ANNUAL REPORT ON EXCHANGE ARRANGEMENTS AND EXCHANGE RESTRICTIONS 2017 There are five tables within this section.Table 2 summarizes the detailed descripti asin the country chat each IM memberoforks indicated by counry officasand thefco ion of their de facto down countries de facto exchange rate arrangements for 200 he rec on o r200g2p3020 eports foreign exchange market structure among the membership for 2014-17. Exchange Rate Arrangements The distribution of de facto exchange rate arrangements continued to shift during this reporting period to less flexible or more aginst the US dolar .Sofi pegs-The more stable economic environment may have contributed to the increase in the number of countries in this of countries with sof Ke a of all members. ategory 6 pe number of countries in this category decreased by 1.to 43.Venezuela was reclassified to"othe managed"from a conventional peg arrangement beginning in March 2016.The conventional peg arrangement holds the largest share among soft pegs,with 53 percent. wl-like ar Costa K dCroaria,Papua New Guinca).Four or fthe a)and two to "other managed"(Democrat L:1: oCnlike arngemenThe number of countries with crawl-like arrangements remained at 10.Three countries exited this:wo moved o a stabilized arrangement (Croatia,Papua New Guinea).and one met the criteria for a doatingaringcmcntunisil.Thrcecoun wer dd d:two were reclassific arrangement(Burundi the e ir sure,and new trends in world trade.As a result,they are often rclassificd sof Pegged ange nates within b l band ·Other managed o nts-The number of other managed arrangements dropped from 20 to 18 between May 1,2016,and April 30,2017 h ent is characteristic of periods during which volatile foreign exchange market der th dangepd ore clea is category This sectio 2016. te N ma abilized"in August 2016. yers AREAER 4 Intemationl Monetary Fund|October 2017 OInternational Monetary Fund.Not for Redistribution
4 International Monetary Fund | October 2017 ANNUAL REPORT ON EXCHANGE ARRANGEMENTS AND EXCHANGE RESTRICTIONS 2017 There are five tables within this section. Table 2 summarizes the detailed descriptions in the country chapters by reporting each IMF member country’s monetary policy framework as indicated by country officials and the classification of their de facto exchange rate arrangements. Table 3 breaks down countries’ de facto exchange rate arrangements for 2009–17. Table 4 highlights changes in the reclassification of the de facto exchange rate arrangements between May 1, 2016, and April 30, 2017. Table 5 outlines IMF member countries’ monetary policy frameworks and exchange rate anchors for 2009–17, and Table 6 reports the foreign exchange market structure among the membership for 2014–17. Exchange Rate Arrangements9 The distribution of de facto exchange rate arrangements continued to shift during this reporting period to less flexible or more clearly defined exchange rate regimes, reflecting a more stable economic environment relative to previous years. Generally, countries with flexible exchange rates were able to stabilize their currencies, and most central banks of countries with less flexible exchange rate arrangements were able to maintain their soft peg arrangements despite depreciation pressure on their currencies against the US dollar. • Soft pegs—The more stable economic environment may have contributed to the increase in the number of countries in this category since April 2016. The number of countries with soft pegs has increased to about the same level as in 2012, with most of the changes in stabilized and crawl-like arrangements (Table 3). Countries with soft pegs are the single largest exchange rate arrangement category, 6.3 percentage points larger than that of floating arrangements and accounting for 42.2 percent of all members. 0 Conventional pegs—The number of countries in this category decreased by 1, to 43. Venezuela was reclassified to “other managed” from a conventional peg arrangement beginning in March 2016. The conventional peg arrangement holds the largest share among soft pegs, with 53 percent. 0 Stabilized arrangements—The number of countries with stabilized arrangements increased by 6, to 24. Ten countries were added, four from “other managed” (Angola, China, Pakistan, Tajikistan), four from “floating” (Kenya, Malawi, Serbia, Tanzania), and two from a crawl-like arrangement (Croatia, Papua New Guinea). Four countries left the group: two to “crawl-like” (Burundi, Costa Rica) and two to “other managed” (Democratic Republic of the Congo, Suriname). Two countries were reclassified twice during this reporting period, reverting to a stabilized arrangement (Nigeria,¹0 Trinidad and Tobago¹¹). The category stabilized arrangement remained the second largest among the soft pegs, with 30 percent. 0 Crawl-like arrangements—The number of countries with crawl-like arrangements remained at 10. Three countries exited this classification: two moved to a stabilized arrangement (Croatia, Papua New Guinea), and one met the criteria for a floating arrangement (Tunisia). Three countries were added: two were reclassified from a stabilized arrangement (Burundi, Costa Rica) and one from “other managed” (Rwanda). Countries adopting stabilized and crawl-like arrangements often flexibly adjust the way they manage their exchange rate in response to external events, including differences in inflation across countries, capital flow pressure, and new trends in world trade. As a result, they are often reclassified to “other soft pegs” or the residual category, “other managed.” 0 Pegged exchange rates within horizontal bands—Only Tonga maintains this arrangement. Two additional countries have de jure pegged exchange rates within horizontal bands, but one has a de facto stabilized arrangement (Maldives) and the other a de facto other managed arrangement (Syria). • Other managed arrangements—The number of other managed arrangements dropped from 20 to 18 between May 1, 2016, and April 30, 2017. This exchange rate arrangement is characteristic of periods during which volatile foreign exchange market conditions hinder the use of more clearly defined exchange rate arrangements. The percentage of countries in this category rebounded since reaching its lowest point in 2015 on the back of improving global financial conditions. Eight countries 9 This section summarizes developments between May 1, 2016, and April 30, 2017. ¹0 Nigeria was reclassified twice—to “other managed” in June 2016 and back to “stabilized” in August 2016. ¹¹ Trinidad and Tobago was reclassified retroactively to a crawl-like from a stabilized arrangement in December 2015 and reclassified back to a stabilized arrangement in July 2016. The first change is reflected as of January 1, 2016, corresponding to the first day of the period covered in this year’s AREAER. ©International Monetary Fund. Not for Redistribution
ANNUAL REPORT ON EXCHANGE ARRANGEMENTS AND EXCHANGE RESTRICTIONS 2017 Taiiki arrangement(Democratic Republic of the Congo,Surinan arrangement(Venezuela),and one from a no separate legal tender arrangement(Zimbabwe). ntries in this authorized the bank to issue bond notes and bond coins,at parity with the US dollar,to improve domestic liquidity. ngeable at par withan transactions in Zir cto e ments tend to maintain their exchange rate policies unless there are large structural changes in their economies that resul in an exit. sclassified as float in the tion of the oup.Of the entered(F managed"(Sierra Leone). .number of countries with free-floating arrangements remained at 31. Table2.De Facto assification of Exchange Rate Arrangements and Monetary Policy Frameworks, The classification by IMF staff,w sprimarily on the basis of the degre Monetary aggregate target e exchar rate is c an by The monetary authority uses its achieve a targ flexible.The system distinguishes among four major categ es:hard the tare ed ag pegs (such as exchange arrangements with no separate legal tende target of monetary policy. Inflation-targeting framework ngements,and crawl-like arrangements) This involves the public announcement of numerical targetsfor infl ting regimes (suchI )and with an instituti ate arrangements against alternative monetary policy frame of the exchange rate in broad ecc omic policy and nd the markets about the plans and bjective guided by as follows: deviation of forec stsof futureinfation from the annou Exchange rate anchor The mo etary authority buys or sells foreign exchange to maintain the within a range.The exchange explicitly stated pominal anchor.bur tather moni raty policy these fram orks are associated with exchance rate arrange. ments with no separate legal tender,currency board arrangements,pegs AREAER Intemnational Monetary Fund loctober 2017 OInternational Monetary Fund.Not for Redistribution
ANNUAL REPORT ON EXCHANGE ARRANGEMENTS AND EXCHANGE RESTRICTIONS 2017 International Monetary Fund | October 2017 5 abandoned this category: four were reclassified to a stabilized arrangement (Angola, China,¹² Pakistan, Tajikistan), one to a crawl-like arrangement (Rwanda), and two to floating (Egypt, Malaysia). Five countries were added, two from a stabilized arrangement (Democratic Republic of the Congo, Suriname), one from floating (Sierra Leone), one from a conventional peg arrangement (Venezuela), and one from a no separate legal tender arrangement (Zimbabwe). • Hard pegs (no separate legal tender and currency boards)—The number of countries in this category dropped by one when Zimbabwe introduced its own legal tender. On October 31, 2016, an amendment of the Reserve Bank of Zimbabwe Act authorized the bank to issue bond notes and bond coins, at parity with the US dollar, to improve domestic liquidity. The act states that bond notes and coins issued by the central bank are exchangeable at par with any currency prescribed as legal tender in Zimbabwe and are legal tender in all transactions in Zimbabwe. Accordingly, the de facto exchange rate arrangement was reclassified to “other managed” from an arrangement with no separate legal tender, decreasing the number of countries in the latter category by 1, to 13. Changes in this category are rare, as countries with such arrangements tend to maintain their exchange rate policies unless there are large structural changes in their economies that result in an exit. • Floating arrangement—The number of countries classified as floating dropped by 2, to 38, with eight changes in the composition of the group. Of the eight countries, three entered (Egypt, Malaysia, Tunisia) and five countries abandoned the floating category; four were reclassified to a stabilized arrangement (Kenya, Malawi, Serbia, Tanzania); and one was classified as “other managed” (Sierra Leone). • Free floating—The number of countries with free-floating arrangements remained at 31. ¹² China was reclassified retroactively to a crawl-like from other managed arrangement in November 2015 and reclassified again to a stabilized arrangement beginning in August 2016. The first change is reflected as of January 1, 2016, corresponding to the first day of the period covered in this year’s AREAER. Table 2. De Facto Classifi cation of Exchange Rate Arrangements and Monetary Policy Frameworks, April 30, 2017 The classification system is based on the members’ actual, de facto arrangements as identified by IMF staff, which may differ from their officially announced, de jure arrangements. The system classifies exchange rate arrangements primarily on the basis of the degree to which the exchange rate is determined by the market- rather than by official action, with market-determined rates being on the whole more flexible. The system distinguishes among four major categories: hard pegs (such as exchange arrangements with no separate legal tender and currency board arrangements) soft pegs (including conventional pegged arrangements, pegged exchange rates within horizontal bands, crawling pegs, stabilized arrangements, and crawl-like arrangements) floating regimes (such as floating and free floating) and a residual category, other managed. This table presents members’ exchange rate arrangements against alternative monetary policy frameworks to highlight the role of the exchange rate in broad economic policy and illustrate that different exchange rate regimes can be consistent with similar monetary frameworks. The monetary policy frameworks are as follows: Exchange rate anchor The monetary authority buys or sells foreign exchange to maintain the exchange rate at its predetermined level or within a range. The exchange rate thus serves as the nominal anchor or intermediate target of monetary policy. These frameworks are associated with exchange rate arrangements with no separate legal tender, currency board arrangements, pegs (or stabilized arrangements) with or without bands, crawling pegs (or crawl-like arrangements), and other managed arrangements. Monetary aggregate target The monetary authority uses its instruments to achieve a target growth rate for a monetary aggregate, such as reserve money, M1, or M2, and the targeted aggregate becomes the nominal anchor or intermediate target of monetary policy. Inflation-targeting framework This involves the public announcement of numerical targets for inflation, with an institutional commitment by the monetary authority to achieve these targets, typically over a medium-term horizon. Additional key features normally include increased communication with the public and the markets about the plans and objectives of monetary policymakers and increased accountability of the central bank for achieving its inflation objectives. Monetary policy decisions are often guided by the deviation of forecasts of future inflation from the announced inflation target, with the inflation forecast acting (implicitly or explicitly) as the intermediate target of monetary policy. Other The country has no explicitly stated nominal anchor, but rather monitors various indicators in conducting monetary policy. This category is also used when no relevant information on the country is available. ©International Monetary Fund. Not for Redistribution
ANNUAL REPORT ON EXCHANGE ARRANGEMENTS AND EXCHANGE RESTRICTIONS 2017 able 2 (continued Monetary Policy Framework Exchange rate anchor ots 密 三 兰 w QS BHEENECEEIETES 器 Crawl-like p ntemationl Monetary FundOtober 2017 OInternational Monetary Fund.Not for Redistribution
6 International Monetary Fund | October 2017 ANNUAL REPORT ON EXCHANGE ARRANGEMENTS AND EXCHANGE RESTRICTIONS 2017 Exchange rate arrangement (number of countries) Monetary Policy Framework Exchange rate anchor Monetary aggregate target (24) Infl ationtargeting framework (40) Other¹ (46) US dollar (39) Euro (25) Composite (9) Other (9) No separate legal tender (13) Ecuador El Salvador Marshall Islands Micronesia Palau Panama Timor-Leste Kosovo Montenegro San Marino Kiribati Nauru² Tuvalu Currency board (11) Djibouti Hong Kong SAR ECCU Antigua and Barbuda Dominica Grenada St. Kitts and Nevis St. Lucia St. Vincent and the Grenadines Bosnia and Herzegovina Bulgaria Brunei Darussalam Conventional peg (43) Aruba Th e Bahamas Bahrain Barbados Belize Curaçao and Sint Maarten Eritrea Iraq Jordan Oman Qatar Saudi Arabia Turkmenistan United Arab Emirates Cabo Verde Comoros Denmark³ São Tomé and Príncipe WAEMU Benin Burkina Faso Côte d’Ivoire Guinea Bissau Mali Niger Senegal Togo CEMAC Cameroon Central African Rep. Chad Rep. of Congo Equatorial Guinea Gabon Fiji Kuwait Morocco4 Libya Bhutan Lesotho Namibia Nepal Swaziland Solomon Islands5 Samoa5 Stabilized arrangement (24) Angola (04/16) Guyana Lebanon Maldives Trinidad and Tobago9,¹0 (12/15) Croatia (4/16) FYR Macedonia Singapore Vietnam6 Bangladesh6 Bolivia6 China5,9,¹0 (11/15) Malawi6 (08/16) Nigeria6 (03/15) Papua New Guinea6 (05/16) Tajikistan6 (02/16) Tanzania6 (01/16) Yemen6 Czech Rep.7 Serbia7 (01/16) Kenya6,8,9 (11/15) Lao P.D.R.6 (01/15) Pakistan6,9 (03/15) Sudan6 Crawling peg (3) Honduras Nicaragua Botswana Crawl-like arrangement (10) Iran6 Burundi6 (06/16) Ethiopia6 Rwanda6,9 (03/15) Uzbekistan6 Dominican Republic6 Costa Rica6,8 (4/16) Jamaica6,8 Mauritania6,9 Sri Lanka6,8 Pegged exchange rate within horizontal bands (1) Tonga5 Table 2 (continued) ©International Monetary Fund. Not for Redistribution
ANNUAL REPORT ON EXCHANGE ARRANGEMENTS AND EXCHANGE RESTRICTIONS 2017 Table2(contined) Monetary Policy Framework Exchange ra Exchange rate ancho 三 Foating(38) tn iiaiinitledl ntemational Monetary Fundb017 OInternational Monetary Fund.Not for Redistribution
ANNUAL REPORT ON EXCHANGE ARRANGEMENTS AND EXCHANGE RESTRICTIONS 2017 International Monetary Fund | October 2017 7 Exchange rate arrangement (number of countries) Monetary Policy Framework Exchange rate anchor Monetary aggregate target (24) Infl ationtargeting framework (40) Other¹ (46) US dollar (39) Euro (25) Composite (9) Other (9) Other managed arrangement (18) Cambodia Liberia Zimbabwe (10/16) Syria Algeria Belarus Democratic Rep. of the Congo6 (6/16) Th e Gambia Guinea Sierra Leone9 (10/15) Suriname (03/16) Myanmar Azerbaijan Haiti Kyrgyz Rep. South Sudan Vanuatu Venezuela (03/16) Floating (38) Afghanistan Madagascar Seychelles Albania Argentina Armenia Brazil Colombia Georgia Ghana Guatemala Hungary Iceland India Indonesia Israel Kazakhstan Korea Moldova New Zealand Paraguay Peru Philippines Romania South Africa Th ailand Turkey Uganda Ukraine Uruguay Egypt (11/16) Malaysia (09/16) Mauritius Mongolia8 Mozambique8 Switzerland Tunisia8 (05/16) Zambia Free fl oating (31) Australia Canada Chile Japan Mexico Norway Poland Russia Sweden United Kingdom Somalia¹¹ United States EMU Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Latvia Lithuania Table 2 (continued) ©International Monetary Fund. Not for Redistribution
ANNUAL REPORT ON EXCHANGE ARRANGEMENTS AND EXCHANGE RESTRICTIONS 2017 Table 2 (concluded) Monetary Policy Framework xchange rate Exchange rate ancho de fact hoaEtdeofd l anchor,but rather u indicators in conducting n ary polic ed to policy fram ork in 2006 based on various infla hange rate ar ively,overriding a previously published Table3.Exchange Rate Arrangements,2009-17 (Percent of IMF members as of April 30] Exchange Rate Arrangement 20092 2010201142012201520142015 2016520175 Hard peg 63 132 56 Currency board 6.9 6.3 63 63 58 34.6 39.7 43.2 39.5 42.9 45.5 42.2 Conventional peg 22.3 233 22.6 22.6 23.6 23.0 23.0 24 Stabilized arrangement 6.9 127 8 11.0 115 125 Crawling peg 1 1.6 1.6 16 6 6 Crawl-like arrangemen 0.5 11 6.3 79 9 10 Pegged exchange rate within horizontal bands 2.1 11 0.5 0.5 05 05 0.5 0.5 430 36.0 347 34.7 340 34.0 37. 39.5 24.5 20.1 189 18.4 183 188 194 20.8 198 17.6 159 15.8 157 152 161 16.1 11.2 11 89 126 99 9.4 52 10.4 94 成 an IMF Intemationl Monetary Fund|October 2017 OInternational Monetary Fund.Not for Redistribution
8 International Monetary Fund | October 2017 ANNUAL REPORT ON EXCHANGE ARRANGEMENTS AND EXCHANGE RESTRICTIONS 2017 Exchange rate arrangement (number of countries) Monetary Policy Framework Exchange rate anchor Monetary aggregate target (24) Infl ationtargeting framework (40) Other¹ (46) US dollar (39) Euro (25) Composite (9) Other (9) Luxembourg Malta Th e Netherlands Portugal Slovak Rep. Slovenia Spain Source: IMF staff. Note: If the member country’s de facto exchange rate arrangement has been reclassified during the reporting period, the date of change is indicated in parentheses. CEMAC = Central African Economic and Monetary Community; ECCU = Eastern Caribbean Currency Union; EMU = European Economic and Monetary Union; WAEMU = West African Economic and Monetary Union. ¹ Includes countries that have no explicitly stated nominal anchor, but rather monitor various indicators in conducting monetary policy. ² Nauru became a member of the IMF on April 12, 2016. ³ The member participates in the European Exchange Rate Mechanism (ERM II). 4 Within the framework of an exchange rate fixed to a currency composite, the Bank Al-Maghrib adopted a monetary policy framework in 2006 based on various inflation indicators, with the overnight interest rate as its operational target to pursue its main objective of price stability. 5 The country maintains a de facto exchange rate anchor to a composite. 6 The country maintains a de facto exchange rate anchor to the US dollar. 7 The country maintains a de facto exchange rate anchor to the euro. 8 The central bank has taken preliminary steps toward inflation targeting. 9 The exchange rate arrangement or monetary policy framework was reclassified retroactively, overriding a previously published classification. ¹0 The exchange rate arrangement was reclassified twice during this reporting period. ¹¹ Currently the Central Bank of Somalia does not have a monetary policy framework. Table 3. Exchange Rate Arrangements, 2009–17 (Percent of IMF members as of April 30)1 Exchange Rate Arrangement 2009² 2010³ 20114 20124 2013 2014 2015 20165 20175 Hard peg 12.2 13.2 13.2 13.2 13.1 13.1 12.6 13.0 12.5 No separate legal tender 5.3 6.3 6.8 6.8 6.8 6.8 6.8 7.3 6.8 Currency board 6.9 6.9 6.3 6.3 6.3 6.3 5.8 5.7 5.7 Soft peg 34.6 39.7 43.2 39.5 42.9 43.5 47.1 39.6 42.2 Conventional peg 22.3 23.3 22.6 22.6 23.6 23.0 23.0 22.9 22.4 Stabilized arrangement 6.9 12.7 12.1 8.4 9.9 11.0 11.5 9.4 12.5 Crawling peg 2.7 1.6 1.6 1.6 1.0 1.0 1.6 1.6 1.6 Crawl-like arrangement 0.5 1.1 6.3 6.3 7.9 7.9 10.5 5.2 5.2 Pegged exchange rate within horizontal bands 2.1 1.1 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Floating 42.0 36.0 34.7 34.7 34.0 34.0 35.1 37.0 39.5 Floating 24.5 20.1 18.9 18.4 18.3 18.8 19.4 20.8 19.8 Free fl oating 17.6 15.9 15.8 16.3 15.7 15.2 15.7 16.1 16.1 Residual Other managed arrangement 11.2 11.1 8.9 12.6 9.9 9.4 5.2 10.4 9.4 Source: AREAER database. ¹ Includes 189 member countries and three territories: Aruba, Curaçao and Sint Maarten (both in the Kingdom of the Netherlands), and Hong Kong SAR (China). ² As published in the 2009 AREAER; does not include Kosovo, Tuvalu, and South Sudan, which became IMF members on June 29, 2009; June 24, 2010; and April 18, 2012, respectively. ³ As published in the 2010 AREAER; does not include Tuvalu and South Sudan, which became IMF members on June 24, 2010, and April 18, 2012, respectively. 4 As published in the 2011 and 2012 AREAERs; does not include South Sudan, which became an IMF member on April 18, 2012. 5 Includes Nauru, which became an IMF member on April 12, 2016. Table 2 (concluded) ©International Monetary Fund. Not for Redistribution