MULTILATERAL INVESTMENT GUARANTEE AGENCY

MIGA, established in 1988 with U.S. support, has a specialized mandate: to encourage equity investment and other direct investment flows to developing countries through the mitigation of noncommercial investment barriers. To carry out this mandate, MIGA offers investors guarantees against noncommercial risks; advises developing member governments on the design and implementation of policies, programs and procedures related to foreign investments; and sponsors a dialogue between the international business community and host governments on investment issues. MIGA commenced operations in the latter half of 1989.

INTERNATIONAL FINANCE CORPORATION

The IFC assists the economic development of its borrowing members countries by making loans to, and equity investments in, productive enterprises in the private sector; matching investment opportunities with domestic and foreign private capital and experienced management; helping to develop local and regional capital markets; and promoting privately owned development finance corporations. Projects are selected on the basis of financial viability and their contribution to economic development.

The IFC approved $1.7 billion for 90 projects in 37 countries during FY 1989, a 31 percent increase in lending from the previous year. The number of companies in which IFC holds investments rose from 454 to 468 by end of FY 1989.

International Monetary Fund (IMF)

Following the trend in recent years, only developing countries borrowed from the International Monetary Fund (IMF) in 1989. Drawings on Fund resources totaled Special Drawing Rights (SDR)* 3.5 billion, compared to SDR 2.7 billion in 1988, reversing several years of declining use of Fund resources.

At the end of 1989, aggregate general Fund credit outstanding amounted to SDR 22.3 billion, compared to SDR 24.8 billion at the end of 1988. This decline continues a trend since 1985 when general credit outstanding peaked at SDR 35.2 billion. Explanations include improved economic performance in some developing countries, less demand for IMF programs, and net repayments-consistent with the IMF's monetary character on IMF loans extended during the 1982-1984 world recession and the onset of the debt crisis.

Under the strengthened international debt strategy endorsed in 1989, the IMF renewed its efforts to help debtor countries pursue sound marketoriented policies and agreed to provide resources to those implementing debt

* The SDR, the IMF's unit of account, is a composite of the currencies of the five members with the largest exports of goods and services during the 1980-1984 period: the U.S. dollar, West German mark, French franc, Japanese yen and U.K. pound sterling. The relative weights of the currencies broadly reflect their relative importance in international trade and finance. The SDR was valued at $1.31 on December 31, 1989; its average value in 1989 was $1.28.

and debt service reduction operations negotiated with commercial bank creditors. Macroeconomic and structural reforms, as well as measures to encourage new foreign investment and repatriation of flight capital, are key components of the strategy. Several major debtor countries, including Mexico, the Philippines and Costa Rica, negotiated medium-term commercial bank financing packages, including debt and debt service reduction, in 1989.

IMF Stand-By Arrangements (SBA) and Extended Fund Facility (EFF) programs aim at balance of payments viability in the short and medium term, respectively. EFFs are especially designed to tackle structural distortions in the economy. In 1989 the IMF approved 12 new SBAs amounting to SDR 2.47 billion and 3 EFFs totaling SDR 7.16 billion, compared to 15 SBAs (SDR 2.7 billion) and 1 EFF (SDR 203 million) in 1988. In 1989 the IMF disbursed SDR 1.5 billion under Stand-By/Credit tranche transactions, compared to SDR 1.7 billion in 1988. EFF disbursements totaled SDR 1.2 billion, compared to SDR 200 million in 1988. At the end of 1989, there were 18 Stand-By and 4 Extended Arrangements, compared to 16 Stand-By and 2 Extended Arrangements in late 1988.

Several years ago, the IMF recognized that its shorter term resources based on market-oriented interest rates were not well suited to address protracted balance of payments and structural economic problems often underlying lowincome countries' balance of payments difficulties. In 1986 the IMF created the Structural Adjustment Facility (SAF) to provide assistance to low-income countries on concessional terms. Financed by repayment of IMF Trust Fund loans extended in the 1970's, SAF loans support 3-year reform efforts in tandem with World Bank programs; for these loans, members develop a policy framework jointly with the IMF and the World Bank. The longer duration of the programs and the repayment of principal at concessional interest rates over 10 years, including a 5-year grace period, are designed to provide borrowers the breathing space they need in order to undertake structural reforms that promote sustainable growth.

At the 1987 Venice Summit, participants supported the IMF's call for a major increase in SAF resources; and the Enhanced SAF (ESAF) was created that year. Surplus member countries' loans to the IMF totaling SDR 6 billion, combined with some members' grant contributions, enable the Fund to provide ESAF resources at concessional rates to the poorest countries, particularly those in sub-Saharan Africa. In 1989 the U.S. Administration obtained Congressional support for a FY 1990 $140 million ESAF contribution.

In 1989 the IMF approved three new SAF programs with total commitments of SDR 45.2 million, compared to seven programs totaling SDR 692.2 million in 1988. In 1989 SAF disbursements totaled SDR 700 million under 23 SAF programs, compared to SDR 300 million in 1988. In 1989 the IMF approved five ESAF programs with total commitments of SDR 594.5 million, compared to six programs totaling SDR 776 million in 1988. In 1989 ESAF drawings

totaled SDR 300 million, compared to SDR 100 million in 1988. At the end of 1989, there were 18 Structural Adjustment and 11 Enhanced Structural Adjustment Arrangements, compared to 23 and 6, respectively.

In 1989 drawings under the Compensatory and Contingency Financing Facility (CCFF), established in 1988, amounted to SDR 800 million, compared to SDR 700 million in 1988. The CCFF preserves the essential features of the Compensatory Financing Facility, which was available to members facing payments difficulties stemming from temporary shortfalls in export earnings or surges in food import costs that were largely beyond the member's control. Through the contingency element of the CCFF, the Fund provides resources to members that face adverse external developments that threaten their programs.

Arrears to the IMF continued to grow rapidly, totaling SDR 3.1 billion in late 1989, compared to SDR 2.6 billion in late 1988. Further, 90 percent of the arrears was overdue for 6 months or longer; almost 55 percent of arrears was for 2 years or more. Arrears challenge the Fund's status as preferred creditor, weaken the IMF's financial position, erode the monetary character of the Fund, and potentially undermine the IMF's central role in the international financial system. The United States, in particular, has encouraged the Fund to review its policies toward members in arrears and to strengthen preventive, collaborative and remedial measures.

In 1989 the IMF continued its Ninth Quota Review, begun in 1988, to assess the adequacy of Fund resources and members' quotas in the context of the envisioned role of the Fund in the 1990's. Size and distribution of a quota increase, including reordering of ranking among the industrialized countries, as well as progress on resolving the problem of arrears to the Fund, were the key issues under consideration. In December the IMF extended the deadline for the review from December 1989 to March 1990. (In March 1990 the IMF extended the deadline to June 1990.)

In 1989 Angola joined the International Monetary Fund, increasing membership to 152 countries. With the exception of the Soviet Union and several Eastern European countries, most developed and developing countries are members of the Fund.

International Fund for Agricultural Development (IFAD)

The International Fund for Agricultural Development (IFAD) was founded in 1977 with strong leadership from the United States. IFAD's mandate is to increase food production in the developing countries through loans for projects benefiting small farmers and landless poor. IFAD has traditionally been financed by a negotiated ratio of contributions from members of the Organization for Economic Cooperation and Development (OECD) and members of the Organization of Petroleum Exporting Countries (OPEC), as

well as by smaller amounts from some of the more prosperous developing countries. IFAD has a unique governing structure that accords equal numbers of votes to the three groups of members OECD (Category I), OPEC (Category II) and non-OPEC developing countries (Category III). Decisions have normally been made by consensus.

The president of IFAD is Idriss Jazairy from Algeria. The vice president is a former U.S. development official, Don Brown. Two other senior officers, Chief of Administrative Services and Director of IFAD Policy Review Division, are U.S. citizens. Of the 83 current professional employees, 8 are Americans.

The Administrator of the Agency for International Development (AID) is the U.S. Governor on the IFAD Governing Council. The Assistant Secretary of the Bureau of Economic and Business Affairs in the Department of State is the U.S. Alternate Governor. The United States is the only country which occupies a permanent seat on IFAD's Executive Board, the body which approves projects and determines policy. All other countries take turns as members of the 36-member Board.

IFAD co-finances more than two-thirds of its portfolio with other multilateral institutions. The United States and other donors have encouraged co-financing in order to increase the engagement of other international financial institutions in small farmer development activities. Many of IFAD's loans (33 percent) fund projects designed by other international lending institutions, chiefly the World Bank and the regional development banks, with input from IFAD specifically on the small farmer and landless laborer aspects.

During 1978-1989, two-thirds of IFAD's resources were provided on highly concessional terms-1 percent interest, with 50-year repayment and 10-year grace periods. (These terms are available to countries with a per capita GNP of $300 in 1976 prices.) Other countries (23 percent) have received loans on intermediate terms of 4 percent interest, 5-year grace period and 20-year repayment. A few loans (8 percent) have been made on ordinary terms-8 percent interest, 3-year grace period and repayment in 15 to 18 years.

During the 11th session of the Governing Council, held January 23–26, 1989, in Rome, President Jazairy was elected to a second 4-year term. The plenary also approved the request of Greece to move from Category III to Category I. In the general debate, IFAD was praised for its innovative programs, lean overhead and attention to the environment and sustainable development. The remainder of the session was spent working toward an agreement on the third replenishment.

Basic agreement on a third replenishment for IFAD was reached at a reconvened IFAD Governing Council in June and finalized in October. The $566.3 million replenishment agreed upon will support a lending program of

$250-$350 million a year, well above the average of the 1984–1988 period. Since the OPEC countries did not provide a contribution level which other donors thought adequate for a 3-year replenishment, it was agreeed to shorten the third replenishment period to 2 years, with formal notification of participation due June 30, 1990, and final contributions due June 30, 1992.

The first element of the replenishment follows the traditional 60-40 OECDOPEC burden sharing. However, the second element is based on the Category III members contributing significant amounts of convertable currencies for the first time, to be matched by the OECD countries on a three-to-one basis.

At its three meetings in 1989, the IFAD Executive Board approved 23 projects. A total of $277 million in new loans and technical assistance grants was approved for project activities in 1989. (Figures based on 1 SDR = $1.34, which is the average 1988 dollar rate for SDRs.) In FY 1989, the United States contributed $2.5 million to complete its obligation of $79,840,000 which it had pledged toward the second replenishment.

Food and Agriculture Organization (FAO)

The Food and Agriculture Organization of the United Nations, one of the largest UN specialized agencies, is the lead international organization in the fields of agriculture, fisheries and forestry. FAO's agriculture program seeks to bring about a sustained global improvement in nutrition levels, food security and rural incomes, especially for the disadvantaged, through increasing rural productivity. Its fisheries program promotes improved management and utilization of the world's fishery resources, particularly by helping developing countries to increase their capacity to manage their marine and inland fisheries. The FAO forestry program assists member countries to find a balance between, on the one hand, environmental concerns and, on the other, both growing demands for forest goods and services and increasing pressures of agriculture on forest land. These FAO goals are consistent with the aims of U.S. bilateral development assistance programs.

FAO is governed by its Conference, to which all the member states of the Organization belong. The Conference is held biennially in odd-numbered years to review FAO's performance and to adopt the program of work and budget for the coming 2 years. Between Conference sessions, the 49member FAO Council directs the work of the Organization. In evennumbered years, there are regional conferences in each of FAO's five geographic regions and a fall session of the Council. FAO is unusual among specialized agencies in that the Soviet Union is not a member. Having been a member of the 1944 Interim Commission on Food and Agriculture, which was instrumental in the founding of FAO, the Soviet Union would need only to declare its desire to be a member of FAO, and it would become one without the necessity of a vote on its admission. The Soviet Union, however, has not yet opted to join.