and MIGA and US$11.1 billion in contributions to IDA.

Canada’s voting power ranges from 2.5 per cent to 3.0 per cent within the Bank’s different institutions. Voting power at the Bank is mainly a function of the shareholdings held by a country, which in effect means that voting power reflects the relative economic strength of individual members. A small share of a member’s voting power is also determined by basic votes, which are distributed equally among all members. At the end of 2010, new shareholding and voting reforms were agreed for IBRD, which will result in a shift in voting shares in favour of developing countries and emerging economies as member states subscribe to the general and special capital increases. As these voice reforms are implemented, Canada is expected to fall from the 7th largest to the 11th largest shareholder, allowing greater voice for and recognition of certain major emerging market countries.

Each member appoints a Governor to represent it on the Board of Governors, the highest authority governing the World Bank Group. Canada’s Governor at the World Bank Group is the Minister of Finance, the Honourable William Francis Morneau.

Governors are responsible for core institutional decisions, such as admitting or suspending members, increasing or decreasing the Bank’s authorized capital stock, determining the distribution of net income, and reviewing financial statements and budgets.

The Board of Governors is asked to vote on a number of resolutions throughout the year. Canada’s positions on resolutions taken in the period July 1, 2015 to June 30, 2016 are shown below.

By virtue of its significant shareholding, Canada’s Governor is also accorded a seat at the Development Committee of the Boards of Governors of the World Bank and IMF, which meets twice a year, at the Spring Meetings and the Annual (fall) Meetings. The Development Committee is a ministerial-level forum of the World Bank Group and the IMF for intergovernmental consensus-building on development issues and the financial resources required to promote economic development in developing countries.

In 2015–16, the Governor tabled two Development Committee statements on behalf of Canada’s constituency, comprising Antigua and Barbuda, the Bahamas, Barbados, Belize, Canada, Dominica, Grenada, Guyana, Ireland, Jamaica, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines, on October 10, 2015 and on April 16, 2016 in Washington, D.C.

Governors delegate responsibility for the day-to-day running of the organization to 25 full-time Executive Directors, located at the Bank’s headquarters in Washington, D.C. Executive Directors are appointed for two years. They each represent a constituency, which can include more than one country. The Canadian Executive Director, Alister Smith, also represents Ireland and 11 Caribbean countries. Representatives of the governments within the constituency provide advice to the Executive Director on issues discussed at the Executive Board. The Executive Director considers this advice in formulating his positions and applies his own judgment as an officer of the World Bank Group.

The Executive Board usually makes decisions by consensus. In the event of a formal vote, however, the relative voting power of individual Executive Directors is based on the shares held by the constituencies they represent.

Shareholders typically raise serious questions or concerns about specific Bank operations before they get to the Executive Board. In addition, Executive Directors may abstain or vote against projects or policies in consultation with their constituencies. In 2015–16, the Executive Director representing Canada supported all policies and projects approved by the Board, with exceptions (see following box).

The World Bank Group is made up of five complementary but distinct entities: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID). Each institution plays a unique role in promoting global poverty reduction.

All figures in this section reflect the World Bank Group’s 2016 financial year (July 1, 2015 to June 30, 2016) unless otherwise indicated. Further information on the World Bank Group’s financial performance can be found on its Results webpage.

Established in 1944, IBRD is the original institution of the World Bank Group and continues to be its main lending agency, providing loans to middle-income and creditworthy low-income countries.

IBRD raises most of its funds in the world’s financial markets by selling AAA-rated World Bank bonds. It lends these funds to its client countries at a rate of interest that is much lower than the rate they could secure on their own. IBRD can borrow at attractive rates due to its financial strength and because it is backed by capital commitments from member countries, including Canada.

IBRD does not seek to maximize profit; rather, it aims to earn enough to ensure its financial strength and to sustain its development activities. In FY2016, IBRD’s loan portfolio included commitments of US$29.7 billion to 118 projects in 45 countries, a large increase from US$23.5 billion in FY2015.

Latin America and the Caribbean received the largest portion of IBRD funding (27.0 per cent) in FY2016, followed by Europe and Central Asia (23.7 per cent). More information about IBRD can be found on its website.

In the 1950s, it became clear that the poorest developing countries could not afford to borrow capital at the interest terms offered by IBRD. In response, IDA was set up to reduce poverty by providing low-interest loans and grants. IDA offers 25- and 40-year interest-free loans and grants to countries at risk of debt distress and represents the largest source of development financing for many of these countries. IDA is focused on countries with lower creditworthiness and an annual per capita income of less than US$1,215. 78 countries are currently eligible to receive IDA resources. Countries that are eligible for IDA lending but also have an active IBRD lending program pay some interest on loans from IDA compared to the interest-free loans offered to IDA-only borrowers.

New IDA commitments are financed through contributions from donor governments, including Canada, annual transfers from IBRD and IFC net income, and principal repayment on past loans. Donor contributions make up the largest component of IDA’s finances. Every three years, IDA funds are replenished through new donor pledges. The 17th replenishment round was concluded in December 2013 and approved by the Board of Governors on May 5, 2014.

Sub-Saharan Africa received the largest share of IDA resources in FY2016—US$10.4 billion, or 54.6 per cent of total commitments. South Asia received 30.4 per cent of new commitments, totalling US$5.8 billion. More information about IDA can be found on its website.

IBRD and IDA lending for infrastructure (Transportation; Energy and Mining; Water and Sanitation) combined for approximately 37.8 per cent of total lending in FY2016. Other sectors that were a major focus for lending included Public Administration (23.9 per cent), Health and Social Services (12.6 per cent), Social Resilience (7.9 per cent) and Education (4.3 per cent).

IFC works with the private sector in developing countries to reduce poverty and encourage sustainable economic growth. It provides financing for private sector projects, assists in mobilizing financing in international financial markets, and provides advice and technical assistance to businesses and governments. IFC provides financing where sufficient private capital cannot be obtained from other sources on reasonable terms. It is now the largest multilateral source of loan and equity financing for private sector projects in the developing world.

IFC is legally and financially autonomous, but it collaborates and coordinates with IBRD, IDA, MIGA and other organizations.

In FY2016, IFC committed US$18.9 billion in new investments (US$11.12 billion on IFC’s own account and US$7.74 billion in core mobilization). New commitments on IFC’s own account included US$2.68 billion in Latin America and the Caribbean, US$2.30 billion in East Asia and the Pacific, US$2.13 billion in Europe and Central Asia, US$1.43 billion in South Asia, US$1.40 billion in Sub-Saharan Africa, and US$0.95 billion in the Middle East and North Africa.

More information about IFC can be found on its website.

MIGA encourages foreign investment in developing countries by providing guarantees to foreign investors against loss caused by non-commercial risks. MIGA also provides technical support to help developing countries promote investment opportunities and uses its legal services to reduce possible barriers to investment.

In FY2016, the total amount of guarantees issued for projects in MIGA’s developing member countries was US$4.3 billion, a large increase from US$2.8 billion in FY2015.

More information about MIGA can be found on its website.

ICSID, established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, provides facilities for conciliation and arbitration of investment disputes between member countries and foreign investors. On November 1, 2013, Canada deposited its Instrument of Ratification of the ICSID Convention with the World Bank. Canada signed the ICSID Convention on December 15, 2006. ICSID membership now provides Canadian investors with an additional mechanism for the resolution of investment disputes pursued under international arbitration.

Canada is an important provider of funding for the World Bank Group. In 2015–16, Canada made the following contributions:

IDA Contribution: $441,610,000

IDA is the World Bank Group’s principal financing tool for the world’s poorest countries, providing them with low-interest loans, interest-free loans and grants. IDA allocates its resources primarily through a performance-based allocation mechanism, which includes measures of a country’s social inclusion (e.g., social protection, gender equality) and governance. The higher countries rate on these indicators, the more IDA resources they can receive.

During the reporting period of July 1, 2015 to June 30, 2016, Canada provided $441.61 million as agreed under the IDA17 replenishment. This contribution supports IDA’s efforts to enhance aid effectiveness, finance large regional projects such as infrastructure projects, and provide special assistance for fragile states such as Afghanistan and Haiti, while ensuring countries do not take on unsustainable levels of debt.

Multilateral Debt Relief Through the World Bank: $51,200,000

Under the Multilateral Debt Relief Initiative (MDRI), the World Bank, IMF and African Development Fund have agreed to cancel 100 per cent of eligible debts owed by heavily indebted poor countries. At the G8 Summit in Gleneagles in 2005, Canada and other donor countries agreed to fully compensate these institutions for the debts they will cancel on behalf of poor countries, so as not to undermine their ability to provide new financial support to all low-income countries. Canada’s total commitment over the 50-year lifespan of the MDRI is $2.5 billion and payments are made annually.

During the reporting period of July 1, 2015 to June 30, 2016, Canada provided $51.2 million to the World Bank Group for the MDRI.

World Bank Group Trust Funds: $676,100,000

Trust funds are an important instrument for channelling donor funding through the World Bank Group to address key strategic development issues at the country, regional or global level. In particular, trust funds leverage bank funding for development programs, particularly in post-disaster and post-conflict situations; enable donor and private sector financiers of development activities to partner with the Bank, consistent with harmonization objectives; build capacity to work in innovative areas; and work with civil society organizations. Trust funds can either be single-donor or multi-donor; Canada contributes to both types of trust funds, with the majority of its contributions going to multi-donor trust funds.

The table below provides a list of all trust funds to which Global Affairs Canada contributed in 2015–16, unless otherwise indicated.

The World Bank Group’s annual report highlights results across many investment areas such as: health, nutrition and population services; access to water and sanitation; community development, employment and financial management; and infrastructure and rural development. Some examples of Bank-supported development results include the following:

• 390.4 million people worldwide received essential health, nutrition and population services between 2013 and 2015.
• 54.3 million people were provided with access to an improved water source, and 30.5 million people received access to improved sanitation facilities.
• 32.7 million people were covered by social safety net programs, and 63.9 million people and micro, small and medium enterprises gained access to financial services between 2013 and 2015.
• 30,504 megawatts of renewable energy generation capacity were developed with World Bank Group support between 2013 and 2015. Further, 15.1 million people were provided with direct access to electricity over the same period.
• Across 44 health districts in Cameroon, the proportion of fully vaccinated children has more than doubled, and the rate of assisted births has increased from 44 to 63 per cent.
• 650,000 people in three cities in Sri Lanka have benefitted from improved access to water treatment and transportation infrastructure. Further, local municipal councils have received technical assistance to improve their capacity for sustainable city management and planning.
• Construction of six micro-water treatment plants in Lagos, Nigeria, which collectively provide 10 million cubic metres of clean water, increasing households’ access to water.
• 265,000 farmers in Rwanda benefitted from training and capacity building in hillside farming and irrigation techniques, with women making up 49 per cent of beneficiaries.

More details on results achieved in the past decade can be found on the World Bank Group’s Results webpage.

Lima, Peru
October 9, 2015

Communiqué of the Thirty-Second Meeting of the IMFC

Chaired by Mr. Agustín Carstens, Governor of the Bank of Mexico

Global economy

The global recovery continues, but growth remains modest and uneven overall. Uncertainty and financial market volatility have increased, and medium-term growth prospects have weakened. In advanced economies, the recovery is expected to pick up modestly, supported by lower commodity prices, continued accommodative monetary policies, and improved financial stability, but underlying productivity growth remains weak and inflation remains generally below central bank objectives. While growth prospects differ across emerging market and developing countries, the overall outlook is affected by uncertainties around commodity prices and global financial conditions.

Risks to the global outlook have increased. With stronger fundamentals, buffers, and policy frameworks, emerging market and developing countries are generally better prepared than earlier for a less favorable environment. Nevertheless, many emerging market economies are exposed to tighter financing conditions, slowing capital inflows, and currency pressures amid high private sector foreign currency indebtedness. Further declines in commodity prices could weaken the outlook for commodity exporters, many of which are low-income countries. Developments in several countries connected with large refugee flows have created economic and humanitarian challenges for both source and host countries. China’s ongoing rebalancing toward more sustainable growth is welcome, while vigilance is necessary with regard to external challenges that might arise. In advanced economies, a sustained recovery in the euro area, positive growth in Japan, and continued solid activity in the United States and the United Kingdom are positive forces, although spillovers from increased market volatility may pose financial stability challenges in the near term. In many advanced economies, the main risk remains a decline of already low growth, particularly if global demand falters further and supply constraints are not removed. More broadly, high levels of debt remain a concern. Global imbalances are reduced from previous years but a further rebalancing of demand is still needed.

Global policy priorities

The key policy priorities are to take further measures to lift short-term and potential growth, preserve fiscal sustainability, reduce unemployment, manage financial stability risks, and support trade. We reaffirm our commitment to cooperation to implement this agenda forcefully in order to secure strong, sustainable, inclusive, job-rich, and more balanced global growth. Careful calibration and clear and effective communication of policy stances are essential to help limit excessive market volatility and negative spillovers. We also reiterate our commitment to refrain from all forms of protectionism and competitive devaluations.

Support growth today: Advanced economies should maintain an accommodative monetary stance, where appropriate, consistent with central bank mandates. We are mindful of financial stability risks. We will implement fiscal policies flexibly to take into account near-term economic conditions, so as to support growth and job creation, while putting debt as a share of GDP on a sustainable path. Emerging market and developing countries should use available policy space to smooth the adjustment to less favorable external conditions, while pursuing efforts to remove bottlenecks to stronger growth. In economies with limited policy space, fiscal policies should ensure sustainability while preserving efficient social and infrastructure spending. Commodity-exporting countries with worsening terms of trade and limited buffers may need to reassess their fiscal policies in the face of lower commodity-related revenue.

Invest in resilience: The global financial regulatory reform agenda should be completed and implemented in a timely and consistent manner and further developed, including through monitoring and addressing issues raised by financial activities outside the banking system, as necessary. Priorities in many advanced economies are to repair balance sheets, tackle nonperforming loans, and monitor and, if necessary, address market liquidity issues. Emerging market and developing countries should continue to enhance policy frameworks and maintain adequate buffers. Foreign currency exposures warrant special attention, while exchange rate flexibility, where feasible, can act as a shock absorber. Appropriate, well targeted macro-prudential tools as well as strong supervision are important to preserve financial stability. When dealing with risks from large and volatile capital flows, necessary macroeconomic policy adjustment could be supported by macro-prudential and, as appropriate, capital flow management measures. A strong global financial safety net remains important in order to provide liquidity in times of need.

Secure sustainable long-term growth: Timely-implemented and well-sequenced structural reforms remain critical to raise productivity, potential output, and living standards; bolster confidence; and reduce inequality. There is a need to identify new sources of growth; address supply bottlenecks, infrastructure gaps, and population aging; and promote inclusive, environmentally sustainable growth. Further trade liberalization could complement and reinforce other reforms. Lower oil prices provide an opportunity to reform inefficient energy subsidies and energy taxes, as needed, while strengthening targeted social safety nets. In advanced economies, invigorating productivity growth will require a combination of policies to stimulate labor demand as well as labor supply—for example by raising female labor force participation—boost innovation, and enhance resource allocation in services sectors and investment. In emerging market and low-income countries, improving business conditions, institutions and governance, and closing education and infrastructure gaps can support continued convergence to higher income levels and help reduce inequality.

IMF operations

We welcome the IMF’s initiatives to be even more agile, integrated, and member-focused. Countries are facing an increasingly uncertain global environment. Economic and financial linkages are becoming more complex and difficult to predict. In this global context, the IMF has to deepen its analysis and surveillance activities, and broaden the scope of its policy advice on macro-critical issues.

Policy advice and surveillance: We ask the IMF to help members calibrate policies to overcome the twin challenges of addressing vulnerabilities and enhancing strong, sustainable, and balanced growth. We welcome progress in implementing surveillance priorities, including ongoing work on risk and spillover analysis, examining the links between monetary policy and financial stability, analyzing and addressing, as appropriate, “de-risking” pull-backs by international banks, strengthening exchange rate analysis, deepening macro-financial analysis, and closing data gaps—which should continue. We encourage the IMF, in cooperation with other international institutions, to continue to play its role with regard to international tax issues. Following the adoption of the IMF’s institutional view, we support a stocktaking of members’ policies in handling capital flows. The IMF should help emerging market and developing countries reap the benefits of foreign financing, including through advice to strengthen policies in order to mitigate risks of capital flow reversals. We look forward to expanded work on macro-critical structural reforms, including by leveraging the expertise of other institutions. Attention should also be given to the macroeconomic consequences of demographic transitions, as well as migration and large-scale refugee flows in particular in the Middle-East and Africa. We welcome the IMF’s contribution to the global framework for sustainable development and look forward to its implementation. We also look forward to the IMF’s active contribution—including through the assessment of macroeconomic implications of climate change—to a positive outcome of the Conference of Parties 21 (COP21) in Paris, consistent with its mandate.

Lending: We call on the IMF to continue to stand ready to respond promptly to future demand for financial assistance, including on a precautionary basis, for appropriate adjustments and reforms and to help protect against risks. In this regard, we look forward to the forthcoming stocktaking of the international monetary system, including a review of the adequacy of the global financial safety net architecture. We welcome the progress made in enhancing access to concessional resources. We look forward to the completion of the follow-up crisis program review; continued work on sovereign debt issues so as to facilitate timely and orderly debt restructuring; the review of the exceptional access framework; and completion of the review of the method of valuation of the SDR. We call on the IMF to continue to work closely with the World Bank and other international institutions to support the countries affected by the humanitarian and refugee crises, especially in the Middle East and Africa, in order to mitigate the adverse effects on the economies of the regions and spillovers to the global economy.

Capacity building: We support more integration and synergies between surveillance, program work, technical assistance (TA), and training, and the increased use of a results-based management framework. We welcome a shift in focus of capacity building and TA to bolster resilience, maintain debt sustainability, improve governance, and support global sustainable development goals within the IMF’s mandate, including boosting domestic revenue mobilization and financial deepening in developing countries and small and fragile states, and deepening the dialogue with developing countries on international tax issues while closely collaborating with other development partners. This will also help countries tackle illicit flows. We look forward to IMF initiatives to boost peer learning and facilitate the transmission of best policy practices among its membership.

Governance and representation

We remain deeply disappointed with the protracted delay in implementing the 2010 IMF quota and governance reforms. Recognizing the importance of these reforms for the credibility, legitimacy, and effectiveness of the IMF, we reaffirm that their earliest implementation remains our highest priority and urge the United States to ratify the 2010 reforms as soon as possible. Mindful of the aims of the 2010 reforms, we call on the IMF Executive Board to complete its work on an interim solution that will meaningfully converge quota shares as soon as and to the extent possible to the levels agreed under the 14th General Review of Quotas. We will use the 14th Review as a basis for work on the 15th Review, including a new quota formula. We remain committed to maintaining a strong, well-resourced, and quota-based IMF. We reiterate the importance of enhancing staff diversity in the IMF and encourage further progress.

We thank the government and the people of Peru for hosting our meetings and for their warm hospitality. Our next meeting will be held in Washington, D.C. on April 15-16, 2016.

Washington, DC
April 16, 2016

Communiqué of the Thirty-Third Meeting of the IMFC

Chaired by Mr. Agustín Carstens, Governor of the Bank of Mexico

Global economy

The global economy continues to expand modestly. Global growth, however, has been subdued for a long time, and the outlook has weakened somewhat since October. Although recent developments point to some improvements in sentiment, financial market volatility and risk aversion have risen, reflecting partly the reappraisal of potential growth. The significant slowdown in global trade growth also persists. Recoveries in many advanced economies are restrained by a combination of weak demand, low productivity growth, and remaining crisis legacies. Activity in emerging market and developing economies has cooled down, although it still accounts for the bulk of world growth. Globally, lower commodity prices have adversely affected exporters, while their short-term growth impact on energy importers has been less positive than expected.

Downside risks to the global economic outlook have increased since October, raising the possibility of a more generalized slowdown and a sudden pull-back of capital flows. At the same time, geopolitical tensions, refugee crises, and the shock of a potential U.K. exit from the European Union pose spillover risks. Against this backdrop, it is important to buttress confidence in our policies.

Policy response

We reinforce our commitment to strong, sustainable, inclusive, job-rich, and more balanced global growth. To achieve this, we will employ a more forceful and balanced policy mix. Implementation of mutually-reinforcing structural reforms and macroeconomic policies—using all policy tools, individually and collectively—is vital to stimulate actual and potential growth, enhance financial stability, and avert deflation risks. Clear and effective communication of policy stances will be key to limit excessive market volatility and negative spillovers.

• Growth-friendly fiscal policy is needed in all countries. Fiscal strategies should aim to support the economy, providing for flexible use of fiscal policy to strengthen growth, job creation, and confidence, while enhancing resilience and ensuring that debt as a share of GDP is on a sustainable path. Tax policy and public spending needs to be as growth-friendly as possible, including by prioritizing expenditure in favor of high-quality investment.
• Accommodative monetary policy should continue in advanced economies where output gaps are negative and inflation is below target, consistent with central banks’ mandates and mindful of financial stability risks. Monetary policy by itself cannot achieve balanced and sustainable growth, and hence must be accompanied by other supportive policies. In a number of emerging market economies, monetary policy will need to address the impact of weaker currencies on inflation. Exchange rate flexibility, where feasible, should be used to cushion the impact of external shocks, including terms-of-trade shocks.
• Structural reforms need to be advanced, benefitting from synergies with other policies to support demand. Structural reforms should be appropriately prioritized and sequenced in each country. Commodity exporters and low-income developing countries should implement policies to promote economic diversification.
• Timely, full, and consistent implementation of agreed financial reforms, including the Basel III and Total Loss-Absorbing Capacity (TLAC) standard, remains important to boost the resilience of the financial system. Efforts must continue to facilitate the repair of private sector balance sheets. Advanced economies must deal with remaining crisis legacy issues. Emerging market economies need to monitor foreign currency exposures and bolster their ability to withstand financial shocks. Further analysis and solutions are needed, as appropriate, with the aim to prevent de-risking from unduly impeding access to financial services, including correspondent banking relationships.
• Global cooperation is needed on several fronts, including ensuring a well-functioning international monetary system; reinvigorating global trade integration; combating corruption and improving governance; addressing international tax issues including transparency; coping with challenges of non-economic origin, including those pertaining to refugees; and consistently implementing and completing the financial regulatory reform agenda—including policies to transform the shadow banking sector into a stable source of market-based finance. We reiterate our commitment to refrain from all forms of protectionism and competitive devaluations, and to allow exchange rates to respond to changing fundamentals.

IMF operations

The IMF has a key role to play in supporting a stronger policy response by the membership.

• Policy advice and surveillance: We support efforts to deepen analysis of the impact of macro-critical structural reforms, including the new initiative to increase the efficiency of infrastructure investment, and on principles to guide prioritization. To improve the policy mix for strong, balanced, and sustainable growth, we support work to identify country-specific priorities for fiscal policy based on a careful assessment of fiscal positions, and to identify areas where fiscal policy can play a larger and more effective role, consistent with maintaining debt sustainability. We look forward to the review of members’ experiences and policies in dealing with capital flows, and welcome plans to bring together the work on capital flow management and macro-prudential policies to inform financial and macroeconomic risk management. We look forward to the analysis of the implications of negative policy rates. We welcome efforts to strengthen exchange rate analysis. We also welcome plans to examine a framework of options to reduce risks from rising corporate and household indebtedness and unresolved crisis legacies in banks.
• International Monetary System (IMS): We welcome the recent stocktaking of the IMS and the global financial safety net (GFSN) to determine what areas need further consideration. We reiterate that strong policies and effective IMF surveillance remain the cornerstone of crisis prevention. We agree that a strong and coherent GFSN—with an adequately resourced IMF at its center—is important for the effective functioning of the IMS, safeguarding stability, and helping reap the benefits of further financial integration. We call on the IMF to continue to explore ways to further strengthen the GFSN, including through more effective cooperation with regional financing arrangements. The IMF will discuss the case for a general allocation of SDRs and the reporting of official reserves in SDR. We support the examination of the possible broader use of the SDR.
• Revisiting the lending toolkit: We emphasize the IMF’s central role in supporting adjustment and fostering effective implementation of sound policies. In this context, and in light of the risks that have been identified, we call on the IMF to explore ways to strengthen its approach to helping members manage volatility and uncertainty—including through financial assistance, also on a precautionary basis. We recognize the particular challenges for commodity exporters and emphasize the IMF’s role in assisting them in their adjustments. We also look forward to work on non-financial instruments, such as a policy signaling instrument covering emerging market and advanced economies.
• Support for low-income countries: We welcome the IMF’s continued work in support of the implementation of the 2030 Agenda for Sustainable Development, as well as continued efforts to support growth and boost resilience in fragile states. We look forward to discussions on how to enhance countries’ access to precautionary financial support and reviewing current practices in regard to blending resources between the General Resources Account and the Poverty Reduction and Growth Trust (PRGT). We also look forward to the successful conclusion of the current efforts to mobilize additional loan resources for the PRGT and to broadening the group of contributors. We support efforts to integrate capacity development and policy advice more closely, in particular, plans to assist low-income countries in boosting their domestic resource mobilization efforts, alongside international tax issues. We welcome the ongoing review of the IMF and World Bank Debt Sustainability Framework for low-income countries.
• Addressing other challenges facing members: We call on the IMF to continue to collaborate with the Financial Stability Board, the World Bank Group, and other relevant bodies to help solidify a view on the drivers, magnitude, and impact of de-risking by global financial institutions on developing and emerging market economies, and provide advice and capacity development, where warranted. We welcome the IMF’s growing engagement with small states. We welcome proposed work on other challenges facing the membership—within the IMF’s mandate and where they are macro-critical—including migration, income inequality, gender inequality, financial inclusion, corruption, climate change, and technological change, including by leveraging the expertise of other institutions. To support countries managing spillovers from non-economic sources, such as large refugee flows and global epidemics, the IMF should be prepared to contribute within its mandate, including to global initiatives. We look forward to a review of the Guidance Note on The Role of the Fund in Governance Issues. We encourage the IMF to continue helping countries to strengthen their institutions to tackle illicit financial flows. We welcome progress made in Argentina’s effort to end a decade-long dispute and regain access to international capital markets. We also welcome its efforts and those of other countries to normalize relations with the IMF.

IMF resources and governance

We strongly welcome the effectiveness of quota increases under the 14th General Review of Quotas and of the Seventh Amendment on the Reform of the IMF Executive Board. We call on the Executive Board to work expeditiously toward completion of the 15th General Review of Quotas, including a new quota formula, by the 2017 Annual Meetings, and look forward to a progress report for our next meeting. Any realignment under this Review is expected to result in increases in the quota shares of dynamic economies in line with their relative positions in the world economy, and hence likely in the share of emerging market and developing countries as a whole. We are committed to protecting the voice and representation of the poorest members. We reaffirm our commitment to maintain a strong, quota-based, and adequately resourced IMF. We reiterate the importance of maintaining the high quality and improving the regional, gender, and educational diversity of the IMF’s staff, and of promoting gender diversity in the Executive Board.

We welcome the appointment for a second five-year term of Ms. Christine Lagarde as IMF Managing Director, and of Mr. David Lipton as IMF First Deputy Managing Director. We look forward to their continued excellent and unwavering leadership in the challenging period ahead.

Our next meeting will be held in Washington, D.C. on October 7–8, 2016.

Lima, Peru
October 10, 2015

Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries

1. The Development Committee met today, October 10, 2015, in Lima.

2. Global growth remains weak, and the downside risks for the second half of 2015 and 2016 have risen. A moderate recovery in high-income countries is still continuing, but prospects of tighter financing conditions, slowing trade, and renewed weakness in commodity prices are weighing on confidence in many developing countries. We call on the World Bank Group (WBG) and the International Monetary Fund (IMF) to monitor risks and vulnerabilities closely, to enhance their assistance to countries to support growth and build resilience, and to play their countercyclical role when needed.

3. Given the scale of the current refugee and migrant crisis, we call for targeted support, in collaboration with the UN and other partners, in addressing the challenges for countries and regions in turmoil, especially in the Middle East and North Africa, but also in other fragile and conflict states.

4. The Sustainable Development Goals (SDGs) chart a new course for development for the next 15 years. The SDGs are universal, integrated, and align with the WBG’s corporate goals. Building on the billions to Trillions discussion at the last Spring Meetings we endorse the WBG’s role and support for the 2030 Agenda for Sustainable Development. This will involve convening, connecting and coordinating with governments, UN, IMF, MDBs, and the WTO, private sector and civil society to mobilize the financing needed; deliver development solutions at country, regional, and global levels, including through South-South cooperation. We stress the need to focus on inclusive growth, jobs, infrastructure, human development and health systems, and to deepen the WBG’s engagement in fragile and conflict states. Private sector development is crucial to achieving the SDGs. We call on the IFC and MIGA to play a more catalytic role to mobilize private sector investment and finance for development. We welcome the steps the WBG has taken to enhance its effectiveness and delivery to respond to strong demand, through operational reforms and optimizing the use of its balance sheets and external resources. We recognize that the WBG must remain adequately resourced to meet its goals and to contribute to the SDGs and climate agendas.

5. IDA remains a critical tool to achieve the WBG’s goals and the SDGs and we look forward to continued strong IDA replenishments and further consideration of options to generate additional IDA financial capacity while ensuring continued focus on the poorest countries.

6. We welcome the IMF’s support for the 2030 Agenda, including its decision to increase access to concessional lending facilities, and its work to boost economic resilience and sustain global economic and financial stability.

7. We urge the WBG and the IMF to scale up their support to developing countries to improve domestic resource mobilization, public financial management and to curb illicit finance. Illicit finance and the underlying activities, including tax evasion, corruption, criminal activities, collusion, represent a major drain on the resources of developing countries. We welcome their plans to work jointly to build capacity for developing countries, including on international tax issues.

8. Climate change and natural disasters put hard-earned development gains at risk, particularly for the poor and vulnerable. Smart policy and investment choices can help transition to economic growth paths that reduce poverty while preserving the environment. We urge the WBG to scale up its technical and financial support and mobilize resources to assist countries in assessing climate risks and opportunities, to address the drivers of climate change, and to build resilience. We look forward to an updated report on Disaster Risk Management in Spring 2016. We call on the WBG to enhance its support for small states in building resilience against and mitigating the impact of natural disasters and climate change, which are among the greatest challenges faced by these countries. We look forward to a successful COP21 meeting in Paris.

9. We reaffirm our commitment to gender equality, critical to ending poverty, boosting shared prosperity, and building more inclusive societies. We look forward to the implementation of a new WBG gender strategy aimed at closing persistent gender gaps.

10. The Global Monitoring Report has proven its value in tracking progress in achieving the MDGs and we are confident it will play a similar role for the SDGs. The latest GMR shows that changes in global demography will profoundly affect the trajectory of global development during the 2030 Agenda period. With the right policies, demographic change can help growth both in developing and developed economies. We urge the WBG to take demographic challenges into account in its work to support development policies.

11. We stress the importance of strengthening data quality and coverage, and its availability for policy making and for monitoring and implementing the SDGs. We call on the WBG and the IMF to increase their support to developing countries in building national data capacity and investing in evidence.

12. We welcome the Report of the 2015 Shareholding Review and agree to the shareholding review principles and the Roadmap for its implementation, including further consideration of the WBG’s long term role. We commit to implementing the Roadmap, including agreement on a dynamic formula by the 2016 Annual Meetings, based on the guidance set out in the report. We stress the critical importance of wider reforms to strengthen WBG responsiveness to its members and their voice and representation in its governance. We will continue to promote diversity and inclusion to reflect better the global nature of the WBG.

13. Delivering transformative development solutions requires a focus on results, support for implementation, and fiduciary and safeguards policies to manage risks. This will ensure responsiveness to client needs and deliver sustainable development outcomes. We welcome the new procurement framework approved in July 2015 and look forward to successful completion of the review and update of the World Bank's environmental and social framework.

14. The Committee expressed its appreciation to the Government of the Republic of Peru for hosting the Annual Meetings. We thanked Mr. Marek Belka, President of the National Bank of Poland, for his valuable and outstanding leadership and guidance as Chairman of the Committee during the past four years, and welcomed his successor, Mr. Bambang Brodjonegoro, Minister of Finance of Indonesia.

15. The next meeting of the Development Committee is scheduled for April 16, 2016, in Washington, D.C

Washington, DC
April 16, 2016

Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries

1. The Development Committee met today, April 16, in Washington, D.C.

2. Global growth continues to disappoint in 2016. Substantial downside risks to growth remain, including weak demand, tighter financial markets, softening trade, persistently low oil and commodity prices, and volatile capital flows. We call on the World Bank Group (WBG) and the International Monetary Fund (IMF), within their respective mandates, to monitor these risks and vulnerabilities closely, and update the Debt Sustainability Framework for Low-Income Countries. We also call on them to provide policy advice and financial support for sustained, inclusive and diversified growth and resilience.

3. We are encouraged by progress on the Forward Look exercise on the medium to long term future of the WBG, which aims to ensure that the Group remains a strong global development institution in an evolving development landscape; and we expect a final report by the Annual Meetings. The Board and management shall develop proposals to ensure that the WBG remains responsive to the diverse needs of all its clients; leads on global issues and knowledge; makes the “billions to trillions” agenda a reality; partners effectively with the private sector; becomes a more effective and agile development partner; and adapts its business model accordingly. The Board and management should continue to consider ways to strengthen the financial position of the WBG institutions, including by optimizing the use of their existing resources, so that they are adequately resourced to accomplish the Group’s mission.

4. Fragility and conflict have displaced millions of people, significantly impacting both origin and host countries. We look forward to WBG and IMF action in this area, within their respective mandates and in partnership with humanitarian and other actors, to mitigate the vulnerabilities of forcibly displaced persons, to help host communities manage shocks, and to tackle the root causes of forced displacement. We urge the international community to take action in supporting these vulnerable populations who largely live below the poverty line. We recognize the sacrifices and generosity of host countries and the lack of adequate instruments to support them. We welcome Islamic Development Bank, UN and WBG efforts to develop the financing facility for the Middle East and North Africa and donor commitments to this initiative. We ask the WBG to explore options to develop a long term global crisis response platform. We look forward to the upcoming first World Humanitarian Summit and the Summit on Refugees at the UN General Assembly.

5. IDA remains the most important source of concessional financing for the poorest countries. We advocate for a strong IDA 18 replenishment with the support of traditional and new donors that ensures continued focus on the poorest countries. We look forward to a concrete and ambitious proposal on IDA leveraging options in the context of the replenishment.

6. In 2016, we begin the task of implementing in earnest the challenging program we committed to in the 2030 Development Agenda. In line with their comparative advantage, the IMF, MDBs, UN and WBG should partner to support developing countries’ efforts to meet the SDGs, while adjusting to a slower growth environment and reduced private capital flows. We support collaboration among MDBs on developing high quality financing for sustainable and growth-oriented infrastructure investments. The WBG and IMF should also step up efforts to implement the Addis Ababa Action Agenda on Financing for Development, in particular, crowding in the private sector and boosting domestic resource mobilization, including by tackling illicit financial flows.

7. The private sector is critical to achieve our ambitious development objectives. Inclusive job creation is central to shared prosperity. We encourage all WBG institutions to work together in support of this agenda. In particular, we call on IFC and MIGA to do more to catalyze sustainable economic growth, including by mobilizing funds and providing guarantees in the most challenging environments, and to small and medium enterprises. We also urge IFC, IBRD and IDA to help countries undertake reforms and invest in the quality infrastructure needed to establish business environments that support private investment and local entrepreneurs.

8. Achieving gender equality is central to the 2030 Agenda for Sustainable Development. We welcome the WBG’s recent adoption of the renewed gender strategy and look forward to its effective implementation.

9. The WBG should continue to deliver evidence-based development solutions at the country, regional, and global levels, including through improved country data systems, and South-South cooperation both in low- and middle-income countries. We urge the WBG and IMF to become more effective in fragile and conflict situations, through strengthened operational capacity in affected countries, better-tailored capacity development activities, incentives and enhanced security for staff, and innovative financing and resourcing.

10. We stress the need to strengthen country institutions and health systems, including enhancement of pandemic prevention and preparedness, in close collaboration with the World Health Organization and other stakeholders. We urge the WBG to finish the preparatory work on the Pandemic Emergency Facility as soon as possible and foster a new market for pandemic risk management insurance.

11. We applaud the historic Paris Agreement, which set the stage for ambitious climate action for all stakeholders. The WBG’s recent Climate Change Action Plan sets out its commitment to help operationalize, based on client demand, climate-smart policies and projects as well as to scale up technical and financial support for climate change mitigation and adaptation, consistent with UNFCCC. Small states, the poor and the vulnerable are among the most exposed to the negative impacts of climate change and natural disasters and we urge the WBG and IMF to continue to step up their support to build resilience in these countries.

12. We welcome the Progress Report on Mainstreaming Disaster Risk Management. We call on the WBG to implement actions and policies using the principles of prevention and preparedness and to continue to build capacity for disaster response guided by the Sendai Framework for Disaster Risk Reduction, in particular, in Small Island Developing States. We look forward to an update on the Progress Report in two years.

13. We encourage management and the Board to finalize the modernization of the World Bank’s Environmental and Social Framework by August 2016.

14. We welcome the interim report on the Dynamic Formula and stress the need for the planned further work aiming to reach an agreement by the 2016 Annual Meetings in line with the Shareholding Review principles and the Roadmap agreed in Lima.

15. The next meeting of the Development Committee is scheduled for October 8, 2016.

¹ The IMF’s financial operations are conducted in Special Drawing Rights (SDRs). The SDR is the international reserve asset created by the IMF to supplement the existing official reserves of member countries. It can be exchanged for the freely useable currencies of IMF members. The SDR serves as the unit of account of the IMF, and its value is based on a basket of currencies comprising the US dollar, euro, pound sterling and Japanese yen. On April 29, 2016, 1 SDR equalled 1.78 Canadian dollars.

² Mexico’s FCL is SDR 47.3 billion (531 per cent of quota) and accounts for 11.7 per cent of useable resources. Poland’s SDR 13 billion (317 per cent of quota) FCL accounts for 3.2 per cent of useable resources, and Colombia’s SDR 3.9 billion (183 per cent of quota) arrangement accounts for 1 per cent of useable resources. Current useable resources as of June 30, 2016 are listed as SDR 405.8 billion.

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