The IMF released on September 14 the report of a group of independent experts: External Evaluation of IMF Surveillance. At a press conference accompanying the release of the report—whose conclusions were broadly welcomed by the IMF Executive Board, management, and staff—the chair of the Board’s Evaluation Group, Thomas Bernes of Canada, said that in selecting the topic of IMF surveillance, the Board “wanted to look at what is at the heart of the IMF’s mandate.” The aim was not to look at individual country programs, he said, but to examine how the whole process of surveillance was carried out—both bilateral reviews of individual economies and multilateral surveillance (as in the case of the IMF’s World Economic Outlook exercise).
The chair of the external evaluation team, John Crow, highlighted three central sets of issues for IMF surveillance over the macroeconomic policies of its members:
- Scope of surveillance. What should surveillance focus on and is it in danger of becoming unfocused? The external evaluation team concluded, he said, that the IMF “should focus above all on the important systemic and international issues in the world financial picture—those matters where the IMF has a significant comparative expertise.” There was a risk, the team felt, that, as the IMF was asked to do more and to cover a broader set of issues, this focus might be lost without much being gained in compensation.
- Transparency and confidentiality. Crow said that on grounds of principle, such considerations as accountability; peer review, which is at the heart of surveillance and therefore its political legitimacy; and practicality argue for the publication of the IMF staff’s Article IV consultation reports with member countries. At the same time, he emphasized that this did not mean there should be no confidential exchanges between a member and the IMF.
- Methods and governance. Crow said that the team had addressed a range of issues in staff surveillance practice and the role of the Executive Board. Regarding the Board, there were two issues, he said: how to lessen the Board’s excessive workload by making its oversight more focused through efficient and effective committee work; and the governance question of “how the Board might best exercise ownership of the process and thereby ensure that each consultation exercise covers what is truly important”
Focus and impact of surveillance
In reviewing IMF surveillance, Crow said, the external evaluation team had examined the policy advice that the IMF provided to member countries rather than its program lending. In its work, the team had full access to a wide sample of countries, to IMF staff, and to internal IMF documents. In explaining the team’s key recommendation that bilateral surveillance should focus as much as possible on the core issues of exchange rate policy and directly associated macroeconomic policies—including financial sector, capital account, and vulnerability issues—he emphasized that the IMF had a clear and underexploited advantage in three areas. These were in relating a country’s position to the international economic situation and prospects; analyzing the experiences of other countries encountering similar policy problems; and discussing the likelihood of, and possible responses to, significant negative external shocks.
IMF advice could often be significant, Crow said. The external evaluation team had looked at IMF surveillance advice to four countries that subsequently experienced economic crises. “At the end of the day, however, it was not clear to us that the authorities really paid that much attention to the IMF’s advice, whether they wanted to or not,” he said. “They were all in rather difficult political situations, and the domestic politics overrode the IMF advice.” This, he said, pointed to the need to make IMF advice more transparent; publication of staff reports would enhance the weight and influence of IMF advice.
The report also recommends that the IMF curtail the expansion of surveillance into nonfinancial structural areas and emphasize more continuous surveillance. It recommends reducing the resources devoted to the surveillance of small and medium-sized industrial countries and argues that the surveillance of the major industrial countries should focus more on the international aspects of policy. This point was also stressed at the press conference by Niels Thygesen, who said that the IMF should be more reticent about taking on additional responsibilities. Some issues, such as labor standards, he said, could be left to other institutions.
IMF releases External Evaluation of Economic Research Activities
External Evaluation of IMF Economic Research Activities—a report by another group of independent experts—was also released by the IMF to the public on September 14. The evaluation was chaired by Professor Frederic S. Mishkin of Columbia University, New York. The other members of the evaluation team were Professor Francesco Giavazzi of Bocconi University, Italy, and Professor T.N. Srinivasan of Yale University.
The full text of this report, together with the conclusions of the IMF Executive Board’s consideration of the evaluation, the comments by the Managing Director, and the IMF staff’s response, is available on the IMF website: http://www.imf.org
Surveillance external evaluation team
Bank of Canada Ricardo Arriazu
Bansud, Buenos Aires,
Danske Bank Professor of International Economics, University of Copenhagen
Ian S. McDonald
Senior Editorial Assistant
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Leslie Lipschitz, Deputy Director of the IMF’s Policy Development and Review Department, concurred with the report’s message that the IMF should not be asked to do everything with no more resources. But he did emphasize that the IMF could be neither relevant nor responsive to members’ demands if it focused only on a few small, traditional areas. “There are issues beyond the conventional core topics that are nevertheless core to the set of considerations within the IMF’s mandate,” he said. “As long as the case for relevance can be made on each of these issues, they ought to be brought to the table.”
On the issue of publishing staff reports, Lipschitz pointed out that the IMF had been publishing an increasing number of Public Information Notices (PINs) and also had a pilot project on publishing staff reports (IMF Survey, August 2, 1999, page 247). He added: “the critical question that we were trying to evaluate in this pilot project was whether, if authorities know that this report will be published, the discussions will be a great deal less candid.... We have to see fully the results of this pilot project before we decide which way to go.”
Many of the key themes of the report of the external evaluators will be considered again by the IMF Executive Board in the context of an internal review of IMF surveillance later this year. In addition, the Board will consider an action plan prepared by management in response to the recommendation proposed by the evaluators for improving the internal organization of the IMF.
External evaluations of IMF activities
The external evaluation of IMF surveillance is the second of three independent external evaluations that have been conducted since late 1996. The first, an external evaluation of the Enhanced Structural Adjustment Facility, was conducted by a team of experts led by Kwesi Botchwey, former finance minister of Ghana (IMF Survey, March 23,1998, page 81). The third external evaluation covers the IMF’s economic research activities (see box, page 303).
The full texts of the press conference and the report, External Evaluation of IMF Surveillance, together with the conclusions of the IMF Executive Board’s discussion and the responses of IMF management and staff, are available on the IMF website: http://www.imf.org.