Lyubimtseva_S_N__Koreneva_V_N_L_93_Kurs_angli

national export credit agencies.

While its structure is unlike that of a commercial bank, the EBRD has a similar approach ... dealing with projects and it prices its products ... a commercial basis. With its AAA credit rating, the Bank is able to raise funds ... the finest rates from the international capital markets.

For a project to be considered it has to be commercially viable. The Bank does not issue guarantees ... export credits or provide retail banking services.

Foreign joint ventures are one of the EBRD's main vehicles for financing; joint ventures offer partners an effective way to gain access ... foreign and domestic markets, encourage foreign private investments in the region, reduce risk, and facilitate the transfer ... technology and management skills.

Words you may need: shareholder n акционер relative to относительно flexibility n гибкость specifically adv (зд.) конкретно in relation to что касается willingness n готовность

to bear risk нести риск

multilateral lenders многосторонние кредиторы

AAA credit rating показатель кредитоспособности ААА

viable adj жизнеспособный

Ex. 10. a) Open the brackets putting the verbs into the correct forms, b) Describe the IMF's activities during the anniversary year.

Fiftieth Anniversary of the Bretton Woods Conference

The fiftieth anniversary of the Bretton Woods Conference that led to the foundation of the International Monetary Fund (IMF) (to mark) by a considerable increase in all areas of the IMF's operations. The anniversary (to stimulate) an assessment of changes in the international monetary system and reflections on the ways in which the IMF should respond to them.

In this connection 1995, the anniversary year, (to be) the year of intense activity for the IMF. First of all, the IMF adequately (to respond) to the financial crisis in Mexico. The year also (to see) а further evolution in the IMF's role of assisting countries in the transition from command to market economies. The IMF (to approve) substantial financial arrangements for Russia and Ukraine, extended its financial support to a large number of developing countries, increased access to its resources for all members, and carried out surveillance over members' economic policies.

In 1995 the call on the IMF to provide financial support (to lead) to exceptionally heavy demands on the IMF resources. Total drawings from the IMF's General Resources Account during 1994/95 (to amount) to SDR 10.6 billion. Of this total, SDR 7.6 billion was provided under stand-by arrangements; SDR 1.6 billion

– under extended arrangements; SDR 0.3 billion – under the compensatory and contingency financing facility (CCFF); and SDR 1.1 billion-under the systemic transformation facility (STF). In addition, SDR 0.6 billion in concessional assistance (to disburse) under the structural adjustment facility (SAF) and enhanced structural adjustment facility (ESAF). Among the IMF's most important responsibilities (to be) its mandate to oversee the effective functioning of the international monetary system and to exercise firm surveillance

over members' economic policies.

The IMF (to fulfil) these oversight and surveillance roles in a variety of ways. The IMF has regular annual consultations with member countries. The IMF (to assess) a member's macroeconomic and structural policies and (to encourage) all members to adopt policies that are in their long-term interests and contribute to their expansion and balanced growth of the world economy.

During the anniversary year this work (to give) an added impetus by the "Madrid Declaration" adopted by the IMF in 1994.

Access to technical assistance and training (to become) an increasingly valuable benefit of the IMF membership. The global revolution in favour of market-oriented economies and the widening implementation of structural adjustment policies (to increase) member countries' requests for IMF assistance.

It should be mentioned, however, that in spite of the activities serious policy challenges (to remain), like how to sustain economic growth, to reduce unemployment, to prevent a resurgence of inflation in the industrial countries, to maintain and extend growth through strong programs of adjustment and structural reform in developing countries, to integrate the economies in transition into the world economy and to set them firmly on the path of sustainable growth.

Words you may need: anniversary n годовщина reflection n размышление

further evolution эволюция, дальнейшее развитие surveillance n надзор

General Resources Account счет общих ресурсов

SDR (Special Drawing Rights) специальные права заимствования stand-by arrangement соглашение о резервных кредитах

compensatory and contingency financing facility система компенсационного финансирования и финансирования непредвиденных расходов

systemic transformation facility механизм финансирования системных преобразований concessional assistance помощь, предоставляемая на льготных условиях

disburse v оплачивать, платить

structural adjustment facility механизм финансирования структурной перестройки

enhanced structural adjustment facility механизм расширенного финансирования структурной перестройки

mandate n мандат oversee v наблюдать

oversight n присмотр, надзор impetus n стимул, толчок in spite of prep несмотря на

resurgence n возрождение, восстановление sustainable growth устойчивый рост

Ex. 11. a) Fill each gap with a suitable word from the box.

b) Sum up the text in 5-7 sentences and present your summary in class.

c) Describe the World Bank's activities. Say how they differ from those of the IMF. boardencouragememberfinancedbearsetupgrowthprovidesperfocusedcarries outoperationsimbalancespolicypurposescountriesestablished

World Bank – International Bank for Reconstruction and Development (IBRD)

The "World Bank" refers to the International Bank for Reconstruction and Development (IBRD) and its affiliate, the International Development Association (IDA). The Bank was ______together with the IMF by the Bretton Woods Conference of 1945 as an international bank for two_______: to help finance the rebuilding of war-devastated areas and to aid in the advancement of less-developed_______.

Operations started in 1946. The Bank is _______ partly by contributions paid by_______countries, partly by bond issues. The national contributions constitute the bank's capital and relate to the individual countries' share of world trade. The bond issues finance the lending_______of the bank.

In financing the economic _______ of member countries the International Bank complements the IMF, which finances temporary balance of payments_______. Loans are made to governments or governmentguaranteed entities. Besides lending funds, the Bank _______technical advice to governments or other borrowers on a wide range of development problems. It_______general economic surveys for governments wishing to study resources and to plan long-range _______of development.

At first devoted to the reconstruction needs of industrial countries the World Bank by the 1950s had

_______ its attention on the developing world. In 1956 the IBRD formed the International Finance Corporation (IFC) the purpose of which was to_______growth in the private sector of developing countries and to mobilize domestic and foreign capital for this purpose. In 1960 the IBRD_______the International Development Association in order to assist the poorer developing countries (those with an annual_______capita GNP of less than $731 in 1980 prices). Loans to these countries_______no interest and are repayable over 50 years with an initial grace period of 10 years.

The Bank's strategy has been to ensure that its aid reaches the broad masses of the people; this is to be done by investments encouraging productivity and integrating the broad masses of people as active partners into the development process.

The powers of the Bank are vested in a_______of Governors.

Words you may need:

affiliate n филиал

war-devastated areas разоренные войной территории bond issue выпуск облигаций

complement v дополнять survey n обследование

International Finance Corporation Международная финансовая корпорация repayable adj подлежащий погашению (уплате)

grace period льготный период

integrate v интегрировать; (зд.) включать, вовлекать vest v облекать, наделять властью

DISCUSSION

Ex. 12. a) Read the text.

b) Describe the facilities under which resources are made available to the IMF members.

c) Explain the "conditionally" principle of the IMF.

The IMF's financial resources are made available to its members under a variety of facilities and policies, depending on the circumstances, especially the nature of the macroeconomic and structural problems to be addressed.

The IMF makes resources available under both its general resources and its concessional financing facilities. Member countries use the general resources of the IMF by making a purchase (drawing) of other members' currencies or SDRs with an equivalent amount of their own currencies. The IMF levies charges on these drawings and requires that members repurchase (repay) their own currencies from the IMF with other members' currencies or SDRs over a specified time. Concessional financing under the structural adjustment and enhanced structural adjustment facilities is made available in the form of loans.

Regular facilities include: Reserve tranche, Credit tranches, Standby Arrangements, Extended Fund Facility. In providing financial support to any member country, the IMF must be assured that the member is pursuing policies that will ameliorate or eliminate its external payments problem. The requirement that members make a commitment to a set of policy measures aimed at correcting economic and financial imbalances within a reasonable period in return for IMF financial support is known as "conditionally". "Conditionally" is designed to ensure that members using IMF resources will be able to repay the IMF in a timely manner. IMF-supported programmes emphasize certain key aggregate economic variables, including domestic credit, the public sector deficit, international reserves, and external debt. They also emphasize crucial elements of the pricing system – including the exchange rate, interest rate, and, in some cases, commodity prices – that significantly affect the country's public finances and foreign trade.

A successful adjustment programme must elicit an adequate response from the supply side of the economy. Interest rates and exchange rates are particularly important, since they influence savings and investment decisions and, therefore, a member country's growth prospects.

Adjustment programmes, typically, have an impact on income distribution, employment and social services. While the promotion of sound macroeconomic policies and structural reforms contributes to sustained growth and employment, adjustment may also involve short-term social costs to vulnerable groups. The IMF staff analyse the implications of reform measures for vulnerable groups and advise the authorities on how best to integrate social safety nets and their financing into programmes.

Words you may need:

facility n (зд.) схема кредитования, механизм финансирования address v обращаться (к чему-л.)

concessional financing facility механизм льготного финансирования regular facilities обычные механизмы финансирования

reserve tranche резервный транш ameliorate v улучшать

external payments problem проблема внешних платежей

"conditionality" n (зд.) обусловленность кредитов (МВФ) timely adj своевременный

aggregate economic variables совокупные экономические переменные (величины) crucial adj решающий

elicit v извлекать, выявлять

sound policy разумная политика vulnerable adj уязвимый

implication n смысл, значение (событии)

Ex. 13. Read the dialogue, sum up its content and act it out: Fiscal Issues Are a Growing Concern of the IMF (Interview with the IMF's Fiscal Affairs Department Head)

Interviewer: Fiscal discipline is a vital element of the IMF's macroeconomic policy advice to member countries. How would you describe your department's role in IMF surveillance and policy advice? Head: Since the early 60s when the department was created, we have been largely involved with technical assistance, with helping countries in Africa and elsewhere create fiscal institutions. Recently, the role of technical assistance has broadened.

Int.: Has it been connected with the movement of the economies in transition to market-oriented systems? Head: Yes, with regard to economies in transition we had to help to create institutions as well as to reform policies. We have been much involved in setting up tax administrations, treasuries, budget offices, as well as creating and reforming customs policies.

Int.: Your role in trying to make tax systems more efficient and equitable is well known.

Head: Thank you. Besides, we have done a lot to improve public expenditure management systems, in other words, all activities that allow a country to gain better control over its expenditure. Work on social safety nets has also become an important activity of our department. And the first reason for this is the major economic policy changes in the transition economies.

Int.: Oh, it is quite understandable, the changes were accompanied by very high inflation that dramatically reduced the income of some groups, such as pensioners, right?

Head: Also, disposable incomes on the whole fell sharply. So, it was necessary to help these countries reform policies to protect the people. The other reason why we became more active in the safety net area was to provide some sort of targeted protection for particularly vulnerable population groups in countries engaged in major macroeconomic adjustment efforts that were accompanied by large withdrawals of subsidies.

Int.: So, your department has become involved in several new areas. I mean poverty, social safety, income distribution, and others. What is the nature of the work in these areas, and how would you assess its relevance to the IMF's main macroeconomic work and its value to members?

Head: Our interest in poverty and social problems has much to do with strengthening the political sustainability of reforms. When a country undertakes a major reform, the distribution of income often deteriorates in the short run. If it deteriorates too much and large groups become impoverished in the process, they may become supporters of populist policies that would defy the reform. We pay attention to poverty to help sustain reform and achieve macroeconomic stability and thereby to expand economic activity and income.

Int.: What future directions and roles do you envisage for FAD?

Head: FAD has been a demand-driven department to a large extent. The pressures on this department are enormous. I take pride in this department's role as one of the world's main fiscal observatories. We have one of the best concentrations of fiscal economists in the world. We try to anticipate fiscal problems and provide intellectual leadership for their solution. I hope, I've made myself clear, haven't I?

Words you may need:

fiscal issues вопросы бюджетно-налоговой политики customs policy таможенная политика

public expenditure management system система управления государственными расходами disposable income располагаемый доход

targeted protection адресная защита relevance n уместность impoverished adj обнищавший

populist policy популистская политика defy v выступать (против)

envisage v предусматривать

to a large extent в значительной степени enormous adj громадный

to take pride (in) гордиться (чём-л.)

I hope, I've made myself clear. Надеюсь, я ясно все объяснил.

Ex. 14. Give extensive answers to these discussion questions:

What is the international monetary system?

When did the system emerge?

What institutions does it comprise?

What functions does the IMF perform? What powers does it have?

What international reserve asset has been created by the IMF? How is the SDR value determined? Under what financing facilities does the IMF offer resources to its members?

What is "conditionally" designed to ensure?

Is Russia (other former republics of the USSR) an IMF's member?

What role does the World Bank play?

What organizations help reschedule debts?

In order to get prepared for participation in the class discussion of the questions, write a short essay on: a) The World Bank.

(Use: purpose, to promote, progress, to carry out, to lend, to provide services, to stimulate investments, to borrow, subscription, funds)

b) The IDA.

(Use: to provide assistance, per capita income, favourable terms, to share the same staff) c) The IMF.

(Use: association, to set up, goals, to promote, to facilitate, balanced trade, to establish, payment system, exchange stability, to correct maladjustments, quota, voting power, to consult, mission, to train)

Ex. 15. Prepare a talk on the following:

a)In what ways are individuals affected by international monetary developments?

b)Relations between Russia and international institutions such as GATT, OECD, BIS, UNCTAD, IMF. In what ways do countries benefit from the membership in these organizations?

c)Your opinion on Russia's borrowings from the IMF. Is it the only way to cover the budget deficit? d)Your opinion on Russia's relations with the Paris Club and the London Club. Do you think that the nation's

Soviet-era foreign depts should be written off?

Ex. 16. Scan the available financial newspapers. Comment on the most important events in the international monetary system today.

READING PRACTICE

Ex. 17. a) Read the text quickly for the main information.

Some Facts About the SDR

The Special Drawing Right (SDR) is an international reserve asset created by the IMF in October 1969. SDRs first came into operation in 1970 as a sort of reserve currency to supplement national currencies and gold as the medium in which countries hold their reserves. It is a new type of money known as "paper gold" and used as the first international legal tender. The SDR serves as a unit of account for the IMF and a number of other international and regional organizations. It is also used in transactions between governments and central banks. However, the market for SDRs is limited because they are not held by individuals or private businesses. In addition, a few countries peg the exchange rates of their currencies to the SDR.

The SDR was initially valued by the IMF in terms of a fixed quantity of gold and was redefined in June 1974 as a basket of 16 currencies. The SDR has changed over time. For many years it was an oddity fully understood only by a few central bankers. In 1981, however, in an attempt to extend its usage beyond the IMF and its accounts (which are denominated in SDRs), it was simplified. It is now based on a weighted average of only five different currencies: the dollar, the Deutschmark, the French franc, the pound sterling and the yen. The basket is revised every five years. The weights in the basket reflect the relative shares of countries in exports of goods and services and the relative shares of the five currencies in official reserve holdings.

Since the adoption of the First Amendment of the IMF's Articles of Agreement in 1969, the IMF has been authorized to allocate SDKs to member countries. Decisions to allocate (or cancel) SDKs require an 85 per cent majority vote of the Board of Governors and are made for "basic periods", which, unless otherwise decided, run for five consecutive years. Cumulative allocations to date total SDR 21.4 billion. SDR allocations are distributed in proportion to IMF members' quota shares. Because of considerable expansion in the IMF's membership since SDRs were last allocated in 1981, 38 of the IMF's 181 member countries have never received SDR allocations. Another 37 members have participated in some, but not all allocations. SDRs are counted as a part of a country's international reserves, along with official holdings of gold, foreign exchange, and reserve position in the IMF. The share of SDRs in global holdings of nongold reserves has declined from 8.4 per cent at the end of 1972, to 6.5 per cent at the end of 1981, and to 2.3 per cent at the end of 1995.

Words you may need:

Special Drawing Right специальное право заимствования reserve assets резервные активы

legal tender законное платежное средство revise v пересматривать

weight n вес

reserve holdings резервы allocate v выделять, распределять

amendment n поправка, исправление consecutive adj последовательный to date на сегодняшний день

total v составлять, достигать reserve position резервная позиция

b) Complete the sentences below with the information from the text.

1.The Special Drawing Right (SDR) is an international reserve asset... .

2.The SDR serves as a unit of account... .

3. The SDR has been used at times to denominate financial instruments but... .

4.... was redefined in June 1974 as a basket of 16 currencies. 5. Since 1981, the SDR basket has consisted of... .

6.... the IMF has been authorized to allocate SDRs to member countries.

7. Because of considerable expansion in the IMF's membership since SDRs were last allocated in 1981 ... .

Debt rescheduling is a form of debt reorganization in which debtors and creditors negotiate to defer

payments of a principal and interest falling due in a specified interval for repayment on a new schedule. Some countries find it almost impossible to service their external debts. Recently, rescheduling external debts has become a widely accepted practice. Debt rescheduling occurs at the Paris Club for government and private debt owed to official creditors and at the London Club for debt owed to commercial creditors.

The Paris Club is an informal forum where countries experiencing difficulties in paying their debts to governments and private institutions meet with their creditors to restructure these debts. The name might be quite misleading because in reality the Paris Club is not a club, nor is it a formal international organization. It has no offices, no secretariat, and above all, no charter. The Paris Club is an ad hoc institution with no legal status.

In part, the Paris Club's confidentiality policy has prevented it from becoming known to a wider public. Creditors refrain from releasing any information pertaining to their assessment of a given debtor's economic and financial situation or to the scope of debt relief granted. The onset of the international debt crisis in the early 1980s, however, brought public attention to the Paris Club and to its contribution to resolving the balance-of-payments disequilibria experienced by a growing number of developing countries and by some Central and Eastern European countries.

Over the years, the Paris Club has become a key instrument in implementing the international debt strategy. This strategy rests on two main pillars: internal reform and structural adjustment, supplemented by external financial assistance in the form of fresh money and debt relief. Despite the public's recent discovery of the Paris Club, this forum has existed since 1956, when Argentina agreed to meet in Paris with official creditors to find a mutually acceptable basis for rescheduling payments due on officially supported export credits. In the late 1950s and 1960s, Brazil, Chile, and Turkey sought similar Paris Club reschedulings. Since 1980, 54 countries have rescheduled the total of 186 debt agreements.

Words you may need:

debt rescheduling реструктурирование долга to defer payments отсрочивать платежи

principal n сумма долга (на которую начисляется процент), капитальная сумма falling due наступающий (о платеже)

schedule n график

to service debts обслуживать долг

Paris Club Парижский клуб owe v быть должным

London Club Лондонский клуб misleading adj вводящий в заблуждение

ad hoc institution специальная (ад хок) организация

to prevent smb from (doing smth) мешать, препятствовать (кому-л. что-л. делать) refrain (from) v воздерживаться (от)

pertaining to относящийся к

debt relief помощь в погашении долга onset n начало

disequilibria n (pl) неустойчивость

rests on two pillars покоится на двух столпах

Ex. 19. a) Read the article below quickly to find the major points of criticism towards the IMF.

b) Reread the article to find the sentence describing the present-day relations between the IMF and the World Bank.

It was not only Brazil that ran up the white flag last week when it halted the defence of its currency on the world foreign exchanges. The defeat of Brazil was also a defeat for the International Monetary Fund, the Group of Seven and the ill-conceived set of policy recommendations which have ensured that a problem in South-East Asia has the potential to turn into a full-scale global crisis.

The orthodox approach insisted on by the IMF in country after country has proved a disaster. If it were a private firm, the IMF's board would have been sacked long ago.

There will doubtless be those who will say that there is no reason to reassess the policies which underpin the free market – deflation, austerity, high interest rates, privatization and capital liberalization.

But last week's events are a crushing blow to that orthodox approach. Their analysis of the crisis has been wrong from the start, and they have not the first idea of what to do now, apart from more of the same. The IMF has a bankers' mentality. It deals with central banks and thinks of itself as a central bank. It is secretive, lacks transparency and has a fixation with narrowly defined indicators. The IMF's obsession with budget deficits, curbing inflation and financial liberalization has engendered a damaging short-termism that has held back long-term development.

Reducing budget deficits through public-spending cuts while simultaneously freeing up domestic capital markets has simply had the effect of raising debt-servicing costs, thereby crowding out investment in health and education.

There have been signs during the last 18 months of a growing fissure between the IMF's thinking and that of its sister organization – the World Bank. The bank's report on the Asian crisis concludes that insistence on pushing up interest rates was a crucial blunder that worsened the situation, and that it would have been better

to have let currencies fall and keep interest rates low in order to keep economies moving forward. Words you may need:

to run up the white flag выбросить белый флаг halt v остановить

disaster n бедствие deflation n дефляция austerity n строгая экономия fissure n трещина

UNIT 8. FINANCIAL MARKETS. THE BOND MARKET

A. TEXT

TRADING IN THE BOND MARKET

People and organisations wanting to borrow money are brought together with those having surplus funds in the financial markets.

There are a great many different financial markets, each one consisting of many institutions, dealing with different instruments in terms of the instrument maturity' and the assets backing it, and serving different types of customers.

Generally, financial markets are classified as money or capital markets and primary or secondary markets. Money markets deal in short-term securities having maturities of one year or less. Capital markets deal in long-term securities having maturities greater than one year. An investor who purchases new securities is participating in a primary financial market. An investor who resells existing securities is participating in a secondary financial market.

So, when businesses, units of government or individuals cannot satisfy their needs for funds by revenue from sales of goods and services, they can turn to either debt financing (any process by which the firm gets cash or some other assets in return for a promise to pay an agreed upon sum plus interest) or equity financing (any process by which a firm raises funds in return for a share in its ownership and management). Some sources of funds available to businesses (like issuing stock) are not available to governments. When revenues fall short of expenditures2 governments go into debt3 – they borrow shortand long-term funds by issuing bonds.

A bond is an instrument in which the issuer (debtor/borrower) promises to repay to the lender/investor the amount borrowed plus interest over some specified period of time. It should be stressed that one of the most important characteristics of a bond is the nature of its issuer. Issuers include federal (central) governments and their agencies, supranational (such as the World Bank, the Asian Development Bank), municipal governments, and nonfmancial and financial corporations.

By far the largest issuers are central governments.

There is no uniform system for classifying the global bond markets. Quite a number of financiers consider it appropriate to use the following classification. From the perspective of a given country, the global bond market can be classified into two markets: an internal bond market and an external bond market. The internal bond market is also called the national bond market. It can be decomposed into two parts: the domestic bond market and the foreign bond market.

The domestic bond market is where issuers domiciled in the country issue bonds and where those bonds are subsequently traded. The foreign bond market of a country is where bonds of issuers not domiciled in the