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International Monetary Fund. Independent Evaluation Office

Abstract

1. This evaluation assesses the performance of IMF surveillance in the run-up to the global financial and economic crisis. It examines whether the IMF identified the mounting risks and vulnerabilities that led to the crisis and effectively warned the countries directly affected as well as the membership at large about possible spillovers and contagion. The evaluation analyzes the factors that might have hindered the IMF’s effectiveness, and offers recommendations on how to strengthen its ability to discern risks and vulnerabilities and to warn the membership in the future.

International Monetary Fund. Independent Evaluation Office

Abstract

The IMF has three core functions: surveillance over the policies of its member countries, financing in support of IMF-backed adjustment programs, and technical assistance. Of these three core functions, surveillance is the most important and has the broadest implications. Given this importance, the International Monetary and Financial Committee (IMFC), the Executive Board, and the Managing Director have called surveillance a critical area in need of strengthening.1

International Monetary Fund. Independent Evaluation Office

Abstract

The financial year 2009 saw the production of an evaluation on The IMF’s Approach to International Trade Policy Issues. The Governance of the IMF report was also discussed by the Board in FY2009, and there were discussions on follow-up to the IEO evaluation of Structural Conditionality in IMF-Supported Programs. This recently completed evaluation and follow-up to past evaluations will be discussed in Chapter 2.

International Monetary Fund. Independent Evaluation Office

Abstract

We now turn to our evaluation of the content and quality of the IMF’s multilateral surveillance outputs. We begin by discussing the selection of issues analyzed as part of multilateral surveillance, showing how they reflect the IMF’s comparative advantage. We then consider the relevance and timeliness of the issues selected for analysis by using as a benchmark the importance attached by national policymakers in the G-7 and G-20 process. We likewise assess the relevance and timeliness of the risks identified in multilateral surveillance by comparing them to the risks identified by other international and national bodies. We look at the integration of multilateral and bilateral surveillance by analyzing the IMF’s policy advice and macroeconomic forecasts. And we assess the integration of macroeconomic and capital market analysis by identifying how multilateral surveillance combines these alternative approaches to analyze relevant issues.

International Monetary Fund. Independent Evaluation Office

Abstract

7. The evaluation assesses the IMF’s performance during the period up to the crisis, focusing primarily on 2004 through 2007.5 It is centered around three pillars, each studying a different aspect of IMF surveillance: multilateral surveillance, bilateral surveillance in systemic financial centers seen as those where the crisis originated (e.g., the United States and United Kingdom), and bilateral surveillance in selected other advanced and emerging economies that were affected by the crisis (Annex 3 lists the countries covered). The report integrates the findings, lessons, and recommendations of case studies and background papers prepared on these pillars.6

International Monetary Fund. Independent Evaluation Office

Abstract

The report for the evaluation of IMF Involvement in International Trade Policy Issues was sent to the Executive Board for discussion in May 2009. The Executive Board discussed in FY2009 the report Governance of the IMF and the Management Implementation Plan for the evaluation of Structural Conditionality in IMF-Supported Programs. Both of these discussions were detailed in the FY2008 IEO Annual Report. This report outlines some of the Board’s subsequent discussions on the topic of IMF governance.

International Monetary Fund. Independent Evaluation Office

Abstract

Previous IEO Annual Reports identified common themes emerging from earlier evaluations. The FY2007 Annual Report emphasized the need for:

International Monetary Fund. Independent Evaluation Office

Abstract

11. During the period 2004 through the start of the crisis in mid-2007, the IMF did not warn the countries at the center of the crisis, nor the membership at large, of the vulnerabilities and risks that eventually brought about the crisis. For much of the period the IMF was drawing the membership’s attention to the risk that a disorderly unwinding of global imbalances could trigger a rapid and sharp depreciation of the dollar, and later on the risks of inflation from rising commodity prices. The IMF gave too little consideration to deteriorating financial sector balance sheets, financial regulatory issues, to the possible links between monetary policy and the global imbalances, and to the credit boom and emerging asset bubbles. It did not discuss macro-prudential approaches that might have helped address the evolving risks. Even as late as April 2007, the IMF’s banner message was one of continued optimism within a prevailing benign global environment. Staff reports and other IMF documents pointed to a positive near-term outlook and fundamentally sound financial market conditions. Only after the eruption of financial turbulence did the IMF take a more cautionary tone in the October 2007 WEO and GFSR.

International Monetary Fund. Independent Evaluation Office

Abstract

We now consider issues related to the use and delivery of the IMF’s multilateral surveillance products. We look first at how multilateral surveillance informs bilateral surveillance. We then discuss whether the multilateral surveillance message is reaching the intended external audience, including how well the delivery of the message is exploiting the potential for peer pressure. We consider whether the presentation of surveillance products is sufficiently focused on areas where the IMF can offer the greatest value added and is done in a way that maximizes its impact. We then offer a few observations on the ultimate impact of IMF multilateral surveillance on policies adopted in major countries.

International Monetary Fund. Independent Evaluation Office

Abstract

The IEO is currently completing the evaluation on The IMF’s Interactions with Its Member Countries. Work is starting on two evaluation projects, one looking at the IMF’s research and one assessing the Fund’s performance in the run-up to the current financial and economic crisis. Beyond these two projects, the selection of future topics will await the arrival of the next Director of the IEO. Table 1 shows the status of IEO evaluations completed or in progress.