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Mr. George M Kabwe, Elie Chamoun, Riaan van Greuning, Mowele Mohlala, and Ms. Julia Cardoso

Safeguards assessments are a key pillar of the risk management arrangements for IMF lending. Safeguards assessments aim to mitigate the risks of misuse of Fund resources and misreporting of program monetary data under Fund arrangements. Safeguards assessment reports are confidential and therefore the IMF Executive Board is provided with a periodic report on safeguards activities on a biennial basis, in addition to high-level summaries in member country staff reports on key findings and recommendations. This update on safeguards activity covers the period May 2017 to end-April 2019 (the period).

International Monetary Fund

activity remained consistent with recent years. 21 assessments were completed during the update period (September 2015-April 2017) and five were in progress at the end of the period. Activity continues to average around 13 assessments per year. While the number of central banks under monitoring decreased slightly from 67 to 63, some monitoring cases required intense engagement due to safeguards challenges that emerged. These related to forensic investigations, governance reforms, and a deterioration in safeguards frameworks of central banks facing difficult external conditions.

International Monetary Fund

This paper reviews experience with the safeguards assessment policy since the last review in 2010. The policy is subject to periodic reviews by the Executive Board. The policy’s main objective is to mitigate risks of misuse of Fund resources and misreporting of monetary data under Fund arrangements. Consistent with past reviews, an external panel of experts provided an independent perspective on the implementation of the policy.

International Monetary Fund

At an informal Board meeting in January, there was broad support for removing the current blanket prohibition on the provision of non-audit-related consulting services by the Fund’s external audit firm and replacing it with a blacklist approach, subject to robust safeguards to ensure the independence of the external audit firm. This paper makes specific proposals to implement such a change. This would align the Fund’s policy on the provision of consulting services by the external audit firm with practices followed in major jurisdictions and allow the external auditor to perform certain consulting services with proper safeguards to maintain the auditor’s independence. The proposed safeguards include: (i) a blacklist of prohibited services; (ii) an independence declaration by the external audit firm; (iii) limitations on the consulting fees that can be paid to the external audit firm; (iv) an oversight role for the External Audit Committee (EAC); and (v) review of consulting services provided by audit firms prior to the selection of a new external audit firm for the Fund. The staff sought the views of the EAC, which concurs with the proposal to modify the policy on the provision of consulting services by the external audit firm along with the related safeguards.

International Monetary Fund

The safeguards policy aims to mitigate the potential risks of misuse of resources, including Fund resources, and misreporting of program monetary data. The policy, introduced in 2000, is an integral part of the Fund’s financing policies and complements other safeguards, such as program design, conditionality, and access limits. Safeguards assessments of central banks of the borrowing member are required for almost all forms of Fund financing, and are followed by a period of monitoring for as long as Fund credit is outstanding.

International Monetary Fund

The safeguards policy, introduced in 2000, is designed to reduce the risks of misuse of Fund resources and misreporting of program monetary data to the Fund. It supports the Fund’s approach to prudent lending and complements other safeguards, including program design, conditionality, and access limits. Safeguards assessments are required for almost all member countries seeking Fund financing, and are followed by a period of monitoring for as long as Fund credit is outstanding

International Monetary Fund

The safeguards policy was introduced in 2000 to reduce the risks of misuse of Fund resources and misreporting of program monetary data to the Fund. It supports the Fund’s approach to prudent lending and complements other safeguards such as program design, conditionality, and access limits, to name a few. Some 242 assessments of 92 central banks have been completed since 2000. Assessments are followed by a period of monitoring for as long as Fund credit is outstanding.

International Monetary Fund

Under the Fund’s safeguards policy introduced in 2000, assessments of central banks are carried out for countries seeking financing from the IMF. They are part of the Fund’s approach to prudent lending and complement the Fund’s other safeguards such as program design, conditionality, and access limits, to name a few. The assessments aim to provide reasonable assurance that governance and controls can protect Fund resources from misuse and guard against misreporting of monetary data used for program monitoring purposes.