Treasurer's Department has important role in mobilizing, managing, safeguarding resources

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Eduard Brau has been Treasurer of the IMF since September 1999. Brau, a German national, joined the IMF in August 1969 and, prior to assuming his present position, held various positions, including Deputy Director of the IMF's European II Department and Director of the Office of Internal Audit and Inspection. He spoke recently with the IMF Survey and discussed the work of the Treasurer's Department and issues facing the IMF in the department's area of responsibility.

IMF SURVEY: Many readers of the IMF Survey have relatively little idea of all the responsibilities-both internal and external-of the Treasurer's Department. What are these functions and how does the department carry them out?

BRAU: Treasurer's is the financial arm of the IMF.We mobilize, manage, and safeguard the IMF's financial resources.

Mobilizing resources involves three areas: First, the work related to quotas, our main source of financial resources, and in particular to quota reviews and quota increases. Second, the department deals with all aspects of raising the resources for our concessional lending through the Poverty Reduction and Growth Facility (PRGF) and for the Heavily Indebted Poor Countries (HIPC) Initiative. This mobilization effort has kept us very busy over the past year. And third, the department is responsible for the operation of the SDR system, including the special equity allocation of SDRs, which is still pending, and the recent decisions to change the valuation and interest rate on the SDR.

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Managing resources covers activities that range from general policies on the use of IMF resources all the way to the nitty-gritty of accounting and financial reporting. Let me give you a few examples. On the policy side, and together with other departments, we advise management and the Board on policies on the use of IMF resources, such as the interest rate charged on IMF lending and on net income to be applied to the IMF's precautionary balances.

We invest the $11 billion in PRGF and HIPC grant and deposit resources.We make all the disbursements when countries borrow from the IMF and also manage all SDR transactions between SDR holders.

And internally, the department effects and controls all administrative expenditures, including the payroll.

The third important function is safeguarding resources. It is the role of the Treasurer's Department to assess and monitor financial risks to the IMF and to help protect the IMF against arrears from member countries and to safeguard resources more generally. The department takes the lead in formulating policies to deal with existing arrears and the complex work of finding financial solutions to clear the arrears of specific members.

IMF SURVEY: In what ways has your view of the Treasurer's Department's role changed during the past year and what changes do you envisage in the coming period?

BRAU: I was impressed by the breadth of activities in the department, and much of the core work that I just described to you will continue. But I have set new priorities in the past year. First, in April 2000 we began a new investment policy for about $11 billion in resources in the PRGF and HIPC Trusts. The income from these resources will be used to subsidize PRGF lending and help finance the IMF's share of HIPC debt reduction.

Until recently, the IMF invested only in short-term deposits with the Bank for International Settlements (BIS).We have now diversified under a conservative strategy and are investing the bulk of these resources in short-term, fixed-income securities with the BIS and external investment managers, including the World Bank and private managers. Our aim is to realize, over alonger term, something like 50 basis points in additional revenue. On a portfolio of $11 billion, this means over $50 million in additional income annually-a very significant sum in additional support for our poorest member countries.We are on track...