The IMF’s Interactions with Its Member Countries

To achieve its objectives, the IMF depends in large part on having effective interactions with member countries. Interactions, in this context, are defined to include exchanges of information, analysis, and views between IMF officials and country authorities, or other people or entities in member countries. The evaluation will examine whether the interactions between the IMF and its member countries, carried out in different circumstances and for various objectives, have been effective and well managed. It will cover the period 2001 to early 2008.

There are motivations for evaluating the IMF’s interactions with member countries at this time, besides their inherent importance to the institution’s effectiveness. First, evidence from a variety of sources—including country authorities and civil society—suggests that these interactions could be improved. Both the importance of the interactions and their shortcomings have been recurrent themes in previous evaluations by the IEO, as well as in comments by country authorities, civil society, and academics. Frustrations have also been expressed by IMF staff. Second, the nature of IMF interactions with member countries has evolved in recent years, reflecting changes in policies and priorities, and more changes are in prospect; the ways in which change has been managed is itself an important topic.

The evaluation questions respond to issues raised about the effectiveness of interactions by country authorities and others. Authorities’ views on what has been successful and unsuccessful were sought in confidential interviews. In addition, in examining various criticisms of the interactions and determining the extent of their validity, the evaluation will take account of concerns that have been made public, as well as the changes in Fund policies that have taken place in recent years. The success or otherwise of the new approaches and priorities, some of which have been adopted in response to previous criticisms, is an important aspect of the evaluation.

The evaluation will also examine how the IMF’s interactions have been managed. A key element is to determine how adaptations are made to changing priorities, changing country circumstances, and feedback from partners, especially the country authorities. In this respect, the way in which other institutions have managed country or “client” relationships could be relevant and instructive, including the balance between management from head office and by local presence.

The effectiveness of interactions will be evaluated against various criteria. These include criteria based on the guidance provided to IMF staff, issues considered important by country authorities, and additional criteria that may be suggested by referring to policies and practices in other institutions. Two aspects will be examined in particular—the clarity of the purpose and scope of interactions, and the quality of the interactions. The evaluation will assess the IMF’s management of interactions against two metrics: (1) the Fund’s own policies for managing interactions; and (2) the policies and practices of other institutions, and some models of what best practice might be in this area.

The evaluation will be based on evidence provided by seven main elements: a description of the mandate, policies, and guidance governing the IMF’s interactions with member countries; an account of the IMF’s process for managing the interactions with its members; a description, using data from IMF internal sources, of how the interactions with member countries evolved over the evaluation` period; a review of other institutions’ policies and practices for conducting interactions; opinion surveys of country authorities, civil society, and IMF staff and Executive Directors; and a study of interactions in about 40–50 countries, involving interviews with staff and country authorities; and thematic studies of interactions in a few countries. The evidence, triangulated from various perspectives, will be distilled into a short overview report containing the main findings and recommendations.

The IMF’s Approach to International Trade Policy Issues

The IMF’s involvement in trade policy issues for well over 25 years has been a source of controversy. It is widely accepted that Article I(ii) of the IMF’s Articles of Agreement, imbuing the IMF with the responsibility “to facilitate the expansion and balanced growth of international trade,” provides the mandate for its involvement in issues affecting international trade.

The mandate is reinforced by references in Article IV to members’ obligations on economic policies in collaborating with the Fund to assure orderly exchange arrangements and in Article V to the IMF’s role in assisting members in solving balance of payments problems. But in contrast to exchange rate arrangements and the system of exchange rates, international trade is not under the regulatory jurisdiction of the IMF. Thus, the mandate is less definitive on the specific nature of the IMF’s involvement in trade issues than on its role in exchange rate policy.

The relatively soft mandate for IMF involvement in trade policy issues leaves substantial scope for disagreement on whether the IMF has overstepped its proper role on trade policy or not done enough. Moreover, reflecting a fundamental orientation toward furthering free trade, the IMF’s involvement in trade policy issues has at times stoked the debate on whether steps toward freer trade are always beneficial for the country concerned or if developmental objectives (particularly in low-income countries) would be better served by programs more tailored to country-specific circumstances. Alongside this debate are charges that IMF advice is not even-handed and pushes harder on developing countries (typically the borrowers from the IMF) than on advanced countries to reduce protectionism. In recent years, with the increasing complexity of trade policy issues, questions about whether IMF staff have the capacity to address trade policies sufficiently systematically have also arisen.

The evaluation will focus on the clarity and conduct of the IMF’s role in trade policy advice and advocacy. It will aim to move beyond the question of whether the IMF’s role should be more focused and address questions of whether interpretation of the mandate for involvement in trade policy is well based and clear; whether critics of IMF positions have a solid basis and where the IMF’s comparative advantage in trade policy issues lies; how well the IMF has adapted to the establishment of the World Trade Organization (WTO); and whether the IMF’s trade policy advice is effective. In its conclusions, the evaluation will consider possible improvements in how the IMF defines its role and executes trade policy advice.

The evaluation will assess the IMF’s work on trade within the standard results-chain framework of inputs, outputs, and outcomes. Inputs consist of IMF internal processes such as the guidance provided for trade work by the Board and Management, and research and analysis—from inside and outside the IMF—that focus and challenge the IMF’s advice on trade policy. Outputs are defined as assessments, analyses, and communication, in surveillance reports, program documents, technical assistance reports, policy dialogues, communiqués, speeches, and statements, among others. Both inputs and outputs are, to a large extent, within the control of the IMF; thus, IMF accountability for their quality is high. Moving along the results chain, the degree of IMF accountability for results becomes increasingly affected by other factors. Outcomes are defined as country authorities’ reception of IMF trade policy advice and changes in trade policies and the trade environment in general.

The evaluation will cover the period since the establishment of the WTO—1996–2007—but may go back further for some questions and focus on the more recent past for others. The main instruments of the evaluation will be desk reviews of policy documents and guidelines issued to staff, Article IV and program documents, Executive Board minutes, and advocacy and outreach items. There will also be case studies of the IMF’s involvement with individual countries (or country groupings) and/or trade policy issues that cut across countries (or country groupings). These will be supplemented by surveys and interviews of current and former IMF, WTO, and World Bank staff as well as government and nongovernment representatives (including the media).

The IMF’s Research Agenda

Seven years ago, a group of independent experts evaluated the IMF’s economic research activities. 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. This will focus both on the use of research for technical assistance purposes, and also in aspects of policy review, dialogue and in recommendations made to member countries. 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 Organization for Economic Cooperation and Development, 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.