- Ruben Lamdany
- Published Date:
- April 2013
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Statement by the Managing Director Staff Response IEO Comments on Management and Staff Responses The Chairman’s Summing Up
Statement by the Managing Director on the Independent Evaluation Office Report on the Role of the IMF as Trusted Advisor
Executive Board Meeting February 1, 2013
I would like to thank the IEO for this report, which provides useful input to the ongoing efforts to strengthen the quality and traction of the Fund’s advice to its members. I am encouraged by the survey findings that the large majority of authorities held positive views of the Fund and its work and that the Fund’s image has continued to improve. That said, I agree that we have more to do to ensure that the entire membership sees the Fund as an honest, even-handed, and intellectually rigorous partner. As the report notes, reversing the lingering effects of legacy and stigma in an important share of the membership is a challenge with no quick or easy solutions. This paper sets out some helpful recommendations in this regard, and I will work with staff over the coming months to implement those endorsed by the Fund’s Executive Board.
However, as the staff statement sets out in more detail, there are some recommendations which may not be practical or advisable, and we will need to reconsider whether there are better ways to achieve the objectives set out in the report. The IEO itself acknowledges that there may be other avenues to respond to these objectives. In particular, I do not believe that sharing all the elements of a policy note, as opposed to agreeing on the important topics, with the authorities ahead of a mission would facilitate a better dialogue. Nor do I think that introducing more bureaucratic processes such as drawing up medium-term strategic plans would do much to enhance the relevance of our work. Instead, I believe we should focus on the proposals to enhance our engagement through deeper dialogue before, during, and after missions, by working harder to ensure continuity of engagement by Fund teams, and by ensuring that staff apply our policies with the utmost transparency and evenhandedness.
I look forward to the Executive Board’s reflections on this report on the state of our engagement with members, and to hearing their views on what we can do to build closer relations.
Staff Response to the Independent Evaluation Office Report on the Role of the IMF as Trusted Advisor
Executive Board Meeting February 1, 2013
We welcome the IEO’s evaluation of this critical issue, which contains interesting analysis and information, and look forward to implementing recommendations that are endorsed by the Board. In particular, we welcome the finding that the Fund’s image has improved markedly since the crisis, and we recognize the need for further work to build on this. However, we found that the tone of the report was unduly negative in places given that the balance of the evidence indicates that the large majority of authorities held positive views of the Fund and its work. Moreover, while some of the recommendations are helpful, certain are problematic: they are not clearly supported by the evidence or the analysis, would not necessarily solve the difficulties that have been identified, or would raise major implementation difficulties.
The report rightly notes the potential tradeoffs between being a trusted advisor and ruthless truth teller. However, the recommendations are drawn up without a thorough analysis of the appropriate balance between developing good relations with a member and the Fund’s obligations to the broader membership (and here it is important to remember that the Fund’s role in bilateral surveillance is not purely advisory, as it also assesses a member country’s compliance with its obligations under the Fund’s Articles of Agreement). Without such an analysis there is no objective way of assessing whether more efforts in any one direction would be justified in light of any potential costs to the Fund’s objectivity.
While the report notes some of the positive findings from the surveys, the negative tone in places is at odds with the favorable views of the authorities. As an example, one of the reports main identified issues is “the lack of relevance and genuine value added in some of the Fund’s advice.” However, this conclusion is not supported by the evidence in the paper. Specifically, survey respondents provided positive views of at least 70 percent for every question (for some over 90 percent) on the supply of advice during IMF missions. Furthermore, the survey results indicated that substantial majorities of respondents (65 to 85 percent) are willing to seek Fund advice on any given policy area. The proposed recommendations therefore need to be considered in light of these positive results.
Some of the analysis is based on outdated or incomplete evidence. For example, the report suggests a lack of evenhandedness in the implementation of the transparency policy by citing the 2009 review, which was based on earlier data and in fact led to a revision in the policy. The report then states that the greater use of deletions in emerging market and advanced economies suggests that the previously identified problems remain. We would note that, given the definition of highly market sensitive information, it is more likely to be an issue in advanced and emerging market countries, and it is thus not surprising that they are the heaviest users of “deletions.”
We support the need to enhance the value-added of Article IV consultations for country authorities. It is currently best practice to consult early with the authorities on the key topics for upcoming consultations, and we welcome the suggestions for fostering a more substantive dialogue with the authorities, including drawing on relevant cross-country experiences.
However, we do not think that the recommendation that teams send the macro framework and key policy recommendations ahead of mission is either feasible or advisable. First, the most important elements in becoming a trusted advisor are to demonstrate the ability to listen, understand the authorities’ views, and reflect those in the mission’s outputs which should—for the most part—reflect a common understanding. Unilaterally transmitting forecasts, analysis, and conclusions before even setting foot in the country could create the false impression that the Fund’s views are cast in stone. Second, in many cases the data needed to produce a reliable framework is only obtained during the mission itself. Finally, the recommendation needs to consider the risk of going too far in the direction of enabling “negotiation” of documents ahead of missions and thereby compromising the independence of Fund surveillance, and the risk that surveillance could be reduced to a simple “exchange of letters.”
We support the need to strengthen the continuity and improve the medium-term focus of the relationship between the Fund and member countries. As the report notes, moves are being implemented to lengthen country assignments. We also agree on the need to increase rewards for team work and to further measures to ensure a smooth transfer of knowledge when team members change. Enhancing the dialogue with country authorities and Executive Directors’ offices would also be appropriate. Further steps to facilitate improving the relationship could be considered in the context of a broader review of surveillance.
However, the proposed country-specific medium-term strategic plans are very similar to the now-abandoned surveillance agendas. Both country authorities and staff found the surveillance agendas to be unwieldy, bureaucratic, often outdated soon after they were written, and of little practical use. It is unclear how the suggested plans would differ and why they would fare any better. Moreover, while an improved focus on medium-term objectives in Fund engagement could prove beneficial, it is not clear that medium-term strategic plans would address the failures identified in the report, which relate mostly to policies providing incentives for continuity, team work, and delivering advice.
The recommendation to assess staff as trusted advisors through performance-based monitoring in the APR process raises serious concerns of moral hazard. How will supervisors judge whether or not staff are trusted advisors to their respective countries? Putting such a recommendation in place (i.e. relating it to performance) may have the unintended side effect of watering down policy messages in an effort to get higher ratings.
The recommendation to “incorporate early and openly the views of all countries” in policy papers needs to be interpreted carefully. We concur that staff should seek to consult intensively with the entire membership during the production of key policy papers, particularly where the issues are contentious. However, Fund papers are not a survey of the opinions of all countries, and setting out the views of all members in Board documents would not be helpful or realistic, particularly in cases where views amongst authorities are split or evolving rapidly.
The recommendation to “reduce unnecessary disclosure concerns” is not supported by the evidence presented in the paper. While staff agrees that it is useful to have space in which to brainstorm over hypothetical policy scenarios, the evidence presented in the paper (e.g., paras 41 and 42 of the background paper on Transparency Policy) suggests that this is already happening and that staff and authorities are in fact completely candid in their policy dialog and advice.
We agree on the need for country-specific approaches to outreach. As with the “strategic plans,” however, we believe that these are best developed as a result of ongoing dialogue between mission chiefs, resident representatives, and authorities rather than being formalized in a document that would quickly be outdated and may not be appropriate for rapidly-evolving situations.
Finally, we agree on the need to implement the Fund’s transparency policy in a uniform and fair manner. As noted above, we did not, however, find evidence in the report that this is not being done at present. Moreover, a regular review of the transparency policy has just been launched, with Board discussion planned for May/June 2013.
Independent Evaluation Office Comments on Management and Staff Responses to the Evaluation of the Role of the IMF as Trusted Advisor
Executive Board Meeting February 1, 2013
The IEO would like to thank the Managing Director for her statement, and, in particular, her recognition that the evaluation provides useful input to the ongoing efforts to strengthen the quality and traction of the Fund’s advice to its members. At the same time, we would like to clarify a few issues that, in view of the staff response, require further elaboration:
- First, the evaluation’s analysis is not based on outdated evidence—it is based on the evaluation’s interviews and surveys, and staff documents up through 2012. Thus, the issues identified by the evaluation remain highly relevant for the Fund and still need to be addressed.
- Second, the IEO analysis does not assume that the Fund’s role in bilateral surveillance is purely advisory. On the contrary, it explicitly acknowledges throughout the report that a key mandate of the Fund is to oversee members’ compliance with their obligations under the Articles of Agreement (the watchdog role). Indeed, the trade-off between the watchdog and trusted advisor roles of the IMF is a central element of the evaluation. The evaluation makes clear that being a trusted advisor can help the Fund fulfill its mandate by enhancing acceptance of the Fund’s advice, but that there are also tensions between these two roles that, if reduced, can strengthen the Fund’s effectiveness.
- Third, much of the evidence comes from almost 400 interviews of country authorities, many of which conveyed more negative views of the Fund than might seem the case from the survey results. Furthermore, even the survey results regarding value-added and relevance, for example, show that 45 percent of the survey respondents in all countries still perceived the IMF as having a one-size-fits-all approach not appropriate to their country, with the figure rising to 90 percent for the large emerging markets. These and other findings from the survey and interviews point at the need for further action.
- Fourth, the evaluation does have evidence on the authorities’ reluctance to use the Fund as a sounding board to discuss sensitive issues such as hypothetical courses of action, costs and benefits of options, and possible risks. A key reason for this reluctance is the uncertainty regarding whether these discussions will be disclosed. This is a true loss because the Fund falls short in its role in helping shape policy decisions of member countries at an early stage.
In this context, the report has six “big picture” recommendations, with the overall aim of strengthening the Fund’s engagement with its membership:
- Enhance the value-added of Article IV consultations for country authorities;
- Strengthen the continuity of the relationship between the Fund and member countries;
- Incorporate early and openly the views of all countries during the preparation of major policy papers on which analytical debate is still ongoing;
- Reduce unnecessary disclosure concerns;
- Work closely with country authorities to design a customized outreach strategy; and
- Implement the Fund’s transparency policy in a uniform and fair manner.
The IEO acknowledges that there are various ways to operationalize these recommendations. The IEO believes that the most productive approach is to discuss a range of options that address the spirit and intent of the “big picture” recommendations, and not to get trapped in a too-narrow focus on the specifics of a particular recommendation.
The IEO hopes that this evaluation’s findings and recommendations—and the discussion spurred by the report—will help strengthen the Fund’s role as a trusted advisor to its membership, a goal clearly supported by all stakeholders in the institution.
The Chairman’s Summing Up the Role of the IMF as Trusted Advisor
Executive Board Meeting 13/10 February 1, 2013
Executive Directors expressed appreciation for the report by the Independent Evaluation Office (IEO) on the role of the IMF as a trusted advisor. They supported the thrust of the IEO recommendations to further improve the quality and traction of Fund advice to its members, and concurred with the IEO that there are various ways to make these recommendations operational.
Directors welcomed the findings that a large majority of country authorities hold positive views of the Fund and its work, and that the Fund’s image has improved markedly in the aftermath of the global crisis. Directors recognized possible tradeoffs and complementarities in the different roles that the Fund plays in interactions with its members. They agreed, however, that additional efforts are needed to enhance the role of the Fund as a trusted advisor to the membership.
In this connection, Directors broadly endorsed five of the IEO’s six high-level recommendations aimed at strengthening the Fund’s engagement with its membership, namely: (i) enhance the value-added of Article IV consultations for country authorities; (ii) strengthen the continuity of the relationship between the Fund and member countries; (iii) reduce unnecessary disclosure concerns; (iv) work closely with country authorities to design a customized outreach strategy; and (v) implement the Fund’s transparency policy in a uniform and fair manner. On the recommendation to incorporate the views of all countries during the preparation of major policy papers, Directors supported the need for extensive consultation with the membership, but there was limited support for setting out all views in the papers.
Directors, however, held different views on how these recommendations could best be implemented. In particular, Directors supported early informal consultations with country authorities on key areas of interest for upcoming consultations and stressed that their offices could play a key role in this process and, more broadly, in promoting dialogue between missions teams and country authorities. Directors, nonetheless, had different views on whether sharing the macroeconomic framework and key policy recommendations with the authorities ahead of missions would add value to Article IV consultations.
Regarding the recommendation to strengthen the continuity of the relationship between the Fund and member countries, many Directors did not support the development of medium-term strategic plans, which would introduce more bureaucratic processes. A number of Directors agreed on the need to develop incentives for staff to better act as a trusted advisor, while a few others were concerned about how such incentives might affect the independence of staff advice. A number of Directors emphasized the importance of lengthening staff country assignments, and a number of others called for increased staff diversity. A few Directors expressed concerns about the report finding that downsizing may have undermined the breadth of the policy dialog with country authorities. Many Directors supported the need for the Fund to address the perception of lack of evenhandedness in the treatment of member countries. A number of Directors suggested that addressing governance deficiencies in the Fund would help mitigate this perception.
In line with established practices, management and staff will give careful consideration to today’s discussion in formulating the implementation plan, including approaches to monitor progress.