ANNUAL REPORT

2007

Independent Evaluation Office of the International Monetary Fund

Washington, D.C.

August 2007

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Contents Page Abbreviations.............................................................................................................................5 Message from the Director.........................................................................................................7 I. Overview of Developments in Financial Year 2007......................................................8 II. Recently Completed Evaluations.................................................................................10 A. The IMF and Aid to Sub-Saharan Africa...............................................................10 B. IMF Exchange Rate Policy Advice, 1999–2005....................................................14 III. Cross-Cutting Issues ....................................................................................................16 IV. Ongoing Projects and the Future Menu of Topics .......................................................18 A. Structural Conditionality in IMF-Supported Programs .........................................18 B. Aspects of IMF Corporate Governance—Including the Role of the Board ..........19 C. The IMF’s Interactions with its Member Countries ..............................................20 D. The IMF’s Research Agenda .................................................................................22 E. The IMF’s Approach to International Trade Issues...............................................22 Table. Completed and Ongoing IEO Work Program...............................................................24 Appendices I. IEO Director’s Visits and Other Outreach Activities ..................................................25 II. Administrative Budget: Independent Evaluation Office..............................................27 III. Evaluation of Prolonged Use of IMF Resources: Recommendations, Board Response, and Subsequent Follow-Up........................................................28 IV. Evaluation of the Role of the IMF in Recent Capital Account Crises: Recommendations, Board Response, and Subsequent Follow-Up........................32 V. Evaluation of Fiscal Adjustment in IMF-Supported Programs: Recommendations, Board Response, and Subsequent Follow-Up........................35 VI. Evaluation of Poverty Reduction Strategy Papers and the Poverty Reduction and Growth Facility: Recommendations, Board Response and Subsequent Follow-up .....................................................................................38 VII. Evaluation of the Role of the IMF in Argentina, 1991–2001: Recommendations, Board Response, and Subsequent Follow-Up........................40 VIII. Evaluation of IMF Technical Assistance ....................................................................42 IX. Evaluation of the IMF’s Approach to Capital Account Liberalization .......................45 X. Evaluation of IMF Support to Jordan, 1989–2004: Recommendations, Board Response, and Subsequent Follow-Up ..................................................................46

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XI. Evaluation of Financial Sector Assessment Program: Recommendations, Board Response, and Subsequent Follow-Up........................................................47 XII. Evaluation of the IMF’s Multilateral Surveillance: Recommendations, Board Response, and Subsequent Follow-Up........................................................50 XIII. Evaluation of the IMF and Aid to Sub-Saharan Africa and Follow-Up Matrix ..................................................................................................51

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Abbreviations APR Annual progress report BCP Basle Core Principles BSR Biennial Review of Surveillance CCB Committee on Capacity Building CIGI Centre for International Governance Innovation CSO Civil society ECG Evaluation Cooperation Group EPA Ex post assessment FAD Fiscal Affairs Department (IMF) FSA Financial Sector Assessment FSAP Financial Sector Assessment Program FSLC Financial Sector Liaison Committee FSSA Financial System Stability Assessment G-7 Group of Seven G-20 Group of Twenty GBS General budgetary support GDDS General Data Dissemination Standards GFSR Global Financial Stability Report HRD Human Resources Department (IMF) ICM International Capital Markets Department (IMF) IEG Independent Evaluation Group (World Bank) IEO Independent Evaluation Office (IMF) IMF International Monetary Fund IMFC International Monetary and Financial Committee IOSCO International Organization of Securities Commissions JSAN Joint Staff Advisory Note LTPE Long-Term Program Engagement MCM Monetary and Capital Markets Department (IMF) MD Managing Director MDG Millennium Development Goals MDRI Multilateral Debt Relief Initiative MFD Monetary and Financial Systems Department (IMF) MIP Management implementation plan MONA Monitoring arrangements MTS Medium-Term Strategy OECD Organization for Economic Cooperation and Development OTM Office of Technical Assistance Management (IMF) PPM Post-Program Monitoring PRGF Poverty Reduction and Growth Facility PRS Poverty Reduction Strategy PRSP Poverty Reduction Strategy Paper

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PSIA Poverty and Social Impact Analysis QEDS Quarterly External Debt Statistics ROSC Report on the Observance of Standards and Codes RSN Regional Strategy Note SSA Sub-Saharan Africa TA Technical Assistance TACSN TA Country Strategy Notes TAIMS TA Information Management System TOR Terms of reference WEO World Economic Outlook

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MESSAGE FROM THE DIRECTOR This fourth Annual Report describes the activities of the Independent Evaluation Office (IEO) during the year to April 30, 2007. This period saw the implementation of a number of initiatives aimed at addressing the recommendations made in 2006 by the External Evaluation Panel—charged with investigating whether the IEO is meeting its goals. These initiatives are discussed in Chapter I of this Annual Report. They, together with others on which the IEO, the Executive Board and IMF Management and staff are currently working, will help to strengthen further the effectiveness of the IEO. Chapter II of the Annual Report summarizes the findings and recommendations of the evaluation The IMF and Aid in Sub-Saharan Africa, which was discussed by the Board on March 5, 2007. A report for a second evaluation, IMF Exchange Rate Policy Advice, 1999–2005, was circulated on April 18, 2006 but was not discussed by the Board until after the cutoff point of April 30, 2007 for this Annual Report. Chapter III presents messages that are common to many of our evaluations. Important lessons arose from our two most recent evaluations that are particularly noteworthy as the IMF proceeds with the implementation of its Medium Term Strategy. Of most significance perhaps, is the finding of difficulties in the process of managing and achieving institutional change at the IMF. A combination of factors has prevented some policy decisions originating at the Executive Board, from being effectively implemented. Overcoming this problem will require strong leadership from Management and support from the Executive Board. Other cross cutting lessons include the need for greater clarity about the goals of various IMF initiatives and properly aligned external communications; the importance of strengthening partnerships with other IFIs and donors; and the desirability of clear metrics to facilitate the assessment of the impact of IMF’s policy advice. Finally, Chapter IV discusses ongoing projects and the process leading to the identification of topics of future evaluations. The Independent Evaluation Office is small by design and therefore to be effective, it must be very strategic. As our choice of topics and reports show and as set out in this annual report, I believe we are increasingly succeeding in this challenge.

Tom Bernes Director

Independent Evaluation Office

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I. OVERVIEW OF DEVELOPMENTS IN FINANCIAL YEAR 2007

This chapter discusses key developments in FY2007, including the institutional efforts at implementing the Board-endorsed recommendations made by an independent panel of experts charged with evaluating the activities of the IEO. Implementing recommendations from the external evaluation of the IEO

When the Independent Evaluation Office (IEO) was established in July 2001, it was envisaged that the IEO would be subject to periodic external evaluations.1 In 2005, an independent panel of experts was appointed and, in April 2006, the Executive Board discussed the panel’s report—henceforth, the External Evaluation Report.2 The report assessed whether the IEO was meeting its goal to (1) serve as a means to enhance the learning culture within the IMF; (2) strengthen the IMF’s external credibility; (3) promote greater understanding of the work of the IMF throughout its membership; and (4) support the Executive Board’s institutional governance and oversight responsibilities. During the Board discussion of the report, IMF Executive Directors agreed that the IEO had served the IMF well and had earned strong support across a broad range of stakeholders, and that the IMF continued to need an independent evaluation office to contribute to the institution’s learning culture and facilitate oversight and governance by the Board. In its most recent Communiqué, the IMFC reiterated its appreciation for the contributions of the IEO. At the same time, Directors also welcomed the report’s recommendations for further strengthening the IEO’s effectiveness, and agreed that a more focused and strategic orientation, together with strong support from the Board and Management, would help ensure the IEO’s continued usefulness and relevance. Significant progress was made during FY2007 in this area, particularly in the setting of rules or procedures for the scheduling of Board discussion of IEO reports, the monitoring of implementation of Board-endorsed IEO recommendations, and the IEO’s outreach and communications strategy. In late 2006, the Executive Board and Management agreed on a guideline stipulating that Board consideration of an IEO report should generally be scheduled within six weeks of its circulation to the Board, and that Executive Directors should receive any comments on the IEO report by Management and staff at least two weeks prior to the Board discussion. It was noted that, within the constraints within which Management and the Executive Board

1 Key information on the IEO such as its terms of reference, organization, and procedures, can be found in http://www.ieo-imf.org/about.

2 The evaluation report can be found at www.imf.org/external/np/pp/eng/2006/032906.pdf.

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operate, every effort would be made to ensure that this guideline is observed; should specific circumstances require a departure from the guideline, Management would explain the reasons to the Executive Board in a timely fashion following the consultation with the Chairman of the Evaluation Committee, who would also have an opportunity to present his views. The External Evaluation Report had recommended a more systematic approach for following up on and monitoring the implementation of IEO recommendations approved by the Board. To this end, in January 2007 the Executive Board approved a framework requiring that: • Soon after the discussion by the Executive Board of each IEO report, Management is

to provide the Board with a forward-looking implementation plan (MIP) for the recommendations endorsed by the Board.

• Management is to present the Board a periodic monitoring report on the state of implementation contained in the MIP.

It was agreed that the first periodic monitoring report will be prepared following the delivery of this Annual Report and that it will also review the implementation of recommendations made in past evaluations. As part of its efforts to follow up on the External Evaluation Report’s recommendations, the IEO revamped its outreach and communications strategy. It adopted a new logo for its communication and other public material, and strengthened communication channels beyond the evaluation reports. Most importantly, the IEO launched a new website—www.ieo-imf.org—prior to the 2007 Spring Meetings. The new website provides a more user-friendly interface with easy access to completed evaluations, issues papers for ongoing evaluations, Annual Reports, the IEO Work Program, and other IEO documentation. In addition, the IEO started a more active management of its e-mail subscriber database and initiated the publication of a biannual newsletter to its stakeholders. Additional work in response to the External Evaluation Report is being carried out within the IMF, including in the areas of human resources policy, the publication policy for IEO reports, and guidelines for the disclosure of information to the IEO. Budget and staffing

In FY2007 the budget was spent nearly in full (Appendix II), with the execution rate reaching over 99 percent of the approved budget (similar to the outturn for FY2006). In FY2007 the IEO employed 12½ regular staff (in full-time equivalent terms), five of whom were seconded from IMF staff; the use of consultants and contractual staff was equivalent to some 9.2 staff years. The budget approved for FY2008 stands at $4.6 million, a 2 percent nominal increase in line with Fund-wide guidance for offices (a cut in real terms of about 1¼ percent). The IEO will

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maintain 13 staff positions and further reduce discretionary expenditures by over 1½ percent (about 4½ percent in real terms). The work plan underlying the approved budget assumes, consistent with the experience to date, that the office will work on three evaluations at any point in time; however, the number of projects actually completed over a period of time will depend on the complexity and scope of the evaluations and budgetary resources. The budgetary reductions registered since FY2006, together with the medium-term (three-year) implications of the recently approved budget, will have a potentially significant impact on IEO resources going forward, with discretionary expenditures set to experience a large fall. Outreach activities

The IEO engages in external outreach activities to disseminate its evaluations findings to a wide audience. Various outreach events are organized to discuss each report after publication. To increase accessibility of the evaluation messages, a number of country case studies are translated into relevant languages as are report summaries.3

In the year to April 2007, the IEO participated in a number of outreach seminars and mid-pipeline workshops, often at the invitation of third-party organizers. These included a visit to Accra in late June 2006 to seek the views of the national authorities, donors and stakeholders on the IEO evaluation of IMF and Aid in Sub-Saharan Africa (SSA); meetings in Beijing and Shanghai to meet with country officials and other financial sector representatives as part of the evaluation of exchange rate policy; and a seminar in Singapore during the last Annual Meetings on “Strengthening IMF Surveillance”. A complete list of outreach activities can be found in Appendix 1.

II. RECENTLY COMPLETED EVALUATIONS

One evaluation was completed in FY2007—The IMF and Aid to SSA. A report for a second evaluation—The IMF’s Advice on Exchange Rate Policy—was circulated to Board but not yet discussed by the end of FY 2007. A description of the former’s main findings and recommendations is provided below. For the latter, a brief account is made of the main findings.4

A. The IMF and Aid to Sub-Saharan Africa

The IEO evaluated the IMF’s role and performance in the determination and use of aid to low-income countries in SSA. Using evidence from 29 SSA countries’ experience with the

3 A full list of IEO publications is available on the IEO website at www.ieo-imf.org/pub.

4 In its most recent Communiqué, the IMFC welcomed both evaluations.

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IMF’s Poverty Reduction and Growth Facility (PRGF) between 1999 and 2005, the evaluation found ambiguity and confusion about IMF policy and practice on aid and poverty reduction, both outside and inside the institution. Underlying these ambiguities, the report found differences of views among members of the Executive Board about what role the IMF should play in low-income countries. Management—along with the Board—should have done more to resolve these differences. How the differences are to be narrowed remains a central policy challenge for the institution. The overarching message of the evaluation is that the IMF should be clearer and more candid about what it has committed to do, and more assiduous, transparent, and accountable in implementing its commitments in low-income Africa.

Three longstanding criticisms of the IMF’s work in SSA provided a point of departure for the evaluation. The first is that IMF-supported programs have blocked the use of available aid to SSA through overly conservative macroeconomic programs. The second is that such programs have lacked ambition in projecting, analyzing, and identifying opportunities for the use of aid inflows to SSA countries, which may in turn have tempered donors’ actual provision of aid. The third is that IMF-supported programs have done little to address poverty reduction and income distributional issues despite institutional rhetoric to the contrary.

Board-approved policies underpinned the assessment framework used by the evaluation team in examining staff performance. Also relevant was Management’s translation of Board decisions into operational guidance to staff. IMF communications, through Management and senior staff speeches, press releases, articles, and correspondence with newspapers were germane as well. These communications constitute an important channel for articulating IMF positions and informing external audiences about what the IMF has undertaken to do; they create expectations against which IMF performance is judged externally.

Key findings

A recurring theme of the evaluation concerned the disconnect in external perceptions between the IMF’s rhetoric on aid and poverty reduction and what it actually did at the country level. Underlying this disconnect is a larger issue of attempted—but ultimately unsuccessful—institutional change. When the PRGF was introduced, it was meant to be more than a name change. It set out a new way of working, grounded in the PRS process, with programs based on specific country-owned measures geared to poverty reduction and growth, and an ambitious vision of the IMF’s role on the analysis and mobilization of aid, working in close partnership with the Bank. But in the face of a weakening consensus in the Board and a staff professional culture strongly focused on macroeconomic stability—and, most important, changes in Senior Management and a resulting lack of focused institutional leadership and follow-through—the IMF gravitated back to business as usual.

At the same time, country performance has improved in a number of SSA countries over the period—thanks in part to the advice and actions of the IMF, including through the HIPC

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Initiative and the Multilateral Debt Relief Initiative (MDRI), and in larger part to the actions of the countries themselves—and donor performance as well. In such cases, PRGF-supported macroeconomic program design has eased and become more accommodative of aid. The combination of improved country and donor performance and the associated adaptation of PRGF program design have materially improved SSA’s prospects for growth and poverty reduction.

The evaluation’s specific findings follow:

• PRGF-supported macroeconomic policies have generally accommodated the use of incremental aid in countries whose recent policies have led to high stocks of reserves and low inflation; in other countries additional aid was programmed to be saved to increase reserves or to retire domestic debt. Reserves in the 2–3 months of imports range were found to be the threshold for determining whether the increased aid should be used to expand the current account deficit or to increase reserves. The estimated inflation threshold for determining whether the country got to spend or save additional aid lies within the 5–7 percent range. These findings are consistent with Board-approved policy on the accommodation of aid and Management guidance to staff. However, they are not well communicated to the donor community nor to civil society. They help to explain why outside observers perceive the IMF as “blocking” the use of aid: PRGFs in countries with inflation above the threshold are likely to program the saving of at least part of additional aid.

• PRGFs have neither set ambitious aid targets nor identified additional aid opportunities—where absorptive capacity exceeds projected aid inflows. They have indirectly catalyzed aid—through their macroeconomic assessment and support for country efforts to improve the underlying macroeconomic environment and fiscal governance. Their medium-term aid forecasts have shown signs of adapting to the increased persistence of aid to SSA—after having been overly conservative at the start. But IMF staff have done little to analyze additional policy and aid scenarios and to share the findings with the authorities and donors. They have not been proactive in mobilizing aid resources, a topic where the Board remains divided and IMF policy—and operational guidance to staff—are unclear.

• Of the key features distinguishing the PRGF from the ESAF, fiscal governance has been the most systematically treated. These strong PRGF efforts on fiscal governance reflect clear, consistent, and continuing support from the Board; the issue’s centrality to the IMF’s core macro objectives through its links to budget execution; and effective Fund/Bank collaboration, grounded in professional capacity in both institutions. The consistent HIPC-related pressure from both Boards was a factor in PRGFs’ support for pro-poor budgets. Executive Directors’ support for Poverty and Social Impact Analysis (PSIA), though strong, has been more measured; the tailoring of PSIA to PRGF needs was initially stymied by unrealistic expectations of how Fund/Bank collaboration might work on the issue, with more recent efforts focused

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on in-house analysis. Weak Fund/Bank collaboration has also been a factor in the IMF’s failure to pay more attention to infrastructure-related growth and competitiveness linkages and their possible macroeconomic implications for the programmed spending and absorption of additional aid.

• IMF communications on aid and poverty reduction have contributed to the external impression that the IMF committed to do more on aid mobilization and poverty reduction analysis. The resulting disconnect has reinforced cynicism about, and distrust of, IMF activities in SSA and other low-income countries. It was especially large in the early years of the evaluation period, when Management communications stressed the two-way linkages between growth and poverty reduction. But it remains a concern even today, in the context of external communications on IMF support for alternative scenarios, MDG strategies, and the mobilization of aid that overstate what the IMF is doing in the context of PRGFs.

• The IMF has missed opportunities for communicating with a broader audience in SSA. The IMF has a network of resident representatives in SSA. Demands on their time have increased in recent years with the changing aid environment, and donors’ increased decentralization and use of budget support instruments. But staff resources and skills have constrained their ability to fully engage with local partners in this changing environment. Meanwhile, they remain a largely untapped source of information on what is happening on the ground among donors and civil society; their observations do not systematically inform institutional positions.

Recommendations

Going forward, the evaluation makes three recommendations for improving the coherence—actual and perceived—of the institution’s policies and actions relating to aid to SSA. They may also be relevant to several undertakings included in the Medium Term Strategy (MTS).

• The Executive Board should reaffirm and/or clarify IMF policies on the underlying performance thresholds for the spending and absorption of additional aid, alternative scenarios, the mobilization of aid, PSIA, and pro-poor and pro-growth budget frameworks. Based on these reaffirmations/clarifications, Management should provide clear guidance to staff on what is required, encouraged, permitted, and/or prohibited—including in working with the World Bank and other partners—and ensure effective implementation and results. The External Relations Department should ensure the consistency of institutional communications with Board-approved operational policies and IMF-supported operations.

• Management should establish transparent mechanisms for monitoring and evaluating the implementation of the clarified policy guidance. The IMF’s Ex-Post Assessments should explicitly cover staff actions and contributions to the implementation of existing and clarified policies. But in view of widespread external concerns about

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IMF staff accountability in SSA, a more periodic and transparent stocktaking across country programs is needed, possibly in the context of Board reviews of the PRGF—or in future reviews of the MTS.

• Management should clarify expectations—and resource availabilities—for resident representatives’ and missions chiefs’ interactions with local donor groups and civil society. It should monitor trends in the institution’s country-level operating environment, including for aid, periodically assessing the cross-country implications for IMF policies and strategies.

Executive Board discussion

The IMF Executive Board broadly supported the evaluation’s recommendations at its March meeting on the report. Executive Directors asked IMF staff to come back with specific and costed proposals on how to implement them.

B. IMF Exchange Rate Policy Advice, 1999–2005

The report of the evaluation of IMF Exchange Rate Policy Advice was sent to the Executive Board on April 18, 2007, but was not discussed until May 9—beyond the FY2007 covered by this report.5 The description that follows focuses on the evaluations’ main findings; next year’s Annual Report will present the report’s recommendations and the reactions of the Executive Board. The IMF was charged by its Articles of Agreement and a landmark 1977 Executive Board Decision to exercise surveillance over the international monetary system and members’ exchange rate policies. The overriding question addressed by the IEO’s evaluation of IMF Exchange Rate Policy Advice is whether, over the 1999–2005 period, the IMF fulfilled this core responsibility. The main finding is that the IMF was simply not as effective as it needs to be in both its analysis and advice, and in its dialogue with member countries. The IEO thus diagnoses an “effectiveness gap” in the IMF’s main line of business. The reasons for the IMF’s failing to fully meet its core responsibility are many and complex. Among these reasons are: a lack of understanding of the role of the IMF in exchange rate surveillance; a failure by member countries to understand and commit to their obligations to exchange rate surveillance; a strong sense amongst some member countries of a lack of even-handedness in surveillance; a failure by Management and the Executive Board to provide adequate direction and incentives for high quality analysis and advice on exchange rate issues; and the absence of an effective dialogue between the IMF and many—though certainly not all—of its member countries.

5 In its latest Communiqué the IMFC stressed the importance of the Board discussion of this report in informing their work leading to the update of the 1977 Decision on Surveillance over Exchange Rate Policies.

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To assess the quality of the IMF’s analysis and advice and the effectiveness of its policy dialogue with the authorities, the evaluation reviewed documents for the last two Article IV consultations for the entire membership through 2005, undertook a review of internal and Executive Board documents for 30 selected economies over the full review period, surveyed IMF staff and country authorities, and held a series of interviews with government officials, market participants, academics, IMF Executive Directors or their Alternates, and IMF staff. Main findings

The IMF’s role in exchange rate policy advice

The IMF’s role in exchange rate surveillance and related advice derives from formal obligations on both the IMF itself and on member countries. In practice, however, there are different perceptions about the exact nature of the IMF’s role. While reasonably clear at a broad legal level, there are gaps in the more specific guidance provided by the Board and with regard to many operational aspects of staff’s work—a situation complicated by the lack of firm professional consensus on many of the issues concerned. Survey evidence suggests that there is lack of clarity—among the authorities and staff—about various aspects of the IMF’s work in exchange rate surveillance, reflecting different expectations of what the IMF is supposed to do, as well as different perceptions about what it is doing. Such differences make it difficult for the IMF to discharge its responsibilities effectively, and for staff to secure the necessary Board support for some aspects of their responsibilities. The quality of staff analysis and advice The IEO’s review of a number of quality indicators found that progress had been made over the evaluation period, though not necessarily in the right areas of analysis or to the extent necessary to address the IMF’s “effectiveness gap.” The increasing number of FSAP exercises, for example, has aided staff knowledge of financial sector issues and the availability of data, improving the integration of such analyses into exchange rate surveillance. Analytical support for IMF advice on regime choice, however, has been weak, and country-specific implementation issues (including in the area of intervention policies) have too often been neglected by IMF staff. Despite increased attention to global imbalances and capital flows in recent years, multilateral considerations and related spillovers did not figure prominently in most bilateral surveillance discussions. In the IEO desk reviews, analytical depth has often been found lacking, with references to multilateral or regional developments not fully integrated into the staff report or supported by formal analysis. With policy advice being formulated largely on the basis of cyclical, country-level considerations that would provide “first best” recommendations for the country in isolation, interdependencies between individual country policies and the responses of other countries were not sufficiently integrated into staff analysis. As a result, scope for active policy coordination was insufficiently exploited; and a

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large group of both the authorities and staff agreed that treatment of policy spillovers remained a key area for improvement in IMF analysis. Policy dialogue and IMF impact

Policy dialogue between staff and the authorities is a key part of the IMF’s surveillance process; and evidence suggests that, while good in many cases, there are important questions about the effectiveness of this dialogue. Survey responses indicated that the large majority of the authorities generally perceived their discussions as two-way, with staff being seen as both respectful and willing to approach these discussions with candor. In interviews, while not all country officials were satisfied with the basis underlying staff advice, most nevertheless appreciated the opportunity to interact. However, the bigger issue appeared to be the tepid enthusiasm expressed privately in several countries, and resulting limits to the IMF’s ability to influence policy formulation. Overall, the IMF was too often considered by the authorities to have provided little value, particularly among the advanced economies and—increasingly—large emerging markets. By contrast, a majority of respondents from smaller emerging market and developing countries regarded IMF involvement as instrumental, particularly in the context of IMF programs. Reasons for ineffective policy dialogue and limited impact are manyfold. Specifically, they appear to have arisen from a lack of attention to country-specifics and insufficient analytical underpinnings in key areas (such as regime choice and policy spillovers). The authorities, in turn, have limited impact to the extent that sensitive policy issues have been taken “off the table.” In addition, data provision appears to have been a pervasive problem. The evaluation encountered cases that should have materially affected Executive Board discussions on exchange rate issues, and the IEO survey of IMF staff suggests that problems with data availability or quality may have impaired staff’s ability to conduct exchange rate analysis in about one-third of the IMF membership. The relative importance of other channels of IMF influence on policy formulation varies by country and context, but has remained limited overall. The influence of Executive Board discussions differed according to country grouping, with positive views particularly strong among program countries. No direct evidence was found of peer pressure from the Board or other authorities as a result of IMF advice, and a large minority of staff respondents in the IEO survey felt that the expectation of publication or concerns about their relationships with authorities tended to dilute coverage in staff reports—limiting the influence that can reasonably be exercised by the Board. Use of public channels of IMF influence has also been constrained. While generally welcoming staff analysis of topical exchange rate issues, authorities have often been wary of sparking a public debate that might unsettle markets.

III. CROSS-CUTTING ISSUES

A number of common messages emerging from earlier evaluations have been identified in previous IEO Annual Reports. The evaluations of the IMF and Aid in SSA and IMF Advice

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on Exchange Rate Policy highlight the need for improvements in managing the process of institutional change within the IMF. The former also stresses some of the messages that had been brought up by previous evaluations that focused on low-income country issues—Prolonged use of IMF Resources, The IMF’s Role in the PRSP and PRGF, Fiscal Adjustment in IMF-Supported Programs, and IMF Technical Assistance. These include the need to clarify the role of the IMF in various areas and the importance of strengthening partnerships with other IFIs and donors. The evaluation of the IMF Advice on Exchange Rate Policy also reached conclusions similar to those made in previous evaluations, such as the need to provide clear yardsticks to facilitate the assessment of the impact of IMF advice. These common messages are discussed below. The need to better manage institutional change at the IMF. The evaluation of the IMF and Aid to SSA points to gaps between Executive Board policy decisions and Management’s guidance to and follow-through with staff aimed to ensure that practices were adapted and aligned effectively with new directions. The evaluation found that the initially ambitious plans for the PRGF, in terms of analysis and mobilization of aid, were not followed through due in part to a loss of momentum. The Multilateral Surveillance evaluation pointed out that because of a “silo” structure at the IMF there was insufficient cooperation among departments, which, inter alia, hindered fuller integration between macroeconomic and financial sector surveillance (as well as between bilateral and multilateral surveillance). There is a need for greater clarity about the goals of various IMF initiatives and a properly aligned external communications policy. The evaluation of the IMF and Aid to SSA found that there was ambiguity and confusion about IMF work in low-income countries, a point that had also been highlighted by the evaluation of the IMF’s role in the PRSP and PRGF. The IMF had, in both its public pronouncements and publications, “overpromised” on what it could deliver to the PRSP process. Ultimately, the IMF failed to follow-through on the initiatives, such as those elaborated in the “key features of PRGF-supported programs,” and the PRSP did not inform PRGF program design as required for the new approach to be effective in poverty reduction. The exchange rate policy evaluation found that there is inadequate appreciation of the formal role of the IMF in exchange rate surveillance, and that this has a deleterious effect on the effectiveness of the IMF’s advice. The negative impact of insufficient clarity of the IMF’s role on the dialogue with member countries had also been voiced in the earlier evaluations The IMF and Recent Capital Account Crises and The IMF’s Approach to Capital Account Liberalization.

The IMF needs to strengthen partnerships with other IFIs and donors. The previous evaluations focusing on low-income countries, notably Fiscal Adjustment in IMF-Supported Programs, the IMF’s role in the PRSPs and the PRGFs, and IMF Technical Assistance, as well as the recent one on aid to SSA, have highlighted the importance of effective partnerships. They have noted that successful IMF engagement in low-income countries requires collaboration with other IFIs and donors, and in particular, the World Bank. Although the evaluation of the IMF and Aid in SSA has found areas where Fund-Bank

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collaboration has worked well—notably fiscal governance—World Bank inputs in many other areas, such as PSIA, have not been effectively sought and incorporated. It was suggested that an effective partnership between the IMF and the World Bank must be based on clear understandings of each institutions responsibilities for the delivery of inputs.

The absence of clear metrics impedes the assessment of the impact of IMF’s policy advice and whether the IMF is meeting its commitments to countries. Earlier evaluations have noted that while the IMF has responded rapidly to the demands of a changing global environment by introducing new products—notably the PRGF—there has been less emphasis on monitoring and assessing the IMF’s performance. The PRSP and PRGF evaluation attributed this to the failure to define what the IMF’s deliverables in the PRSP process were vis-à-vis those of other players. The recent Evaluation of the IMF and Aid to SSA has recommended that Executive Board should reaffirm/clarify IMF policies underlying performance thresholds for the spending and absorption of additional aid, mobilization of aid, alternative scenarios, PSIA, pro-poor and pro-growth budget frameworks.

IV. ONGOING PROJECTS AND THE FUTURE MENU OF TOPICS

The IEO is currently engaged in the preparation of three evaluation projects: Structural Conditionality in IMF-Supported Programs; Aspects of IMF Corporate Governance—Including the Role of the Board; and The IMF’s Interactions with its Member Countries.6 The first evaluation is expected to be completed before the 2007 Annual Meetings. The other two projects would likely be completed in FY2008 or the first half of FY2009. Two other evaluations added to the pipeline in FY 2006—The IMF’s Research Agenda and The IMF’s Approach to International Trade Issues—are expected to commence sometime in FY 2008—Table 1 shows the status of the various evaluations completed, in progress or in the work program of the IEO. In September/October 2007 the IEO will initiate a consultation process with the IMF’s Executive Board, Management and staff as well as external stakeholders to identify a set of topics to be added to the office’s pipeline in FY2009.

A. Structural Conditionality in IMF-Supported Programs

The use of structural conditionality by the IMF rose significantly in the 1980s and 1990s, as the IMF became more deeply involved in issues pertaining to growth, the institutional underpinnings of macroeconomic adjustment and the containment of financial vulnerabilities. The proliferation of structural conditions was met with strong criticism outside the IMF. It was argued that many structural conditions were not needed for the achievement of program goals, and that there was not a clear division of labor between the IMF and the World Bank. It was also argued that there were areas where the IMF had become too “ideological,” such as privatization and trade reforms, and that these conditions undermined the “ownership of policy making” by national authorities and that in some cases they infringed on the member 6 Issues Papers for the first two evaluations can be found in http://www.ieo-imf.org/pub/issues.html.

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country’s sovereignty. Largely in response to this criticism, the IMF launched in 2000 a “streamlining initiative” aimed at reducing the volume and scope of structural conditionality and issued new conditionality guidelines in 2002. The evaluation aims at answering two broad sets of questions: (i) how effective has structural conditionality been at promoting structural change; and (ii) what has been the effect of the streamlining initiative and the 2002 Conditionality Guidelines. On the first question, the evaluation examines how compliance with conditionality varies across sectors and with country circumstances. It then addresses the question of whether conditionality has been conducive to reform and how this is related to its design. As for the streamlining initiative and the 2002 Conditionality Guidelines, the evaluation mainly examines how they affected the number and sectoral composition of conditions. To address these questions the evaluation did statistical analysis of data from the PDR database for monitoring arrangements (MONA) for all programs approved in 1995-2004, which included 6,500 Structural Conditions. To explore design and effectiveness issues, 43 case studies were prepared for countries with arrangements between 1999 and 2004—including a subset of 13 in-depth studies, of which 5 entailed visits to the countries. These programs represent a fairly large fraction of the 102 programs approved during that period, and account for 1,567 conditions out the 3,652 conditions in those programs. Along with a study of trends and patterns of SC based on MONA, the impact of the streamlining initiative was reviewed through in-depth studies of the documentation submitted to the Board as well as Greys, Minutes, and Summing ups, for 10 programs approved in 2004 (4 SBAs and 6 PRGFs), and an additional 8 PRGFs approved in 2005. A Staff survey and focus groups with staff involved in programs over the past 5 years examined their views of streamlining initiatives, program design and IMF-WB cooperation. Finally, the views of the authorities on various aspects of program design were canvassed during country visits or through teleconferencing.

B. Aspects of IMF Corporate Governance—Including the Role of the Board

This evaluation will review the IMF’s governance arrangements, i.e., the institutional structure and the formal and informal relationships that govern the IMF’s activities and decision-making. In the six decades since its founding, the IMF has seen important changes in its membership and roles, but it is often claimed that its governance arrangements have not kept up with these changes. For example, critics have argued that the Board is too absorbed in micro-management to provide effective oversight and strategic guidance. They have also raised concerns about unclear lines of accountability and about the lack of transparency in decision-making and in the selection of the Managing Director (MD). The evaluation will address the validity of some of these criticisms by focusing on the IMF’s efficacy, efficiency, voice and accountability—the core issues of governance that seem most relevant to these concerns. It will assess the degree to which existing governance arrangements at the IMF are

20

consistent with widely-accepted principles of good governance, and it will seek to identify areas where they can be strengthened to help it better fulfill its mandate. The evaluation will focus primarily on the relationships between Management, the Executive Board, and the IMFC—the bodies are at the center of the IMF’s governance. Issues related to the Board of Governors, staff, and country groupings will be covered in the context of their interactions with the bodies mentioned above. The evaluation will not address issues of voting power or the ownership structure of the IMF, as these are currently under active consideration. The evaluation proposes to compare actual governance practices with three standards. First, governance practices will be compared against the arrangements set in the Articles of Agreement and other IMF documents. The second comparison will be with the governance structures and practices of other inter-governmental organizations. These are probably the most closely comparable organizations to the IMF, but they may not necessarily embody best practice. The third comparison will be against principles of good governance developed in the private and public sectors, which would be adapted to make them relevant to the IMF. Together, these three standards for comparison should provide a robust set of insights, even if each of them on its own would have serious weaknesses as a benchmark for IMF governance. The evaluation will be based on several building blocks which, together with a series of surveys, will inform a chapeau report with the main findings and recommendations. The building blocks will include a detailed description of the current IMF governance and its legal authorizing environment, a historical overview of the evolution of IMF governance since its inception, comparisons of the IMF’s governance arrangements with those in a sample of inter-governmental organizations that share some functional commonalities with the IMF and with organizations in the public and private sectors. A series of in-depth case studies will be prepared to exemplify how key governance functions, e.g., strategic thinking, policy implementation, and oversight and accountability, are performed in practice.

C. The IMF’s Interactions with its Member Countries

The effectiveness of the IMF depends in large part on a successful relationship between the IMF and its member countries. The IMF comprises the Executive Board, Management, and staff, and while most of the interaction with member countries takes place between the staff and the country authorities, messages delivered by the Executive Board and other channels of interaction have become increasingly important in recent years. In particular, greater efforts have been made to establish contacts between staff (either headquarters-based or resident representatives) and non-government institutions (parliamentarians, civil society, market participants, the press, etc.) in member countries. The evaluation would focus on how the relationship between staff and country authorities is working, but would also investigate how other channels of contact have affected that key relationship.

21

A starting point would be to establish how well the nature of the relationship is understood by various parties, including an understanding of the appropriate interactions given the unique set of rights and obligations inherent in IMF membership. Thereafter the study would examine the nature of the interactions. In some cases the relationship is perceived to be working very well and the study would attempt to identify underlying best practices, including why some regions have been more receptive to the IMF’s efforts. In other cases there is frequent criticism that the IMF too often conveys advice and views to country authorities without adequately taking account of country circumstances, or without listening carefully enough to the views of the authorities. As a result, critics contend, the IMF does not form an accurate assessment of the true needs and priorities of the membership, or, even when broadly correct, is insufficiently specific to be helpful. It thereby misses opportunities to be effective, or, even worse, misdiagnoses problems or recommends inappropriate policy advice.7

A second type of criticism is that even when the IMF’s views are carefully considered and well worth listening to, they are conveyed in a way that is unlikely to be effective. Either the written documents are too long and inaccessible to be widely used, or contacts are not made with sufficiently senior officials, who, in some instances, are simply unaware or misinformed about the IMF’s purpose and the nature of its activities. Relatedly, it is sometimes claimed, the IMF, while being much more transparent in recent years, has not proactively used the opportunities to shape opinion in member countries that could facilitate debate and reform of economic policies.

The study would rely on various sources, including (i) a perception survey of senior officials in member countries and, in a sample of countries; (ii) interviews with officials as well as with parliamentarians, representatives of the private sector and nongovernmental organizations; and (iii) a survey of relevant staff, Management, and Executive Directors. Based on the views of country authorities and others, such a project could evaluate whether the IMF’s engagement with member countries could be more effective. It would examine aspects of IMF country operations across a wide array of instruments, including program relationships, Article IV consultations, and technical assistance and training, and the modalities of interaction, including through missions, resident representatives, and communication with headquarters. The evaluation would attempt to assess how well the IMF’s instruments and modalities of operation are aligned with the needs of policymakers, and how well the relationship with member countries is managed.

7 Under this type of criticism falls charges that the IMF is arrogant in its views; adopts a one-size fits all approach to problems that are diagnosed in Washington; adopts the latest policy priorities of key members or donors, rather than those of the country it should be advising; or is oblivious to the political and technical constraints that are critical in designing and implementing policies.

22

D. The IMF’s Research Agenda

Seven years ago, a group of independent experts evaluated the IMF’s economic research activities.8 At that time, the Executive Board agreed with the group’s finding that there was “substantial room for improvement in the overall quality of the IMF’s research.” Among other conclusions, Directors endorsed the recommendation that the mix of research conducted at the IMF would need to be directed more to areas where it could add the most value and agreed that it could be integrated to a greater extent into policy work—an assessment that has also been shared by external critics of the IMF. The evaluation would be a follow up exercise and look at two areas.

• First, the evaluation would examine the way in which research topics are selected and priorities imposed across the IMF, and the extent to which the recommendation has been carried out to direct research more to areas where it could add the most value and be better integrated into policy work. In order to do this, an analysis of the research conducted by all departments in the IMF would be undertaken, using as a starting point the work performed by the existing interdepartmental Research Committee. The evaluation would attempt to identify which pieces of research had been particularly relevant and influential for the country and policy work of the IMF. In addition, a survey of staff and country officials would try to elicit whether some topics could have received greater priority. Given the attempt to streamline and focus IMF activities in recent years, and to seek ways to save costs—issues that will be of even greater importance in the years to come—the evaluation would explore the extent to which decisions on research topics are guided by the opportunities to rely on research conducted outside the IMF, either at other institutions such as the World Bank and the OECD, or in academia.

• Second, the evaluation will investigate aspects of the quality (as opposed to the scope and relevance) of IMF research. The process by which IMF research is supervised and vetted would be examined. The views on a sample of research would be sought from a panel of external experts. Issues such as the degree of innovation, and the consistency with first best methodology would be studied.

E. The IMF’s Approach to International Trade Issues

A stated purpose of the IMF is to facilitate the expansion and balanced growth of international trade.9 A recent internal staff review of the “IMF Work on Trade”10 concluded that the IMF has consistently advocated open trade regimes as a means to improve economic 8 See www.imf.org/external/pubs/ft/extev/res/index.htm.

9 See Articles of Agreement of the IMF available at www.imf.org/external/pubs/ft/aa/aa.pdf.

10 See www.imf.org/external/np/pp/eng/2005/020705.htm.

23

efficiency, combat rent-seeking and corruption, and promote income growth. While providing a broad overview of the IMF's work on trade policy, including conditionality, the internal review did not seek to address far-reaching questions relating to the appropriateness and effectiveness of the IMF’s advice on trade reforms. During the review’s discussion at the Board, directors generally agreed that it would be desirable to conduct case studies on the impact and design of trade policy reforms recommended by the IMF. They considered such studies helpful for drawing lessons for future country-specific policy advice and program design.

The IMF’s approach to trade has always drawn substantial criticism. According to critics, (i) IMF-supported trade liberalization has been too fast, (ii) programs have not included appropriate social safety nets for affected vulnerable parts of the population, (iii) IMF advice on trade liberalization has ignored market imperfections in domestic and world markets, (iv) the IMF has failed to take into account the impact of tariff reductions on the revenue base and fiscal sustainability, (v) trade conditionality has been driven by the agenda of developed country shareholders in the IMF, (vi) IMF requirements to liberalize unilaterally have decreased program countries’ bargaining power in the multilateral negotiations, and/or (vii) the IMF has been too soft on tariffs and non-tariff barriers in industrial countries as well as on other policies of industrial countries that amplified global trade imbalances.

The evaluation would entail in-depth case studies of program, surveillance, and technical assistance activities focusing on IMF involvement in trade reforms and their impact. It would assess the quality and effectiveness of the IMF’s advice at country, regional, and multilateral levels, as well as on global trade imbalances. It would also look at the IMF’s coordination with other organizations such as the World Trade Organization, the World Bank, the United Nations Development Program, and the United Nations Conference on Trade and Development (all of which have their own respective mandates in the area of trade). Finally, the evaluation would include the IMF’s contribution to the work of the Integrated Framework since its inauguration in October 1997. The evaluation would complement the evaluation of the World Bank’s trade policy advice carried out last year by the Bank’s Independent Evaluation Group.11

11 See http://www.worldbank.org/ieg/trade/report.html.

24

Table. Completed and Ongoing IEO Work Program

Project Status 1/

Initial round of evaluation projects Prolonged Use of IMF resources Completed (September 2002) The IMF and Recent Capital Account Crises (Indonesia, Korea,

Brazil) Completed (May 2003)

Fiscal Adjustment in IMF-Supported Programs Completed (August 2003)

Additions to Work Program 2/ FY2004

The IMF and Argentina, 1991-2001 Completed (July 2004) Poverty Reduction Strategy Papers/Poverty Reduction

Growth Facility Completed (July 2004) IMF Technical Assistance Completed (January 2005)

FY2005 IMF’s Approach to Capital Account Liberalization Completed (April 2005) IMF Assistance to Jordan Completed (October 2005) Financial Sector Assessment Program Completed (November 2005) Multilateral Surveillance Completed (February 2006)

FY2006 IMF Structural Conditionality Later 2007 The IMF and Aid in Sub-Saharan Africa Completed (January 2007) IMF Advice on Exchange Rate Policy Completed (May 2007)

FY2007 Aspects of IMF Corporate Governance In progress IMF's Interactions with its Member Countries In progress IMF’s Research Agenda To commence in FY2008-09 IMF’s Approach to International Trade Issues To commence in FY2008-09

1/ The date refers to the time the completed report was, or is expected to be, circulated to the Evaluation Committee of the Executive Board.

2/ Refers to the fiscal year in which the projects were first added to the work program.

25

APPENDIX I. IEO DIRECTOR’S VISITS AND OTHER OUTREACH ACTIVITIES12 May 5–11, 2006, Paris, France IEO Director’s attendance at GBS dissemination conference May 11–14, 2006, London, United Kingdom IEO Director’s consultations with authorities, academics and CSOs on the IEO work program. June 7–8, 2006, Bellagio, Italy Seminar sponsored by Center for Global Development June 8–10, 2006, Ottawa and Waterloo, Canada IEO Director’s attendance at Centre for International Governance Innovation (CIGI) workshop and consultations with authorities on IEO role and activities June 20–23, 2006, Accra, Ghana To seek views of authorities, donors, and stakeholders on the IEO evaluation of IMF and Aid to Sub-Saharan Africa and other IEO activities June 24–27, 2006, Johannesburg, South Africa To meet with authorities and financial sector participants on the IEO evaluation of exchange rate policy June 27–30, 2006, Maputo, Mozambique To seek views of authorities, donors, and stakeholders on the IEO evaluation of IMF and Aid to Sub-Saharan Africa and other IEO activities July 16–18, 2006, Tokyo, Japan To meet with authorities, financial sector participants, media and think tanks on IEO evaluation of exchange rate policy July 19–22, 2006, Hong Kong SAR, China To meet with authorities and financial sector participants, media, and think tanks on IEO evaluation of exchange rate policy August 26–31, 2006, Beijing and Shanghai, China To meet with authorities and other financial sector participants on IEO evaluation of exchange rate policy

12 Excluding travel of evaluation teams on specific projects.

26

September 14–19, 2006, Singapore, Singapore Annual Meetings and IEO seminar at IMF/World Bank Program of Seminars entitled “Strengthening IMF Surveillance” October 17–18, 2006, Berlin, Germany InWEnt Policy Workshop October 19–20, 2006, Paris, France IEO Director’s consultations with authorities on IEO role and activities, and evaluation of IMF Advice on Exchange Rate Policy. November 13–17, 2006, Paris, France ECG and DAC evaluation meetings December 9–10, 2006, Cairo, Egypt To meet with authorities on the IEO evaluation of exchange rate policy December 11–14, 2006, Riyadh, Saudi Arabia To meet with authorities on the IEO evaluation of exchange rate policy March 23, 2007, Tunis, Tunisia IEO outreach on evaluation of “The IMF and Aid to Sub-Saharan Africa” March 26–27, 2007, Berlin, Germany Joint IEO/InWent outreach seminar March 27–28, 2007, Geneva, Switzerland Meetings with officials of international organizations on IEO evaluation of corporate governance March 28–31, 2007, Paris, France IEO outreach at OECD/DAC and EUO April 2–3, 2007, London, United Kingdom IEO outreach at ODI April 13, 2007, Washington, D.C., USA IEO outreach with NGOs April 13, 2007, Washington, D.C., USA Event with African Governors

27

App

endi

x II.

Adm

inis

trat

ive

Bud

get:

Inde

pend

ent E

valu

atio

n O

ffice

(In

cur

rent

U.S

. dol

lars

)

FY20

06

FY

2007

FY20

08

Bud

get

Out

turn

Bud

get 1

/ O

uttu

rn

A

ppro

ved

Bud

get

To

tal

4,45

9,85

04,

429,

162

4,

530,

786

4,50

2,68

0

4,62

1,40

2

Reg

ular

sta

ff al

loca

tion

2,

902,

420

2,84

0,95

2

3,07

4,60

02,

974,

050

3,

182,

800

D

iscr

etio

nary

Bud

get

1,55

7,43

01,

588,

210

1,

456,

186

1,52

8,63

0

1,43

8,60

2

C

ontra

ctua

l ser

vice

s (in

cl.

over

time)

89

1,20

31,

016,

522

82

5,06

71,

022,

147

81

5,10

4

B

usin

ess

trave

l and

sem

inar

pr

ogra

m

523,

000

476,

166

48

3,29

942

3,02

4

477,

463

P

ublic

atio

ns

131,

227

86,0

84

135,

820

66,8

44

134,

180

O

ther

fung

ible

bud

gets

12

,000

9,43

8

12,0

0016

,615

11

,855

1/ F

Y20

07 b

udge

t exc

lude

s tra

nsfe

r of $

11,5

80 fr

om F

AD

not

par

t of o

rigin

al b

udge

t fro

m O

BP.

28

APP

EN

DIX

III.

EV

AL

UA

TIO

N O

F PR

OL

ON

GE

D U

SE O

F IM

F R

ESO

UR

CE

S: R

EC

OM

ME

ND

AT

ION

S, B

OA

RD

RE

SPO

NSE

, A

ND

SU

BSE

QU

EN

T F

OL

LO

W-U

P 1/

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 2/

St

aff T

ask

Forc

e R

ecom

men

datio

ns

and

Boa

rd R

espo

nse

3/

Follo

w-U

p 4/

Inst

itutio

nal a

rran

gem

ents

and

ratio

nale

for I

MF

invo

lvem

ent

Ado

pt a

n op

erat

iona

l def

initi

on o

f pro

long

ed

use,

as a

trig

ger f

or e

nhan

ced

“due

dili

genc

e”

(i.e.

, ex

post

ass

essm

ents

and

forw

ard-

look

ing

cons

ider

atio

n of

“ex

it” st

rate

gies

). Th

e cr

iterio

n co

uld

dist

ingu

ish

betw

een

gene

ral

and

conc

essi

onal

reso

urce

s.

Dire

ctor

s saw

mer

it in

a d

efin

ition

to tr

igge

r gr

eate

r due

dili

genc

e. M

any

Dire

ctor

s not

ed

that

a d

efin

ition

shou

ld c

aref

ully

diff

eren

tiate

lo

w in

com

e-co

untri

es re

lyin

g on

con

cess

iona

l re

sour

ces.

Seve

ral D

irect

ors c

autio

ned

that

a

defin

ition

shou

ld n

ot b

e in

terp

rete

d as

cre

atin

g a

new

cla

ssifi

catio

n of

mem

ber c

ount

ries a

nd

that

ther

e sh

ould

not

be

an a

prio

ri ju

dgm

ent

that

pro

long

ed u

se n

eces

saril

y im

plie

s a

prob

lem

.

For g

ener

al re

sour

ces c

ases

, pro

long

ed u

sers

sh

ould

be

defin

ed a

s cou

ntrie

s tha

t hav

e sp

ent

seve

n or

mor

e of

the

last

ten

year

s und

er st

and-

by o

r ext

ende

d ar

rang

emen

ts, i

nclu

ding

pr

ecau

tiona

ry a

rran

gem

ents

, whi

ch w

as th

e de

finiti

on u

sed

in th

e IE

O e

valu

atio

n.

For c

once

ssio

nal r

esou

rces

, enh

ance

d as

sess

men

t and

stra

tegy

pro

cedu

res w

ould

be

trigg

ered

afte

r a c

ount

ry h

as g

one

thro

ugh

two

mul

ti-ye

ar a

rran

gem

ents

und

er c

once

ssio

nal

faci

litie

s.

Def

initi

on a

dopt

ed. T

he B

oard

revi

ewed

the

polic

y on

lo

nger

term

pro

gram

eng

agem

ent (

LTPE

) in

May

200

6. D

irect

ors a

gree

d to

mak

e tw

o ch

ange

s in

the

LTPE

def

initi

on. F

irst,

all m

embe

rs w

ill n

ow b

e co

nsid

ered

as h

avin

g LT

PE if

they

hav

e sp

ent a

t lea

st

seve

n ou

t of t

he la

st te

n ye

ars u

nder

pro

gram

s su

ppor

ted

by th

e IM

F. S

econ

d, ti

me

spen

t und

er

prec

autio

nary

arr

ange

men

ts th

at re

mai

n un

draw

n do

es

not c

ount

tow

ard

LTPE

, par

alle

l to

the

treat

men

t of

mem

bers

usi

ng th

e Po

licy

Supp

ort I

nstru

men

t. Se

mi-a

nnua

l rep

ortin

g of

the

inci

denc

e of

pro

long

ed

use

is ta

king

pla

ce o

n th

is b

asis

.

Mak

e gr

eate

r eff

orts

to ju

dge

whe

ther

co

untri

es a

re re

ady

to im

plem

ent c

redi

ble

prog

ram

s and

be

mor

e se

lect

ive

in e

xten

ding

fin

anci

al su

ppor

t. U

se o

f IM

F re

sour

ces

prop

osal

s sho

uld

cont

ain

an e

xplic

it an

d fr

ank

asse

ssm

ent o

f the

read

ines

s of b

orro

wer

s to

impl

emen

t pro

gram

s.

Dire

ctor

s sup

porte

d th

e re

com

men

datio

n th

at

staf

f pap

ers b

e m

ore

cand

id in

ass

essi

ng

inst

itutio

nal c

apac

ity a

nd o

wne

rshi

p. T

hey

emph

asiz

ed th

e im

porta

nce

of e

xpla

inin

g do

wns

ide

risks

and

avo

idin

g an

y bi

as to

war

d ov

erop

timis

m. I

mpl

emen

tatio

n of

initi

ativ

es

rela

ting

to o

wne

rshi

p w

ould

be

an o

ngoi

ng

proc

ess,

som

etim

es in

volv

ing

diff

icul

t ju

dgm

ents

, in

parti

cula

r reg

ardi

ng m

ore

sele

ctiv

ity in

the

prov

isio

n of

IMF

finan

cial

as

sist

ance

, whe

re st

rong

cou

ntry

ow

ners

hip

is

lack

ing.

A n

umbe

r of D

irect

ors s

tress

ed th

at

grea

ter s

elec

tivity

shou

ld n

ot im

ply

givi

ng u

p on

diff

icul

t cas

es.

Effo

rts to

impr

ove

prog

ram

des

ign

shou

ld b

e ac

com

pani

ed b

y gr

eate

r sel

ectiv

ity in

ex

tend

ing

IMF

finan

cial

supp

ort,

base

d in

par

t on

the

asse

ssm

ent o

f im

plem

enta

tion

capa

city

an

d ow

ners

hip.

Prin

cipa

l cas

e-by

-cas

e fo

llow

-up

will

be

thro

ugh

the

inte

rnal

revi

ew p

roce

ss a

nd B

oard

revi

ew o

f in

divi

dual

cou

ntry

cas

es, w

ith p

erio

dic

asse

ssm

ents

as

part

of th

e re

gula

r con

ditio

nalit

y re

view

.

Aim

to p

rovi

de th

e in

tern

atio

nal c

omm

unity

w

ith c

redi

ble

alte

rnat

ives

to IM

F le

ndin

g ar

rang

emen

ts a

s a c

ondi

tion

for o

ther

off

icia

l flo

ws.

Dire

ctor

s not

ed th

at it

wou

ld b

e de

sira

ble

to

deve

lop

cred

ible

alte

rnat

ives

to in

dica

te to

the

outs

ide

wor

ld th

e IM

F’s a

ppro

val o

f mem

bers

’ po

licie

s and

look

ed fo

rwar

d to

a d

iscu

ssio

n of

th

e si

gnal

ing

func

tion.

The

y no

ted

need

for

care

in p

repa

ratio

n an

d co

nsul

tatio

n, in

clud

ing

with

the

Paris

Clu

b.

The

IMF

shou

ld h

ave

effe

ctiv

e w

ays t

o si

gnal

its

vie

ws o

n po

licie

s to

a co

untry

’s d

onor

s and

cr

edito

rs o

utsi

de a

n IM

F-su

ppor

ted

prog

ram

. A

rticl

e IV

staf

f rep

orts

, Pub

lic In

form

atio

n N

otic

es a

nd “

asse

ssm

ent l

ette

rs”

prov

ide

impo

rtant

veh

icle

s. Th

is to

pic

shou

ld b

e ta

ken

furth

er in

the

revi

ew o

f IM

F ro

le in

low

-in

com

e co

untri

es. D

onor

s’ a

nd o

ther

lend

ers’

co

ncer

ns a

bout

bur

den-

shar

ing

shou

ld n

ot le

ad

to in

appr

opria

te le

ndin

g de

cisi

ons b

y th

e IM

F.

The

issu

e of

sign

alin

g w

as ta

ken

up in

the

Boa

rd’s

su

bseq

uent

dis

cuss

ion

on S

igna

ling

Ass

essm

ents

of

Mem

bers

Pol

icie

s, al

thou

gh it

did

not

add

ress

all

the

rele

vant

issu

es b

roug

ht u

p in

the

eval

uatio

n. T

his

revi

ew re

sulte

d in

the

disc

ontin

uatio

n of

Sta

ff

Mon

itore

d Pr

ogra

ms f

or si

gnal

ing

purp

oses

. The

B

oard

dis

cuss

ed th

e is

sue

of si

gnal

ing

on se

vera

l oc

casi

ons i

n 20

04–0

5, c

ulm

inat

ing

in th

e es

tabl

ishm

ent i

n O

ctob

er 2

005

of th

e Po

licy

Supp

ort

Inst

rum

ent,

whi

ch p

rovi

des p

olic

y su

ppor

t and

en

dors

emen

t to

low

-inco

me

coun

tries

that

do

not n

eed

IMF

finan

cing

and

who

se p

olic

ies m

eet t

he st

anda

rds

of u

pper

cre

dit t

ranc

he c

ondi

tiona

lity.

As o

f Ju

ne 3

0,

2007

, fiv

e PS

Is w

ere

in p

lace

(Cap

e V

erde

, M

ozam

biqu

e, N

iger

ia, T

anza

nia,

and

Uga

nda)

.

29

APP

EN

DIX

III.

EV

AL

UA

TIO

N O

F PR

OL

ON

GE

D U

SE O

F IM

F R

ESO

UR

CE

S: R

EC

OM

ME

ND

AT

ION

S, B

OA

RD

RE

SPO

NSE

, A

ND

SU

BSE

QU

EN

T F

OL

LO

W-U

P (CO

NT

INU

ED

) 1/

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 2/

St

aff T

ask

Forc

e R

ecom

men

datio

ns

and

Boa

rd R

espo

nse

3/

Follo

w-U

p 4/

Prog

ram

s for

iden

tifie

d pr

olon

ged

user

s sho

uld

incl

ude

an e

xplic

it ex

it st

rate

gy.

Dire

ctor

s stre

ssed

the

desi

rabi

lity,

whe

re

appr

opria

te, o

f the

ela

bora

tion

of c

orre

ctiv

e m

easu

res a

s par

t of a

con

scio

us "

exit

stra

tegy

."

The

prop

osed

ass

essm

ent a

nd st

rate

gic

plan

ning

exe

rcis

es (s

ee b

elow

) wou

ld in

clud

e an

exp

licit

"exi

t stra

tegy

" w

here

app

ropr

iate

for

endi

ng p

rolo

nged

use

. An

elem

ent o

f suc

h a

stra

tegy

wou

ld in

clud

e he

lpin

g co

untri

es w

iden

th

eir o

ptio

ns fo

r ext

erna

l fin

anci

ng.

Polic

y ad

opte

d, w

ith a

n ex

plic

it de

finiti

on o

f pr

olon

ged

use

as th

e tri

gger

(see

abo

ve).

Intro

duce

a d

iffer

entia

ted

rate

of c

harg

e fo

r pr

olon

ged

user

s as a

sign

alin

g de

vice

. Th

e B

oard

did

not

supp

ort a

diff

eren

tiate

d ra

te

of c

harg

e fo

r pro

long

ed u

sers

. N

ot re

com

men

ded

Rec

omm

enda

tion

reje

cted

. No

follo

w-u

p ne

cess

ary.

Prog

ram

des

ign

Spec

ific

oper

atio

nal p

roce

dure

s sho

uld

be

deve

lope

d to

ens

ure

grea

ter e

mph

asis

in

prog

ram

des

ign

on th

e do

mes

tic p

olic

y fo

rmul

atio

n pr

oces

s, in

ord

er to

max

imiz

e ow

ners

hip:

(1) m

odify

pro

cedu

res t

owar

d th

e au

thor

ities

hav

ing

the

initi

al re

spon

sibi

lity

for

prop

osin

g a

refo

rm p

rogr

am; (

2) e

ncou

rage

a

proc

ess w

here

by c

ore

prog

ram

ele

men

ts a

re

subj

ect f

irst t

o a

polic

y de

bate

with

in th

e m

embe

r's o

wn

polit

ical

inst

itutio

ns;

(3) s

urve

illan

ce sh

ould

hel

p cr

eate

a b

ette

r un

ders

tand

ing

of w

hat w

ould

be

expe

cted

if a

pr

ogra

m sh

ould

bec

ome

nece

ssar

y; (4

) mor

e ex

plic

it di

scus

sion

of m

ajor

unc

erta

intie

s and

ho

w p

olic

ies w

ould

be

adap

ted

if th

ings

turn

ou

t diff

eren

tly.

Dire

ctor

s bro

adly

agr

eed

with

the

reco

mm

enda

tions

. Man

y D

irect

ors

unde

rsco

red

that

they

shou

ld b

e se

en a

s par

t of

a br

oade

r eff

ort t

o en

sure

gre

ater

eff

ectiv

enes

s of

pro

gram

s. Th

ey sa

w a

nee

d fo

r con

tinui

ng

effo

rt to

impr

ove

prog

ram

des

ign,

whi

ch

wou

ld d

raw

on

the

fres

h pe

rspe

ctiv

es p

rovi

ded

by th

e re

port.

IEO

's re

com

men

datio

ns w

ere

cons

iste

nt w

ith

less

ons e

mer

ging

from

rece

nt c

ount

ry

expe

rienc

e. T

he re

vise

d co

nditi

onal

ity

guid

elin

es, 5

/ inc

orpo

rate

man

y of

the

reco

mm

enda

tions

and

pro

vide

the

appr

opria

te

vehi

cle

to p

ut th

em in

to p

ract

ice.

The

inte

rnal

200

5 re

view

of t

he c

ondi

tiona

lity

guid

elin

es fo

und

that

subs

tant

ial c

hang

es h

ave

been

m

ade

in th

e di

rect

ion

of in

crea

sing

nat

iona

l ow

ners

hip,

and

mad

e su

gges

tions

to e

nabl

e fu

rther

pr

ogre

ss in

this

dire

ctio

n. K

ey c

ross

-cou

ntry

find

ings

w

ere

also

ass

esse

d in

the

revi

ew o

f ex

post

as

sess

men

ts (E

PAs)

dis

cuss

ed b

y th

e B

oard

in M

ay

2006

.

Prog

ram

s sho

uld

plac

e m

ore

emph

asis

on

key

inst

itutio

nal c

hang

es a

nd st

reng

then

ing

impl

emen

tatio

n ca

paci

ty.

Dire

ctor

s und

ersc

ored

the

impo

rtanc

e of

in

crea

sing

the

effe

ctiv

enes

s of t

echn

ical

as

sist

ance

in su

ppor

t of i

nstit

utio

nal c

apac

ity

build

ing.

The

Task

For

ce re

com

men

ded

that

ong

oing

ef

forts

to a

ddre

ss th

ese

issu

es in

ope

ratio

nal

wor

k sh

ould

be

enric

hed

by fu

ture

wor

k on

pr

ogra

m d

esig

n, in

clud

ing

rese

arch

eff

orts

, fo

cusi

ng o

n lin

ks b

etw

een

stru

ctur

al re

form

s an

d pr

ogra

m o

bjec

tives

.

Reg

ular

con

ditio

nalit

y re

view

s will

mon

itor p

rogr

ess.

The

Aug

ust 2

005

Rev

iew

of P

RG

F Pr

ogra

m D

esig

n ex

amin

ed th

e ro

le o

f ins

titut

ions

in su

ppor

ting

grow

th

and

avoi

ding

cris

es. T

he M

ediu

m-T

erm

Stra

tegy

em

phas

izes

thre

e m

acro

-crit

ical

are

as fo

r Fun

d en

gage

men

t in

low

-inco

me

coun

tries

: (1)

fina

ncia

l se

ctor

dev

elop

men

t; (2

) pub

lic fi

nanc

ial m

anag

emen

t re

form

s; a

nd (3

) tra

de re

form

s.

30

APP

EN

DIX

III.

EV

AL

UA

TIO

N O

F PR

OL

ON

GE

D U

SE O

F IM

F R

ESO

UR

CE

S: R

EC

OM

ME

ND

AT

ION

S, B

OA

RD

RE

SPO

NSE

, A

ND

SU

BSE

QU

EN

T F

OL

LO

W-U

P (C

ON

TIN

UE

D) 1/

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 2/

St

aff T

ask

Forc

e R

ecom

men

datio

ns

and

Boa

rd R

espo

nse

3/

Follo

w-U

p 4/

Gre

ater

sele

ctiv

ity in

pro

gram

con

tent

with

: (1

) fur

ther

stre

ngth

enin

g co

llabo

ratio

n w

ith

the

Wor

ld B

ank;

(2) a

mor

e di

ffer

entia

ted

use

of c

ondi

tiona

lity;

(3) g

reat

er e

ffor

ts to

tailo

r th

e tim

e fr

ame

of p

rogr

am d

esig

n to

fo

rese

eabl

e le

ngth

of r

efor

m a

nd a

djus

tmen

t; (4

) mor

e in

-dep

th a

naly

sis o

f rea

l eco

nom

y re

spon

ses t

o ke

y po

licy

elem

ents

and

less

at

tent

ion

to fi

ne-tu

ning

fina

ncia

l pr

ogra

mm

ing.

Dire

ctor

s wer

e en

cour

aged

that

re

com

men

datio

ns o

n st

ream

linin

g of

IMF

cond

ition

ality

and

nee

d fo

r mor

e ef

fect

ive

colla

bora

tion

with

the

Wor

ld B

ank

wer

e al

read

y be

ing

inte

rnal

ized

as p

art o

f the

revi

ew

of c

ondi

tiona

lity.

The

Task

For

ce a

gree

d w

ith th

e IE

O

reco

mm

enda

tions

, man

y of

whi

ch w

ere

alre

ady

inco

rpor

ated

into

the

revi

sed

cond

ition

ality

gu

idel

ines

. Dire

ctor

s stre

ssed

impo

rtanc

e of

co

ntin

ued

effo

rts to

impr

ove

prog

ram

des

ign,

in

clud

ing

impr

oved

col

labo

ratio

n w

ith th

e W

orld

Ban

k. D

irect

ors l

ooke

d fo

rwar

d to

fu

rther

wor

k by

the

staf

f on

the

rela

tions

hip

betw

een

exte

rnal

fina

ncin

g, a

djus

tmen

t, an

d su

stai

nabi

lity;

on

the

anal

ytic

fram

ewor

k fo

r pr

ogra

m d

esig

n; o

n tra

de-o

ffs b

etw

een

mac

roec

onom

ic a

nd st

ruct

ural

pol

icie

s; a

nd o

n th

e pa

ram

eter

s for

ass

essi

ng p

rogr

am su

cces

s.

The

2005

revi

ew o

f the

con

ditio

nalit

y gu

idel

ines

fo

und

maj

or sh

ifts i

n th

e co

vera

ge o

f stru

ctur

al

cond

ition

ality

, con

sist

ent w

ith a

gre

ater

focu

s on

criti

cal m

easu

res.

Des

ign

of IM

F-su

ppor

ted

Prog

ram

s, di

scus

sed

by th

e B

oard

in D

ecem

ber 2

004,

exa

min

ed in

det

ail i

ssue

s re

gard

ing

prog

ram

succ

ess,

finan

cing

, adj

ustm

ent a

nd

debt

sust

aina

bilit

y, a

naly

tical

fram

ewor

ks u

sed

in

prog

ram

des

ign,

and

spec

ific

mac

roec

onom

ic a

nd

stru

ctur

al p

olic

ies.

Syst

emat

ic e

x po

st a

sses

smen

t of p

rogr

ams,

with

prio

rity

to id

entif

ied

prol

onge

d us

ers a

nd

key

mes

sage

s rep

orte

d to

the

Boa

rd. K

ey

inte

rnal

dat

abas

e on

pro

gram

targ

ets a

nd

outc

omes

(MO

NA

) sho

uld

be u

pgra

ded

to

faci

litat

e su

ch a

sses

smen

ts.

Dire

ctor

s end

orse

d th

e re

com

men

datio

ns.

The

Task

For

ce p

ropo

sed

that

a p

roce

ss o

f ex

pos

t ass

essm

ent a

nd st

rate

gic

plan

ning

w

ould

take

pla

ce fo

r all

prol

onge

d us

ers,

with

le

sson

s pre

sent

ed to

the

Exec

utiv

e B

oard

.

Polic

y ad

opte

d. A

s of e

nd-J

une

2007

, 47

ex p

ost

asse

ssm

ents

had

bee

n co

mpl

eted

. A n

umbe

r of t

hese

as

sess

men

ts w

ere

led

by st

aff f

rom

out

side

the

area

de

partm

ents

. Th

e M

ON

A d

atab

ase

has b

een

upgr

aded

.

Surv

eilla

nce

Step

s sho

uld

be ta

ken

to fu

rther

stre

ngth

en

surv

eilla

nce

in p

rogr

am c

ases

. A c

ase

exis

ts

for g

reat

er in

stitu

tiona

l sep

arat

ion

betw

een

surv

eilla

nce

and

prog

ram

s, es

peci

ally

in th

e co

ntex

t of p

rolo

nged

use

.

Reg

ular

IMF

surv

eilla

nce

of p

rogr

am c

ount

ries

shou

ld re

asse

ss e

cono

mic

dev

elop

men

ts a

nd

stra

tegy

from

a fr

esh

pers

pect

ive.

The

Task

For

ce a

gree

d w

ith th

e ov

eral

l thr

ust

of th

e IE

O re

com

men

datio

ns w

hich

it b

elie

ved

wou

ld b

e be

st a

ddre

ssed

thro

ugh

cont

inui

ng

impl

emen

tatio

n an

d re

finem

ent o

f rec

ently

re

vise

d (i.

e., 2

002)

surv

eilla

nce

guid

elin

es.

Thes

e gu

idel

ines

pro

pose

d th

at su

rvei

llanc

e sh

ould

ass

ess m

ore

care

fully

soci

al a

nd

polit

ical

real

ities

; re

ach

out m

ore

wid

ely

to

legi

slat

ive

bodi

es a

nd li

ne m

inis

tries

and

en

sure

that

tim

ing

of c

onsu

ltatio

ns is

such

as t

o en

able

them

to in

fluen

ce p

olic

y.

Dire

ctor

s con

curr

ed w

ith th

e pr

iorit

y gi

ven

to

incr

easi

ng e

ffec

tiven

ess o

f sur

veill

ance

, in

clud

ing

the

need

to c

ombi

ne c

larit

y an

d ca

ndor

with

reco

gniti

on o

f soc

ial a

nd p

oliti

cal

real

ities

. The

y hi

ghlig

hted

the

impo

rtanc

e of

ef

forts

to e

nsur

e th

at A

rticl

e IV

con

sulta

tions

in

pro

gram

cou

ntrie

s "st

ep b

ack"

from

pro

gram

co

ntex

t.

Prog

ress

will

be

mon

itore

d as

par

t of r

egul

ar tr

ienn

ial

revi

ews o

f sur

veill

ance

. At t

he 2

004

revi

ew, D

irect

ors

conc

lude

d th

at th

e qu

ality

of s

urve

illan

ce in

pro

gram

co

untri

es h

ad im

prov

ed si

nce

2002

. 6/

31

APP

EN

DIX

III.

EV

AL

UA

TIO

N O

F PR

OL

ON

GE

D U

SE O

F IM

F R

ESO

UR

CE

S: R

EC

OM

ME

ND

AT

ION

S, B

OA

RD

RE

SPO

NSE

, A

ND

SU

BSE

QU

EN

T F

OL

LO

W-U

P (C

ON

CL

UD

ED

) 1/

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 2/

St

aff T

ask

Forc

e R

ecom

men

datio

ns

and

Boa

rd R

espo

nse

3/

Follo

w-U

p 4/

Inte

rnal

gov

erna

nce

issu

es

The

abili

ty o

f sta

ff to

ana

lyze

pol

itica

l ec

onom

y is

sues

shou

ld b

e st

reng

then

ed.

Mos

t Dire

ctor

s enc

oura

ged

the

staf

f to

enha

nce

its a

naly

sis a

nd re

porti

ng o

f pol

itica

l eco

nom

y is

sues

in st

aff r

epor

ts. S

ome

Dire

ctor

s ca

utio

ned

that

IMF

shou

ld b

e ca

refu

l in

vent

urin

g in

to th

is a

rea,

giv

en it

s com

para

tive

adva

ntag

e in

tech

nica

l ana

lysi

s and

the

need

to

avoi

d in

trudi

ng o

n in

tern

al p

oliti

cal m

atte

rs.

The

Task

For

ce re

com

men

ded

an e

ffor

t to

enha

nce

repo

rting

and

ana

lysi

s of p

oliti

cal

issu

es, w

hen

it ha

s im

porta

nt im

plic

atio

ns fo

r ec

onom

ic p

olic

y. S

taff

cap

aciti

es c

ould

be

stre

ngth

ened

thro

ugh

a m

odes

t inv

estm

ent i

n tra

inin

g.

Trai

ning

cou

rses

in p

oliti

cal e

cono

my

have

now

bee

n es

tabl

ishe

d.

Proc

edur

es sh

ould

be

evol

ved

to h

elp

avoi

d th

e ap

pear

ance

of p

oliti

cal i

nter

fere

nce

in

dete

rmin

ing

whe

ther

pro

gram

s des

erve

su

ppor

t. A

ll pr

ogra

ms s

houl

d be

pre

face

d by

an

exp

licit

asse

ssm

ent o

f im

plem

enta

tion

risks

. Whe

n m

anag

emen

t sug

gest

s ris

ks a

re

high

, the

Exe

cutiv

e B

oard

shou

ld b

e gi

ven

an

oppo

rtuni

ty to

exp

ress

on

the

reco

rd it

s ow

n as

sess

men

t of t

he tr

ade-

offs

.

Dire

ctor

s und

ersc

ored

the

impo

rtanc

e of

di

stin

guis

hing

cle

arly

bet

wee

n te

chni

cal a

nd

polit

ical

judg

men

ts a

nd th

at st

aff s

houl

d be

ca

ndid

in it

s ass

essm

ent o

f ris

ks.

The

Task

For

ce n

oted

that

ther

e ca

n be

no

ques

tion

abou

t the

resp

onsi

bilit

y of

m

anag

emen

t for

reco

mm

endi

ng a

nd th

e Ex

ecut

ive

Boa

rd fo

r con

side

ring

and

appr

ovin

g, a

ll re

ques

ts fo

r the

use

of I

MF

reso

urce

s. St

aff n

onet

hele

ss h

as a

n im

porta

nt

resp

onsi

bilit

y fo

r pro

vidi

ng c

andi

d te

chni

cal

asse

ssm

ent o

f ris

ks a

nd tr

ade-

offs

, and

shou

ld

cont

inue

to st

reng

then

bot

h su

bsta

nce

and

pres

enta

tion

of th

is m

ater

ial.

Gre

ater

can

dor o

n ris

ks is

bei

ng a

dopt

ed in

pr

esen

tatio

ns to

the

Exec

utiv

e B

oard

. St

aff r

epor

ts

incr

easi

ngly

em

phas

ize

the

risks

to th

e IM

F,

incl

udin

g th

e po

litic

al ri

sks t

o im

plem

enta

tion.

A re

view

of i

nter

nal i

ncen

tives

faci

ng st

aff

shou

ld b

e un

derta

ken

with

a v

iew

to

min

imiz

ing

turn

over

of s

taff

wor

king

on

coun

tries

and

to fo

ster

incr

ease

d ca

ndor

and

ac

coun

tabi

lity.

Rec

omm

enda

tions

are

larg

ely

man

agem

ent

resp

onsi

bilit

y. T

hey

have

impo

rtant

im

plic

atio

ns fo

r int

erna

l gov

erna

nce

and

dese

rve

care

ful c

onsi

dera

tion.

Whi

le o

vera

ll pe

rson

nel p

olic

ies d

o no

t nee

d to

be

cha

nged

, man

agem

ent s

houl

d co

nsid

er

guid

elin

es a

nd in

cent

ives

to re

duce

exc

essi

ve

mob

ility

in c

ount

ry te

ams.

The

best

way

to

guar

d ag

ains

t exc

essi

ve m

obili

ty w

ould

be

to

rees

tabl

ish

spar

e st

aff c

apac

ity to

abs

orb

chan

ging

dem

ands

.

The

Hum

an R

esou

rces

Dep

artm

ent (

HR

D),

at th

e re

ques

t of m

anag

emen

t, de

velo

ped

a m

ore

cent

raliz

ed

sche

me

for e

cono

mis

t m

obili

ty. I

n co

llabo

ratio

n w

ith

depa

rtmen

tal s

enio

r per

sonn

el m

anag

ers,

HR

D

prov

ides

bal

ance

d ca

reer

cou

nsel

ing

that

em

phas

izes

th

e ac

quis

ition

of n

ew c

ompe

tenc

ies w

hile

m

inim

izin

g ex

cess

ive

mob

ility

.

1/ F

ollo

win

g th

e B

oard

dis

cuss

ion

of th

e IE

O re

port

on S

epte

mbe

r 23,

200

2, m

anag

emen

t est

ablis

hed

a Ta

sk F

orce

to fo

llow

up

on th

e re

com

men

datio

ns c

onta

ined

in th

e ev

alua

tion

repo

rt. T

he sp

ecifi

c pr

opos

als o

f the

Tas

k Fo

rce

wer

e th

en d

iscu

ssed

by

the

Exec

utiv

e B

oard

on

Mar

ch 7

, 200

3.

2/ T

his c

olum

n su

mm

ariz

es th

e re

actio

n of

the

Exec

utiv

e B

oard

on

each

reco

mm

enda

tion

as re

porte

d in

the

sum

min

g up

by

the

Cha

ir. R

eade

rs a

re in

vite

d to

refe

r to

the

full

text

of t

he su

mm

ary

of th

e di

scus

sion

, whi

ch is

incl

uded

in th

e pu

blis

hed

vers

ion

of th

e re

port

and

can

be a

cces

sed

from

the

IEO

web

site

ww

w.im

f.org

/Ext

erna

l/NP/

ieo/

2002

/pu/

inde

x.ht

m.

3/ “

Con

clus

ions

of t

he T

ask

Forc

e on

Pro

long

ed U

se o

f IM

F R

esou

rces

,” F

ebru

ary

4, 2

003.

The

Tas

k Fo

rce

repo

rt an

d th

e Su

mm

ing

Up

of th

e su

bseq

uent

Boa

rd d

iscu

ssio

n on

that

repo

rt ar

e av

aila

ble

at

ww

w.im

f.org

/ext

erna

l/np/

pdr/u

fr/2

003/

0204

03.p

df.

4/ T

he c

olum

n on

follo

w-u

p w

as p

rovi

ded

by st

aff a

t IEO

's re

ques

t and

has

not

bee

n su

bjec

t to

inde

pend

ent r

evie

w.

5/ “

Gui

delin

es o

n C

ondi

tiona

lity,

” Se

ptem

ber 8

, 200

2. A

vaila

ble

at w

ww

.imf.o

rg/E

xter

nal/n

p/pd

r/con

d/20

02/e

ng/g

uid/

0923

02.h

tm.

6/ S

ee P

ublic

Info

rmat

ion

Not

ice

at w

ww

.imf.o

rg/e

xter

nal/n

p/pd

r/sur

v/20

04/0

8240

4.pd

f#pi

n.

32

APP

EN

DIX

IV. E

VA

LU

AT

ION

OF

TH

E R

OL

E O

F T

HE

IMF

IN R

EC

EN

T C

API

TA

L A

CC

OU

NT

CR

ISE

S: R

EC

OM

ME

ND

AT

ION

S, B

OA

RD

RE

SPO

NSE

, A

ND

SU

BSE

QU

EN

T F

OL

LO

W-U

P

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 1/

Fo

llow

-Up

2/

Pre-

cris

is su

rvei

llanc

e

Arti

cle

IV c

onsu

ltatio

ns sh

ould

take

a st

ress

-te

stin

g ap

proa

ch to

exp

osur

e to

a p

oten

tial c

apita

l ac

coun

t cris

is, e

xten

ding

and

syst

emat

izin

g ex

istin

g ap

proa

ches

. Sta

ff sh

ould

ass

ess t

he

pote

ntia

l im

pact

of i

tem

ized

risk

s. St

aff s

houl

d de

velo

p gr

eate

r und

erst

andi

ng o

f pol

itica

l co

nstra

ints

on

polic

y, in

par

t thr

ough

wid

er

dial

ogue

. Mar

ket v

iew

s and

pol

itica

l eco

nom

y an

alys

is sh

ould

be

refle

cted

in st

aff r

epor

ts.

Dire

ctor

s con

curr

ed w

ith th

e ov

errid

ing

mes

sage

of t

he re

port

for

surv

eilla

nce:

to st

reng

then

the

effe

ctiv

enes

s of I

MF

surv

eilla

nce

by

exte

ndin

g an

d sy

stem

atiz

ing

curr

ent g

uide

lines

for a

sses

sing

vu

lner

abili

ties.

They

supp

orte

d th

e ca

ll to

item

ize

maj

or p

oten

tial

shoc

ks. D

irect

ors e

mph

asiz

ed th

at st

ress

-test

ing

shou

ld n

ot b

e ov

erge

nera

lized

and

mec

hani

cal,

but s

houl

d fo

cus o

n ke

y ris

ks fa

cing

a

parti

cula

r cou

ntry

. Mos

t agr

eed

that

the

IMF

shou

ld d

evel

op g

reat

er

unde

rsta

ndin

g of

pol

itica

l con

stra

ints

on

polic

y w

hile

cau

tioni

ng th

at

this

shou

ld n

ot le

ad to

inte

rfer

ence

in d

omes

tic a

ffai

rs. A

num

ber o

f D

irect

ors c

autio

ned

that

this

cou

ld b

e co

unte

rpro

duct

ive

if it

caus

es

staf

f to

lose

focu

s and

pre

ss fo

r pol

icie

s and

refo

rms t

hat a

re n

ot

mac

ro-c

ritic

al. M

ost D

irect

ors s

aw g

reat

val

ue in

syst

emat

ic

disc

ussi

ons w

ith th

e do

mes

tic a

nd th

e in

tern

atio

nal f

inan

cial

and

bu

sine

ss c

omm

uniti

es—

but e

mph

asiz

ed th

at th

e st

aff w

ould

nee

d to

as

sess

priv

ate

sect

or v

iew

s crit

ical

ly.

The

Boa

rd p

aper

for t

he A

ugus

t 200

4 B

ienn

ial R

evie

w o

f Sur

veill

ance

not

ed

that

the

IMF

had

subs

tant

ially

stre

ngth

ened

its c

apac

ity to

iden

tify

vuln

erab

ilitie

s in

mem

ber c

ount

ries.

In p

artic

ular

, it n

oted

that

bal

ance

shee

t is

sues

had

rece

ived

subs

tant

ial a

ttent

ion

in su

rvei

llanc

e of

adv

ance

d an

d em

ergi

ng m

arke

t eco

nom

ies,

alth

ough

var

ious

com

pone

nts o

f vul

nera

bilit

y as

sess

men

ts w

ere

not w

ell i

nteg

rate

d w

hen

pres

ente

d in

staf

f rep

orts

. Si

nce

then

, the

iden

tific

atio

n of

bal

ance

shee

t vul

nera

bilit

ies h

as b

een

high

light

ed a

s a k

ey a

rea

in g

uida

nce

to st

aff o

n su

rvei

llanc

e, a

nd

met

hodo

logi

cal t

ools

, inc

ludi

ng st

atis

tical

fram

ewor

ks a

nd tr

aini

ng, h

ave

been

de

velo

ped

that

will

hel

p gr

adua

lly m

ains

tream

bal

ance

shee

t ana

lysi

s in

IMF

surv

eilla

nce.

So

me

area

dep

artm

ents

hav

e es

tabl

ishe

d ac

tive

wor

king

gro

ups o

n ex

tern

al a

nd

intra

-reg

iona

l lin

kage

s and

fina

ncia

l sec

tor i

ssue

s in

orde

r to

impr

ove

the

asse

ssm

ent o

f cro

ss-c

ount

ry a

nd c

ross

-reg

ion

vuln

erab

ilitie

s, to

furth

er

stre

ngth

en b

ilate

ral a

nd m

ultil

ater

al su

rvei

llanc

e.

Man

agem

ent a

nd th

e Ex

ecut

ive

Boa

rd sh

ould

take

ad

ditio

nal s

teps

to in

crea

se th

e im

pact

of

surv

eilla

nce,

incl

udin

g th

roug

h m

akin

g st

aff

asse

ssm

ents

mor

e ca

ndid

and

mor

e ac

cess

ible

to

the

publ

ic. I

n pa

rticu

lar,

ther

e sh

ould

be

a pr

esum

ptio

n of

pub

licat

ion

for A

rticl

e IV

staf

f re

ports

. A c

lear

pre

sum

ptio

n of

pub

licat

ion

for

coun

try-r

elat

ed st

aff w

orki

ng p

aper

s sho

uld

also

be

esta

blis

hed.

Bie

nnia

l rev

iew

s of s

urve

illan

ce

shou

ld fo

cus o

n as

sess

ing

the

impa

ct o

f su

rvei

llanc

e on

key

syst

emic

issu

es in

maj

or

emer

ging

mar

ket e

cono

mie

s.

Dire

ctor

s stro

ngly

supp

orte

d gr

eate

r can

dor i

n th

e as

sess

men

t of

coun

try ri

sks a

nd v

ulne

rabi

litie

s in

staf

f rep

orts

, bui

ldin

g on

the

incr

ease

in c

ando

r tha

t has

alre

ady

occu

rred

. Nev

erth

eles

s, D

irect

ors

expr

esse

d a

rang

e of

vie

ws r

egar

ding

the

pote

ntia

l con

flict

bet

wee

n ca

ndor

and

tran

spar

ency

, and

the

impl

icat

ions

of t

he p

ropo

sed

shift

fr

om v

olun

tary

to p

resu

med

pub

licat

ion

of st

aff r

epor

ts. M

any

Dire

ctor

s war

ned

that

gre

ater

can

dor c

ould

adv

erse

ly a

ffec

t bot

h th

e IM

F’s d

ialo

gue

with

cou

ntrie

s and

mar

ket c

onfid

ence

in th

e co

ntex

t of

the

publ

icat

ion

of st

aff r

epor

ts. S

ome

of th

ese

Dire

ctor

s fel

t tha

t wha

t re

ally

mat

ters

is c

ando

r in

face

-to-f

ace

cons

ulta

tions

with

the

key

deci

sion

-mak

ers i

n a

coun

try, r

athe

r tha

n in

the

staf

f rep

ort.

Man

y ot

her D

irect

ors s

trong

ly su

ppor

ted

pres

umed

pub

licat

ion.

The

se

Dire

ctor

s bel

ieve

d th

at c

once

rns a

bout

can

dor a

re o

vers

tate

d, a

nd th

at

surv

eilla

nce

wou

ld b

e m

ore

effe

ctiv

e in

bui

ldin

g ow

ners

hip

and

influ

enci

ng p

olic

y if

IMF

anal

yses

and

reco

mm

enda

tions

are

mad

e pu

blic

. It w

as a

gree

d th

at th

e B

oard

wou

ld re

turn

to th

e is

sue

of

pres

umed

pub

licat

ion

of st

aff r

epor

ts d

urin

g th

e di

scus

sion

on

trans

pare

ncy.

M

any

Dire

ctor

s wer

e no

t in

favo

r of s

hifti

ng fr

om v

olun

tary

to

pres

umed

pub

licat

ion

of st

aff r

epor

ts, b

ut a

num

ber s

trong

ly su

ppor

ted

pres

umed

pub

licat

ion.

The

May

200

6 ve

rsio

n of

the

Ope

ratio

nal G

uida

nce

Not

e fo

r Sta

ff o

n D

ocum

ent P

ublic

atio

n no

tes t

hat s

taff

repo

rts sh

ould

be

draf

ted

inde

pend

ently

of

the

auth

oriti

es’ p

ublic

atio

n in

tent

ions

and

shou

ld in

clud

e th

e st

aff’

s can

did

asse

ssm

ent o

f ris

ks, t

heir

fran

k vi

ews o

n th

e au

thor

ities

’ pol

icy

stan

ce, a

nd th

eir

polic

y ad

vice

on

all a

reas

dee

med

rele

vant

. Si

nce

July

1, 2

004,

pub

licat

ion

of st

aff r

epor

ts fo

r Arti

cle

IV c

onsu

ltatio

ns is

no

w “

volu

ntar

y bu

t pre

sum

ed.”

Mor

eove

r, th

e m

embe

r’s a

gree

men

t to

publ

ish

staf

f rep

orts

is n

ow re

quire

d fo

r man

agem

ent t

o re

com

men

d a

prog

ram

with

ex

cept

iona

l acc

ess t

o th

e B

oard

. Thi

s pol

icy

was

con

firm

ed a

t the

tim

e of

the

June

200

5 re

view

of t

rans

pare

ncy

polic

ies.

Rul

es re

gard

ing

mod

ifica

tions

of

repo

rts p

rior t

o pu

blic

atio

n (in

clud

ing

dele

tions

) wer

e al

so ti

ghte

ned

at th

at

time.

Mor

eove

r, pu

blic

atio

n of

cou

ntry

-rel

ated

staf

f wor

king

pap

ers i

s not

su

bjec

t to

the

cons

ent o

f the

mem

ber c

ount

ries c

once

rned

. Th

e ad

optio

n in

June

200

7 of

a n

ew S

urve

illan

ce D

ecis

ion

shou

ld p

rom

ote

grea

ter f

ocus

on,

and

can

dor i

n, th

e as

sess

men

t of m

embe

rs’ e

xter

nal

vuln

erab

ilitie

s, in

clud

ing

thos

e ro

oted

in th

e ca

pita

l acc

ount

. Rel

ated

inte

rim

guid

ance

not

e to

staf

f was

issu

ed a

lso

in Ju

ne 2

007

to h

elp

its st

eadf

ast

impl

emen

tatio

n. In

crea

sing

the

impa

ct o

f sur

veill

ance

is o

ne o

f the

key

ob

ject

ives

of t

he IM

F's M

ediu

m-T

erm

Stra

tegy

. Sta

ff h

as b

een

enco

urag

ed to

de

velo

p re

gion

al a

nd c

ount

ry-le

vel o

utre

ach

stra

tegi

es fo

r thi

s pur

pose

. In

Febr

uary

200

7, a

Boa

rd se

min

ar d

iscu

ssed

met

hodo

logi

cal i

ssue

s to

asse

ss th

e ef

fect

iven

ess o

f sur

veill

ance

(SM

/07/

35).

This

dis

cuss

ion

will

info

rm th

e ne

xt

trien

nial

revi

ew o

f sur

veill

ance

. Th

e Ex

ecut

ive

Boa

rd sh

ould

agr

ee o

n a

syst

emat

ic

plan

to p

rovi

de in

stitu

tiona

l inc

entiv

es fo

r gre

ater

ca

ndor

in th

e as

sess

men

t of c

ount

ry ri

sks a

nd

vuln

erab

ilitie

s, po

ssib

ly in

clud

ing

mea

sure

s to

give

gr

eate

r ind

epen

denc

e to

surv

eilla

nce

team

s.

Dire

ctor

s enc

oura

ged

the

prov

isio

n of

inst

itutio

nal i

ncen

tives

to th

e st

aff t

o fa

cilit

ate

cand

or.

Som

e ar

ea d

epar

tmen

ts h

ave

expe

rimen

ted

with

hav

ing

a di

ffer

ent m

issi

on

chie

f for

Arti

cle

IV c

onsu

ltatio

ns w

ith p

rogr

am c

ount

ries o

r hav

e a

seni

or st

aff

mem

ber n

ot a

ssig

ned

to th

e co

untry

con

cern

ed p

artic

ipat

e in

Arti

cle

IV

cons

ulta

tion

mis

sion

s. Tr

ienn

ial r

evie

ws o

f sur

veill

ance

will

rem

ain

the

mai

n ve

hicl

e fo

r ass

essi

ng

prog

ress

.

33

A

PPE

ND

IX IV

. EV

AL

UA

TIO

N O

F T

HE

RO

LE

OF

TH

E IM

F IN

RE

CE

NT

CA

PIT

AL

AC

CO

UN

T C

RIS

ES:

RE

CO

MM

EN

DA

TIO

NS,

BO

AR

D R

ESP

ON

SE,

AN

D S

UB

SEQ

UE

NT

FO

LL

OW

-UP

(CO

NT

INU

ED

) IE

O R

ecom

men

datio

n E

xecu

tive

Boa

rd R

espo

nse

1/

Follo

w-U

p 2/

Es

cala

ted

sign

alin

g sh

ould

be

used

whe

n ke

y vu

lner

abili

ties i

dent

ified

ove

r sev

eral

roun

ds o

f su

rvei

llanc

e ar

e no

t add

ress

ed. S

uch

a po

licy

wou

ld

help

strik

e th

e ne

cess

ary

bala

nce

betw

een

the

role

of

the

IMF

as c

onfid

entia

l adv

isor

and

its r

ole

as a

ve

hicl

e fo

r tra

nsm

ittin

g pe

er re

view

s on

mem

bers

’ po

licie

s and

for p

rovi

ding

qua

lity

info

rmat

ion

to

mar

kets

. M

oreo

ver,

man

agem

ent a

nd th

e B

oard

shou

ld

expl

ore

the

poss

ibili

ty o

f see

king

“se

cond

opi

nion

s”

from

out

side

the

IMF

as p

art o

f the

surv

eilla

nce

proc

ess w

hen

the

auth

oriti

es d

isag

ree

with

the

staf

f’s a

sses

smen

t on

issu

es th

at a

re ju

dged

to b

e of

sy

stem

ic im

porta

nce.

Thi

s wou

ld a

lso

serv

e as

a

build

ing

bloc

k fo

r the

idea

of e

scal

ated

sign

alin

g.

Man

y D

irect

ors c

onsi

dere

d th

at e

scal

ated

sign

alin

g m

ight

be

an id

ea

wor

th p

ursu

ing.

A n

umbe

r of t

hese

Dire

ctor

s res

erve

d ju

dgm

ent o

n th

e su

gges

tion

until

they

had

mor

e in

form

atio

n ab

out h

ow it

wou

ld

wor

k. A

few

Dire

ctor

s fel

t tha

t esc

alat

ed si

gnal

ing

wou

ld u

nder

min

e th

e IM

F’s r

ole

as c

onfid

entia

l adv

isor

, and

dou

bted

that

it w

ould

hel

p in

pre

vent

ing

cris

es o

r des

igni

ng m

ore

effe

ctiv

e pr

ogra

ms.

Man

y D

irect

ors w

ere

not i

n fa

vor o

f inv

iting

seco

nd o

pini

ons f

rom

ou

tsid

e th

e IM

F. W

here

as so

me

Dire

ctor

s con

side

red

that

a se

cond

op

inio

n w

ould

brin

g a

fres

h pe

rspe

ctiv

e th

at c

ould

hel

p re

solv

e di

ffer

ence

s of o

pini

ons w

ith th

e au

thor

ities

, man

y w

ere

conc

erne

d th

at it

cou

ld e

ncro

ach

on th

e ro

le o

f the

Boa

rd, a

nd u

nder

min

e th

e w

ork

of th

e st

aff.

A fe

w D

irect

ors a

lso

note

d th

at th

is a

ppro

ach

has

been

trie

d an

d ha

s fai

led.

No

follo

w-u

p ne

cess

ary

beca

use

ther

e w

as n

o co

nsen

sus i

n th

e B

oard

on

esca

late

d si

gnal

ing

or se

cond

opi

nion

s.

Prog

ram

des

ign

A c

ompr

ehen

sive

revi

ew o

f the

IMF'

s app

roac

h to

pr

ogra

m d

esig

n in

cap

ital a

ccou

nt c

rises

shou

ld b

e un

derta

ken.

In p

artic

ular

, (1)

gre

ater

atte

ntio

n sh

ould

be

paid

to b

alan

ce-s

heet

inte

ract

ions

and

th

eir c

onse

quen

ces f

or a

ggre

gate

dem

and;

(2

) pro

gram

des

ign

shou

ld a

llow

for a

flex

ible

re

spon

se, i

n ca

se u

nfav

orab

le o

utco

mes

mat

eria

lize;

(3

) con

vent

iona

l fin

anci

al-p

rogr

amm

ing-

base

d co

nditi

onal

ity sh

ould

be

revi

ewed

, and

pos

sibl

y ad

apte

d fo

r cap

ital a

ccou

nt c

risis

circ

umst

ance

s;

(4) p

arsi

mon

y an

d fo

cus s

houl

d be

bas

ic p

rinci

ples

of

stru

ctur

al c

ondi

tiona

lity

and

cris

es sh

ould

not

be

used

for p

ushi

ng re

form

s tha

t are

not

crit

ical

to

cris

is re

solu

tion,

how

ever

des

irabl

e th

ey m

ay b

e in

th

e lo

ng ru

n; a

nd (5

) the

re sh

ould

be

an a

gree

d co

mm

unic

atio

ns st

rate

gy, c

hara

cter

ized

by

a hi

gh

degr

ee o

f tra

nspa

renc

y.

Dire

ctor

s end

orse

d th

ese

reco

mm

enda

tions

and

hop

ed fo

rthco

min

g st

aff p

aper

s on

prog

ram

des

ign

and

bala

nce

shee

t eff

ects

wou

ld g

ive

due

atte

ntio

n to

them

. The

y en

dors

ed th

e re

port'

s foc

us o

n th

e re

stor

atio

n of

con

fiden

ce, a

nd th

e im

porta

nce

of b

alan

ce sh

eet e

ffec

ts

on k

ey m

acro

econ

omic

var

iabl

es. T

he b

alan

ce sh

eet a

ppro

ach

shou

ld

be c

lose

ly li

nked

to d

ebt s

usta

inab

ility

ana

lysi

s. Th

ere

shou

ld a

lso

be

mor

e w

ork

on tw

in (b

anki

ng a

nd c

apita

l acc

ount

) cris

es. D

irect

ors

agre

ed th

at d

esig

n sh

ould

allo

w fo

r a fl

exib

le re

spon

se to

unf

avor

able

de

velo

pmen

ts; t

hat t

he c

onve

ntio

nal f

inan

cial

pro

gram

min

g co

nditi

onal

ity sh

ould

be

revi

ewed

; and

that

ther

e sh

ould

be

an a

gree

d co

mm

unic

atio

ns st

rate

gy. N

ever

thel

ess,

a fe

w D

irect

ors c

autio

ned

agai

nst e

xces

sive

em

phas

is o

n ris

ks a

nd a

ltern

ativ

e sc

enar

ios i

n pr

ogra

m d

ocum

ents

, sin

ce it

wou

ld b

e di

ffic

ult t

o kn

ow a

ll ris

ks

upfr

ont a

nd si

nce

such

em

phas

is c

ould

ero

de th

e pr

ogra

m’s

ef

fect

iven

ess i

n bu

ildin

g co

nfid

ence

in th

e ch

osen

act

ion

plan

.

The

Dec

embe

r 200

4 re

view

of t

he d

esig

n of

IMF-

supp

orte

d pr

ogra

ms

(SM

/04/

404,

SM

/04/

405,

SM

/04/

406,

BU

FF/0

5/08

) exa

min

ed th

e an

alyt

ical

to

olki

t for

pro

gram

des

ign,

incl

udin

g to

ols f

or b

alan

ce sh

eet a

nd d

ebt

sust

aina

bilit

y an

alys

is, a

nd th

e pe

rfor

man

ce o

f the

se to

ols f

or m

acro

econ

omic

pr

ojec

tions

und

erly

ing

prog

ram

des

ign.

In A

pril

2006

, sta

ff a

lso

com

plet

ed a

re

view

of w

heth

er th

ere

wer

e an

y sy

stem

atic

diff

eren

ces b

etw

een

prec

autio

nary

an

d no

npre

caut

iona

ry p

rogr

ams i

n te

rms o

f pol

icie

s, co

nditi

onal

ity, a

nd

mac

roec

onom

ic o

utco

mes

, and

whe

ther

thes

e di

ffer

ence

s wer

e at

tribu

tabl

e to

the

natu

re o

f the

arr

ange

men

t or t

o th

e m

embe

r’s e

cono

mic

pro

blem

s. In

the

cont

ext

of d

esig

ning

pro

gram

s for

cris

is p

reve

ntio

n, a

rece

nt st

aff s

tudy

foun

d th

at d

urin

g pe

riods

of h

eigh

tene

d vu

lner

abili

ty, I

MF

finan

cing

ove

r the

pre

cedi

ng y

ear a

s a

shar

e of

shor

t-ter

m d

ebt c

an b

e ef

fect

ive

in lo

wer

ing

the

likel

ihoo

d of

a c

risis

. Th

e 20

05 re

view

of t

he c

ondi

tiona

lity

guid

elin

es (S

M/0

5/81

, BU

FF/0

5/59

) fou

nd

that

subs

tant

ial c

hang

es h

ave

been

mad

e in

the

dire

ctio

n of

gre

ater

par

sim

ony

in

stru

ctur

al c

ondi

tiona

lity,

and

mad

e su

gges

tions

to e

nabl

e fu

rther

pro

gres

s in

this

di

rect

ion.

Ef

forts

con

tinue

to st

reng

then

focu

s on

finan

cial

sect

or v

ulne

rabi

litie

s (in

clud

ing

on b

alan

ce sh

eets

) in

line

with

the

Rep

ort o

f the

IMF

Fina

ncia

l Sec

tor R

evie

w

Gro

up a

nd th

e M

ediu

m-T

erm

Stra

tegy

. Th

e IM

F a

s cri

sis c

oord

inat

or

The

IMF

shou

ld e

nsur

e th

at fi

nanc

ing

pack

ages

pr

ovid

ed in

resp

onse

to c

apita

l acc

ount

cris

es a

re

suff

icie

nt to

gen

erat

e co

nfid

ence

and

be

of c

redi

ble

qual

ity. I

n pa

rticu

lar,

(1) p

acka

ges s

houl

d no

t rel

y on

par

alle

l off

icia

l fin

anci

ng u

nles

s the

term

s of

acce

ss a

re tr

ansp

aren

tly li

nked

to IM

F-su

ppor

ted

stra

tegy

; and

(2) t

erm

s for

the

invo

lvem

ent o

f oth

er

inst

itutio

ns p

rovi

ding

par

alle

l fin

anci

ng sh

ould

be

spec

ified

at t

he o

utse

t.

The

Boa

rd a

gree

d w

ith th

e re

com

men

datio

n, w

hile

not

ing

that

ther

e ar

e lim

itatio

ns o

n th

e IM

F’s i

nflu

ence

on

othe

r sou

rces

of f

inan

cing

. Th

e B

oard

stre

ssed

that

the

rece

ntly

revi

sed

acce

ss p

olic

y m

ust b

e ob

serv

ed a

nd e

mph

asiz

ed th

e im

porta

nce

of p

rogr

am c

redi

bilit

y, n

ot

larg

e fin

anci

ng p

acka

ges,

as th

e he

art o

f IM

F in

volv

emen

t. D

irect

ors

fully

supp

orte

d th

e id

ea o

f mov

ing

tow

ard

mor

e ex

plic

it pr

oced

ures

fo

r col

labo

ratio

n w

ith re

gion

al d

evel

opm

ent b

anks

and

oth

ers a

nd

clea

r del

inea

tion

of re

spon

sibi

litie

s, w

hile

not

ing

that

such

pr

oced

ures

do

not b

y th

emse

lves

gua

rant

ee e

ffec

tive

coor

dina

tion.

34

APP

EN

DIX

IV. E

VA

LU

AT

ION

OF

TH

E R

OL

E O

F T

HE

IMF

IN R

EC

EN

T C

API

TA

L A

CC

OU

NT

CR

ISE

S: R

EC

OM

ME

ND

AT

ION

S, B

OA

RD

RE

SPO

NSE

, A

ND

SU

BSE

QU

EN

T F

OL

LO

W-U

P (C

ON

CL

UD

ED

) IE

O R

ecom

men

datio

n E

xecu

tive

Boa

rd R

espo

nse

1/

Follo

w-U

p 2/

Inte

rnal

gov

erna

nce

issu

es

The

IMF

shou

ld b

e pr

oact

ive

in it

s rol

e as

cris

is

coor

dina

tor.

In p

artic

ular

, (1)

man

agem

ent s

houl

d pr

ovid

e a

cand

id a

sses

smen

t of t

he p

roba

bilit

y of

su

cces

s to

the

Exec

utiv

e B

oard

and

shar

ehol

ders

; (2

) man

agem

ent s

houl

d en

sure

that

the

tech

nica

l ju

dgm

ent o

f sta

ff is

pro

tect

ed fr

om e

xces

sive

po

litic

al in

terf

eren

ce; a

nd (3

) the

nat

ure

of p

rivat

e se

ctor

invo

lvem

ent w

ill h

ave

to b

e de

term

ined

on

a ca

se b

y ca

se b

asis

. The

IMF

shou

ld p

lay

a ce

ntra

l rol

e in

iden

tifyi

ng c

ircum

stan

ces w

here

co

ncer

ted

effo

rts c

an h

elp

over

com

e "c

olle

ctiv

e ac

tion"

pro

blem

s, ba

sed

on m

eani

ngfu

l dia

logu

e w

ith th

e pr

ivat

e se

ctor

.

The

Boa

rd e

ndor

sed

the

reco

mm

enda

tions

. Whi

le D

irect

ors

wer

e in

favo

r of e

arly

invo

lvem

ent o

f the

Boa

rd in

pro

gram

di

scus

sion

s, a

num

ber o

f the

m o

bser

ved

that

the

Boa

rd a

nd

maj

or m

embe

rs sh

ould

not

seek

to m

icro

-man

age

the

oper

atio

nal d

etai

ls o

f pro

gram

s or i

nflu

ence

IMF

mis

sion

s in

the

field

. Man

y D

irect

ors a

ttach

ed p

artic

ular

impo

rtanc

e to

the

early

invo

lvem

ent o

f the

priv

ate

sect

or a

s an

inte

gral

ele

men

t of

cris

is re

solu

tion.

The

fram

ewor

k fo

r exc

eptio

nal a

cces

s dec

isio

ns (S

M/0

4/99

, BU

FF/0

4/81

) pro

vide

s a

mec

hani

sm fo

r enc

oura

ging

mor

e sy

stem

atic

ear

ly c

onsi

dera

tion

of c

ircum

stan

ces i

n w

hich

the

succ

ess o

f a p

rogr

am w

ould

be

enha

nced

by

volu

ntar

y ef

forts

to a

ddre

ss

colle

ctiv

e ac

tion

prob

lem

s am

ong

priv

ate

cred

itors

and

whe

re st

eps t

o ad

dres

s an

unsu

stai

nabl

e de

bt b

urde

n ne

ed to

be

part

of a

stra

tegy

to re

stor

e gr

owth

and

fina

ncia

l vi

abili

ty.

Hum

an re

sour

ce m

anag

emen

t sho

uld

be a

dapt

ed

to d

evel

op a

nd b

ette

r util

ize

coun

try e

xper

tise,

in

clud

ing

polit

ical

eco

nom

y sk

ills,

and

to

esta

blis

h “c

ente

rs o

f exp

ertis

e” o

n cr

isis

m

anag

emen

t iss

ues.

In p

artic

ular

, (1)

the

leng

th o

f st

aff a

ssig

nmen

ts sh

ould

be

mon

itore

d to

ens

ure

cont

inui

ty o

f sta

ff e

xper

tise

and

a cr

itica

l mas

s of

coun

try e

xper

tise

in e

ach

syst

emic

ally

impo

rtant

em

ergi

ng m

arke

t eco

nom

y sh

ould

be

deve

lope

d;

(2) R

esid

ent R

epre

sent

ativ

es sh

ould

pla

y a

mor

e ce

ntra

l rol

e in

surv

eilla

nce

and

prog

ram

des

ign;

an

d (3

) int

erna

l pro

cedu

res s

houl

d pr

otec

t tho

se

who

rais

e un

com

forta

ble

issu

es th

roug

h pr

oper

ch

anne

ls, b

ut c

onse

quen

tly a

ttrac

t com

plai

nts

from

the

auth

oriti

es.

The

Boa

rd g

ener

ally

agr

eed

on th

e ne

ed fo

r ins

titut

iona

l cha

nge

to e

nsur

e th

at th

e IM

F is

in a

pos

ition

to re

spon

d ra

pidl

y to

m

embe

r cou

ntrie

s fac

ing

cris

es. S

ome

Dire

ctor

s sup

porte

d cr

eatio

n of

cen

ters

of e

xper

tise

in c

risis

man

agem

ent,

whe

reas

ot

hers

put

gre

ater

em

phas

is o

n m

echa

nism

s for

dra

win

g up

on

avai

labl

e ex

perti

se a

nd e

xper

ienc

e in

the

even

t of a

cris

is. A

nu

mbe

r of D

irect

ors f

avor

ed lo

nger

cou

ntry

des

k as

sign

men

ts,

whi

le o

ther

s not

ed th

e im

porta

nce

of st

aff m

obili

ty in

br

oade

ning

the

expe

rienc

e an

d pe

rspe

ctiv

es o

f the

staf

f and

m

aint

aini

ng it

s im

parti

ality

. Mos

t Dire

ctor

s fav

ored

a g

reat

er

role

for R

esid

ent R

epre

sent

ativ

es w

ith a

few

not

ing

that

onl

y re

lativ

ely

seni

or R

esid

ent R

epre

sent

ativ

es w

ould

be

suff

icie

ntly

ac

cept

able

to th

e au

thor

ities

to p

lay

such

a ro

le. D

irect

ors

supp

orte

d m

odifi

catio

n of

inte

rnal

gui

delin

es a

nd h

uman

re

sour

ce p

roce

dure

s. Th

ey a

lso

note

d th

at h

uman

reso

urce

is

sues

are

man

agem

ent's

resp

onsi

bilit

y.

The

Inte

rnat

iona

l Cap

ital M

arke

ts a

nd M

onet

ary

and

Fina

ncia

l Sys

tem

s Dep

artm

ents

w

ere

inte

grat

ed w

ith a

vie

w to

enh

ance

fina

ncia

l sec

tor s

urve

illan

ce, a

s wel

l as

prov

ide

a ce

nter

of e

xper

tise

on b

anki

ng c

risis

reso

lutio

n is

sues

. A

revi

ew o

f bro

ad st

rate

gic

issu

es re

late

d to

the

IMF’

s Res

iden

t Rep

rese

ntat

ive

prog

ram

has

bee

n co

mpl

eted

. Th

e B

oard

pap

er fo

r the

Aug

ust 2

004

Bie

nnia

l Rev

iew

of S

urve

illan

ce (B

SR) c

alle

d fo

r a re

asse

ssm

ent o

f mec

hani

sms f

or st

aff r

otat

ion

and

mob

ility

to a

chie

ve g

reat

er

cont

inui

ty in

the

polic

y di

alog

ue, e

nhan

ce m

utua

l tru

st, a

nd b

uild

up

coun

try-s

peci

fic

know

ledg

e. G

uida

nce

issu

ed to

staf

f fol

low

ing

the

2004

Bie

nnia

l Rev

iew

of

Surv

eilla

nce

high

light

s a n

umbe

r of s

teps

to fo

ster

goo

d po

licy

dial

ogue

with

the

auth

oriti

es. T

he in

tern

al re

view

pro

cess

has

als

o be

en st

reng

then

ed to

pro

vide

gre

ater

co

ntin

uity

, for

inst

ance

thro

ugh

mai

nstre

amin

g of

pre

-brie

f mee

tings

. The

in

trodu

ctio

n of

thre

e-ye

ar su

rvei

llanc

e ag

enda

s pro

vidi

ng a

med

ium

-term

fram

ewor

k to

gui

de st

aff’

s wor

k sh

ould

als

o go

a lo

ng w

ay in

pro

vidi

ng th

e ne

eded

con

tinui

ty.

Trai

ning

for r

esid

ent r

epre

sent

ativ

es h

as b

een

esta

blis

hed

and

wor

k is

cur

rent

ly

unde

rway

to in

trodu

ce th

e tra

inin

g fo

r mis

sion

chi

efs.

1/ T

his c

olum

n su

mm

ariz

es th

e re

actio

n of

the

Exec

utiv

e B

oard

on

each

reco

mm

enda

tion

as re

porte

d in

the

Sum

min

g U

p by

the

Cha

irman

of t

he Ju

ly 1

6, 2

003

Boa

rd m

eetin

g. A

lthou

gh c

are

has b

een

take

n to

ens

ure

accu

racy

, rea

ders

are

invi

ted

to re

fer t

o th

e fu

ll te

xt o

f the

sum

mar

y of

the

disc

ussi

on, w

hich

is in

clud

ed in

the

publ

ishe

d ve

rsio

n of

the

repo

rt an

d ca

n be

acc

esse

d fr

om th

e IE

O w

ebsi

te

(ww

w.im

f.org

/ext

erna

l/np/

ieo/

2003

/cac

/inde

x.ht

m).

2/ T

he c

olum

n on

follo

w-u

p w

as p

rovi

ded

by st

aff a

t IEO

's re

ques

t and

has

not

bee

n su

bjec

t to

inde

pend

ent r

evie

w.

35

APP

EN

DIX

V. E

VA

LU

AT

ION

ON

FIS

CA

L A

DJU

STM

EN

T IN

IMF-

SUPP

OR

TE

D P

RO

GR

AM

S: R

EC

OM

ME

ND

AT

ION

S, B

OA

RD

RE

SPO

NSE

, A

ND

SU

BSE

QU

EN

T F

OL

LO

W-U

P

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 1/

Fo

llow

-Up

2/

Prog

ram

des

ign

and

inte

rnal

revi

ew

Prog

ram

doc

umen

tatio

n sh

ould

pro

vide

a m

ore

in-d

epth

and

co

here

nt ju

stifi

catio

n fo

r the

mag

nitu

de a

nd p

ace

of

prog

ram

med

fisc

al a

djus

tmen

t and

how

it is

link

ed w

ith

assu

mpt

ions

abo

ut th

e re

cove

ry o

f priv

ate

sect

or a

ctiv

ity a

nd

grow

th. I

t will

als

o fa

cilit

ate

the

revi

ew p

roce

ss a

nd

disc

ussi

ons a

t the

Boa

rd, a

s wel

l as p

rovi

de e

xter

nal

audi

ence

s with

a m

ore

conv

inci

ng e

xpla

natio

n fo

r the

ra

tiona

le fo

r the

pro

gram

and

iden

tify

poss

ible

risk

s and

su

bseq

uent

cor

rect

ive

mea

sure

s.

Dire

ctor

s sup

porte

d th

is re

com

men

datio

n, a

nd d

eem

ed th

at th

is in

itiat

ive

wou

ld

inst

ill g

reat

er d

isci

plin

e in

pro

gram

des

ign,

enh

ance

tran

spar

ency

, and

pro

vide

th

e pu

blic

and

the

priv

ate

sect

or w

ith a

mor

e co

nvin

cing

ratio

nale

for t

he

prog

ram

, the

reby

hel

ping

to o

verc

ome

polit

ical

obs

tacl

es to

impl

emen

tatio

n.

Nev

erth

eles

s, th

ey re

cogn

ized

that

unc

erta

intie

s reg

ardi

ng k

ey m

acro

econ

omic

va

riabl

es, p

artic

ular

ly in

cou

ntrie

s in

cris

is, a

nd c

once

rn a

bout

the

impl

emen

tatio

n of

pol

icy

mea

sure

s and

refo

rms c

ompl

icat

e th

is ta

sk. A

few

D

irect

ors c

autio

ned

agai

nst s

purio

us p

reci

sion

in su

ch ju

stifi

catio

ns, a

nd o

ther

s no

ted

that

the

mag

nitu

de a

nd p

ace

of p

rogr

amm

ed fi

scal

adj

ustm

ent m

ay a

lso

refle

ct p

oliti

cal c

onst

rain

ts. S

ever

al D

irect

ors s

tress

ed th

e im

porta

nce

of b

ette

r in

tegr

atin

g de

bt su

stai

nabi

lity

anal

yses

into

pro

gram

wor

k. D

irect

ors l

ooke

d fo

rwar

d to

furth

er st

aff a

naly

sis o

f gro

wth

pro

ject

ions

in th

e co

ntex

t of p

rogr

am

desi

gn d

iscu

ssio

ns.

The

Fisc

al A

ffai

rs D

epar

tmen

t (FA

D) i

n 20

04

prep

ared

a g

uida

nce

note

on

how

repo

rts m

ight

bes

t pr

esen

t the

app

ropr

iate

size

, pat

tern

, and

com

posi

tion

of fi

scal

adj

ustm

ent.

The

inte

rnal

revi

ew m

echa

nism

shou

ld p

lace

mor

e em

phas

is

on th

e ea

rly st

ages

of t

he p

roce

ss. A

mor

e in

tens

ive

proc

ess

of b

rain

stor

min

g is

nee

ded

at th

e tim

e of

the

initi

al b

rief,

and

the

brie

f sho

uld

also

arti

cula

te m

ore

clea

rly th

e ba

sis f

or

the

fisca

l pro

gram

, and

its l

inks

with

deb

t sus

tain

abili

ty

issu

es.

Dire

ctor

s sup

porte

d th

is re

com

men

datio

n. T

hey

wel

com

ed m

anag

emen

t’s

rece

nt in

itiat

ive

aim

ed a

t enh

anci

ng th

e ef

fect

iven

ess o

f the

revi

ew p

roce

ss,

whi

ch, i

nter

alia

, enc

oura

ges e

arly

con

sulta

tion

amon

g de

partm

ents

.

Follo

win

g th

e as

sess

men

t of

th

e in

tern

al

revi

ew

proc

ess

by a

sta

ff t

ask

forc

e in

200

4, m

anag

emen

t en

dors

ed s

ever

al c

hang

es t

o th

e pr

oces

s, in

clud

ing

mor

e sy

stem

atic

dis

cuss

ions

of

key

issu

es p

rior

to th

e pr

epar

atio

n of

brie

fing

pape

rs. I

n pa

rticu

lar,

pre-

brie

f m

eetin

gs th

at b

ring

toge

ther

orig

inat

ing

and

revi

ewin

g de

partm

ents

for

a d

iscu

ssio

n of

the

mai

n po

licy

issu

es

are

requ

ired

for

all

Arti

cle

IV c

onsu

ltatio

ns a

nd n

ew

prog

ram

brie

fs. T

he n

umbe

r of

pre

-brie

f m

eetin

gs h

as

incr

ease

d by

12

perc

ent i

n 20

07 to

a to

tal o

f 156

. The

in

trodu

ctio

n of

su

rvei

llanc

e ag

enda

s se

rves

as

an

op

portu

nity

to d

efin

e th

e br

oade

r roa

dmap

of r

efor

ms.

Prog

ram

s sho

uld

give

gre

ater

em

phas

is to

the

form

ulat

ion

and

impl

emen

tatio

n of

key

inst

itutio

nal r

efor

ms i

n th

e fis

cal

area

, eve

n if

(as i

s lik

ely)

they

can

not b

e fu

lly im

plem

ente

d du

ring

the

prog

ram

per

iod.

Pro

gram

s sho

uld

mak

e st

rong

er

effo

rts to

spec

ify th

ose

stru

ctur

al re

form

s tha

t sho

uld

be

carr

ied

out d

urin

g th

e pr

ogra

m h

oriz

on a

s par

t of a

bro

ader

ro

ad m

ap o

f prio

rity

refo

rms.

This

road

map

, and

its

prio

ritiz

atio

n, sh

ould

idea

lly h

ave

emer

ged

in th

e co

urse

of

surv

eilla

nce

and

be u

pdat

ed re

gula

rly a

s out

lined

bel

ow.

Dire

ctor

s agr

eed

that

key

inst

itutio

nal r

efor

ms c

an b

e m

ore

criti

cal f

or fi

scal

su

stai

nabi

lity

than

shor

t-ter

m e

xpen

ditu

re a

nd re

venu

e m

easu

res.

How

ever

, the

y re

cogn

ized

that

shor

t-ter

m m

easu

res a

re h

ard

to a

void

in m

any

case

s, es

peci

ally

if

the

imm

edia

te o

bjec

tive

is e

cono

mic

stab

iliza

tion.

Med

ium

-term

inst

itutio

nal

refo

rm m

ay b

e of

par

ticul

ar re

leva

nce

in c

ount

ries t

hat h

ave

achi

eved

m

acro

econ

omic

stab

ility

and

whe

re “

seco

nd g

ener

atio

n” re

form

s are

nec

essa

ry to

fo

ster

gro

wth

and

redu

ce lo

nger

-term

vul

nera

bilit

ies.

Som

e D

irect

ors a

gree

d w

ith

the

repo

rt’s s

ugge

stio

n th

at re

form

s sho

uld

be b

roke

n do

wn

into

thos

e th

at

requ

ire e

xecu

tive

actio

n, le

gisl

atio

n, a

nd c

apac

ity b

uild

ing.

D

irect

ors,

how

ever

, poi

nted

out

that

in c

risis

situ

atio

ns, t

he p

ress

ing

need

to

reso

lve

the

cris

is m

ay p

ose

serio

us c

onst

rain

ts o

n a

med

ium

-term

app

roac

h. T

hey

reite

rate

d th

e co

nclu

sion

of t

he d

iscu

ssio

n on

the

Eval

uatio

n of

the

Rol

e of

the

IMF

in R

ecen

t Cap

ital A

ccou

nt C

rises

(BU

FF/0

3/12

5) th

at a

cris

is sh

ould

not

be

used

as a

n op

portu

nity

to fo

rce

long

-aw

aite

d re

form

s, ho

wev

er d

esira

ble

they

m

ay b

e, in

are

as th

at a

re n

ot c

ritic

al to

the

reso

lutio

n of

the

cris

is o

r to

addr

ess

vuln

erab

ility

to fu

ture

cris

es. C

aref

ul ju

dgm

ent w

ill c

ontin

ue to

be

need

ed to

fo

cus c

ondi

tiona

lity

on th

ose

refo

rms j

udge

d cr

itica

l whi

le a

t the

sam

e tim

e en

surin

g th

at a

dequ

ate

prog

ress

is m

ade

in a

ddre

ssin

g vu

lner

abili

ties a

nd

achi

evin

g th

e pr

ogra

m’s

goa

ls d

urin

g th

e pe

riod

of th

e ar

rang

emen

t, th

us

safe

guar

ding

the

IMF’

s res

ourc

es.

See

belo

w.

36

APP

EN

DIX

V. E

VA

LU

AT

ION

ON

FIS

CA

L A

DJU

STM

EN

T IN

IMF-

SUPP

OR

TE

D P

RO

GR

AM

S: R

EC

OM

ME

ND

AT

ION

S, B

OA

RD

RE

SPO

NSE

, A

ND

SU

BSE

QU

EN

T F

OL

LO

W-U

P (C

ON

TIN

UE

D)

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 1/

Fo

llow

-Up

2/

Surv

eilla

nce

The

surv

eilla

nce

proc

ess s

houl

d be

use

d m

ore

expl

icitl

y to

pr

ovid

e a

long

er-te

rm ro

ad m

ap fo

r fis

cal r

efor

ms a

nd to

ass

ess

prog

ress

ach

ieve

d.

• In

col

labo

ratio

n w

ith th

e au

thor

ities

, the

IMF

shou

ld c

lear

ly

iden

tify

in su

rvei

llanc

e re

ports

the

mos

t crit

ical

dis

torti

ons i

n a

coun

try’s

pub

lic fi

nanc

es fr

om th

e pe

rspe

ctiv

es o

f equ

ity

and

effic

ienc

y.

Mos

t Dire

ctor

s agr

eed

that

Arti

cle

IV c

onsu

ltatio

ns sh

ould

pla

y a

stro

nger

ro

le in

iden

tifyi

ng lo

nger

-term

refo

rm p

riorit

ies a

nd th

e ca

uses

of p

ast

failu

res i

n ad

dres

sing

fisc

al p

robl

ems,

and

that

thes

e an

alys

es sh

ould

info

rm

subs

eque

nt p

rogr

am d

esig

n. In

this

resp

ect,

the

vario

us in

itiat

ives

to

dist

ingu

ish

Arti

cle

IV su

rvei

llanc

e fr

om p

rogr

am w

ork

are

aim

ed a

t pr

ovid

ing

fres

h pe

rspe

ctiv

es.

A p

ilot e

xerc

ise

was

con

duct

ed in

16

coun

tries

with

a

view

to st

reng

then

ing

disc

ussi

on o

f stru

ctur

al fi

scal

is

sues

, bui

ldin

g on

fisc

al st

rate

gy b

riefs

, pre

pare

d by

the

Fisc

al A

ffai

rs D

epar

tmen

t (FA

D) i

n co

llabo

ratio

n w

ith

area

dep

artm

ents

. Fo

llow

ing

on fr

om th

is p

ilot,

FAD

no

w m

aint

ains

and

regu

larly

upd

ates

fisc

al st

rate

gy

brie

fs fo

r abo

ut 5

5 co

untri

es. T

hese

brie

fs c

an b

e us

ed

by a

rea

depa

rtmen

ts to

info

rm d

iscu

ssio

ns w

ith th

e au

thor

ities

on

criti

cal s

truct

ural

and

inst

itutio

nal f

isca

l is

sues

that

can

be

cove

red

subs

eque

ntly

in A

rticl

e IV

an

d pr

ogra

m re

ports

. In

a nu

mbe

r of c

ount

ries,

staf

f re

ports

hav

e in

clud

ed e

nhan

ced

cove

rage

of s

truct

ural

fis

cal i

ssue

s and

prio

ritiz

ed a

gend

as fo

r ref

orm

.

• Su

ch a

n an

alys

is w

ould

pro

vide

a ro

ad m

ap fo

r fis

cal r

efor

m

in th

e fu

ture

, with

a c

lear

sens

e of

prio

ritie

s. It

wou

ld h

elp

to

prov

ide

the

basi

s for

iden

tifyi

ng c

ritic

al re

form

s—pa

rticu

larly

in

are

as w

here

thes

e re

form

s hav

e be

en la

ggin

g—th

at w

ould

ne

ed to

be

addr

esse

d sh

ould

IMF

finan

cing

be

requ

ired

in th

e fu

ture

. •

The

iden

tific

atio

n in

adv

ance

of a

reas

con

side

red

criti

cal w

ill

allo

w th

e au

thor

ities

flex

ibili

ty in

the

timin

g an

d pa

ckag

ing

of

refo

rms t

hat i

s ofte

n lo

st if

thes

e re

form

s are

flag

ged

at th

e la

st m

inut

e in

the

cont

ext o

f a c

risis

situ

atio

n. T

his a

ppro

ach

wou

ld a

lso

help

fost

er g

reat

er d

omes

tic d

ebat

e on

key

refo

rms

and

henc

e w

ould

enc

oura

ge h

omeg

row

n so

lutio

ns a

nd g

reat

er

owne

rshi

p. E

arly

and

cle

ar p

riorit

izat

ion

of re

form

s is a

lso

cons

iste

nt w

ith st

ream

linin

g ob

ject

ives

—it

will

avo

id la

st

min

ute

bunc

hing

of r

efor

ms u

nder

cris

is si

tuat

ions

. •

The

anal

ysis

of f

isca

l ref

orm

prio

ritie

s sho

uld

be

acco

mpa

nied

by

an a

sses

smen

t of w

hy c

erta

in im

porta

nt

dist

ortio

ns w

ere

not a

ddre

ssed

in th

e pa

st a

nd w

hat l

esso

ns

have

bee

n le

arne

d fr

om p

ast e

xper

ienc

e. T

his s

houl

d in

clud

e an

eff

ort t

o id

entif

y an

d un

bund

le th

e va

rious

con

stra

ints

to

criti

cal r

efor

ms,

incl

udin

g la

ck o

f tec

hnic

al c

apac

ity, a

reas

w

here

add

ition

al le

gisl

ativ

e ac

tion

is n

eces

sary

, and

are

as

whe

re k

ey d

ecis

ions

from

the

exec

utiv

e br

anch

are

requ

ired.

•

Surv

eilla

nce

shou

ld in

clud

e m

ore

syst

emat

ic e

ffor

ts to

es

timat

e th

e ex

tent

of t

ax e

vasi

on a

nd ta

x ex

empt

ions

, in

clud

ing

the

use

of c

ross

-cou

ntry

com

paris

ons.

• Pu

blic

deb

t sus

tain

abili

ty c

ould

hel

p an

chor

the

road

map

of

fisca

l ref

orm

prio

ritie

s pro

pose

d ab

ove

and

to a

sses

s tra

de-

offs

ove

r tim

e. A

t the

sam

e tim

e, d

ebt a

naly

sis p

rovi

des a

ch

eck

of c

umul

ativ

e pr

ogre

ss in

impr

ovin

g fis

cal s

yste

ms t

hat

coul

d al

so b

e re

porte

d in

succ

essi

ve su

rvei

llanc

e re

ports

.

Som

e D

irect

ors c

onsi

dere

d th

e cu

rren

t fra

mew

ork

of su

rvei

llanc

e to

be

adeq

uate

for a

chie

ving

the

obje

ctiv

es o

f the

IEO

’s re

com

men

datio

n.

Dire

ctor

s als

o ca

lled

for s

taff

repo

rts to

set o

ut in

mor

e de

tail

the

prog

ress

in

impl

emen

ting

the

reco

mm

enda

tions

of R

epor

ts o

n th

e O

bser

vanc

e of

St

anda

rds a

nd C

odes

(RO

SCs)

and

tech

nica

l ass

ista

nce

mis

sion

s, as

wel

l as

key

refo

rm p

riorit

ies.

Nev

erth

eles

s, th

ey u

nder

scor

ed th

at th

e ul

timat

e re

spon

sibi

lity

to d

evel

op a

fisc

al re

form

age

nda

resi

des w

ith th

e in

divi

dual

co

untry

aut

horit

ies,

whi

le th

e IM

F sh

ould

stan

d re

ady

to p

rovi

de a

dvic

e.

Dire

ctor

s als

o st

ress

ed th

at, c

onsi

sten

t with

the

IMF’

s man

date

, sur

veill

ance

ne

eds t

o fo

cus o

n ke

y is

sues

of m

acro

econ

omic

rele

vanc

e, w

hich

will

be

diff

eren

t in

each

cou

ntry

, and

shou

ld d

raw

on

the

expe

rtise

of o

ther

in

stitu

tions

as a

ppro

pria

te. T

hey

enco

urag

ed th

e us

e of

cro

ss-c

ount

ry

expe

rienc

es a

nd c

ompa

rison

s, in

clud

ing

inpu

ts fr

om re

gion

al a

nd m

ultil

ater

al

surv

eilla

nce,

to a

ssis

t in

prog

ram

des

ign.

Mos

t Dire

ctor

s vie

wed

Arti

cle

IV

cons

ulta

tions

as t

he a

ppro

pria

te v

ehic

le fo

r sta

ff to

iden

tify

coun

tries

in n

eed

of a

n in

-dep

th fi

scal

revi

ew, s

tress

ing

that

this

iden

tific

atio

n pr

oces

s sho

uld

be a

pplie

d un

iform

ly to

all

mem

ber c

ount

ries o

f the

IMF.

In m

ost c

ases

, th

ese

need

s cou

ld b

e ac

com

mod

ated

thro

ugh

tech

nica

l ass

ista

nce

and

RO

SCs.

The

Med

ium

-Ter

m S

trate

gy e

mph

asiz

es th

e im

porta

nce

of c

ross

-cou

ntry

ana

lyse

s and

of s

treng

then

ed

inte

grat

ion

betw

een

mul

tilat

eral

, reg

iona

l and

bila

tera

l su

rvei

llanc

e. T

he p

repa

ratio

n of

Reg

iona

l Eco

nom

ic

Out

look

s hav

e be

en a

n im

porta

nt v

ehic

le in

this

rega

rd,

espe

cial

ly w

ith re

spec

t to

sele

cted

ana

lytic

al st

udie

s. A

s par

t of t

he im

plem

enta

tion

of th

e re

com

men

datio

ns

of th

e 20

05 re

view

of t

he st

anda

rds a

nd c

odes

initi

ativ

e (S

M/0

5/25

2, B

UFF

/05/

125)

and

the

Fund

’s M

ediu

m-

Term

Stra

tegy

, sta

ff sh

ould

men

tion

in th

e st

aff

appr

aisa

ls o

f Arti

cle

IV re

ports

whe

n th

ey ju

dge

that

a

fisca

l RO

SC is

a h

igh

prio

rity,

with

out f

eelin

g co

nstra

ined

by

the

auth

oriti

es’ p

erce

ived

or a

ctua

l (u

n)w

illin

gnes

s to

volu

ntee

r for

the

RO

SC

(SM

/06/

219)

.

37

A

PPE

ND

IX V

. EV

AL

UA

TIO

N O

N F

ISC

AL

AD

JUST

ME

NT

IN IM

F-SU

PPO

RT

ED

PR

OG

RA

MS:

RE

CO

MM

EN

DA

TIO

NS,

BO

AR

D R

ESP

ON

SE,

AN

D S

UB

SEQ

UE

NT

FO

LL

OW

-UP

(CO

NC

LU

DE

D)

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 1/

Fo

llow

-Up

2/

Rol

e of

the

IMF

in so

cial

pro

tect

ion

The

IMF

shou

ld c

lear

ly d

elin

eate

the

oper

atio

nal f

ram

ewor

k in

w

hich

soci

al is

sues

will

be

addr

esse

d w

ithin

pro

gram

des

ign

in

non-

PRG

F co

untri

es. T

his s

houl

d in

clud

e a

clea

r ind

icat

ion

of

the

IMF’

s res

pons

ibili

ties a

nd a

ctiv

ities

in th

is a

rea.

Th

e ob

ject

ive

shou

ld b

e to

ass

ist m

iddl

e-in

com

e co

untri

es to

pr

epar

e an

d im

prov

e th

eir i

nstit

utio

nal f

ram

ewor

k to

allo

cate

re

sour

ces t

o cr

itica

l soc

ial p

rogr

ams a

nd to

est

ablis

h m

echa

nism

s to

prot

ect t

he m

ost v

ulne

rabl

e gr

oups

in th

e fa

ce o

f ex

tern

al sh

ocks

and

bud

geta

ry re

trenc

hmen

t. •

The

IMF

coul

d in

vite

the

auth

oriti

es re

gula

rly d

urin

g A

rticl

e IV

con

sulta

tions

to id

entif

y th

e ex

istin

g cr

itica

l soc

ial

prog

ram

s and

soci

al se

rvic

es th

at th

ey w

ould

like

to se

e pr

otec

ted

in th

e ev

ent o

f adv

erse

shoc

ks. P

artic

ipat

ion

on th

e pa

rt of

the

auth

oriti

es w

ould

cle

arly

be

volu

ntar

y.

• Su

cces

sful

impl

emen

tatio

n w

ill d

epen

d he

avily

on

havi

ng

bette

r and

mor

e tra

nspa

rent

exp

endi

ture

mon

itorin

g sy

stem

s. O

n th

e ba

sis o

f the

prio

ritie

s ide

ntifi

ed b

y th

e au

thor

ities

, the

IM

F an

d th

e W

orld

Ban

k co

uld

join

thei

r acc

eler

ated

eff

orts

to

refo

rm p

ublic

exp

endi

ture

man

agem

ent (

PEM

) sys

tem

s, sp

ecifi

cally

gea

red

tow

ard

the

soci

al a

rea,

with

a v

iew

to

prot

ectin

g th

e sp

ecifi

ed p

rogr

ams a

nd sp

endi

ng c

ateg

orie

s.

• Th

is c

oncr

ete

appl

icat

ion

of th

e PE

M in

itiat

ive

is p

artic

ular

ly

impo

rtant

bec

ause

in m

any

case

s whe

re th

ere

is a

n IM

F-su

ppor

ted

prog

ram

the

Wor

ld B

ank

is a

lso

activ

e w

ith

adju

stm

ent l

endi

ng su

ppor

ting

the

budg

et.

• Su

rvei

llanc

e w

ould

rout

inel

y re

port

on th

ese

initi

ativ

es a

nd

thei

r pro

gres

s ove

r tim

e.

Dire

ctor

s agr

eed

that

an

impo

rtant

aim

of p

rogr

am d

esig

n sh

ould

be

to

prot

ect c

ritic

al so

cial

exp

endi

ture

s. H

owev

er, t

hey

stre

ssed

, as r

ecog

nize

d in

th

e re

port,

that

the

IMF

shou

ld n

ot b

ecom

e in

volv

ed in

the

deta

iled

sele

ctio

n an

d de

sign

of s

ocia

l pol

icy;

this

task

is o

utsi

de b

oth

the

IMF’

s man

date

and

its

exp

ertis

e. A

num

ber o

f Dire

ctor

s sup

porte

d th

e IE

O’s

cal

l for

upd

atin

g of

th

e 19

97 g

uide

lines

that

dire

ct IM

F w

ork

in th

e so

cial

are

a, in

ord

er to

im

prov

e th

eir c

larit

y an

d ef

fect

iven

ess a

s an

oper

atio

nal t

ool i

n pr

otec

ting

the

mos

t vul

nera

ble

from

eco

nom

ic sh

ocks

and

bud

geta

ry re

trenc

hmen

t. O

ther

D

irect

ors,

how

ever

, vie

wed

the

exis

ting

guid

elin

es a

s ade

quat

e, a

nd a

few

co

nsid

ered

that

the

annu

al a

nd m

ediu

m-te

rm b

udge

ts o

f non

-PR

GF

coun

tries

al

read

y ad

equa

tely

iden

tify

criti

cal s

ocia

l sec

tor p

rogr

ams.

Thes

e D

irect

ors

reca

lled

that

the

new

fram

ewor

k fo

r Ban

k-IM

F co

llabo

ratio

n on

pub

lic

expe

nditu

re is

sues

shou

ld e

nhan

ce c

ount

ries’

pub

lic e

xpen

ditu

re re

form

st

rate

gies

, inc

ludi

ng m

easu

res t

o pr

otec

t crit

ical

soci

al sp

endi

ng. M

ost

Dire

ctor

s agr

eed

with

the

reco

mm

enda

tion

that

staf

f sho

uld

inqu

ire, d

urin

g A

rticl

e IV

con

sulta

tions

, whe

ther

the

auth

oriti

es h

ave

iden

tifie

d so

cial

pr

ogra

ms t

hat t

hey

wou

ld li

ke to

pro

tect

in th

e ev

ent o

f a c

risis

, as t

hey

belie

ved

this

wou

ld h

elp

disp

el th

e cr

itici

sm th

at IM

F-su

ppor

ted

prog

ram

s un

duly

cur

tail

soci

al sp

endi

ng. A

few

oth

ers c

onsi

dere

d th

is re

com

men

datio

n im

prac

tical

, as i

t wou

ld c

reat

e si

gnifi

cant

cos

ts a

nd p

ress

ures

for t

he

auth

oriti

es w

ith li

ttle

bene

fit.

Dur

ing

the

disc

ussi

ons o

f the

200

4 B

ienn

ial

Rev

iew

of I

MF

Surv

eilla

nce,

the

Exec

utiv

e B

oard

co

nclu

ded

that

, “In

mem

bers

whe

re sh

ocks

cou

ld

have

a si

zabl

e im

pact

on

soci

al c

ondi

tions

, mos

t D

irect

ors w

ere

of th

e vi

ew th

at A

rticl

e IV

co

nsul

tatio

ns a

nd o

ther

con

tact

s can

off

er a

n op

portu

nity

to so

licit

inte

rest

ed m

embe

rs’ v

iew

s on

pro

tect

ion

of so

cial

safe

ty n

ets o

r of o

ther

pr

iorit

y ex

pend

iture

s in

times

of e

cono

mic

stre

ss.”

Th

e su

rvei

llanc

e gu

idan

ce n

ote

issu

ed to

staf

f in

early

200

5 (S

M/0

5/15

6) c

alls

for s

ocia

l and

rela

ted

issu

es—

such

as p

over

ty, i

ncom

e di

strib

utio

n,

soci

al sa

fety

net

s, an

d so

cial

exp

endi

ture

s—to

be

addr

esse

d, w

ith d

ue re

gard

to p

rinci

ples

of f

ocus

an

d se

lect

ivity

. How

ever

, the

gui

delin

es d

o no

t m

entio

n th

e sp

ecifi

c re

com

men

datio

n no

ted

in th

e fir

st b

ulle

t und

er “

Rol

e of

the

IMF

in S

ocia

l Pr

otec

tion.

” 3/

The

surv

eilla

nce

guid

ance

not

e is

cu

rren

tly b

eing

revi

sed

in li

ne w

ith th

e 20

07

Surv

eilla

nce

Dec

isio

n, w

hich

reaf

firm

s and

sh

arpe

ns th

e pr

inci

ples

of f

ocus

and

sele

ctiv

ity.

1/ T

his c

olum

n su

mm

ariz

es th

e re

actio

n of

the

Exec

utiv

e B

oard

on

each

reco

mm

enda

tion

as re

porte

d in

the

Act

ing

Cha

irman

’s S

umm

ing

Up

of th

e A

ugus

t 29,

200

3 B

oard

mee

ting.

Alth

ough

car

e ha

s be

en ta

ken

to e

nsur

e ac

cura

cy, r

eade

rs a

re in

vite

d to

refe

r to

the

full

text

of t

he su

mm

ary

of th

e di

scus

sion

, whi

ch is

incl

uded

in th

e pu

blis

hed

vers

ion

of th

e re

port

and

can

be a

cces

sed

on th

e IE

O

web

site

at w

ww

.imf.o

rg/E

xter

nal/N

P/ie

o/20

03/fi

s/in

dex.

htm

. 2/

The

col

umn

on fo

llow

-up

was

pro

vide

d by

staf

f at I

EO's

requ

est a

nd h

as n

ot b

een

subj

ect t

o in

depe

nden

t rev

iew

. 3/

See

Sur

veill

ance

Gui

danc

e N

ote,

May

200

5.

38

APP

EN

DIX

VI.

EV

AL

UA

TIO

N O

F PO

VE

RT

Y R

ED

UC

TIO

N S

TR

AT

EG

Y P

APE

RS

AN

D T

HE

PO

VE

RT

Y R

ED

UC

TIO

N A

ND

GR

OW

TH

FA

CIL

ITY

: R

EC

OM

ME

ND

AT

ION

S, B

OA

RD

RE

SPO

NSE

, AN

D S

UB

SEQ

UE

NT

FO

LL

OW

-UP

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 1/

Fo

llow

-Up

2/

Alig

ning

ince

ntiv

es a

nd o

bjec

tives

Intro

duce

gre

ater

flex

ibili

ty in

the

impl

emen

tatio

n of

the

PRS

appr

oach

to fi

t bet

ter t

he n

eeds

of c

ount

ries a

t di

ffer

ent s

tage

s of t

he p

roce

ss a

nd w

ith d

iffer

ent

capa

citie

s and

pol

itica

l and

adm

inis

trativ

e sy

stem

s. C

ount

ries w

ould

be

put m

ore

firm

ly in

the

driv

er’s

seat

by

det

erm

inin

g th

emse

lves

: (1

) H

ow th

e po

licy

form

ulat

ion,

impl

emen

tatio

n, a

nd

mon

itorin

g pr

oces

ses w

ill b

e bu

ilt u

p ov

er ti

me.

Pr

ogre

ss w

ould

be

mon

itore

d ag

ains

t an

expl

icit

set

of c

ount

ry-d

eter

min

ed in

term

edia

te b

ench

mar

ks.

(2)

Wha

t the

out

put o

f the

se p

roce

sses

will

be

in te

rms

of d

ocum

ents

, with

IMF

proc

ess r

equi

rem

ents

m

inim

ized

.

Dire

ctor

s bro

adly

end

orse

d th

e re

com

men

datio

n, a

gree

ing

that

th

e PR

S ap

proa

ch w

ill n

eed

to b

e im

plem

ente

d fle

xibl

y ta

king

du

e ac

coun

t of c

ount

ry-s

peci

fic c

ircum

stan

ces a

nd th

e co

re

obje

ctiv

es o

f the

PR

S ap

proa

ch.

Seve

ral c

hang

es h

ave

been

mad

e to

intro

duce

gre

ater

flex

ibili

ty. I

n ad

ditio

n to

the

shift

in fo

cus f

rom

the

JSA

to th

e Jo

int S

taff

Adv

isor

y N

ote

(JSA

N) (

see

belo

w),

the

Ann

ual P

rogr

ess R

epor

t (A

PR) c

an n

ow

be m

ore

clos

ely

alig

ned

with

dom

estic

pro

cess

es, g

ivin

g th

e co

untry

an

oppo

rtuni

ty to

ass

ess p

rogr

ess a

nd se

t the

age

nda

for t

he p

erio

d ah

ead.

In

mos

t cas

es, A

PRs w

ill n

ot b

e di

scus

sed

by th

e IM

F an

d W

orld

Ban

k B

oard

s and

will

be

dist

ribut

ed fo

r the

ir in

form

atio

n on

ly.

The

requ

irem

ent t

hat t

he P

RS

and

the

PRG

F be

fully

con

sist

ent h

as

been

eas

ed, w

ith th

e ai

m o

f elim

inat

ing

the

need

for l

ast-m

inut

e fo

rmal

ad

just

men

ts to

the

stra

tegy

doc

umen

t.

Shift

the

emph

asis

of t

he in

itiat

ive

from

the

prod

uctio

n of

do

cum

ents

to th

e de

velo

pmen

t of s

ound

dom

estic

pol

icy

form

ulat

ion

and

impl

emen

tatio

n pr

oces

ses.

This

wou

ld in

volv

e th

e fo

llow

ing

elem

ents

: (1

) B

uild

in g

reat

er re

sults

orie

ntat

ion.

(2

) Sh

ift th

e em

phas

is o

f the

ince

ntiv

es st

ruct

ure

to

achi

evin

g su

bsta

ntiv

e ch

ange

s in

dom

estic

pol

icie

s an

d pr

oces

ses t

hat a

re o

bjec

tivel

y m

easu

red.

Dire

ctor

s agr

eed

that

ther

e sh

ould

be

less

em

phas

is o

n do

cum

ent

prep

arat

ion

and

mor

e on

impr

ovin

g th

e ca

pabi

lity

of c

ount

ries t

o de

velo

p an

d im

plem

ent p

olic

ies.

Som

e D

irect

ors a

gree

d th

at

coun

tries

shou

ld se

t exp

licit

crite

ria fo

r jud

ging

pro

gres

s tow

ard

key

inte

rmed

iate

obj

ectiv

es, b

ut m

any

Dire

ctor

s cau

tione

d th

at

this

shou

ld n

ot im

ply

exce

ssiv

e IM

F in

volv

emen

t in

asse

ssin

g th

e co

untry

’s d

ecis

ion-

mak

ing

proc

ess a

nd sh

ould

not

est

ablis

h an

unw

arra

nted

dire

ct li

nkag

e be

twee

n su

ch a

sses

smen

ts a

nd th

e IM

F’s l

endi

ng d

ecis

ions

. Dire

ctor

s not

ed th

at fu

rther

dis

cuss

ion

was

nee

ded

on h

ow th

e IM

F sh

ould

reac

t in

case

s whe

re it

be

lieve

s tha

t the

pac

e of

pro

gres

s cho

sen

is n

ot a

mbi

tious

en

ough

.

JSA

Ns (

see

belo

w) a

re to

pro

vide

con

stru

ctiv

e fe

edba

ck to

the

auth

oriti

es, f

ocus

ing

on a

lim

ited

num

ber o

f sug

gest

ed k

ey

impr

ovem

ents

that

cou

ld b

e m

ade

to th

e st

rate

gy. T

his i

ncre

ased

se

lect

ivity

is in

tend

ed to

focu

s eff

orts

on

subs

tant

ive

chan

ges i

n po

licie

s an

d pr

oces

ses.

Cla

rify

the

purp

ose

of th

e Jo

int S

taff

Ass

essm

ent a

nd

rede

fine

the

vehi

cle

acco

rdin

gly.

D

irect

ors c

alle

d fo

r a re

form

ulat

ion

of th

e JS

A w

ith a

n em

phas

is

on g

radu

ated

rath

er th

an b

inar

y as

sess

men

ts.

The

Boa

rd su

bseq

uent

ly a

ccep

ted

the

staf

f pro

posa

l to

repl

ace

the

JSA

w

ith a

JSA

N th

at fo

cuse

s on

prov

idin

g fe

edba

ck to

the

auth

oriti

es o

n th

e PR

SP a

nd th

at d

rops

the

bina

ry (y

es o

r no)

ass

essm

ent o

f the

su

itabi

lity

of th

e PR

SP a

s a b

asis

for c

once

ssio

nal l

endi

ng.

39

APP

EN

DIX

VI.

EV

AL

UA

TIO

N O

F PO

VE

RT

Y R

ED

UC

TIO

N S

TR

AT

EG

Y P

APE

RS

AN

D T

HE

PO

VE

RT

Y R

ED

UC

TIO

N A

ND

GR

OW

TH

FA

CIL

ITY

: R

EC

OM

ME

ND

AT

ION

S, B

OA

RD

RE

SPO

NSE

, AN

D S

UB

SEQ

UE

NT

FO

LL

OW

-UP

(CO

NC

LU

DE

D)

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 1/

Fo

llow

-Up

2/

Cla

rify

ing

the

IMF

’s ro

le a

nd im

prov

ing

its e

ffec

tiven

ess

Cla

rify

wha

t the

PR

S ap

proa

ch im

plie

s for

the

IMF’

s ow

n op

erat

ions

and

stre

ngth

en th

e im

plem

enta

tion

of th

e ag

reed

role

. Thi

s wou

ld a

ffec

t the

follo

win

g ar

eas:

(1

) IM

F en

gage

men

t in

the

PRS

proc

ess.

(2)

PRG

F-re

late

d ac

tiviti

es in

clud

ing

clar

ifyin

g th

e IM

F ro

le w

here

the

PRSP

doe

s not

yet

pro

vide

an

oper

atio

nal r

oad

map

. (3

) St

ream

line

IMF

docu

men

tatio

n an

d B

oard

scru

tiny.

Dire

ctor

s agr

eed

that

the

IMF

need

s to

set o

ut m

ore

clea

rly it

s ro

le in

the

PRS

appr

oach

in e

ach

coun

try, b

ased

on

the

IMF’

s co

re m

anda

te in

mac

roec

onom

ic a

nd re

late

d st

ruct

ural

pol

icy

issu

es.

Man

y D

irect

ors a

lso

supp

orte

d a

mor

e ac

tive

role

for t

he IM

F in

th

e pu

blic

deb

ate

on m

acro

econ

omic

pol

icy

desi

gn a

nd

impl

emen

tatio

n. W

here

PR

SPs a

re n

ot y

et o

pera

tiona

lly v

iabl

e,

the

IMF

shou

ld n

ot in

sist

on

imm

edia

te ti

ght a

lignm

ent b

etw

een

the

PRSP

and

PR

GF-

supp

orte

d pr

ogra

m. I

nste

ad, I

MF

staf

f sh

ould

wor

k w

ith th

ese

mem

bers

to st

reng

then

thei

r m

acro

econ

omic

fram

ewor

ks in

PR

SPs.

How

ever

, inc

reas

ed

flexi

bilit

y sh

ould

not

impl

y de

linki

ng th

e PR

GF

from

the

PRSP

, an

d th

e IM

F w

ould

still

seek

to a

pply

the

PRSP

prin

cipl

es in

its

prog

ram

wor

k.

Add

ition

al w

ork

on th

e PR

SP p

roce

ss w

ill b

e do

ne in

the

cont

ext o

f the

M

anag

ing

Dire

ctor

’s R

epor

t on

the

IMF’

s Med

ium

-Ter

m S

trate

gy a

nd a

B

oard

pap

er o

n th

e ro

le o

f the

IMF

in th

e PR

S pr

oces

s and

in d

onor

co

llabo

ratio

n is

und

er p

repa

ratio

n fo

r Boa

rd d

iscu

ssio

n.

Boa

rd sc

rutin

y ha

s bee

n si

mpl

ified

, as P

RS

docu

men

ts a

nd

corr

espo

ndin

g JS

AN

s will

no

long

er b

e pu

t aut

omat

ical

ly o

n th

e B

oard

ag

enda

. Ins

tead

, the

y w

ill b

e is

sued

for i

nfor

mat

ion

and

disc

usse

d on

ly a

t an

Exe

cutiv

e D

irect

or’s

requ

est.

Whe

re P

RS

docu

men

ts d

o no

t pro

vide

an

oper

atio

nal s

trate

gy, t

his c

an

be se

t out

in th

e co

ntex

t of P

RG

F-su

ppor

ted

prog

ram

s. W

here

the

stra

tegy

has

wea

knes

ses t

hat a

re c

ritic

al to

the

succ

ess o

f PR

GF-

supp

orte

d pr

ogra

ms,

the

Lette

r of I

nten

t/Mem

oran

dum

of E

cono

mic

and

Fi

nanc

ial P

olic

ies a

nd st

aff r

epor

t for

the

PRG

F re

ques

t or r

evie

w is

ex

pect

ed to

set o

ut h

ow th

e w

eakn

esse

s hav

e be

en a

ddre

ssed

.

A se

para

te JS

AN

is n

o lo

nger

requ

ired

for P

RSP

pre

para

tion

stat

us

repo

rts; i

nste

ad, a

brie

f dis

cuss

ion

of th

e st

atus

repo

rt is

incl

uded

in th

e PR

GF

staf

f rep

ort.

Stre

ngth

en p

riorit

izat

ion

and

acco

unta

bilit

y on

wha

t the

IM

F its

elf i

s sup

pose

d to

del

iver

with

in th

e br

oade

r pa

rtner

ship

fram

ewor

k, b

uilt

arou

nd th

e pr

iorit

ies

emer

ging

from

the

PRS

proc

ess,

and

ensu

re th

at

reso

urce

s mat

ch c

omm

itmen

ts.

Dire

ctor

s wel

com

ed th

e em

phas

is o

n be

tter d

efin

ing

prio

ritie

s for

th

e IM

F’s w

ork

in lo

w-in

com

e co

untri

es a

nd in

dica

ted

that

the

prio

ritiz

atio

n of

bud

get r

esou

rces

mus

t be

guid

ed b

y th

e IM

F’s

over

all m

anda

te. T

hey

calle

d fo

r a c

aref

ul a

sses

smen

t of t

he

reso

urce

impl

icat

ions

of a

dapt

ing

the

IMF’

s rol

e al

ong

the

lines

of

the

repo

rt’s r

ecom

men

datio

ns.

See

resp

onse

to “

Cla

rifyi

ng th

e IM

F’s r

ole

and

impr

ovin

g its

ef

fect

iven

ess”

abo

ve.

The

IMF

and

Wor

ld B

ank

(AFR

and

Wor

ld B

ank

Afr

ica

Reg

ion)

are

cu

rren

tly im

plem

entin

g a

pilo

t aim

ed a

t enh

ance

d co

llabo

ratio

n to

su

ppor

t cou

ntry

refo

rms i

n th

e ar

eas o

f fin

anci

al se

ctor

dev

elop

men

t, pu

blic

fina

ncia

l man

agem

ent,

and

the

man

agem

ent o

f nat

ural

reso

urce

s Fo

llow

ing

on fr

om th

e M

alan

Rep

ort,

a jo

int F

und-

Ban

k M

anag

emen

t A

ctio

n Pl

an w

ill o

utlin

e ne

w m

easu

res t

o fu

rther

enh

ance

col

labo

ratio

n be

twee

n Fu

nd a

nd B

ank

coun

try te

ams i

nclu

ding

in lo

w-in

com

e co

untri

es.

The

IMF

shou

ld e

ncou

rage

a st

reng

then

ing

of th

e fr

amew

ork

for e

stab

lishi

ng th

e ex

tern

al re

sour

ces

enve

lope

as p

art o

f the

PR

S ap

proa

ch.

Dire

ctor

s ind

icat

ed th

at th

e IM

F sh

ould

pla

y a

supp

ortiv

e ro

le

with

don

ors a

nd lo

w-in

com

e m

embe

rs to

hel

p en

sure

ade

quat

e pr

ovis

ion

of a

id to

ach

ieve

the

MD

Gs.

In th

is re

gard

, the

IMF

need

s to

cons

ider

how

its s

igna

ls c

an b

e cl

ear a

nd u

sefu

l to

its

mem

bers

.

The

Med

ium

-Ter

m S

trate

gy p

ropo

ses t

hat s

taff

sign

al to

don

ors w

hen

mor

e ai

d ca

n be

acc

omm

odat

ed w

ithou

t end

ange

ring

mac

roec

onom

ic

stab

ility

. Thi

s pro

posa

l is a

lso

put f

orw

ard

in th

e pa

per o

n th

e Fu

nd’s

ro

le in

the

PRS

and

dono

r col

labo

ratio

n pr

oces

s.

1/ T

his c

olum

n su

mm

ariz

es th

e re

actio

n of

the

Exec

utiv

e B

oard

on

each

reco

mm

enda

tion

as re

porte

d in

the

Act

ing

Cha

irman

’s S

umm

ing

Up

of th

e Ju

ly 2

1, 2

004

Boa

rd m

eetin

g. A

lthou

gh c

are

has

been

take

n to

ens

ure

accu

racy

, rea

ders

are

invi

ted

to re

fer t

o th

e fu

ll te

xt o

f the

sum

mar

y of

the

disc

ussi

on, w

hich

is in

clud

ed in

the

publ

ishe

d ve

rsio

n of

the

repo

rt an

d ca

n be

acc

esse

d on

the

IEO

web

site

at

ww

w.im

f.org

/Ext

erna

l/NP/

ieo/

2004

/prs

pprg

f/eng

/inde

x.ht

m.

40

APP

EN

DIX

VII

. EV

AL

UA

TIO

N O

F T

HE

RO

LE

OF

TH

E IM

F IN

AR

GE

NT

INA

, 199

1–20

01: R

EC

OM

ME

ND

AT

ION

S, B

OA

RD

RE

SPO

NSE

, A

ND

SU

BSE

QU

EN

T F

OL

LO

W-U

P

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 1/

Fo

llow

-Up

2/

Cri

sis m

anag

emen

t

The

IMF

shou

ld h

ave

a co

ntin

genc

y st

rate

gy fr

om

the

outs

et o

f a c

risis

, inc

ludi

ng in

par

ticul

ar “

stop

-lo

ss ru

les”

—th

at is

, a se

t of c

riter

ia to

det

erm

ine

if th

e in

itial

stra

tegy

is w

orki

ng a

nd to

gui

de th

e de

cisi

on o

n w

hen

a ch

ange

in a

ppro

ach

is n

eede

d.

Mos

t Dire

ctor

s vie

wed

con

tinge

ncy

plan

ning

as u

sefu

l, bu

t man

y no

ted

that

in a

cris

is o

r pre

cris

is se

tting

, it i

s not

alw

ays p

ossi

ble

to a

sses

s the

va

rious

con

tinge

ncie

s tha

t mig

ht o

ccur

. Con

cern

was

als

o ex

pres

sed

that

an

y in

dica

tion

that

the

IMF

was

dev

elop

ing

cont

inge

nt st

rate

gies

cou

ld

unde

rmin

e co

nfid

ence

in th

e pr

ogra

m. A

s reg

ards

spec

ific

stop

-loss

rule

s, w

hile

som

e D

irect

ors s

uppo

rted

thei

r con

side

ratio

n, m

ost f

elt t

hat d

efin

ing

and

impl

emen

ting

such

rule

s wou

ld b

e di

ffic

ult o

r im

prac

tical

.

No

cons

ensu

s em

erge

d in

the

Boa

rd m

eetin

g.

Whe

re th

e su

stai

nabi

lity

of d

ebt o

r the

exc

hang

e ra

te is

in q

uest

ion,

the

IMF

shou

ld in

dica

te th

at it

s su

ppor

t is c

ondi

tiona

l upo

n a

mea

ning

ful s

hift

in th

e co

untry

’s p

olic

y w

hile

rem

aini

ng a

ctiv

ely

enga

ged

to fo

ster

such

a sh

ift. H

igh

prio

rity

shou

ld b

e gi

ven

to d

efin

ing

the

role

of t

he IM

F w

hen

a co

untry

se

ekin

g ex

cept

iona

l acc

ess h

as a

solv

ency

pro

blem

.

Dire

ctor

s agr

eed

with

the

IEO

’s re

com

men

datio

n. A

t the

sam

e tim

e, th

ey

note

d th

at a

sses

sing

exc

hang

e ra

te o

r deb

t sus

tain

abili

ty w

ill n

eces

saril

y en

tail

judg

men

t, an

d it

is e

ssen

tial t

hat t

he B

oard

be

prov

ided

with

up-

to-

date

and

com

preh

ensi

ve in

form

atio

n an

d an

alys

is. S

teps

hav

e al

read

y be

en

take

n si

nce

the

Arg

entin

e cr

isis

to st

reng

then

the

basi

s on

whi

ch d

ebt a

nd

exch

ange

rate

sust

aina

bilit

y as

sess

men

ts a

re m

ade.

Dire

ctor

s ind

icat

ed th

at

they

look

ed fo

rwar

d to

an

oppo

rtuni

ty to

ass

ess w

heth

er fu

rther

cha

nges

m

ay b

e ne

eded

.

In Ju

ne 2

002,

the

Boa

rd a

dopt

ed a

fram

ewor

k fo

r mor

e ob

ject

ive

and

stan

dard

ized

deb

t sus

tain

abili

ty a

naly

sis;

refin

emen

ts to

this

fr

amew

ork

wer

e en

dors

ed b

y th

e B

oard

in Ju

ly 2

003.

D

ebt s

usta

inab

ility

ana

lyse

s, in

clud

ing

a sp

ecia

lized

fram

ewor

k fo

r lo

w-in

com

e co

untri

es, a

re n

ow re

gula

rly in

clud

ed in

staf

f rep

orts

for

Arti

cle

IV c

onsu

ltatio

ns a

nd u

se o

f IM

F re

sour

ces.

They

pla

y a

cent

ral r

ole

in c

onsi

derin

g ex

cept

iona

l acc

ess a

nd in

the

Evia

n ap

proa

ch o

f Par

is C

lub

cred

itors

. Pr

ogre

ss h

as b

een

mad

e to

def

ine

the

role

of t

he IM

F in

solv

ency

ca

ses a

nd th

is is

an

issu

e th

at c

ontin

ues t

o be

und

er a

ctiv

e co

nsid

erat

ion.

The

intro

duct

ion

of th

e ex

cept

iona

l acc

ess p

olic

y re

cogn

ized

the

spec

ial c

ircum

stan

ces o

f cou

ntrie

s whe

re so

lven

cy is

an

issu

e. A

revi

ew o

f the

Fun

d’s p

olic

y on

lend

ing

into

arr

ears

is

curr

ently

sche

dule

d fo

r 200

8. T

he B

oard

has

als

o co

nsid

ered

the

issu

e of

man

agin

g sy

stem

ic b

anki

ng c

rises

in th

e co

ntex

t of d

ebt

rest

ruct

urin

g (S

M/0

5/24

9). A

naly

tical

wor

k ha

s bee

n ca

rrie

d ou

t w

hich

spec

ifica

lly e

xam

ined

sove

reig

n de

bt re

stru

ctur

ing

and

debt

su

stai

nabi

lity

(OP

255)

. Su

rvei

llanc

e

Med

ium

-term

exc

hang

e ra

te a

nd d

ebt s

usta

inab

ility

sh

ould

form

the

core

focu

s of I

MF

surv

eilla

nce.

To

fulfi

ll th

ese

obje

ctiv

es (w

hich

are

alre

ady

curr

ent

polic

y), t

he IM

F ne

eds t

o im

prov

e to

ols f

or

asse

ssin

g th

e eq

uilib

rium

real

exc

hang

e ra

te th

at a

re

mor

e fo

rwar

d lo

okin

g an

d re

ly o

n a

varie

ty o

f cr

iteria

, exa

min

e de

bt p

rofil

es fr

om th

e pe

rspe

ctiv

e of

“de

bt in

tole

ranc

e,”

and

take

a lo

nger

-term

pe

rspe

ctiv

e on

vul

nera

bilit

ies t

hat c

ould

surf

ace

over

the

med

ium

term

.

Dire

ctor

s con

curr

ed w

ith th

e IE

O’s

reco

mm

enda

tion

that

med

ium

-term

ex

chan

ge ra

te a

nd d

ebt s

usta

inab

ility

shou

ld fo

rm th

e co

re fo

cus o

f IM

F su

rvei

llanc

e. T

hey

caut

ione

d th

at fi

ndin

g an

app

ropr

iate

ope

ratio

nal

mea

sure

of e

xcha

nge

rate

sust

aina

bilit

y w

ould

be

diff

icul

t, bu

t a fe

w

sugg

este

d th

at th

e de

velo

pmen

t of s

uch

a m

easu

re b

y th

e st

aff s

houl

d be

a

prio

rity.

Dire

ctor

s saw

a c

ontin

ued

need

for g

reat

er c

ando

r in

the

treat

men

t of

exc

hang

e ra

te p

olic

y in

the

cont

ext o

f Arti

cle

IV d

iscu

ssio

ns. I

n or

der t

o av

oid

trigg

erin

g a

pote

ntia

lly d

esta

biliz

ing

mar

ket r

eact

ion,

som

e su

gges

ted

that

the

scop

e fo

r est

ablis

hing

pro

cedu

res f

or h

andl

ing

sens

itive

to

pics

dur

ing

surv

eilla

nce

exer

cise

s sho

uld

be e

xplo

red

by st

aff.

As t

o de

bt

sust

aina

bilit

y, re

cent

eve

nts h

ave

led

to a

reas

sess

men

t of w

hat l

evel

of

debt

is su

stai

nabl

e fo

r em

ergi

ng m

arke

t cou

ntrie

s, w

hich

is a

lread

y re

flect

ed in

the

IMF’

s wor

k. D

irect

ors a

sked

staf

f to

cont

inue

to sh

arpe

n its

ana

lytic

al to

ols,

and

a fe

w c

alle

d fo

r exa

min

ing

way

s to

stre

ngth

en th

e or

gani

zatio

n an

d in

depe

nden

ce o

f deb

t sus

tain

abili

ty a

naly

sis w

ork.

Upo

n co

mpl

etin

g th

e 20

04 B

ienn

ial R

evie

w o

f Sur

veill

ance

, the

Ex

ecut

ive

Boa

rd e

stab

lishe

d sh

arpe

r exc

hang

e ra

te su

rvei

llanc

e an

d im

prov

ed a

naly

sis o

f deb

t sus

tain

abili

ty a

s prio

rity

obje

ctiv

es. S

ince

th

en, b

oth

area

s hav

e be

en re

ceiv

ing

spec

ial e

mph

asis

in st

aff

guid

ance

, tra

inin

g, re

sear

ch a

nd in

the

inte

rnal

revi

ew p

roce

ss.

The

Med

ium

-Ter

m S

trate

gy in

clud

es a

num

ber o

f ini

tiativ

es to

st

reng

then

the

anal

ysis

of e

xcha

nge

rate

s, in

clud

ing

the

exte

nsio

n of

th

e w

ork

of C

GER

(SM

/06/

283)

to m

ajor

em

ergi

ng m

arke

ts.

Som

e ar

ea d

epar

tmen

ts h

ave

esta

blis

hed

activ

e w

orki

ng g

roup

s on

exch

ange

rate

issu

es.

The

2007

Sur

veill

ance

Dec

isio

n us

es th

e co

ncep

t of e

xter

nal

stab

ility

—a

conc

ept l

inke

d to

bot

h eq

uilib

rium

exc

hang

e ra

tes a

nd

debt

sust

aina

bilit

y—as

the

orga

nizi

ng p

rinci

ple

of th

e Fu

nd’s

bi

late

ral s

urve

illan

ce. T

he D

ecis

ion

prov

ides

furth

er g

uida

nce

to

mem

bers

on

the

cond

uct o

f exc

hang

e ra

te p

olic

ies a

nd c

larif

ies

expe

ctat

ions

as t

o ho

w su

rvei

llanc

e sh

ould

ass

ess e

xcha

nge

rate

po

licie

s.

41

APP

EN

DIX

VII

. EV

AL

UA

TIO

N O

F T

HE

RO

LE

OF

TH

E IM

F IN

AR

GE

NT

INA

, 199

1–20

01: R

EC

OM

ME

ND

AT

ION

S, B

OA

RD

RE

SPO

NSE

, A

ND

SU

BSE

QU

EN

T F

OL

LO

W-U

P (C

ON

CL

UD

ED

)

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 1/

Fo

llow

-Up

2/

Prog

ram

rela

tions

hip

The

IMF

shou

ld re

frai

n fr

om e

nter

ing

or

mai

ntai

ning

a p

rogr

am re

latio

nshi

p w

ith a

mem

ber

coun

try (i

n th

e fo

rm o

f a p

reca

utio

nary

ar

rang

emen

t) w

hen

ther

e is

no

imm

edia

te b

alan

ce o

f pa

ymen

ts n

eed

and

ther

e ar

e se

rious

pol

itica

l ob

stac

les t

o ne

eded

pol

icy

adju

stm

ent o

r stru

ctur

al

refo

rm.

Dire

ctor

s not

ed th

e po

ssib

le ri

sks a

ssoc

iate

d w

ith p

reca

utio

nary

IMF

arra

ngem

ents

, esp

ecia

lly w

here

ther

e ar

e se

rious

pol

itica

l obs

tacl

es to

ne

eded

pol

icie

s and

refo

rms,

but m

ost d

id n

ot su

ppor

t the

impl

icat

ion

that

th

e IM

F sh

ould

not

ent

er in

to a

pro

gram

rela

tions

hip

with

a m

embe

r co

untry

whe

n th

ere

is n

o im

med

iate

bal

ance

of p

aym

ents

nee

d. T

hey

reite

rate

d th

e va

lue

of p

reca

utio

nary

arr

ange

men

ts a

s an

impo

rtant

tool

for

supp

ortin

g so

und

polic

ies,

whi

le a

gree

ing

that

ther

e is

a n

eed

to e

nsur

e th

at

prog

ram

stan

dard

s and

requ

irem

ents

are

the

sam

e as

thos

e fo

r all

othe

r ar

rang

emen

ts.

The

Boa

rd d

id n

ot su

ppor

t the

reco

mm

enda

tion,

so n

o ex

plic

it fo

llow

-up

is e

xpec

ted.

How

ever

, in

resp

onse

to th

e ex

pira

tion

of th

e C

ontin

gent

Cre

dit L

ine,

ther

e is

an

ongo

ing

deba

te o

n th

e ne

ed fo

r, an

d de

sira

bilit

y of

, a n

ew p

olic

y th

at w

ould

cla

rify

the

use

of

exce

ptio

nal a

cces

s und

er p

reca

utio

nary

arr

ange

men

ts. M

any

Dire

ctor

s sup

port

the

exis

ting

IMF

polic

ies a

s ade

quat

e.

Exce

ptio

nal a

cces

s sho

uld

enta

il a

pres

umpt

ion

of

clos

e co

oper

atio

n be

twee

n th

e au

thor

ities

and

the

IMF,

and

spec

ial i

ncen

tives

to fo

rge

such

clo

se

colla

bora

tion

shou

ld b

e ad

opte

d, in

clud

ing

man

dato

ry d

iscl

osur

e to

the

Exec

utiv

e B

oard

of a

ny

criti

cal i

ssue

or i

nfor

mat

ion

that

the

auth

oriti

es

refu

se to

dis

cuss

with

(or d

iscl

ose

to) s

taff

or

man

agem

ent.

Dire

ctor

s stre

ssed

that

all

case

s of t

he u

se o

f IM

F re

sour

ces,

parti

cula

rly

case

s of e

xcep

tiona

l acc

ess,

shou

ld e

ntai

l a p

resu

mpt

ion

of c

lose

co

oper

atio

n. M

any

Dire

ctor

s agr

eed

that

ther

e sh

ould

be

a re

quire

men

t of

man

dato

ry d

iscl

osur

e to

the

Boa

rd o

f any

crit

ical

issu

es w

hich

the

auth

oriti

es re

fuse

to d

iscu

ss.

The

deci

sion

-mak

ing

proc

ess

In o

rder

to st

reng

then

the

role

of t

he E

xecu

tive

Boa

rd, p

roce

dure

s sho

uld

be a

dopt

ed to

enc

oura

ge

(1) e

ffec

tive

Boa

rd o

vers

ight

of d

ecis

ions

und

er

man

agem

ent’s

pur

view

; (2)

pro

visi

on o

f can

did

and

full

info

rmat

ion

to th

e B

oard

on

all i

ssue

s rel

evan

t to

dec

isio

n m

akin

g; a

nd (3

) ope

n ex

chan

ges o

f vi

ews b

etw

een

man

agem

ent a

nd th

e B

oard

on

all

topi

cs, i

nclu

ding

the

mos

t sen

sitiv

e on

es.

Dire

ctor

s not

ed th

at th

e pr

oced

ures

for e

xcep

tiona

l acc

ess a

dopt

ed si

nce

the

Arg

entin

e cr

isis

hav

e ge

nera

lly w

orke

d to

stre

ngth

en th

e B

oard

’s

invo

lvem

ent a

nd e

nsur

e th

at d

ecis

ions

to c

ontin

ue p

rogr

am e

ngag

emen

t un

der e

xcep

tiona

l acc

ess a

re a

dequ

atel

y in

form

ed. A

num

ber o

f Dire

ctor

s, ho

wev

er, s

aw a

nee

d fo

r fur

ther

dis

cuss

ion

of a

ppro

ache

s to

stre

ngth

en th

e ro

le o

f the

Boa

rd. F

urth

er e

ffor

ts to

enh

ance

dec

isio

n m

akin

g by

the

Boa

rd

wou

ld in

clud

e im

prov

emen

ts in

the

prov

isio

n of

full

info

rmat

ion

on a

ll re

leva

nt is

sues

and

ope

n ex

chan

ges o

f vie

ws b

etw

een

man

agem

ent a

nd th

e B

oard

on

all t

opic

s, in

clud

ing

the

mos

t sen

sitiv

e on

es.

1/ T

his c

olum

n su

mm

ariz

es th

e re

actio

n of

the

Exec

utiv

e B

oard

on

each

reco

mm

enda

tion

as re

porte

d in

the

Sum

min

g U

p by

the

Cha

ir. A

lthou

gh c

are

has b

een

take

n to

ens

ure

accu

racy

, rea

ders

are

in

vite

d to

refe

r to

the

full

text

of t

he su

mm

ary

of th

e di

scus

sion

whi

ch is

incl

uded

in th

e pu

blis

hed

vers

ion

of th

e re

port

and

can

be a

cces

sed

from

the

IEO

web

site

(w

ww

.imf.o

rg/E

xter

nal/N

P/ie

o/20

04/a

rg/e

ng/in

dex.

htm

).

2/ T

he c

olum

n on

follo

w-u

p w

as p

rovi

ded

by st

aff a

t IEO

's re

ques

t and

has

not

bee

n su

bjec

t to

inde

pend

ent r

evie

w.

42

APP

EN

DIX

VII

I. E

VA

LU

AT

ION

OF

IMF

TE

CH

NIC

AL

ASS

IST

AN

CE

IEO

Rec

omm

enda

tions

E

xecu

tive

Boa

rd R

espo

nse

1/

Tas

k Fo

rce

Rec

omm

enda

tions

2/

Follo

w-U

p 3/

Pr

iori

tizat

ion

and

reso

urce

al

loca

tion

The

IMF

shou

ld d

evel

op a

med

ium

-te

rm c

ount

ry p

olic

y fr

amew

ork

for

setti

ng T

A p

riorit

ies,

inco

rpor

atin

g co

untry

-spe

cific

stra

tegi

c di

rect

ions

an

d lin

ked

to m

ore

syst

emat

ic

asse

ssm

ents

of f

acto

rs u

nder

lyin

g pa

st p

erfo

rman

ce.

Dire

ctor

s end

orse

d th

is re

com

men

datio

n an

d ge

nera

lly su

ppor

ted

the

man

ager

ial

appr

oach

es su

gges

ted

for c

arry

ing

it fo

rwar

d. In

par

ticul

ar, m

ost D

irect

ors

agre

ed th

at in

low

-inco

me

coun

tries

, the

PR

SP sh

ould

incr

easi

ngly

serv

e as

a

vehi

cle

for i

dent

ifyin

g m

ediu

m-te

rm T

A

need

s and

impr

ovin

g co

ordi

natio

n am

ong

ag

enci

es, a

lthou

gh in

a n

umbe

r of c

ases

, th

e fo

cus o

f PR

SPs w

ill n

eed

to b

e sh

arpe

ned

to c

arry

out

this

role

eff

ectiv

ely.

In

oth

er c

ount

ries,

Dire

ctor

s stre

ssed

the

impo

rtanc

e of

dev

elop

ing

coun

try-

cent

ered

fram

ewor

ks fo

r ide

ntify

ing

TA

need

s and

not

ed th

at a

var

iety

of

appr

oach

es—

poss

ibly

incl

udin

g gr

eate

r us

e of

Arti

cle

IV c

onsu

ltatio

ns to

ass

ess

need

s—m

ay b

e ap

prop

riate

.

Shor

t TA

Cou

ntry

Stra

tegy

Not

es (T

AC

SNs)

shou

ld b

e pr

epar

ed fo

r “in

tens

ive

IMF

TA u

sers

” an

d sy

stem

ical

ly

impo

rtant

TA

cou

ntrie

s. W

ith a

stra

tegi

c pe

rspe

ctiv

e de

velo

ped

in th

eir s

urve

illan

ce o

r Use

of F

und

Res

ourc

es

activ

ities

, are

a de

partm

ents

wou

ld id

entif

y th

e is

sues

/pro

blem

s to

be a

ddre

ssed

by

TA. T

AC

SNs w

ould

pr

esen

t the

IMF’

s TA

stra

tegy

to th

e au

thor

ities

, and

seek

th

eir i

nput

into

that

stra

tegy

. TA

CSN

s sho

uld

prov

ide

area

an

d fu

nctio

nal d

epar

tmen

ts w

ith a

solid

info

rmat

ion

base

to

furth

er th

eir d

ialo

gue

on T

A p

riorit

izat

ion

deci

sion

s. In

vie

w

of th

e po

ssib

le si

gnifi

cant

reso

urce

impl

icat

ions

of t

his

prop

osal

and

an

inco

nclu

sive

ear

lier e

xper

ienc

e w

ith

Tech

nica

l Con

sulta

tions

, the

pro

posa

l wou

ld b

e la

unch

ed o

n a

pilo

t bas

is.

Are

a de

partm

ents

alre

ady

incl

ude

TA m

onito

ring

on th

eir R

esid

ent R

epre

sent

ativ

e te

rms o

f re

fere

nce

whe

n ap

plic

able

. 4/

Sim

ilar i

ssue

s wer

e ra

ised

in th

e M

alan

C

omm

ittee

repo

rt w

hich

furth

er st

ress

ed b

ette

r co

ordi

natio

n be

twee

n th

e B

ank

and

the

Fund

in

deliv

ery

of te

chni

cal a

ssis

tanc

e, a

nd th

e C

rock

ett

Com

mitt

ee re

port

whi

ch re

com

men

ded

char

ging

fo

r bila

tera

l ser

vice

s (su

ch a

s tec

hnic

al a

ssis

tanc

e).

The

TAC

SN p

ilot w

as c

ompl

eted

in A

pril

2006

. Fo

llow

ing

an e

valu

atio

n of

exp

erie

nce

with

the

TAC

SNs a

nd g

uide

d by

the

Com

mitt

ee o

n C

apac

ity B

uild

ing

(CC

B),

the

TAC

SNs h

ave

been

re

plac

ed b

y R

egio

nal S

trate

gy N

otes

(RSN

s),

whi

ch p

rovi

de th

e ar

ea d

epar

tmen

ts’ s

trate

gic

pers

pect

ives

for t

heir

regi

ons a

s wel

l as t

he k

ey

prio

ritie

s for

cou

ntrie

s rec

eivi

ng in

tens

ive

TA.

The

RSN

s ser

ve a

s a k

ey in

put i

nto

depa

rtmen

ts’

Bus

ines

s Pla

ns a

nd th

e fo

rmul

atio

n of

the

Res

ourc

e A

lloca

tion

Plan

(RA

P) w

hich

is d

one

join

tly b

y fu

nctio

nal a

nd a

rea

depa

rtmen

ts. T

he

first

roun

d of

RSN

s wer

e co

mpl

eted

in A

pril

2007

.

Tra

ckin

g pr

ogre

ss a

nd r

easo

ns fo

r sh

ortf

alls

Th

e IM

F sh

ould

dev

elop

mor

e sy

stem

atic

app

roac

hes t

o tra

ck

prog

ress

on

maj

or T

A a

ctiv

ities

and

to

iden

tify

reas

ons b

ehin

d m

ajor

sh

ortfa

lls.

Dire

ctor

s sup

porte

d th

e re

com

men

datio

n th

at a

t the

out

set o

f maj

or T

A a

ctiv

ities

, st

aff a

nd a

utho

ritie

s sho

uld

agre

e on

m

easu

rabl

e in

dica

tors

of p

rogr

ess

cove

ring

all m

ajor

stag

es o

f the

TA

life

cy

cle.

Bet

ter t

rack

ing

incl

udes

car

eful

ex

plan

atio

n of

shor

tfalls

in e

xecu

tion,

and

ca

ndid

staf

f rep

ortin

g on

obs

tacl

es to

pr

ogre

ss. H

owev

er, o

n th

ese

ende

avor

s st

aff s

houl

d av

oid

impo

sing

con

ditio

ns o

n m

embe

rs w

ithou

t the

ir co

nsen

t. W

hile

su

ppor

ting

the

view

that

impl

emen

tatio

n re

cord

s sho

uld

be a

n im

porta

nt g

uide

in

wei

ghin

g TA

requ

ests

, a n

umbe

r of

Dire

ctor

s cau

tione

d ag

ains

t usi

ng tr

acki

ng

indi

cato

rs m

echa

nist

ical

ly fo

r TA

reso

urce

al

loca

tions

.

The

Task

For

ce n

otes

the

IEO

’s v

iew

on

the

TA In

form

atio

n M

anag

emen

t Sys

tem

(TA

IMS)

that

was

bei

ng d

evel

oped

as

“an

oppo

rtuni

ty to

syst

emat

ical

ly im

prov

e tra

ckin

g an

d m

onito

ring

of T

A o

n a

IMF-

wid

e ba

sis,”

and

a “

vehi

cle

thro

ugh

whi

ch e

nhan

ced

mon

itorin

g pr

actic

es b

ecom

e un

ified

an

d m

ore

trans

pare

nt a

cros

s the

inst

itutio

n.”

Agr

eein

g w

ith

that

vie

w, i

t not

es th

at T

AIM

S is

exp

ecte

d to

syst

emat

ical

ly

incl

ude

clea

r ex

ante

set o

f pro

gres

s ind

icat

ors a

nd id

entif

ied

risk

fact

ors,

to re

cord

out

puts

and

oth

er m

easu

rabl

e in

dica

tors

, an

d to

pro

vide

for t

heir

mon

itorin

g.

In th

e co

ntex

t of t

he T

ask

Forc

e on

Per

form

ance

In

dica

tors

, sta

ff is

seek

ing

to id

entif

y di

ffer

ent

type

s of T

A o

utpu

ts fo

r the

pur

pose

of t

rack

ing

and

mon

itorin

g pe

rfor

man

ce.

TAIM

S no

w g

ener

ates

mon

thly

mis

sion

act

ivity

re

ports

. It a

lso

assi

sts p

roje

ct m

anag

ers t

o m

onito

r id

entif

iabl

e T

A in

dica

tors

for t

rack

ing

perf

orm

ance

. TA

IMS

is b

eing

ext

ende

d to

the

IMF’

s reg

iona

l TA

cen

ters

, and

furth

er w

ork

is o

ngoi

ng o

n en

hanc

ing

TAIM

S as

a m

onito

ring

tool

.

43

APP

EN

DIX

VII

I. E

VA

LU

AT

ION

OF

IMF

TE

CH

NIC

AL

ASS

IST

AN

CE

(CO

NT

INU

ED

)

IEO

Rec

omm

enda

tions

E

xecu

tive

Boa

rd R

espo

nse

1/

Tas

k Fo

rce

Rec

omm

enda

tions

2/

Follo

w-U

p 3/

In

tera

ctio

n w

ith a

utho

ritie

s and

lo

cal e

xper

ts

Gre

ater

invo

lvem

ent b

y th

e au

thor

ities

and

cou

nter

parts

in th

e de

sign

of T

A a

ctiv

ities

and

ar

rang

emen

ts fo

r fol

low

-up

shou

ld

be e

mph

asiz

ed a

s a si

gnal

of

owne

rshi

p an

d co

mm

itmen

t.

TA d

epar

tmen

ts sh

ould

furth

er st

reng

then

the

dial

ogue

with

co

untry

aut

horit

ies w

hen

draf

ting

TOR

s for

shor

t- an

d lo

ng-

term

exp

erts

, and

syst

emat

ical

ly se

ek th

eir i

nput

s. Fo

r en

hanc

ing

the

likel

ihoo

d of

impl

emen

tatio

n, fo

ster

ing

less

ons

to b

e le

arne

d, a

nd d

isse

min

atin

g be

st p

ract

ices

, tho

se

depa

rtmen

ts sh

ould

syst

emat

ical

ly se

ek th

e au

thor

ities

’ co

nsen

t to

diss

emin

ate

TA re

ports

am

ong

the

coun

try’s

te

chni

cal s

taff

, IM

F Ex

ecut

ive

Boa

rd, a

nd se

lect

ed d

onor

s. B

road

er c

ircul

atio

n an

d av

aila

bilit

y of

the

TA re

ports

cou

ld

help

in b

uild

ing

cons

ensu

s aro

und

prop

osed

refo

rms a

nd

stre

ngth

en th

e au

thor

ities

’ res

olve

to fo

llow

up

on

reco

mm

enda

tions

.

Act

ions

sugg

este

d by

the

Task

For

ce a

re b

eing

im

plem

ente

d by

all

depa

rtmen

ts. T

A d

epar

tmen

ts

have

mad

e ef

forts

to e

nhan

ce th

e di

alog

ue w

ith th

e au

thor

ities

, inc

ludi

ng e

ffor

ts to

cle

arly

lay

out t

he

auth

oriti

es’ a

nd T

A d

epar

tmen

ts’ e

xpec

tatio

ns fo

r TA

ope

ratio

ns. T

he w

ork

plan

s by

the

Reg

iona

l TA

Cen

ters

are

dev

elop

ed in

col

labo

ratio

n w

ith

coun

try a

utho

ritie

s and

are

als

o en

dors

ed b

y th

e re

spec

tive

stee

ring

com

mitt

ees,

com

pris

ing

repr

esen

tativ

es o

f mem

ber c

ount

ries.

Follo

win

g th

e fir

st ro

und

of R

SNs,

it is

pla

nned

to d

iscu

ss

them

with

cou

ntry

aut

horit

ies,

to c

ontri

bute

furth

er

to th

e fu

lfillm

ent o

f thi

s obj

ectiv

e.

Enh

anci

ng id

entif

icat

ion

of o

ptio

ns

Stro

nger

eff

orts

shou

ld b

e m

ade

by

TA e

xper

ts to

iden

tify

optio

ns a

nd

disc

uss a

ltern

ativ

es w

ith lo

cal

offic

ials

prio

r to

draf

ting

TA

reco

mm

enda

tions

.

Dire

ctor

s con

curr

ed th

at g

reat

er

invo

lvem

ent a

nd o

wne

rshi

p by

the

reci

pien

t aut

horit

ies a

nd d

iscu

ssio

n of

op

tions

are

cru

cial

to g

reat

er T

A

effe

ctiv

enes

s. Th

ey w

elco

med

the

prop

osal

s for

mor

e pa

rtici

patio

n by

co

untry

aut

horit

ies i

n dr

awin

g up

term

s of

refe

renc

e (T

OR

s) w

hile

syst

emat

ical

ly

seek

ing

thei

r tan

gibl

e co

mm

itmen

ts to

the

cont

empl

ated

TA

stra

tegy

or a

dvic

e ea

rly

on. H

owev

er, a

num

ber o

f Dire

ctor

s ca

utio

ned

that

thes

e in

dica

tions

of

com

mitm

ent s

houl

d no

t be

treat

ed a

s co

nditi

onal

ity fo

r acc

ess t

o TA

.

Whe

n re

leva

nt, T

A re

ports

shou

ld re

cord

dis

cuss

ions

with

the

auth

oriti

es o

n al

tern

ativ

e po

licy

optio

ns, t

he c

onsi

dera

tions

le

adin

g to

them

, and

whe

n th

ere

wer

e di

ffer

ence

s of v

iew

s su

mm

ariz

e th

e au

thor

ities

’ vie

ws o

n ke

y is

sues

and

re

com

men

datio

ns.

Act

ions

reco

mm

ende

d by

the

Task

For

ce a

re

bein

g im

plem

ente

d by

TA

dep

artm

ents

. D

epar

tmen

ts e

ngag

e w

ith a

utho

ritie

s in

disc

ussi

ons o

f pre

limin

ary

findi

ngs a

nd a

ltern

ativ

e re

spon

ses b

efor

e dr

aftin

g re

ports

. In

final

izin

g th

e re

ports

, dep

artm

ents

als

o in

corp

orat

e th

e vi

ews o

f th

e au

thor

ities

.

Ex

post

eva

luat

ions

Th

e pr

ogra

m o

f ex

post

eva

luat

ions

of

TA

shou

ld b

e w

iden

ed a

nd m

ore

syst

emat

ic p

roce

dure

s for

di

ssem

inat

ing

less

ons p

ut in

pla

ce.

Dire

ctor

s hig

hlig

hted

the

impo

rtanc

e of

en

surin

g th

at th

e sc

ope

of e

x-po

st

eval

uatio

ns b

e ca

refu

lly c

onsi

dere

d an

d in

tegr

ated

into

a b

road

er st

rate

gy to

mak

e TA

del

iver

y m

ore

effe

ctiv

e. T

hey

conc

urre

d th

at e

xter

nal e

valu

atio

ns a

re a

us

eful

tool

to e

nhan

ce a

ccou

ntab

ility

and

pr

ovid

e a

fres

h pe

rspe

ctiv

e, a

nd th

at th

e O

ffic

e of

Tec

hnic

al A

ssis

tanc

e M

anag

emen

t (O

TM),

in c

olla

bora

tion

with

ot

her d

epar

tmen

ts, s

houl

d co

ntin

ue to

pr

epar

e an

d up

date

its p

rogr

am o

f ex

post

ev

alua

tions

and

to a

sses

s shi

fts in

TA

de

man

ds a

cros

s sub

ject

are

as.

For l

arge

r TA

pro

ject

s, it

is re

com

men

ded

that

func

tiona

l de

partm

ents

pro

duce

stan

dard

ized

self-

asse

ssm

ents

with

in

thre

e m

onth

s of t

he c

oncl

usio

n of

the

proj

ect a

nd in

clud

e th

em in

TA

IMS.

The

se se

lf-as

sess

men

ts c

ould

be

used

as

inpu

t to

inst

itutio

nal l

esso

n-le

arni

ng a

nd fo

r ex

post

ev

alua

tions

. To

assi

st in

this

eff

ort,

it is

pro

pose

d th

at O

TM

man

age

a TA

self-

asse

ssm

ent/e

valu

atio

n kn

owle

dge

base

that

co

uld

be in

corp

orat

ed in

to fu

ture

TA

and

mad

e av

aila

ble

to a

ll IM

F st

aff t

o m

axim

ize

its p

oten

tial b

enef

its.

As a

firs

t ste

p to

des

igni

ng a

stan

dard

ized

ap

proa

ch to

eva

luat

ions

, TA

dep

artm

ents

hav

e lis

ted

thei

r exi

stin

g ev

alua

tion

prac

tices

and

co

mpl

eted

eva

luat

ions

. The

IMF-

wid

e TA

Ev

alua

tion

Prog

ram

has

bee

n co

mpl

eted

for 2

006,

an

d th

e re

spec

tive

Boa

rd p

aper

s hav

e be

en is

sued

(s

ee

ww

w.im

f.org

/ext

erna

l/np/

pp/e

ng/2

006/

0712

06.h

tm).

Li

nked

als

o to

dep

artm

ents

’ pol

icy

deve

lopm

ent

wor

k, e

valu

atio

ns a

re in

crea

sing

ly fo

cusi

ng o

n TA

ac

tiviti

es d

eliv

ered

acr

oss c

ount

ries (

e.g.

, reg

iona

l) an

d on

topi

cal i

ssue

s. Th

e C

omm

ittee

on

Cap

acity

Bui

ldin

g ha

s ini

tiate

d w

ork

on st

reng

then

ing

the

TA e

valu

atio

n fu

nctio

n.

44

APP

EN

DIX

VII

I. E

VA

LU

AT

ION

OF

IMF

TE

CH

NIC

AL

ASS

IST

AN

CE

(CO

NC

LU

DE

D)

IEO

Rec

omm

enda

tions

E

xecu

tive

Boa

rd R

espo

nse

1/

Tas

k Fo

rce

Rec

omm

enda

tions

2/

Follo

w-U

p 3/

St

rate

gic

deci

sion

s and

trad

e-of

fs

The

prio

ritiz

atio

n fil

ters

shou

ld b

e di

scon

tinue

d or

repl

aced

by

ones

that

w

ould

mor

e ef

fect

ivel

y gu

ide

TA

allo

catio

n. E

ither

cou

rse

of a

ctio

n in

volv

es st

rate

gic

deci

sion

s on

trade

-of

fs th

at n

eed

to b

e ta

ken

expl

icitl

y.

Whi

le D

irect

ors c

oncu

rred

that

the

case

fo

r dis

cont

inui

ng th

e cu

rren

t filt

ers w

as

stro

ng, s

ever

al o

f the

m o

bser

ved

that

el

emen

ts o

f thi

s app

roac

h m

ight

use

fully

be

pre

serv

ed. P

riorit

izat

ion

of T

A

reso

urce

s sho

uld

flow

from

a sh

ared

vi

sion

of t

he IM

F’s o

vera

ll m

ediu

m-te

rm

obje

ctiv

es—

refle

ctin

g its

cor

e co

mpe

tenc

ies—

whi

le a

t the

sam

e tim

e re

tain

ing

the

flexi

bilit

y to

resp

ond

to th

e ur

gent

nee

ds o

f mem

bers

. Dire

ctor

s ag

reed

that

the

IEO

’s re

com

men

datio

ns

wou

ld e

ntai

l mor

e st

aff-

inte

nsiv

e ap

proa

ches

to p

rovi

ding

TA

, inc

ludi

ng

grea

ter c

olla

bora

tion

with

cou

ntry

au

thor

ities

and

oth

er T

A p

rovi

ders

. Goi

ng

forw

ard,

Dire

ctor

s wel

com

ed

man

agem

ent’s

pro

posa

l to

ask

staf

f to

mak

e co

ncre

te p

ropo

sals

on

how

to

impl

emen

t the

IEO

reco

mm

enda

tions

, ta

king

into

acc

ount

bud

geta

ry c

osts

, and

im

plic

atio

ns fo

r wor

k pr

actic

es a

nd T

A

deliv

ery,

and

look

ed fo

rwar

d to

futu

re

disc

ussi

on o

f the

se p

ropo

sals

, inc

ludi

ng

on p

riorit

izat

ion,

bef

ore

thei

r im

plem

enta

tion.

It is

reco

mm

ende

d th

at th

e cu

rren

t set

of p

riorit

izat

ion

filte

rs—

deem

ed in

effe

ctiv

e—be

dis

cont

inue

d as

the

prop

osed

rem

edia

l act

ions

enc

ompa

ss th

e ke

y in

gred

ient

s fo

r an

effe

ctiv

e pr

iorit

izat

ion

of T

A re

sour

ces.

If fu

lly

impl

emen

ted,

they

wou

ld fo

rm a

bas

ic a

ccou

ntab

ility

fr

amew

ork

for a

ll th

e st

ages

of t

he T

A li

fe c

ycle

—pr

iorit

izat

ion,

del

iver

y, a

nd m

onito

ring

and

eval

uatio

n—ag

ains

t whi

ch th

e ef

fect

iven

ess o

f IM

F TA

can

be

gaug

ed.

To m

ake

it vi

able

, how

ever

, a n

umbe

r of m

anag

emen

t and

or

gani

zatio

nal c

halle

nges

mus

t be

over

com

e, w

hile

its

linka

ge to

the

effic

ient

allo

catio

n of

TA

reso

urce

s—th

e bu

dget

per

spec

tive—

need

s to

be d

evel

oped

. The

pro

visi

on

of a

dequ

ate

ince

ntiv

es fo

r sta

ff to

impl

emen

t the

pr

opos

als,

in p

artic

ular

for a

rea

depa

rtmen

t sta

ff a

nd

Res

iden

t Rep

rese

ntat

ives

is c

ritic

al.

It is

impo

rtant

that

thes

e pr

opos

als a

lso

feed

into

m

echa

nism

s tha

t res

ult i

n an

eff

icie

nt a

lloca

tion

of T

A

reso

urce

s acr

oss c

ount

ries,

sect

ors,

and

polic

y in

itiat

ives

on

an

evol

ving

bas

is. T

hus,

beyo

nd th

e an

nual

exe

rcis

e,

reso

urce

allo

catio

ns fo

r TA

thro

ugh

the

Med

ium

-Ter

m

Bud

get F

ram

ewor

k w

ill n

eed

to b

e in

form

ed b

y st

rate

gic

deci

sion

s, w

hich

in tu

rn, w

ill re

quire

that

em

ergi

ng tr

ends

ac

ross

dep

artm

ents

be

iden

tifie

d in

a ti

mel

y w

ay.

Prio

ritiz

atio

n fil

ters

wer

e di

scon

tinue

d. I

n th

eir p

lace

, th

e C

omm

ittee

on

Cap

acity

Bui

ldin

g (C

CB

) has

en

dors

ed re

com

men

datio

ns to

ens

ure

a c

lose

r in

tegr

atio

n of

the

reso

urce

allo

catio

n pl

ans (

RA

Ps)

with

the

budg

etar

y pr

oces

ses o

f bot

h fu

nctio

nal a

nd

area

dep

artm

ents

. Beg

inni

ng w

ith th

e pl

anni

ng fo

r FY

2009

, an

inte

grat

ed ti

mel

ine

has b

een

devi

sed

for

the

prep

arat

ion

of th

e de

partm

ents

’ bud

get a

nd

busi

ness

pla

ns, t

he R

SNs a

nd th

e R

APs

. Thi

s is

expe

cted

to st

reng

then

the

alig

nmen

t of T

A re

sour

ces

with

oth

er F

und

core

act

iviti

es a

nd th

e st

rate

gic

prio

ritie

s est

ablis

hed

in th

e M

ediu

m-T

erm

Stra

tegy

. In

addi

tion,

in F

Y20

08, a

Cen

tral T

A R

eser

ve h

as b

een

esta

blis

hed.

The

rese

rve

will

be

allo

cate

d to

func

tiona

l de

partm

ents

at m

id-y

ear F

Y20

08 b

y th

e C

CB

. The

ai

m o

f the

rese

rve

is to

pro

vide

flex

ibili

ty to

resp

ond

to u

nant

icip

ated

TA

nee

ds c

uttin

g ac

ross

func

tiona

l an

d re

gion

al a

reas

.

1/ T

his c

olum

n su

mm

ariz

es th

e re

actio

n of

the

Exec

utiv

e B

oard

on

each

reco

mm

enda

tion

as re

porte

d in

the

Sum

min

g U

p by

the

Act

ing

chai

r. A

lthou

gh c

are

has b

een

take

n to

ens

ure

accu

racy

, rea

ders

are

invi

ted

to re

fer t

o th

e fu

ll te

xt o

f the

sum

mar

y of

the

disc

ussi

on, w

hich

is in

clud

ed in

the

publ

ishe

d ve

rsio

n of

the

repo

rt an

d ca

n be

acc

esse

d fr

om th

e IE

O w

ebsi

te

(ww

w.im

f.org

/ext

erna

l/np/

ieo/

2005

/ta/e

ng/0

1310

5.ht

m.)

2/ Th

e Ta

sk F

orce

was

cre

ated

by

man

agem

ent o

n M

arch

31,

200

5 in

resp

onse

to th

e Ex

ecut

ive

Boa

rd d

iscu

ssio

n of

the

IEO

’s e

valu

atio

n. T

he T

ask

Forc

e re

port

was

dis

cuss

ed b

y th

e Ex

ecut

ive

Boa

rd o

nJu

ly 2

7, 2

005.

3/ T

he c

olum

n on

follo

w-u

p w

as p

rovi

ded

by st

aff a

t IEO

's re

ques

t and

has

not

bee

n su

bjec

t to

inde

pend

ent r

evie

w.

4/ T

erm

s of r

efer

ence

for R

esid

ent R

epre

sent

ativ

es in

cou

ntrie

s tha

t are

maj

or T

A re

cipi

ents

shou

ld li

st a

mon

g th

eir r

espo

nsib

ilitie

s an

activ

e in

volv

emen

t in

TA im

plem

enta

tion,

follo

w-u

p on

TA

ac

tiviti

es b

y ot

her p

rovi

ders

in a

reas

of i

nter

est t

o th

e IM

F, a

s wel

l as c

oord

inat

ing

activ

ities

whe

re th

ose

prov

ider

s are

rece

ptiv

e to

this

app

roac

h.

45

APP

EN

DIX

IX. E

VA

LU

AT

ION

OF

TH

E IM

F’S

APP

RO

AC

H T

O C

API

TA

L A

CC

OU

NT

LIB

ER

AL

IZA

TIO

N

IEO

rec

omm

enda

tions

E

xecu

tive

Boa

rd r

espo

nse

1/

Follo

w-U

p 2/

R

ecom

men

datio

n 1.

The

re is

a n

eed

for m

ore

clar

ity

on th

e IM

F’s a

ppro

ach

to c

apita

l acc

ount

issu

es:

• Th

e pl

ace

of c

apita

l acc

ount

issu

es in

IMF

surv

eilla

nce

coul

d be

cla

rifie

d.

• Th

e IM

F co

uld

shar

pen

its a

dvic

e on

cap

ital

acco

unt i

ssue

s, ba

sed

on so

lid a

naly

sis o

f the

pa

rticu

lar s

ituat

ion

and

risks

faci

ng sp

ecifi

c co

untri

es.

• Th

e Ex

ecut

ive

Boa

rd c

ould

issu

e a

stat

emen

t cl

arify

ing

the

com

mon

ele

men

ts o

f agr

eem

ent o

n ca

pita

l acc

ount

libe

raliz

atio

n.

Som

e D

irect

ors s

aw m

erit

in fu

rther

cla

rifyi

ng th

e sc

ope

of IM

F su

rvei

llanc

e to

reco

gniz

e ex

plic

itly

the

cent

ral i

mpo

rtanc

e of

ca

pita

l acc

ount

pol

icie

s; D

irect

ors a

lso

saw

scop

e fo

r sha

rpen

ing

the

IMF’

s adv

ice

on c

apita

l acc

ount

issu

es, u

rgin

g th

e st

aff t

o ba

se it

s pol

icy

advi

ce o

n so

lid a

naly

sis o

f ind

ivid

ual c

ount

ry

situ

atio

ns. H

owev

er, a

var

iety

of v

iew

s wer

e ex

pres

sed

on “

the

mer

it of

an

Exec

utiv

e B

oard

stat

emen

t cla

rifyi

ng th

e el

emen

ts o

f ag

reem

ent o

n ca

pita

l acc

ount

issu

es.”

Dire

ctor

s not

ed th

at th

ey

wou

ld h

ave

an o

ppor

tuni

ty to

com

e ba

ck to

this

issu

e in

the

cont

ext o

f the

IMF’

s ong

oing

stra

tegi

c re

view

.

Staf

f has

bee

n w

orki

ng o

n m

ultip

le re

sear

ch p

roje

cts o

n va

rious

di

men

sion

s of c

apita

l acc

ount

libe

raliz

atio

n. A

pap

er p

rese

nted

to th

e B

oard

in Ju

ne 2

007

(SM

/07/

193)

repo

rts e

mpi

rical

resu

lts b

road

ly

supp

ortiv

e of

the

Fund

’s “

inte

grat

ed a

ppro

ach”

tow

ard

capi

tal a

ccou

nt

liber

aliz

atio

n, a

nd sh

ows t

hat t

he im

pact

of f

inan

cial

glo

baliz

atio

n de

pend

s on

the

stre

ngth

of c

ount

ries’

pol

icie

s and

inst

itutio

ns. S

taff

ha

ve a

lso

rece

ntly

pro

duce

d a

com

preh

ensi

ve st

udy

prov

idin

g a

unifi

ed

conc

eptu

al fr

amew

ork

to o

rgan

ize

the

vast

lite

ratu

re o

n th

e be

nefit

s an

d co

sts o

f fin

anci

al g

loba

lizat

ion.

3/

Staf

f ini

tiate

d fu

rther

ana

lytic

al w

ork,

with

a sp

ecia

l foc

us o

n th

e in

tera

ctio

n of

pru

dent

ial m

easu

res a

nd c

apita

l con

trols

that

upd

ates

the

inte

grat

ed a

ppro

ach

for t

he se

quen

cing

of c

apita

l acc

ount

lib

eral

izat

ion.

A

pap

er p

rese

nted

to

the

Boa

rd in

July

200

6 an

alyz

ed h

ow c

ount

ries

can

use

dom

estic

pol

icie

s to

redu

ce th

eir v

ulne

rabi

lity

to sh

ocks

and

, in

parti

cula

r, to

sudd

en st

ops i

n ca

pita

l flo

ws o

r to

exte

rnal

deb

t cris

es. 4

/ B

egin

ning

with

the

2009

edi

tion,

the

Ann

ual R

epor

t on

Exch

ange

A

rran

gem

ents

and

Exc

hang

e R

estri

ctio

ns w

ill b

e m

odifi

ed to

faci

litat

e th

e an

alys

is o

f cap

ital a

ccou

nt li

bera

lizat

ion,

and

to re

flect

the

inte

ract

ion

of p

rude

ntia

l mea

sure

s and

cap

ital c

ontro

ls.

Rec

omm

enda

tion

2. T

he IM

F’s a

naly

sis a

nd

surv

eilla

nce

shou

ld g

ive

grea

ter a

ttent

ion

to th

e su

pply

-sid

e fa

ctor

s of i

nter

natio

nal c

apita

l flo

ws a

nd

wha

t can

be

done

to m

inim

ize

the

vola

tility

of c

apita

l m

ovem

ents

.

Dire

ctor

s wel

com

ed th

e va

rious

initi

ativ

es u

nder

way

in th

e IM

F to

stre

ngth

en re

sear

ch, a

naly

sis,

and

surv

eilla

nce

of th

e su

pply

si

de o

f cap

ital f

low

s, an

d en

cour

aged

staf

f to

cont

inue

to b

uild

on

the

wor

k al

read

y be

ing

unde

rtake

n at

the

IMF

in o

rder

to fu

rther

its

und

erst

andi

ng o

f sup

ply-

side

fact

ors a

nd th

eir o

pera

tiona

l and

po

licy

impl

icat

ions

.

The

IMF

and

the

Wor

ld B

ank

have

laun

ched

a jo

int p

roje

ct to

ext

end

the

publ

icly

ava

ilabl

e qu

arte

rly e

xter

nal d

ebt s

tatis

tics (

QED

S) to

pa

rtici

pant

s of t

he IM

F’s G

ener

al D

ata

Dis

sem

inat

ion

Stan

dard

s (G

DD

S), p

artic

ular

ly lo

w-in

com

e co

untri

es. T

he p

roje

ct is

to fo

cus o

n di

ssem

inat

ing

publ

ic a

nd p

ublic

ly g

uara

ntee

d ex

tern

al d

ebt s

tock

dat

a fo

r par

ticip

atio

n in

QED

S, in

line

with

the

GD

DS

data

cat

egor

y.

Cha

pter

s of t

he G

loba

l Fin

anci

al S

tabi

lity

Rep

ort (

Apr

il an

d O

ctob

er

2007

) cov

er th

e su

pply

side

of c

apita

l inf

low

s and

wha

t can

be

done

fr

om a

fina

ncia

l dev

elop

men

t per

spec

tive

to m

inim

ize

thei

r vol

atili

ty,

resp

ectiv

ely.

1/

Thi

s col

umn

sum

mar

izes

the

reac

tion

of th

e Ex

ecut

ive

Boa

rd o

n ea

ch re

com

men

datio

n as

repo

rted

in th

e Su

mm

ing

Up

by th

e C

hairm

an o

f the

May

11,

200

5 B

oard

mee

ting.

Alth

ough

car

e ha

s bee

n ta

ken

to e

nsur

e ac

cura

cy, r

eade

rs a

re in

vite

d to

refe

r to

the

full

text

of t

he su

mm

ary

of th

e di

scus

sion

, whi

ch is

incl

uded

in th

e pu

blis

hed

vers

ion

of th

e re

port

and

can

be a

cces

sed

from

the

IEO

web

site

ww

w.im

f.org

/Ext

erna

l/NP/

ieo/

2005

/cal

/eng

/inde

x.ht

m.

2/ T

he c

olum

n on

follo

w-u

p w

as p

rovi

ded

by st

aff a

t IEO

's re

ques

t and

has

not

bee

n su

bjec

t to

inde

pend

ent r

evie

w.

3/ S

ee M

. Ayh

an K

ose,

Esw

ar P

rasa

d, K

enne

th R

ogof

f, an

d Sh

ang-

Jin

Wei

, “Fi

nanc

ial G

loba

lizat

ion:

A R

eapp

rais

al,”

IMF

Wor

king

Pap

er N

o. 0

6/18

9 (W

ashi

ngto

n: In

tern

atio

nal M

onet

ary

Fund

). 4/

See

“C

ount

ry In

sura

nce:

The

Rol

e of

Dom

estic

Pol

icie

s” (w

ww

.imf.o

rg/e

xter

nal/n

p/pp

/eng

/200

6/06

1906

.pdf

); al

so is

sued

as O

ccas

iona

l Pap

er n

o. 2

54.

46

APP

EN

DIX

X. E

VA

LU

AT

ION

OF

TH

E IM

F SU

PPO

RT

TO

JO

RD

AN

198

9–20

04: R

EC

OM

ME

ND

AT

ION

S, B

OA

RD

RE

SPO

NSE

, A

ND

SU

BSE

QU

EN

T F

OL

LO

W-U

P

IEO

Rec

omm

enda

tion

1/

Exe

cutiv

e B

oard

Res

pons

e 2/

Fo

llow

-Up

3/

Bro

ad le

sson

s sug

gest

ed b

y th

e IM

F e

xper

ienc

e in

Jor

dan

The

unde

rlyin

g ra

tiona

le fo

r key

pro

gram

des

ign

elem

ents

sh

ould

be

expl

aine

d cl

early

in B

oard

pap

ers.

In p

artic

ular

, ju

dgm

ents

on

the

mag

nitu

de a

nd c

ompo

sitio

n of

targ

eted

ad

just

men

t nee

d to

be

grou

nded

in a

n ex

plic

it as

sess

men

t of

exte

rnal

and

pub

lic d

ebt s

usta

inab

ility

ove

r the

med

ium

term

.

Man

y D

irect

ors a

gree

d th

at th

e Jo

rdan

ian

expe

rienc

e re

info

rces

the

need

for

Boa

rd p

aper

s to

prov

ide

clea

rly th

e un

derly

ing

ratio

nale

for k

ey e

lem

ents

of

prog

ram

des

ign.

The

y al

so su

ppor

ted

the

IEO

’s c

all f

or g

reat

er c

ando

r in

staf

f re

port

asse

ssm

ents

, esp

ecia

lly o

f the

risk

s to

the

prog

ram

and

reco

mm

enda

tions

on

how

bes

t to

miti

gate

and

man

age

them

.

Jord

an h

as b

een

unde

r Pos

t Pro

gram

Mon

itorin

g (P

PM) s

ince

July

200

4. T

he m

acro

econ

omic

fr

amew

ork

and

adju

stm

ent p

rofil

e is

bas

ed o

n th

e fis

cal a

nd e

xter

nal d

ebt s

usta

inab

ility

ana

lysi

s. St

aff

repo

rts u

nder

PPM

hav

e be

com

e m

ore

cand

id (s

ee

in p

artic

ular

, EB

S/05

/154

, EB

S/07

/17)

.

In c

erta

in c

ircum

stan

ces,

stru

ctur

al c

ondi

tiona

lity

can

have

si

gnifi

cant

val

ue a

dded

in te

rms o

f enc

oura

ging

and

mon

itorin

g pr

ogre

ss o

n re

form

s. H

owev

er, u

nder

lyin

g is

sues

such

as l

arge

an

d ab

rupt

surg

es in

gra

nts r

equi

re th

at p

rogr

ams b

e se

t in

an

expl

icitl

y lo

nger

-term

per

spec

tive.

Tim

etab

les n

eed

to b

e de

sign

ed c

aref

ully

, tak

ing

acco

unt o

f the

pol

itica

l eco

nom

y si

tuat

ion,

esp

ecia

lly w

hen

legi

slat

ive

actio

n is

invo

lved

.

Dire

ctor

s agr

eed

with

the

repo

rt’s o

vera

ll as

sess

men

t: Jo

rdan

’s lo

ng e

ngag

emen

t in

IMF-

supp

orte

d pr

ogra

ms h

elpe

d th

e au

thor

ities

add

ress

mac

roec

onom

ic

stab

iliza

tion

chal

leng

es su

cces

sful

ly, a

lthou

gh st

ruct

ural

rigi

ditie

s rem

ain

to b

e ad

dres

sed.

W

hile

agr

eein

g th

at st

ruct

ural

con

ditio

nalit

y ha

d be

en w

ell d

esig

ned,

man

y D

irect

ors a

lso

poin

ted

to th

e le

sson

s for

the

timin

g of

thes

e co

nditi

ons o

ffer

ed b

y th

e Jo

rdan

ian

expe

rienc

e. In

par

ticul

ar, t

hey

note

d th

e im

porta

nce

of a

mbi

tious

bu

t rea

listic

tim

etab

les t

hat t

ake

into

acc

ount

a c

ount

ry’s

impl

emen

tatio

n ca

paci

ty a

s wel

l as t

he p

reva

iling

pol

itica

l and

soci

al e

nviro

nmen

t.

The

IMF’

s pro

gram

invo

lvem

ent w

ould

hav

e be

en m

ore

effe

ctiv

e if

prog

ram

s had

giv

en g

reat

er e

mph

asis

at a

n ea

rlier

st

age

to th

e fo

rmul

atio

n of

key

inst

itutio

nal r

efor

ms i

n th

e fis

cal

area

.

Dire

ctor

s con

side

red

that

a lo

nger

-term

per

spec

tive,

with

gre

ater

em

phas

is a

t an

earli

er st

age

on th

e fo

rmul

atio

n of

key

inst

itutio

nal r

efor

ms i

n th

e fis

cal a

rea,

w

ould

hav

e in

crea

sed

the

effe

ctiv

enes

s of I

MF-

supp

orte

d pr

ogra

ms

A w

ider

dis

sem

inat

ion

of IM

F TA

repo

rts w

ould

hav

e co

ntrib

uted

to m

ore

info

rmed

pub

lic d

isco

urse

and

shed

ligh

t on

the

ratio

nale

for I

MF

polic

y ad

vice

on

key

issu

es.

Dire

ctor

s con

curr

ed w

ith th

e IE

O’s

less

on th

at a

wid

er d

isse

min

atio

n of

IMF

TA

repo

rts c

ould

hav

e co

ntrib

uted

to m

ore

info

rmed

pub

lic d

isco

urse

and

shed

ligh

t on

the

IMF

polic

y ad

vice

on

key

issu

es. A

t the

sam

e tim

e, D

irect

ors n

oted

that

de

cisi

ons o

n di

ssem

inat

ing

such

repo

rts a

re o

nes f

or th

e au

thor

ities

to ta

ke.

The

IMF

’s fu

ture

role

in J

orda

n

Hel

p Jo

rdan

man

age

the

proj

ecte

d de

clin

e in

gra

nts i

n a

man

ner

that

pre

serv

es th

e ga

ins m

ade

in th

e ar

eas o

f mac

roec

onom

ic

stab

ility

and

long

er-te

rm fi

scal

sust

aina

bilit

y. T

his w

ill b

e do

ne

by (1

) ass

istin

g th

e au

thor

ities

to d

esig

n a

mac

roec

onom

ic

fram

ewor

k th

at w

ill a

chie

ve a

smoo

th tr

ansi

tion

and

(2) f

ocus

ing

on h

elpi

ng to

des

ign

stra

tegi

es to

tack

le Jo

rdan

’s

key

rem

aini

ng fi

scal

rigi

ditie

s, in

clud

ing

expl

orin

g al

tern

ativ

e po

licy

optio

ns to

ach

ieve

the

nece

ssar

y st

ruct

ural

refo

rms i

n th

e fis

cal a

rea.

The

Boa

rd sh

ared

the

view

that

Jord

an st

ill fa

ces t

he c

halle

nges

of a

djus

ting

to a

sh

arpl

y lo

wer

leve

l of f

orei

gn g

rant

s and

redu

cing

fisc

al ri

gidi

ties.

Mos

t D

irect

ors n

oted

that

thes

e ch

alle

nges

wou

ld h

ave

been

less

dau

ntin

g if

mor

e pr

ogre

ss h

ad b

een

mad

e on

crit

ical

refo

rms d

urin

g Jo

rdan

’s lo

nger

-term

pro

gram

en

gage

men

t.

Staf

f rem

ains

in c

lose

con

sulta

tion

with

the

auth

oriti

es th

roug

h su

rvei

llanc

e, P

PM th

roug

h th

e en

d of

200

7, a

nd th

e pr

ovis

ion

of te

chni

cal

assi

stan

ce.

1/ T

he Jo

rdan

eva

luat

ion

repo

rt m

ade

no e

xplic

it re

com

men

datio

ns, p

rese

ntin

g in

stea

d a

num

ber o

f les

sons

aris

ing

from

IMF

expe

rienc

e in

Jord

an.

2/ T

his c

olum

n su

mm

ariz

es th

e re

actio

n of

the

Exec

utiv

e B

oard

on

the

less

ons p

rese

nted

in th

e Jo

rdan

eva

luat

ion

as re

porte

d in

the

Sum

min

g U

p by

the

Act

ing

Cha

ir. A

lthou

gh c

are

has b

een

take

n to

en

sure

acc

urac

y, re

ader

s are

invi

ted

to re

fer t

o th

e fu

ll te

xt o

f the

sum

mar

y of

the

disc

ussi

on, w

hich

is in

clud

ed in

the

publ

ishe

d ve

rsio

n of

the

repo

rt an

d ca

n be

acc

esse

d on

the

IEO

web

site

(w

ww

.imf.o

rg/e

xter

nal/N

P/ie

o/20

05/jo

r/eng

/pdf

/sum

up.p

df).

3/

The

re w

as n

o ex

plic

it fo

llow

-up

stra

tegy

. How

ever

, Jor

dan’

s Ex-

Post

Ass

essm

ent w

as d

one

abou

t the

sam

e tim

e as

IEO

’s e

valu

atio

n of

IMF

supp

ort t

o Jo

rdan

(and

pre

sent

ed to

the

Exec

utiv

e B

oard

on

the

sam

e da

y); t

here

was

coo

pera

tion

betw

een

the

team

s car

ryin

g ou

t the

se e

valu

atio

ns.

47

APP

EN

DIX

XI.

EV

AL

UA

TIO

N O

F T

HE

FIN

AN

CIA

L S

EC

TO

R A

SSE

SSM

EN

T P

RO

GR

AM

: RE

CO

MM

EN

DA

TIO

NS,

BO

AR

D R

ESP

ON

SE,

AN

D S

UB

SEQ

UE

NT

FO

LL

OW

-UP

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 1/

Fo

llow

-Up

2/

Ince

ntiv

es fo

r par

ticip

atio

n, c

lari

fyin

g pr

iori

ties,

and

stre

ngth

enin

g th

e lin

ks w

ith su

rvei

llanc

e

Rec

omm

enda

tion

1. T

he IM

F B

oard

and

m

anag

emen

t sho

uld

refin

e th

e cr

iteria

for s

ettin

g pr

iorit

ies o

n IM

F re

sour

ce in

puts

into

fina

ncia

l sec

tor

surv

eilla

nce,

incl

udin

g th

e FS

AP.

Bas

ed o

n th

ese

prio

ritie

s, IM

F st

aff s

houl

d in

dica

te, a

s par

t of i

ts

med

ium

-term

pla

nnin

g, w

hat c

ompo

nent

s are

nee

ded

for s

treng

then

ing

finan

cial

sect

or su

rvei

llanc

e in

eac

h co

untry

, dra

win

g up

on a

rang

e of

pos

sibl

e m

odal

ities

. Th

ese

stra

tegi

es w

ould

form

the

basi

s for

mor

e ex

plic

it ac

coun

tabi

lity

on re

sults

.

Whi

le so

me

did

not s

ee su

ffic

ient

evi

denc

e th

at c

urre

nt

mec

hani

sms a

re in

adeq

uate

, man

y D

irect

ors a

gree

d on

the

need

for c

lear

er g

uida

nce—

incl

udin

g on

the

trade

-off

be

twee

n as

sess

men

ts o

f vul

nera

bilit

y an

d de

velo

pmen

t is

sues

—as

par

t of a

med

ium

-term

stra

tegy

aim

ed a

t eff

icie

nt

reso

urce

allo

catio

n in

line

with

the

IMF’

s cor

e m

anda

te.

Con

side

ratio

n be

ing

give

n to

the

thre

e pi

llars

of r

ecom

men

datio

ns in

the

cont

ext

of im

plem

entin

g th

e M

ediu

m-T

erm

Stra

tegy

and

reco

mm

enda

tions

of t

he T

ask

Forc

e on

Inte

grat

ing

Fina

nce

and

Fina

ncia

l Sec

tor A

naly

sis i

nto

Arti

cle

IV

Surv

eilla

nce

(FST

F, S

M/0

7/57

). A

s par

t of i

nitia

l im

plem

enta

tion

of F

STF

reco

mm

enda

tions

, cou

ntry

fina

ncia

l sec

tor b

riefs

are

bei

ng d

evel

oped

. The

se

brie

fs w

ill b

e a

vehi

cle

to m

ore

syst

emat

ical

ly a

sses

s app

ropr

iate

fina

ncia

l sec

tor

surv

eilla

nce

activ

ities

(mod

aliti

es a

s wel

l as c

over

age)

in a

mul

ti-ye

ar c

onte

xt, a

s an

inpu

t int

o th

e br

oade

r mul

ti-ye

ar s

urve

illan

ce a

gend

as in

trodu

ced

by th

e M

ediu

m-T

erm

Stra

tegy

. M

ore

gene

rally

, mod

aliti

es o

f fin

anci

al se

ctor

surv

eilla

nce

in in

divi

dual

co

untri

es, i

nclu

ding

an

initi

al a

sses

smen

t or F

SAP

upda

te, a

re a

sses

sed

in A

rticl

e IV

brie

fing

pape

rs a

nd st

aff r

epor

ts, a

nd o

ther

cou

ntry

-spe

cific

dis

cuss

ions

be

twee

n M

CM

and

are

a de

partm

ents

. Fo

r FSA

Ps sp

ecifi

cally

, prio

ritiz

atio

n is

car

ried

out a

nnua

lly (w

ith se

mi-a

nnua

l up

date

s) b

ased

on

crite

ria a

ppro

ved

by th

e Fu

nd a

nd B

ank

Boa

rds.

It is

co

ordi

nate

d th

roug

h th

e B

ank-

Fund

Fin

anci

al S

ecto

r Lia

ison

Com

mitt

ee (F

SLC

) an

d is

app

rove

d by

the

man

agem

ents

of t

he F

und

and

Ban

k (s

ee b

elow

).

Rec

omm

enda

tion

2. T

o st

reng

then

ince

ntiv

es a

nd

draw

ing

upon

thes

e co

untry

-spe

cific

pla

ns, I

MF

man

agem

ent s

houl

d cl

early

sign

al to

the

Boa

rd th

ose

coun

tries

that

it se

es a

s the

hig

hest

prio

ritie

s for

FS

APs

and

Upd

ates

, irr

espe

ctiv

e of

whe

ther

thes

e co

untri

es h

ave

volu

ntee

red.

The

se li

sts s

houl

d be

the

basi

s for

per

iodi

c di

scus

sion

s by

the

Boa

rd o

f cou

ntry

-sp

ecifi

c pr

iorit

ies.

Mos

t Dire

ctor

s agr

eed

with

the

IEO

pro

posa

l tha

t, to

bet

ter

alig

n FS

AP

cove

rage

with

the

need

s of s

urve

illan

ce,

man

agem

ent s

houl

d in

dica

te to

the

Boa

rd w

hich

cou

ntrie

s it

cons

ider

s the

hig

hest

prio

ritie

s for

FSA

P as

sess

men

ts a

nd

Upd

ates

. Ann

ual r

epor

ting

on p

artic

ipat

ion

coul

d pr

ovid

e us

eful

info

rmat

ion

to g

uide

dis

cuss

ion

of p

riorit

ies.

Sche

dulin

g of

FSA

Ps is

alre

ady

base

d on

the

prio

ritiz

atio

n pr

oces

s est

ablis

hed

by

staf

f. Th

is p

roce

ss h

as b

een

stre

ngth

ened

by

dist

ingu

ishi

ng m

ore

clea

rly b

etw

een

the

intri

nsic

cou

ntry

prio

ritie

s—in

a p

rogr

am th

at o

ver t

ime

shou

ld c

over

all

coun

tries

—an

d th

e lik

ely

wor

k pr

ogra

m th

at is

aff

ecte

d by

aut

horit

ies’

w

illin

gnes

s to

parti

cipa

te in

any

par

ticul

ar p

erio

d.

Res

ults

of t

he p

riorit

izat

ion

proc

ess a

re u

sed

to e

ncou

rage

par

ticip

atio

n of

pr

iorit

y co

untri

es a

nd to

pre

pare

the

FSA

P w

ork

prog

ram

. Enc

oura

ging

pa

rtici

patio

n in

volv

es st

aff a

nd m

anag

emen

t as w

ell a

s the

Boa

rd, i

n pa

rticu

lar i

n A

rticl

e IV

con

sulta

tions

, but

als

o on

oth

er o

ccas

ions

such

as A

nnua

l Mee

tings

. Th

e A

nnua

l Rep

ort o

n FS

AP

Parti

cipa

tion

(intro

duce

d in

the

2005

Boa

rd re

view

of

the

FSA

P, a

nd la

unch

ed in

200

6) is

als

o be

ing

used

to p

rovi

de th

e Ex

ecut

ive

Boa

rd w

ith o

vera

ll in

form

atio

n on

pro

gram

cov

erag

e.

48

APP

EN

DIX

XI.

EV

AL

UA

TIO

N O

F T

HE

FIN

AN

CIA

L S

EC

TO

R A

SSE

SSM

EN

T P

RO

GR

AM

: RE

CO

MM

EN

DA

TIO

NS,

BO

AR

D R

ESP

ON

SE,

AN

D S

UB

SEQ

UE

NT

FO

LL

OW

-UP

(CO

NT

INU

ED

)

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 1/

Fo

llow

-Up

2/

Rec

omm

enda

tion

3. S

treng

then

the

links

bet

wee

n th

e FS

AP

and

surv

eilla

nce

by m

ains

tream

ing

FSA

Ps a

nd

follo

w-u

p w

ork

into

regu

lar s

urve

illan

ce a

ctiv

ities

.

Dire

ctor

s con

curr

ed w

ith th

e re

com

men

datio

n to

stre

ngth

en

links

bet

wee

n FS

APs

and

surv

eilla

nce.

The

y un

ders

core

d th

e ne

ed to

follo

w u

p on

key

vul

nera

bilit

ies a

nd g

aps a

nd

inte

grat

e su

ch is

sues

into

Arti

cle

IV su

rvei

llanc

e re

ports

. D

irect

ors s

tress

ed th

at in

cas

es w

here

fina

ncia

l sta

bilit

y is

sues

, inc

ludi

ng a

ny p

oten

tial g

loba

l rep

ercu

ssio

ns, a

re

judg

ed to

be

of h

igh

impo

rtanc

e, th

ey sh

ould

be

a m

ajor

fo

cus o

f Arti

cle

IV c

onsu

ltatio

ns.

Follo

win

g th

e M

ediu

m-T

erm

Stra

tegy

, and

the

Rep

ort o

f the

Tas

k Fo

rce

on

Inte

grat

ing

Fina

nce

and

Fina

ncia

l Sec

tor A

naly

sis i

nto

Arti

cle

IV S

urve

illan

ce

(FST

F) a

rea

depa

rtmen

ts h

ave

iden

tifie

d a

seni

or st

aff m

embe

r who

will

be

resp

onsi

ble

for t

he d

epar

tmen

t’s fi

nanc

ial s

ecto

r sur

veill

ance

(FSS

) and

co

ordi

natio

n of

the

FSS

wor

k pr

ogra

m w

ith M

CM

; and

MC

M a

nd a

rea

depa

rtmen

ts a

re in

crea

sing

eff

orts

to w

ork

toge

ther

in F

SS, i

nclu

ding

thro

ugh

furth

er M

CM

supp

ort t

o A

rticl

e IV

team

s. FS

S tra

inin

g w

ill b

e pr

ovid

ed to

staf

f at

all

leve

ls a

s nee

ded,

with

new

trai

ning

und

er d

evel

opm

ent.

The

intro

duct

ion

(by

the

Med

ium

-Ter

m S

trate

gy) o

f cou

ntry

-spe

cific

thre

e-ye

ar su

rvei

llanc

e ag

enda

s and

the

rela

ted

FSTF

reco

mm

enda

tion

for m

ulti-

year

fina

ncia

l su

rvei

llanc

e pl

anni

ng, s

houl

d he

lp e

nsur

e ad

equa

te fo

llow

thro

ugh

of fi

nanc

ial

sect

or su

rvei

llanc

e pr

iorit

ies.

A

Fin

anci

al S

ecto

r Ste

erin

g G

roup

incl

udin

g re

pres

enta

tives

of a

rea

and

rele

vant

fu

nctio

nal d

epar

tmen

ts h

as b

een

set u

p by

the

Man

agin

g D

irect

or to

ens

ure

high

-le

vel c

oord

inat

ion

of th

e w

ork

of a

ll de

partm

ents

invo

lved

in fi

nanc

ial s

ecto

r su

rvei

llanc

e.

The

inte

rnal

revi

ew p

roce

ss o

f FSA

P-re

late

d do

cum

ents

and

Arti

cle

IV re

ports

is

bein

g st

reng

then

ed to

ens

ure

that

the

Exec

utiv

e Su

mm

ary

sum

mar

izes

the

mai

n m

acro

-rel

evan

t fin

ding

s usi

ng c

andi

d la

ngua

ge, t

he F

SSA

s cle

arly

hig

hlig

ht a

nd

sum

mar

ize

mac

ro-r

elev

ant f

indi

ngs,

and

that

thes

e fin

ding

s are

ade

quat

ely

refle

cted

and

inco

rpor

ated

in th

e an

alys

is o

f the

Arti

cle

IV re

port.

Impr

ovin

g th

e qu

ality

and

impa

ct o

f the

FSA

P an

d or

gani

zatio

nal c

hang

es

Rec

omm

enda

tion

4. Im

plem

ent s

teps

to im

prov

e fu

rther

the

qual

ity o

f the

FSA

P an

d st

reng

then

its

impa

ct.

Dire

ctor

s enc

oura

ged

the

staf

f to

follo

w u

p on

IEO

re

com

men

datio

ns to

impr

ove

furth

er th

e qu

ality

of F

SAPs

an

d st

reng

then

thei

r im

pact

. The

y no

ted

that

re

com

men

datio

ns sh

ould

be

clea

rly p

riorit

ized

and

the

pote

ntia

l con

sequ

ence

s can

didl

y di

scus

sed.

Dire

ctor

s em

phas

ized

in p

artic

ular

the

impo

rtanc

e of

trea

ting

finan

cial

se

ctor

and

cro

ss-b

orde

r lin

kage

s mor

e sy

stem

atic

ally

in

FSA

P an

alys

is.

Initi

al re

visi

ons w

ere

mad

e to

FSA

P pr

oced

ures

to st

ress

that

reco

mm

enda

tions

ne

ed to

be

cand

idly

dis

cuss

ed a

nd c

lear

ly p

riorit

ized

by

mac

ro-r

elev

ance

, and

m

issi

ons s

houl

d co

ver a

ll m

ajor

risk

s, in

clud

ing

thos

e th

at m

ay b

e po

litic

ally

se

nsiti

ve. I

n ca

ses w

here

dat

a ar

e in

adeq

uate

, pot

entia

l maj

or ri

sks s

houl

d ne

verth

eles

s be

iden

tifie

d an

d lim

itatio

ns tr

ansp

aren

tly d

iscu

ssed

. The

revi

sed

proc

edur

es w

ill a

lso

stre

ss th

e ne

ed to

hav

e m

ore

info

rmat

ive

and

cand

id

disc

ussi

ons o

n m

etho

dolo

gica

l and

dat

a lim

itatio

ns in

FSS

As.

Furth

er, s

peci

fic

guid

ance

is b

eing

dev

elop

ed to

stre

ngth

en im

plem

enta

tion

of th

ese

prin

cipl

es.

Staf

f is d

evel

opin

g th

e st

ress

test

ing

met

hodo

logy

and

est

ablis

hing

“m

inim

um

stan

dard

s” fo

r stre

ss te

sts,

to e

nsur

e th

at st

ress

test

met

hodo

logi

es a

re a

pplie

d m

ore

cons

iste

ntly

acr

oss c

ount

ries.

W

ork

on re

gion

al fi

nanc

ial s

ecto

r ass

essm

ents

and

cro

ss-b

orde

r iss

ues h

as b

een

step

ped

up a

nd o

ff-s

hore

fina

ncia

l cen

ter r

epor

ts a

re n

ow e

xpec

ted

to in

clud

e a

sect

ion

on c

ross

-bor

der c

oope

ratio

n an

d in

form

atio

n ex

chan

ge. S

peci

fic g

uida

nce

to F

SAP

team

s is a

lso

bein

g de

velo

ped

in th

ese

area

s.

To im

prov

e th

e qu

ality

and

con

sist

ency

of s

tand

ards

ass

essm

ents

, an

inte

rnal

re

view

was

con

duct

ed to

eva

luat

e as

sess

men

ts o

f the

Bas

el C

ore

Prin

cipl

es, t

he

Inte

rnat

iona

l Org

aniz

atio

n fo

r Sec

uriti

es C

omm

issi

on (I

OSC

O),

Obj

ectiv

es a

nd

Prin

cipl

es o

f Sec

uriti

es R

egul

atio

n, a

nd th

e In

sura

nce

Cor

e Pr

inci

ples

. A B

CP

asse

ssor

s wor

ksho

p ha

s bee

n co

nven

ed fo

r lat

er th

is y

ear.

A

join

t IM

F/W

B/IO

SCO

ass

esso

rs w

orks

hop

was

con

duct

ed in

200

6 an

d a

follo

w-

up w

orks

hop

will

take

pla

ce e

arly

200

8. A

dditi

onal

gui

danc

e to

ass

esso

rs h

as

also

bee

n in

clud

ed in

the

asse

ssm

ent t

oolk

its..

49

APP

EN

DIX

XI.

EV

AL

UA

TIO

N O

F T

HE

FIN

AN

CIA

L S

EC

TO

R A

SSE

SSM

EN

T P

RO

GR

AM

: RE

CO

MM

EN

DA

TIO

NS,

BO

AR

D R

ESP

ON

SE,

AN

D S

UB

SEQ

UE

NT

FO

LL

OW

-UP

(CO

NC

LU

DE

D)

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 1/

Fo

llow

-Up

2/

Rec

omm

enda

tion

5. In

trodu

ce c

hang

es in

the

orga

niza

tion

of IM

F m

issi

on a

ctiv

ities

to u

tiliz

e sc

arce

fina

ncia

l sec

tor t

echn

ical

exp

ertis

e (e

spec

ially

in M

FD a

nd IC

M) m

ore

effe

ctiv

ely

in

the

surv

eilla

nce

proc

ess.

Man

y D

irect

ors w

elco

med

the

IEO

’s re

com

men

datio

n to

in

trodu

ce c

hang

es in

the

orga

niza

tion

of IM

F m

issi

on a

ctiv

ities

to

util

ize

mor

e ef

fect

ivel

y sc

arce

fina

ncia

l sec

tor e

xper

tise

with

in th

e IM

F. D

irect

ors n

oted

that

this

will

be

cons

ider

ed in

th

e br

oade

r con

text

of i

mpr

ovin

g fin

anci

al se

ctor

surv

eilla

nce,

as

par

t of t

he m

ediu

m-te

rm st

rate

gic

revi

ew.

The

mod

aliti

es to

do

this

are

bei

ng a

sses

sed

as p

art o

f the

Med

ium

-Ter

m

Stra

tegy

and

as p

art o

f the

follo

w-u

p to

the

Fina

ncia

l Sec

tor T

ask

Forc

e.

Join

t IM

F–W

orld

Ban

k N

atur

e of

the

FSA

P

Rec

omm

enda

tion

6. M

aint

ain

the

curr

ent j

oint

ap

proa

ch, b

ut c

larif

y fu

rther

the

dist

inct

ive

cont

ribut

ions

the

IMF

and

Ban

k ca

n m

ake,

with

the

IMF

taki

ng th

e le

ad w

here

sign

ifica

nt d

omes

tic o

r gl

obal

stab

ility

issu

es a

re p

rese

nt, a

nd th

e B

ank

taki

ng th

e le

ad w

here

fina

ncia

l sec

tor d

evel

opm

ent

issu

es a

re m

ore

para

mou

nt. S

uch

clar

ity sh

ould

in

clud

e a

clea

r del

inea

tion

of p

rimar

y re

spon

sibi

litie

s for

setti

ng p

riorit

ies (

and

cont

ribut

ing

reso

urce

s).

Dire

ctor

s wer

e in

bro

ad a

gree

men

t with

the

reco

mm

enda

tions

re

gard

ing

Ban

k-IM

F co

llabo

ratio

n. T

hey

conc

urre

d th

at th

e cu

rren

t joi

nt a

ppro

ach,

incl

udin

g th

e ce

ntra

l rol

e fo

r the

Ban

k-IM

F FS

LC, s

houl

d be

mai

ntai

ned.

At t

he sa

me

time,

furth

er

effo

rts sh

ould

be

mad

e to

take

full

adva

ntag

e of

the

dist

inct

ive

cont

ribut

ions

that

the

two

inst

itutio

ns c

an m

ake—

with

the

IMF

focu

sing

on

stab

ility

issu

es a

nd th

e B

ank

on fi

nanc

ial s

ecto

r de

velo

pmen

t and

inst

itutio

n bu

ildin

g.

The

Exte

rnal

Rev

iew

Com

mitt

ee o

n B

ank-

Fund

Col

labo

ratio

n (th

e M

alan

C

omm

ittee

) iss

ued

in D

ecem

ber 2

006

a re

port

exam

inin

g ar

eas o

f col

labo

ratio

n an

d pr

opos

ing

impr

ovem

ents

. In

the

finan

cial

sect

or sp

here

, the

Mal

an R

epor

t en

dors

ed th

e pr

inci

ple

that

the

Fund

focu

s on

stab

ility

issu

es a

nd th

e B

ank

on

deve

lopm

ent i

ssue

s. N

onet

hele

ss, i

t obs

erve

d th

at th

e re

spon

sibi

litie

s cou

ld n

ot

be p

reci

sely

dem

arca

ted.

Sp

ecifi

c re

com

men

datio

ns a

re b

eing

dev

elop

ed to

take

forw

ard

the

issu

es ra

ised

in

the

Mal

an R

epor

t. Th

is w

ork

will

cul

min

ate

in a

join

t Ban

k-Fu

nd

Man

agem

ent A

ctio

n Pl

an to

be

issu

ed a

head

of t

he A

nnua

l Mee

tings

.

Rec

omm

enda

tion

7. T

he IM

F, in

con

junc

tion

with

th

e W

orld

Ban

k an

d ot

her t

echn

ical

ass

ista

nce

prov

ider

s, sh

ould

seek

to e

stab

lish

a cl

eare

r fr

amew

ork

for c

oord

inat

ing

follo

w-u

p ca

paci

ty-

build

ing

tech

nica

l ass

ista

nce

activ

ities

, bas

ed o

n th

e co

untry

’s o

wn

actio

n pl

ans.

Dire

ctor

s con

curr

ed th

at th

ere

is ro

om to

impr

ove

the

coor

dina

tion

of F

SAP-

rela

ted

tech

nica

l ass

ista

nce

activ

ities

, ba

sed

on th

e co

untry

’s o

wn

actio

n pl

an. A

t the

sam

e tim

e,

Dire

ctor

s cau

tione

d ag

ains

t ove

rbur

deni

ng th

e FS

AP

with

ad

ditio

nal e

xpec

tatio

ns re

gard

ing

the

tech

nica

l ass

ista

nce

need

s.

FSLC

has

in th

e pa

st sp

onso

red

mee

tings

of B

ank-

Fund

team

s to

disc

uss T

A

follo

w-u

p fo

r cou

ntrie

s rec

ently

com

plet

ing

FSA

P as

sess

men

ts. T

his p

ract

ice

is

bein

g re

new

ed to

hel

p pr

omot

e br

oade

r col

labo

ratio

n on

TA

stra

tegi

es.

Staf

f will

als

o in

clud

e in

the

trans

mitt

al le

tter f

or th

e FS

AP

pack

age,

whe

n ap

prop

riate

, a su

gges

tion

that

a fo

llow

-up

mee

ting

or “

prov

ider

s for

um”

on T

A

be o

rgan

ized

. The

dec

isio

n on

whe

ther

to in

clud

e su

ch a

sugg

estio

n w

ill b

e ba

sed

on d

iscu

ssio

n w

ith th

e ar

ea d

epar

tmen

ts a

nd th

e W

orld

Ban

k, a

nd

follo

win

g th

e B

oard

’s g

uida

nce

not t

o ov

erbu

rden

the

FSA

P w

ith a

dditi

onal

ex

pect

atio

ns a

nd e

xces

sive

ly fo

rmal

app

roac

hes t

o fo

llow

-up.

1/ T

his c

olum

n su

mm

ariz

es th

e re

actio

n of

the

Exec

utiv

e B

oard

on

each

reco

mm

enda

tion

as re

porte

d in

the

Sum

min

g U

p by

the

Cha

ir. A

lthou

gh c

are

has b

een

take

n to

ens

ure

accu

racy

, rea

ders

are

in

vite

d to

refe

r to

the

full

text

of t

he su

mm

ary

of th

e di

scus

sion

whi

ch is

incl

uded

in th

e pu

blis

hed

vers

ion

of th

e re

port

and

can

be a

cces

sed

from

the

IEO

web

site

(w

ww

.imf.o

rg/E

xter

nal/N

P/ie

o/20

06/F

sap/

eng/

inde

x.ht

m.).

2/ T

he c

olum

n on

follo

w-u

p w

as p

rovi

ded

by st

aff a

t IEO

's re

ques

t and

has

not

bee

n su

bjec

t to

inde

pend

ent r

evie

w.

50

APP

EN

DIX

XII

. EV

AL

UA

TIO

N O

F T

HE

IMF’

S M

UL

TIL

AT

ER

AL

SU

RV

EIL

LA

NC

E: R

EC

OM

ME

ND

AT

ION

S, B

OA

RD

RE

SPO

NSE

, AN

D S

UB

SEQ

UE

NT

FO

LL

OW

-UP

IEO

Rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e 1/

Fo

llow

-Up

2/

Rec

omm

enda

tion

1. S

treng

then

the

IMF’

s rol

e at

the

cent

er o

f a m

ore

robu

st g

loba

l pee

r rev

iew

syst

em b

y es

tabl

ishi

ng a

mor

e pr

oact

ive

enga

gem

ent w

ith

rele

vant

inte

rgov

ernm

enta

l gro

ups.

Rec

omm

enda

tion

2. E

nhan

ce th

e ro

les o

f the

Ex

ecut

ive

Boa

rd a

nd th

e IM

FC in

mul

tilat

eral

su

rvei

llanc

e.

The

first

mul

tilat

eral

con

sulta

tion

(SM

/07/

232,

SU

R/0

7/90

) whi

ch fo

cuse

d on

ad

dres

sing

glo

bal i

mba

lanc

es w

hile

mai

ntai

ning

glo

bal g

row

th d

emon

stra

ted

that

th

e m

ultil

ater

al c

onsu

ltatio

n ap

proa

ch h

ad b

een

usef

ul fo

r add

ress

ing

glob

al

issu

es th

roug

h di

scus

sion

and

coo

pera

tion

amon

g m

embe

rs, a

nd sh

ould

pro

ve to

be

a v

alua

ble

inst

rum

ent f

or e

nhan

cing

the

effe

ctiv

enes

s of F

und

surv

eilla

nce

As p

art o

f the

Fun

d's e

ngag

emen

t with

var

ious

inte

rnat

iona

l for

a, in

clud

ing

the

G7,

G20

, and

the

APE

C, s

urve

illan

ce n

otes

/pap

ers a

re d

rafte

d w

ith g

reat

er fo

cus

on k

ey th

emes

, with

a v

iew

to fu

rther

ing

polic

y de

bate

in th

ese

fora

.

Rec

omm

enda

tion

3. S

tream

line

and

bette

r foc

us th

e pr

oduc

ts o

f mul

tilat

eral

surv

eilla

nce,

pre

sent

shor

ter

and

clea

rer m

essa

ges,

and

deliv

er th

em m

ore

stra

tegi

cally

to ta

rget

gro

ups.

The

Wor

ld E

cono

mic

Out

look

(WEO

) is b

eing

reco

nfig

ured

to h

ighl

ight

key

cr

oss-

coun

try m

essa

ges a

nd st

reng

then

risk

ana

lysi

s. W

ork

is o

ngoi

ng to

focu

s po

st-W

EO o

utre

ach

on is

sues

of p

artic

ular

con

cern

in sp

ecifi

c re

gion

s.

A n

ew p

roce

dure

has

bee

n im

plem

ente

d in

200

7 by

whi

ch in

terim

WEO

upd

ates

ar

e pu

blis

hed—

twic

e a

year

—be

twee

n th

e pu

blic

atio

ns o

f the

Spr

ing

and

Fall

WEO

. The

se u

pdat

e th

e st

aff’

s vie

w o

f the

glo

bal o

utlo

ok o

n th

e ba

sis o

f rec

ent

deve

lopm

ents

and

pro

vide

gre

ater

con

tinui

ty fo

r the

Fun

d's s

urve

illan

ce a

nd

outre

ach.

Th

e G

loba

l Fin

anci

al S

tabi

lity

Rep

ort (

GFS

R) n

ow in

clud

es a

"gl

obal

risk

map

" to

hel

p m

ake

the

staf

f's o

vera

ll ju

dgm

ent a

bout

glo

bal f

inan

cial

stab

ility

eas

ier t

o co

nvey

. Mor

e pu

blic

out

reac

h is

bei

ng c

oord

inat

ed w

ith th

e Ex

tern

al R

elat

ions

D

epar

tmen

t to

brin

g G

FSR

mes

sage

s to

a gr

eate

r glo

bal a

udie

nce,

per

haps

ou

tsid

e fin

anci

al c

ente

rs.

Rec

omm

enda

tion

4. D

efin

e m

ore

clea

rly th

e go

als o

f m

ultil

ater

al su

rvei

llanc

e an

d th

e m

echa

nism

s to

achi

eve

them

. Par

ticul

ar e

ffor

t sho

uld

also

go

into

be

tter i

nteg

ratin

g m

ultil

ater

al p

ersp

ectiv

es in

to

bila

tera

l sur

veill

ance

.

Mos

t Dire

ctor

s con

curr

ed th

at, w

hile

the

Exec

utiv

e B

oard

and

th

e IM

FC re

mai

n th

e m

ost a

ppro

pria

te fo

rum

s for

dis

cuss

ing

polic

y sp

illov

ers a

nd p

ossi

ble

resp

onse

s, th

e IM

F sh

ould

als

o pa

rtici

pate

mor

e ac

tivel

y in

oth

er fo

rum

s—su

ch a

s, bu

t not

lim

ited

to, t

he G

-7 a

nd th

e G

-20—

whi

ch p

rovi

de o

ppor

tuni

ties

for a

fran

k ex

chan

ge o

f vie

ws o

n m

ultil

ater

al is

sues

. D

irect

ors n

oted

that

mul

tilat

eral

surv

eilla

nce

wou

ld h

ave

a la

rger

eff

ect o

n th

e gl

obal

pol

icy

deba

te if

they

wer

e be

tter

targ

eted

to th

eir c

ore

audi

ence

s, st

ream

lined

, and

focu

sed

on

key

issu

es.

Dire

ctor

s agr

eed

that

it w

ould

be

bene

ficia

l to

clar

ify th

e op

erat

iona

l goa

ls o

f mul

tilat

eral

surv

eilla

nce,

but

wer

e no

t pe

rsua

ded

abou

t the

nee

d fo

r bro

ad o

rgan

izat

iona

l cha

nges

. Pr

iorit

y sh

ould

be

give

n to

stre

ngth

enin

g th

e in

tegr

atio

n be

twee

n m

ultil

ater

al a

nd b

ilate

ral s

urve

illan

ce, p

artic

ular

ly fo

r co

untri

es th

at h

ave

an im

pact

on

glob

al fi

nanc

ial s

tabi

lity.

Con

sist

ent w

ith th

e M

ediu

m-T

erm

Stra

tegy

, Arti

cle

IV re

ports

for s

yste

mic

ally

im

porta

nt c

ount

ries w

ill b

e ex

pect

ed to

incl

ude

anal

ysis

and

dis

cuss

ion

of

regi

onal

or g

loba

l spi

llove

r eff

ects

, and

all

Arti

cle

IV c

onsu

ltatio

ns a

re e

xpec

ted

to m

ake

a gr

eate

r use

of c

ross

-cou

ntry

ana

lysi

s and

to b

ring

to b

ear o

ther

co

untri

es’ e

xper

ienc

e in

add

ress

ing

sim

ilar p

robl

ems.

To a

id in

tegr

atio

n of

bi

late

ral a

nd m

ultil

ater

al su

rvei

llanc

e, th

e re

sults

of t

he W

EO w

ill b

e pr

esen

ted

to st

aff i

n an

inte

rnal

sem

inar

. Th

e G

FSR

has

bee

n, a

nd w

ill c

ontin

ue to

be,

pre

sent

ed to

eac

h ar

ea d

epar

tmen

t be

fore

pub

licat

ion

in a

n ef

fort

to b

oth

info

rm b

ilate

ral s

urve

illan

ce o

f glo

bal

trend

s and

hav

e m

ultil

ater

al su

rvei

llanc

e be

info

rmed

abo

ut c

ount

ry-s

peci

fic a

nd

regi

onal

fina

ncia

l tre

nds r

equi

ring

grea

ter a

ttent

ion.

1/ T

his c

olum

n su

mm

ariz

es th

e re

actio

n of

the

Exec

utiv

e B

oard

on

each

reco

mm

enda

tion

as re

porte

d in

the

sum

min

g up

by

the

Cha

ir. A

lthou

gh c

are

has b

een

take

n to

ens

ure

accu

racy

, rea

ders

are

invi

ted

to re

fer t

o th

e fu

ll te

xt o

f the

sum

mar

y of

the

disc

ussi

on, w

hich

is in

clud

ed in

the

publ

ishe

d ve

rsio

n of

the

repo

rt an

d ca

n be

acc

esse

d fr

om th

e IE

O w

ebsi

te

(ww

w.im

f.org

/ext

erna

l/np/

ieo/

2006

/ms/

eng/

inde

x.ht

m).

2/ T

he c

olum

n on

follo

w-u

p w

as p

rovi

ded

by st

aff a

t IEO

's re

ques

t and

has

not

bee

n su

bjec

t to

inde

pend

ent r

evie

w.

51 A

PPE

ND

IX X

III.

EV

AL

UA

TIO

N O

F T

HE

IMF

AN

D A

ID T

O S

UB

-SA

HA

RA

N A

FRIC

A A

ND

FO

LL

OW

-UP

MA

TR

IX

IEO

Rec

omm

enda

tions

E

xecu

tive

Boa

rd R

espo

nse

Man

agem

ent

Impl

emen

tatio

n Pl

an 1

/ Fo

llow

-Up

2/

The

Exec

utiv

e B

oard

shou

ld

reaf

firm

and

/or c

larif

y Fu

nd

polic

ies o

n th

e un

derly

ing

perf

orm

ance

thre

shol

ds fo

r the

sp

endi

ng a

nd a

bsor

ptio

n of

ad

ditio

nal a

id, a

ltern

ativ

e sc

enar

ios,

the

mob

iliza

tion

of

aid,

PSI

A, a

nd p

ro-p

oor a

nd

pro-

grow

th b

udge

t fra

mew

orks

. B

ased

on

thes

e re

affir

mat

ions

/ cl

arifi

catio

ns, M

anag

emen

t sh

ould

pro

vide

cle

ar g

uida

nce

to st

aff o

n w

hat i

s req

uire

d,

enco

urag

ed, p

erm

itted

, and

/or

proh

ibite

d—in

clud

ing

in

wor

king

with

the

Wor

ld B

ank

and

othe

r par

tner

s—an

d en

sure

ef

fect

ive

impl

emen

tatio

n an

d re

sults

.

Dir

ect r

efer

ence

: D

irect

ors s

uppo

rted

the

repo

rt’s r

ecom

men

datio

n on

the

need

for f

urth

er c

larif

icat

ion

of F

und

polic

y on

se

vera

l aid

-rel

ated

issu

es, i

nclu

ding

the

mob

iliza

tion

of a

id, a

ltern

ativ

e sc

enar

ios,

pove

rty a

nd so

cial

im

pact

ass

essm

ents

of m

acro

econ

omic

pol

icie

s, an

d pr

o-po

or a

nd p

ro-g

row

th b

udge

t fra

mew

orks

. D

irect

ors a

sked

the

staf

f to

com

e ba

ck w

ith sp

ecifi

c an

d co

sted

pro

posa

ls o

n ho

w to

cla

rify

rele

vant

po

licie

s and

impl

emen

t the

repo

rt’s r

ecom

men

datio

ns.

Rel

ated

refe

renc

es:

[Dire

ctor

s] c

onsi

dere

d th

at a

ny im

prov

emen

ts in

the

Fund

’s e

ngag

emen

t in

low

-inco

me

coun

tries

sh

ould

, in

line

with

the

MTS

, con

tinue

to b

e fo

cuse

d on

its c

ore

man

date

of p

rovi

ding

adv

ice

and

supp

ort f

or so

und

mac

roec

onom

ic p

olic

ies a

s a p

rere

quis

ite fo

r sus

tain

ed g

row

th a

nd p

over

ty re

duct

ion.

In

this

con

text

, mos

t Dire

ctor

s con

firm

ed th

at d

istri

butio

nal p

olic

ies g

ener

ally

lie

outs

ide

the

Fund

’s

core

man

date

and

that

pov

erty

and

soci

al im

pact

ana

lysi

s (PS

IA) s

houl

d be

con

duct

ed b

y ot

her a

genc

ies

in th

e co

ntex

t of t

he P

RSP

pro

cess

, alth

ough

oth

ers s

aw a

con

tinui

ng ro

le fo

r the

Fun

d. D

irect

ors n

oted

th

at P

SIA

s hav

e no

t sys

tem

atic

ally

supp

orte

d PR

GF

prog

ram

des

ign,

and

em

phas

ized

the

impo

rtanc

e of

im

prov

ing

Fund

col

labo

ratio

n w

ith d

evel

opm

ent p

artn

ers,

in p

artic

ular

the

Wor

ld B

ank,

to ta

ke th

ese

issu

es in

to a

ccou

nt w

hen

help

ing

coun

tries

form

ulat

e th

eir m

acro

econ

omic

pol

icie

s. D

irect

ors c

onfir

med

the

impo

rtanc

e of

acc

omm

odat

ing

high

er a

id fl

ows t

hrou

gh h

ighe

r spe

ndin

g an

d ne

t im

ports

, pro

vide

d th

at th

is w

ould

not

jeop

ardi

ze m

acro

econ

omic

stab

ility

. The

y co

nsid

ered

that

this

ap

proa

ch sh

ould

con

tinue

to b

e im

plem

ente

d on

a c

ase-

by-c

ase

basi

s and

in th

e co

ntex

t of a

mul

ti-ye

ar

stra

tegy

—w

ith th

e ge

nera

l obj

ectiv

e be

ing

to b

ring

all l

ow-in

com

e m

embe

rs to

a si

tuat

ion

in w

hich

aid

ca

n be

fully

abs

orbe

d an

d ef

fect

ivel

y sp

ent.

Dire

ctor

s con

curr

ed o

n th

e ne

ed fo

r im

prov

ed tr

ansp

aren

cy a

nd c

lear

com

mun

icat

ions

by

the

Fund

on

its st

ance

rega

rdin

g th

e us

e of

aid

, and

on

the

trade

-off

s inv

olve

d.

On

the

role

of t

he F

und

in d

evel

opin

g al

tern

ativ

e ai

d sc

enar

ios,

man

y D

irect

ors i

ndic

ated

that

, in

the

cont

ext o

f the

PR

SP, t

he st

aff s

houl

d be

ava

ilabl

e to

pre

pare

scen

ario

s tha

t illu

stra

te th

e m

acro

econ

omic

ch

alle

nges

of s

calin

g up

aid

, inc

ludi

ng, i

n th

e vi

ew o

f som

e D

irect

ors,

thos

e ba

sed

on e

stim

ates

by

othe

rs o

f add

ition

al re

sour

ces n

eede

d fo

r the

MD

Gs w

hen

avai

labl

e. M

ost D

irect

ors e

mph

asiz

ed,

how

ever

, tha

t the

Fun

d’s r

ole

shou

ld b

e lim

ited

to a

sses

sing

the

cons

iste

ncy

of a

dditi

onal

aid

flow

s with

m

acro

econ

omic

stab

ility

and

the

abso

rptio

n ca

paci

ty o

f the

cou

ntry

, with

mor

e no

rmat

ive

advi

ce a

nd th

e pr

epar

atio

n of

less

like

ly a

id sc

enar

ios f

allin

g ou

tsid

e th

e Fu

nd’s

man

date

. O

n bu

dget

fram

ewor

ks, D

irect

ors g

ener

ally

con

side

red

that

the

Wor

ld B

ank

and

othe

r MD

Bs s

houl

d be

th

e le

ad a

genc

ies i

n pr

ovid

ing

advi

ce re

late

d to

exp

endi

ture

com

posi

tion

issu

es.

Boa

rd-e

ndor

sed

reco

mm

enda

tions

in th

e ar

ea o

f Fu

nd p

olic

ies r

elat

ing

to th

e ha

ndlin

g of

aid

inflo

ws w

ill b

e ta

ken

forw

ard

prim

arily

in th

e co

ntex

t of:

i) Th

e R

ole

of th

e Fu

nd in

M

anag

ing

Aid

Inflo

ws a

nd

Impa

ct o

n th

e D

esig

n of

Fun

d-su

ppor

ted

Prog

ram

s, an

d ii)

Fi

scal

Pol

icy

Res

pons

e to

Sca

led-

up A

id a

nd a

ccom

pany

ing

back

grou

nd p

aper

s. 3/

Boa

rd d

iscu

ssio

n of

thes

e is

sues

cla

rifie

d Fu

nd

polic

y on

issu

es re

late

d to

the

spen

ding

and

ab

sorp

tion

of a

dditi

onal

ai

d, th

e m

obili

zatio

n of

ai

d, a

ltern

ativ

e sc

enar

ios,

and

pro-

poor

and

pro

-gr

owth

bud

get

fram

ewor

ks.

Furth

er g

uida

nce

will

be

issu

ed to

staf

f in

due

cour

se.

The

Exte

rnal

Rel

atio

ns

Dep

artm

ent s

houl

d en

sure

the

cons

iste

ncy

of in

stitu

tiona

l co

mm

unic

atio

ns w

ith B

oard

-ap

prov

ed o

pera

tiona

l pol

icie

s an

d Fu

nd-s

uppo

rted

oper

atio

ns.

Dire

ctor

s not

ed th

at a

com

mon

them

e in

the

IEO

reco

mm

enda

tions

is th

e ne

ed fo

r im

prov

ed a

nd m

ore

real

istic

Fun

d co

mm

unic

atio

ns. D

irect

ors w

ere

conc

erne

d ov

er th

e di

scon

nect

bet

wee

n th

e Fu

nd’s

co

mm

unic

atio

n on

aid

and

pov

erty

redu

ctio

n po

licy

and

wha

t is t

he a

ctua

l exp

erie

nce

at th

e co

untry

le

vel i

n lo

w-in

com

e co

untri

es; t

he re

sulti

ng e

xpec

tatio

ns g

ap m

ight

put

the

Fund

's cr

edib

ility

at s

take

. Th

us, D

irect

ors s

uppo

rted

the

repo

rt’s c

all f

or g

reat

er c

larit

y in

the

Fund

’s e

xter

nal r

elat

ions

on

wha

t the

Fu

nd c

an a

nd c

anno

t do

in it

s low

-inco

me

coun

try w

ork.

Dire

ctor

s wel

com

ed m

anag

emen

t’s in

tent

ion

to

take

furth

er st

eps t

o bu

ild o

n th

e ef

forts

to st

reng

then

the

com

mun

icat

ions

pro

cess

that

is a

lread

y un

der

way

. The

y al

so u

nder

scor

ed th

e im

porta

nce

of a

step

ped-

up in

tern

al c

omm

unic

atio

ns e

ffor

t acr

oss t

he

Fund

to a

lign

bette

r sta

ff’s

ong

oing

wor

k w

ith in

stitu

tiona

l prio

ritie

s. A

t the

sam

e tim

e, D

irect

ors

emph

asiz

ed th

at, g

iven

the

budg

etar

y co

nstra

ints

, im

prov

emen

ts in

coo

rdin

atio

n an

d co

mm

unic

atio

n w

ould

nee

d to

be

impl

emen

ted

in a

stra

tegi

c m

anne

r

Boa

rd-e

ndor

sed

reco

mm

enda

tions

in th

e ar

ea o

f th

e ne

ed fo

r Fun

d po

licy

and

its

impl

emen

tatio

n to

be

cons

iste

nt

and

com

mun

icat

ed c

lear

ly w

ithin

th

e in

stitu

tion

and

outs

ide,

will

be

take

n fo

rwar

d in

the

cont

ext

of: T

he IM

F's C

omm

unic

atio

ns

Stra

tegy

.

Boa

rd d

iscu

ssio

n of

thes

e is

sue

conf

irmed

nee

d to

im

prov

e fu

rther

Fun

d co

mm

unic

atio

ns,

incl

udin

g th

e ne

ed to

be

tter i

nteg

rate

co

mm

unic

atio

ns w

ith

oper

atio

ns a

nd to

alig

n be

tter i

nter

nal

com

mun

icat

ions

with

in

stitu

tiona

l prio

ritie

s an

d po

licie

s.

52 A

PPE

ND

IX X

III.

EV

AL

UA

TIO

N O

F T

HE

IMF

AN

D A

ID T

O S

UB

-SA

HA

RA

N A

FRIC

A A

ND

FO

LL

OW

-UP

MA

TR

IX (C

ON

CL

UD

ED

)

IEO

rec

omm

enda

tion

Exe

cutiv

e B

oard

Res

pons

e M

anag

emen

t Im

plem

enta

tion

Plan

1/

Follo

w U

p 2/

Man

agem

ent s

houl

d es

tabl

ish

trans

pare

nt m

echa

nism

s for

m

onito

ring

and

eval

uatin

g th

e im

plem

enta

tion

of th

e cl

arifi

ed

polic

y gu

idan

ce. T

he F

und’

s Ex-

Post

Ass

essm

ents

shou

ld

expl

icitl

y co

ver s

taff

act

ions

and

co

ntrib

utio

ns to

the

impl

emen

tatio

n of

exi

stin

g an

d cl

arifi

ed p

olic

ies.

But

in v

iew

of

wid

espr

ead

exte

rnal

con

cern

s ab

out I

MF

staf

f acc

ount

abili

ty in

SS

A, a

mor

e pe

riodi

c an

d tra

nspa

rent

stoc

ktak

ing

acro

ss

coun

try p

rogr

ams i

s nee

ded,

po

ssib

ly in

the

cont

ext o

f Boa

rd

revi

ews o

f the

PR

GF—

or in

fu

ture

revi

ews o

f the

MTS

.

Dir

ect r

efer

ence

D

irect

ors w

elco

med

the

repo

rt’s r

ecom

men

datio

n to

est

ablis

h tra

nspa

rent

mec

hani

sms f

or m

onito

ring

and

eval

uatin

g th

e im

plem

enta

tion

of th

e cl

arifi

ed p

olic

y gu

idan

ce. I

n th

is c

onte

xt, t

hey

agre

ed th

at

exis

ting

mec

hani

sms f

or fo

llow

up,

such

as e

x-po

st a

sses

smen

ts o

f pas

t Fun

d ar

rang

emen

ts, m

ight

be

stre

ngth

ened

. The

y al

so n

oted

the

usef

ulne

ss o

f bro

ader

stoc

ktak

ing

in th

e co

ntex

t of p

erio

dic

Boa

rd

revi

ews o

f the

PR

GF.

The

y as

ked

for s

taff

pro

posa

ls in

thes

e ar

eas.

Rel

ated

refe

renc

e D

irect

ors l

ooke

d fo

rwar

d to

man

agem

ent’s

pro

posa

ls o

n im

plem

entin

g th

e IE

O’s

reco

mm

enda

tions

. So

me

Dire

ctor

s sug

gest

ed th

at th

e IE

O m

ay a

lso

usef

ully

pro

vide

com

men

ts to

the

Boa

rd o

n im

plem

enta

tion

plan

s. N

otin

g th

at se

vera

l pol

icy

issu

es ra

ised

in th

e IE

O re

port

wou

ld b

enef

it fr

om

grea

ter c

larit

y re

gard

ing

delin

eatio

n of

Ban

k-Fu

nd re

spon

sibi

litie

s, D

irect

ors l

ooke

d fo

rwar

d to

re

view

ing

thes

e is

sues

furth

er in

the

cont

ext o

f the

ir fo

rthco

min

g co

nsid

erat

ion

of th

e re

port

on IM

F-B

ank

colla

bora

tion.

In p

artic

ular

, the

y no

ted

that

gre

ater

cla

rity

of th

e re

spec

tive

inst

itutio

ns’

obje

ctiv

es, r

espo

nsib

ility

for e

xpec

ted

deliv

erab

les,

and

acco

unta

bilit

y fo

r qua

lity

wou

ld b

e cr

ucia

l to

help

add

ress

seve

ral o

f the

issu

es ra

ised

by

both

the

repo

rts

Boa

rd-e

ndor

sed

reco

mm

enda

tions

in th

e ar

ea o

f m

onito

ring

and

eval

uatio

n of

th

e im

plem

enta

tion

of c

larif

ied

polic

y gu

idan

ce w

ill b

e ta

ken

forw

ard

in th

e co

ntex

t of:

i) A

re

view

of t

he st

aff g

uida

nce

note

on

ex p

ost a

sses

smen

ts;

and,

ii) T

he n

ext r

evie

w o

f the

PR

GF.

Man

agem

ent s

houl

d cl

arify

ex

pect

atio

ns—

and

reso

urce

av

aila

bilit

ies—

for r

esid

ent

repr

esen

tativ

es’ a

nd m

issi

ons

chie

fs’ i

nter

actio

ns w

ith lo

cal

dono

r gro

ups a

nd c

ivil

soci

ety.

It

shou

ld m

onito

r tre

nds i

n th

e in

stitu

tion’

s cou

ntry

-leve

l op

erat

ing

envi

ronm

ent,

incl

udin

g fo

r aid

, per

iodi

cally

ass

essi

ng th

e cr

oss-

coun

try im

plic

atio

ns fo

r IM

F po

licie

s and

stra

tegi

es.

Dir

ect r

efer

ence

D

irect

ors a

lso

wel

com

ed th

e fin

al re

com

men

datio

n in

the

IEO

repo

rt to

cla

rify

expe

ctat

ions

und

er

Fund

pol

icie

s—an

d re

sour

ce a

vaila

bilit

ies—

for r

esid

ent r

epre

sent

ativ

es’ a

nd m

issi

ons c

hief

s’

inte

ract

ions

with

loca

l don

ors a

nd c

ivil

soci

ety

grou

ps. T

hey

emph

asiz

ed th

at, i

n pa

rticu

lar,

the

conc

erns

rais

ed b

y do

nor g

roup

s cal

led

for i

mpr

oved

coo

rdin

atio

n an

d co

mm

unic

atio

n, w

hile

st

ress

ing

that

the

Fund

shou

ld n

ot it

self

play

the

role

of c

oord

inat

or o

r con

vene

r of d

onor

act

iviti

es

and

assi

stan

ce. I

n ad

dres

sing

thes

e ch

alle

nges

, in

thei

r vie

w, a

ttent

ion

shou

ld b

e pa

id to

cha

ngin

g ai

d m

odal

ities

and

incr

easi

ng d

ecen

traliz

atio

n of

don

or o

pera

tions

, whi

le a

lso

taki

ng in

to a

ccou

nt th

e Fu

nd’s

bud

get a

nd st

affin

g co

nstra

ints

. M

ost D

irect

ors r

ecog

nize

d th

e pa

rticu

lar i

mpo

rtanc

e of

the

role

pla

yed

by re

side

nt re

pres

enta

tives

in

this

con

text

, but

stre

ssed

that

any

furth

er c

onsi

dera

tion

of th

eir r

ole

shou

ld b

e in

form

ed b

y a

care

ful

cost

-ben

efit

anal

ysis

, giv

en th

e hi

gh c

osts

invo

lved

and

the

Fund

’s c

urre

nt re

sour

ce p

ress

ures

. D

irect

ors a

gree

d th

at th

e Fu

nd’s

eng

agem

ent w

ith d

evel

opm

ent p

artn

ers w

ould

ben

efit

from

ens

urin

g th

at in

stitu

tiona

l com

mun

icat

ions

—bo

th in

tern

al a

nd e

xter

nal—

are

cons

iste

nt w

ith B

oard

-app

rove

d op

erat

iona

l pol

icie

s.

Boa

rd-e

ndor

sed

reco

mm

enda

tions

in th

e ar

ea o

f th

e ro

le a

nd re

sour

cing

of

resi

dent

repr

esen

tativ

es’ a

nd

mis

sion

s chi

efs’

inte

ract

ions

w

ith lo

cal d

onor

gro

ups a

nd

civi

l soc

iety

will

be

take

n fo

rwar

d in

the

cont

ext o

f: i)

The

Role

of t

he F

und

in th

e PR

SP a

nd D

onor

Coo

rdin

atio

n Pr

oces

ses,

and

ii) T

he IM

F’s

Com

mun

icat

ion

Stra

tegy

1/ Th

e M

anag

emen

t Im

plem

enta

tion

Plan

was

pre

sent

ed to

the

Boa

rd o

n Ju

ne 2

9, 2

007.

2/

The

col

umn

on fo

llow

-up

was

pro

vide

d by

staf

f at I

EO's

requ

est a

nd h

as n

ot b

een

subj

ect t

o in

depe

nden

t rev

iew

. 3/

Stre

ngth

enin

g Pu

blic

Fin

ance

Man

agem

ent a

nd F

isca

l Pol

icy

Res

pons

e to

Sca

led-

Up

Aid

: Mac

ro-F

isca

l and

Exp

endi

ture

Pol

icy

Cha

lleng

es.