- Ruben Lamdany
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- April 2013
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Independent Evaluation Office of the International Monetary Fund (IEO), 2009, IMF Interactions with Member Countries (Washington: International Monetary Fund).
Independent Evaluation Office of the International Monetary Fund (IEO), 2011a, IMF Performance in the Run-Up to the Financial and Economic Crisis: IMF Surveillance in 2004–07 (Washington: International Monetary Fund).
Independent Evaluation Office of the International Monetary Fund (IEO), 2011b, Research at the IMF: Relevance and Utilization (Washington: International Monetary Fund).
International Monetary Fund (IMF), 2006a, “Implementing Streamlining,” SM/06/359, October25 (Washington).
International Monetary Fund (IMF), 2006b, “Streamlining Paper Flow and Procedure,” memorandum from First Deputy Managing Director to Department Heads, December4 (Washington).
International Monetary Fund (IMF), 2007, “IMF Executive Board Adopts New Decision on Bilateral Surveillance Over Members’ Policies,” Public Information Notice No. 07/69, June21 (Washington).
International Monetary Fund (IMF), 2008, “Key Trends in the Implementation of the Fund’s Transparency Policy,” SM/08/42, January (Washington).
International Monetary Fund (IMF), 2009a, “Key Trends in the Implementation of the Fund’s Transparency Policy,” SM/09/53, February (Washington).
International Monetary Fund (IMF), 2009b, “Review of the Fund’s Transparency Policy,” SM/09/264, October (Washington).
International Monetary Fund (IMF), 2010a, “Reserve Accumulation and International Monetary Stability,” SM/10/86, April (Washington).
International Monetary Fund (IMF), 2010b, “Key Trends in the Implementation of the Fund’s Transparency Policy,” SM/10/229, August (Washington).
International Monetary Fund (IMF), 2010c, “The Fund’s Role Regarding Cross-Border Capital Flows,” SM/10/298, November (Washington).
International Monetary Fund (IMF), 2010d, “Guidance Note on the Fund’s Transparency Policy,” SM/10/61, December (Washington).
International Monetary Fund (IMF), 2010e, “2010 Staff Survey,” December (Washington). Available at www-intranet.imf.org/departments/HumanResources/Programs/EngagementRecognition/Pages/2010StaffSurvey.aspx.
International Monetary Fund (IMF), 2011a, “Recent Experiences in Managing Capital Inflows—Cross-Cutting Themes and Possible Guidelines,” SM/11/30, February (Washington).
International Monetary Fund (IMF), 2011b, “Assessing Reserve Adequacy,” SM/11/31, February (Washington).
International Monetary Fund (IMF), 2011c, “Working Group Report on Increasing the Effectiveness of Staff in the Field,” June (Washington). Available at www-intranet.imf.org/News/Pages/WorkingGroupFillsinGapsonBoostingStaffEffectivenessintheField.aspx.
International Monetary Fund (IMF), 2011d, “Key Trends in Implementation of the Fund’s Transparency Policy,” SM/11/168, July (Washington).
International Monetary Fund (IMF), 2011e, “Towards Effective Macroprudential Policy Frameworks—An Assessment of Stylized Institutional Models,” FO/Dis/11/174, August (Washington).
International Monetary Fund (IMF), 2011f, “The Multilateral Aspects of Policies Affecting Capital Flows,” SM/11/277, October (Washington).
International Monetary Fund (IMF), 2011g, “2011 Triennial Surveillance Review” (Washington). Available at www.imf.org/external/np/spr/triennial.
International Monetary Fund (IMF), 2012a, “The Chairman’s Summing Up—Implementation Plan in Response to Board-Endorsed Recommendations for the IEO Evaluation of IMF Performance in the Run-Up to the Financial and Economic Crisis,” BUFF/12/59, May (Washington).
International Monetary Fund (IMF), 2012b, “Modernizing the Legal Framework for Surveillance—An Integrated Surveillance Decision,” SM/12/156, June (Washington).
International Monetary Fund (IMF), 2012c, “Key Trends in Implementation of the Fund’s Transparency Policy,” SM/12/194, July (Washington).
International Monetary Fund (IMF), 2012d, “Factsheet: Integrated Surveillance Decision,” July31 (Washington). Available at www.imf.org/external/np/exr/facts/isd.htm.
International Monetary Fund (IMF), 2012e, “Workplace Values Statement,” July31 (Washington). Available at www-intranet.imf.org/News/Pages/MDLaunchesWorkplaceValuesStatementatTownHall.aspx.
International Monetary Fund (IMF), 2012f, “The IMF’s Financial Surveillance Strategy,” SM/12/231, August (Washington).
International Monetary Fund (IMF), 2012g, “Guidance Note for Article IV Consultations,” SM/12/246, September (Washington).
International Monetary Fund (IMF), 2012h, “Fifth Periodic Monitoring Report on the Status of Implementation Plans in Response to Board-Endorsed IEO Recommendations,” SM/12/248, September (Washington).
Mannathoko, Ita, 2012, “Transparency Policy,” No. IV in background studies for The Role of the IMF as Trusted Advisor (Washington: IEO). Available at www.ieo-imf.org.
Prieur, Jérôme, 2012, “Survey Evidence,” No. V in background studies for The Role of the IMF as Trusted Advisor (Washington: IEO). Available at www.ieo-imf.org.
Reichmann, Thomas, 2012a, “Taking Stock of Previous IEO Evaluations, No. I in background studies for The Role of the IMF as Trusted Advisor (Washington: IEO). Available at www.ieo-imf.org.
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The evaluation does not assess either the quality or impact of the Fund’s advice. Gaining traction partly depends on the political, social, and cultural environment for policy implementation, over which the Fund has little influence apart from its efforts through its communications policy.
The term, “Great Moderation,” is often used to refer to the period from the mid-1980s until the onset of the global crisis in 2007–08. This period was characterized by a substantial decline in macroeconomic volatility in the major advanced economies, attributed in large part to improved macroeconomic policies and structural changes in the economies.
At this time, it was almost inconceivable to most stakeholders that the Fund would be a lender to advanced economies, as such countries were seen as largely immune to balance of payments or financial crises.
The IMF’s Articles of Agreement explicitly note the importance of collaboration for the purposes of the Fund: “(i) to promote international monetary cooperation through a permanent institution which provides the machinery for consultation and collaboration on international monetary problems.” Indeed, “collaborate”, implying “more or less equal partners who work together” or “to work in partnership,” is used throughout the Articles of Agreement. Thus, the Articles of Agreement would seem to be implicitly noting the importance of being a trusted advisor.
Note that demand-driven advice and proactive policy dialogue could often take place during the course of the Fund’s formal interactions.
For purposes of exposition, this report classifies countries by size and level of development as follows: large advanced country, other advanced country, large emerging market, other emerging market, and low-income countries. This classification is based on the September 2011 World Economic Outlook, but with advanced and emerging market economies split into “large” and “other” (large advanced economies are the G-7, and large emerging markets have a 2009 GDP above $300 billion in PPP terms).
Annex 4 provides the individual views, in their own words, of four representative IMF stakeholders (a country authority, an Executive Board member, a mission chief, and a resident representative) as to what they think constitutes a trusted advisor in the context of the IMF.
IEO (2011a) provides examples of where the Fund should have given tougher messages in its Article IV consultations. If the Article IV missions at the time had drawn clear attention to the troubles and dangers ahead, discussions might have been more difficult in 2007, but would likely have increased trust in the Fund’s advice in the longer term.
For example: a comparison with interviews conducted for the 2008 TSR shows that even those interviewees who were previously highly critical of the relationship with the Fund were no longer so negative.
This perception was confirmed by the survey of mission chiefs, with more than 85 percent agreeing that the Fund had become more open.
More than 90 percent of mission chief respondents also agreed that the IMF had become more flexible in its application of conditionality in programs.
Excluding the impact of new donor financing (largely for technical assistance), the FY2013 budget has reversed about half of the impact of the downsizing in terms of full-time staff equivalents, but about three-fourths of the reversal is of a temporary or crisis-related nature.
This issue was recognized by the Managing Director in her first message to staff in July 2011, “there are tensions between helping one member and informing or warning others, and we need also to consider how we relate to a broader range of stakeholders, including the public and financial markets.”
The ISD, which will take effect in early 2013, makes the Article IV consultation a vehicle for both bilateral and multilateral surveillance.
Many authorities complained that the only information they received prior to the mission’s arrival was a questionnaire—little changed from previous years—or a set of sparse bullet points, merely listing issues for discussion.
For exposition purposes, this report uses quotations from officials in member countries, as well as from IMF staff and Management. The quotations were chosen because they reflect views that were broadly shared.
The answers to this survey question varied widely based on country income level, with none of the large advanced country authorities, but almost 40 percent of the large emerging market and low-income country authorities, agreeing that missions focused too much on numbers at the expense of policy discussions.
Almost one-quarter of the authorities from LICs and more than 40 percent of those from large emerging markets felt that the Fund had not done well in balancing its role of trusted advisor with providing financial assistance.
Almost 60 percent of the surveyed mission chiefs complained that the time allowed for writing the staff report after the mission was too short; as a result, almost 70 percent (and 80 percent of those working on surveillance-only countries) indicated that the Policy Consultation Note was already being written with a view to becoming the staff report. Sixty percent of mission chiefs also felt that the restriction on staff report length was limiting the reporting of analytically important issues.
By contrast, among large advanced and emerging economies, about 65 percent of the authorities did not wish to have more frequent staff visits or informal contact. Some interviewees from these economies believed that Fund interactions already took up too much of their time. This underscores the importance of tailoring staff engagement to the needs of member countries.
In contrast, for 90 percent of UFR countries, the frequency of contact was typically weekly or monthly.
Overall, while a large majority believed these institutions performed the same as the Fund in this role, more than 20 percent of respondents felt that the Fund was a better trusted advisor, and only 8 percent preferred other IFIs. In contrast, for those African respondents who expressed a preference, about twice as many considered the other institutions better advisors than the IMF.
Approximately 80 percent of technical assistance is requested at the authorities’ initiative, as opposed to strong urging by the IMF or as part of UFR conditionality.
The survey of mission chiefs confirmed these concerns about publication and transparency, with concerns appearing to be greater for surveillance-only countries than for UFR countries.
These findings from the Transparency Reviews were based on a review of documents and a survey of mission chiefs. However, they did not survey country authorities themselves.
The rules that guide the treatment of confidential information by staff are found in the N-rules and the IMF Code of Conduct for staff.
This is not a term formally used in the Fund, but is used by this evaluation to describe the second principle.
The formal obligations for the furnishing of information by member countries are described in Article VIII, Section 5 of the Articles of Agreement.
Interviewed country authorities tended to express more negative views on the value-added of Fund advice than indicated by the results of the survey.
These findings are consistent with those from the Fund’s interviews of authorities conducted for the 2011 Triennial Surveillance Review.
The IEO’s evaluation of IMF Interactions with Member Countries (IEO, 2009) yielded similar findings. It found that the large emerging economies, in particular, viewed the surveillance process as routine and uninteresting.
The importance of experience was emphasized by the former IMF Deputy Managing Director (Murilo Portugal) in his farewell speech: “Our founder, Keynes, once said that the secret of persuasion is to stay within the boundaries of feasibility. And our most experienced mission chiefs, with their detailed knowledge of the circumstances and realities of the country concerned, their experience of past crises, and their wise judgment are able to determine what is feasible best. The feasible best sometimes will be the second best, or the third best. And with their interpersonal and diplomatic skills our experienced mission chiefs are able to gain the confidence of authorities to become their trusted advisors and to negotiate a program or to influence policy making.”
Most of these analytical weaknesses have been the subject of recurrent complaints from the membership, as confirmed by the findings of the TSR and previous IEO evaluations.
The Fund has recognized this problem and now has a Working Group on Jobs and Inclusive Growth.
Mission chiefs and resident representatives also recognized the importance of this issue, with about 80 percent agreeing that incorporating other country experiences in the advice more often would have an important payoff in improving the policy dialogue.
The Fund is making an effort to deal with this coordination problem, in part, with its Integrated Surveillance Decision.
Authorities in about half of all countries (and two-thirds of LICs) had contacted their mission chiefs three or more times a year to seek their views or advice, and authorities in almost three-fourths of LICs would have welcomed more frequent staff visits and informal contact with the Fund. According to surveyed resident representatives, more than half had been contacted by authorities at least twice a month for advice on policy or strategic issues.
Most of the responses from other country groups suggested no difference between the BIS and the Fund.
A senior official had worked with two IMF mission chiefs, both of equal technical and analytical ability, but with very different approaches. One was “bureaucratic, followed the books, and was careful not to deviate from the brief nor take any risks.” The other was empathetic and “deeply interested in [the country], willing to speculate on topics beyond the brief.” The official would never discuss sensitive areas with the first person for fear that what he said would be disclosed, but would willingly discuss such topics with the second. He added that “it was like dealing with two different IMFs!”
While the perception of arrogance was more common in smaller developing economies, even advanced country interactions were not immune. As one authority from an advanced economy stressed, “Why would we ever use IMF research? The IMF staff are very arrogant in not taking on board our comments on their research on our country.”
The evaluation of IMF Interactions with Member Countries (IEO, 2009) also reported a view prevalent among staff indicating that they exercise less candor in their assessments of advanced economies, in part because they fear that Management will, in the end, not support them.
These findings confirm those in IEO (2009), where surveyed staff complained that performance evaluations gave insufficient weight to effective interactions with country authorities.
This was a finding in two 2011 IEO evaluations (on the crisis and IMF research) and the 2010 IMF staff survey.
Almost half of the country authorities (and three-fourths in large emerging markets) rarely or never included their resident representative in confidential policy discussions, and about 20 percent did not see them as good counterparts for discussing policy ideas. Surveyed resident representatives largely confirmed these findings, but noted that, since the crisis, the authorities were inviting them more frequently to participate in confidential policy discussions. The responses depended heavily on the seniority of the resident representative: positive answers were received in 30 percent, 50 percent, and 65 percent of cases from staff at the A13/14, A15, and B level, respectively.
There was also a regional dimension, with countries in Asia and Latin America most likely to be dissuaded from seeking Fund advice due to a view that the Fund was not evenhanded.
Interviewees recognized that it is difficult to determine what role the IMF has played in the program design relative to that of the other Troika members. But many European interviewees were appreciative of what they saw as the more objective input of the IMF within the Troika context.
Subsequently, the Fund issued a Board paper (IMF, 2011f) that explicitly addressed the “push” factors behind capital flows.
Earlier, IEO (2009) reported that “More than half of the surveyed staff working on advanced economies said that a desire to preserve the relationship had caused them to make assessments that were too cautious.” And according to IEO (2011a), “Many [staff] felt that there were strong disincentives to ‘speak truth to power,’ particularly in large countries, as there was a perception that staff might not be supported by Management if they disagreed with these authorities.”
This compared with 20 percent and 8 percent of those working, respectively, on emerging markets and LICs.
Political constraints on this analysis were confirmed in interviews with mission chiefs and Executive Directors.
For example, IMF staff found that 26 percent of the deletions in 2008 were not clearly within the policy guidelines. Furthermore, “advanced and emerging market countries—in particular ‘influential’ countries as proxied by quota shares and/or having a dedicated Executive Director at the Board—accounted for a disproportionately large share of corrections that were in the ‘gray zone’” (IMF, 2009b).
The IMF made some revisions to its transparency policy and issued a revised guidance note in 2010 (see IMF, 2010a). The next Review of Transparency Policy is expected to be completed in 2013.
In contrast, 5 percent or fewer of European and Middle Eastern survey respondents expressed concerns about past negative experiences, although political stigma mattered more, adversely affecting relationships with almost one-fifth and one-fourth of European and Middle Eastern members, respectively. For Africa, results were mixed with respect to legacy and stigma, with nonprogram countries much more adversely affected than those currently engaged in Fund programs; for example, almost a third of African nonprogram countries expressed concerns about political stigma compared to only 5 percent of program countries.
These are all elements of the mission’s Management-approved Policy Note.
The often-minimalist approach to providing information to authorities before a mission affords little basis for stimulating indepth discussions of policy issues during the mission. Sharing more information could help to dispel the perception that missions are primarily aimed at fulfilling only the IMF’s watchdog role.
The IMF has recently announced reforms that imply that country assignments would be expected to last three years on average.
The plan would be expected to evolve flexibly as domestic or external conditions changed.
For resident representatives, move forward with the recommendations of the Working Group on Increasing the Effectiveness of Staff in the Field, particularly on better advance planning, raising the bar of qualifications, and strengthening training and preparation. Adopt similar approaches for mission chiefs.
Effective team work would include forward-looking planning and ensuring sufficient overlap between outgoing and incoming team members.
This might imply rethinking the “zero-sum game” approach embedded in the current performance rating system, which puts strict limits on top ratings. The practical implication is that one teammate rated as “outstanding” makes it far less likely that other teammates could also receive high ratings, even if the overall teamwork was of top quality. This undermines teamwork.
Annex 5 provides an overview of the most relevant initiatives. See also Fifth Periodic Monitoring Report on the Status of Implementation Plans in Response to Board-Endorsed IEO Recommendations (SM/12/248, 9/25/12), which discusses progress on implementing the Board-endorsed recommendations from IMF Interactions with Member Countries (IEO, 2009).
The survey response rates for both the 2008 and 2011 TSRs were only about a third, with the responses for the 2011 TSR heavily weighted toward European countries (e.g., the response rate for Africa was only 15 percent). The interviews were conducted during the Spring Meetings and included a few officials from 20 countries, almost half of which were advanced economies; only 2 were LICs.
The interviews were conducted by phone.
The small number of interviews and country visits for the Middle East and Central Asia Department (MCD) was influenced by the Arab Spring events in the region during 2011. However, countries from that region were well represented in the survey of authorities; about 70 percent of countries submitted at least one response—the second highest among all regions.
For a more detailed description of the surveys and survey methodology, together with the full set of data from the three surveys, see Jérôme Prieur, “Survey Evidence,” No. V in background studies for The Role of the IMF as Trusted Advisor (2012). Available at www.ieo-imf.org.
Somalia was not included, even though a member country, because it had not had an Article IV consultation in the time span of our evaluation (2005–11). Three selected territorial entities participated in Article IV missions: Aruba, Curação-St. Maarten, and Hong Kong SAR. The IMF does not conduct Article IV discussions with the West Bank and Gaza but staffs a resident representative office there and maintains regular interactions. The three regional central banks are the Eastern Caribbean Currency Union (ECCU), the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO), and the Banque des Etats de l’Afrique Centrale (BEAC).
This is not intended to be an exhaustive list of reform efforts, but rather highlights those aspects most closely related to enhancing the trusted advisor role.
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.