- International Monetary Fund
- Published Date:
- May 2008
Relations with Other International Organizations
Arrangement for Consultation and Cooperation with the Contracting Parties of GATT
The Fund agrees that the informal arrangement of an administrative character proposed by the Chairman of the Contracting Parties constitutes a satisfactory basis for consultation and cooperation between the Fund and the Contracting Parties to the General Agreement on Tariffs and Trade (Executive Board Document No. 316, Supplement 2). The Managing Director is authorized to agree to that arrangement on behalf of the Fund and the text of the proposed reply to the Contracting Parties is agreed (Committee on Liaison with ITO Document No. 11).
Decision No. 363-1,
September 24, 1948
Document No. 316
to the General Agreement
on Tariffs and Trade
Palais des Nations
9 September 1948
The Managing Director,
International Monetary Fund,
1818 “H” Street,
Washington 6, D.C.
The General Agreement on Tariffs and Trade, which has now been put into provisional application by all but one of the countries participating in the negotiation thereof, provides in paragraph 1 of Article XV as follows:
“The CONTRACTING PARTIES shall seek co-operation with the International Monetary Fund to the end that the CONTRACTING PARTIES and the Fund may pursue a coordinated policy with regard to exchange questions within the jurisdiction of the Fund and questions of quantitative restrictions and other trade measures within the jurisdiction of the CONTRACTING PARTIES.”
Throughout the Agreement various provisions call for consultation or agreement between the CONTRACTING PARTIES, that is, the contracting parties to the General Agreement acting jointly, and the International Monetary Fund on matters of common concern. In particular, paragraph 2 of Article XV calls for a wide range of consultation, and paragraph 3 of Article XV provides:
“The CONTRACTING PARTIES shall seek agreement with the Fund regarding procedures for consultation under paragraph 2 of this Article.”
In view of the fact that the General Agreement on Tariffs and Trade has been given only provisional rather than definitive application, it is the view of the CONTRACTING PARTIES that an elaborate agreement to implement paragraph 3 quoted above is not necessary at this time. However, questions may arise in the interim, which would require the CONTRACTING PARTIES to seek the cooperation of the Fund.
Under such circumstances it is proposed by the CONTRACTING PARTIES that the Fund agree to co-operate with the CONTRACTING PARTIES in carrying out the provisions of the General Agreement in accordance with the terms thereof and, in particular, to consult, at the request of the CONTRACTING PARTIES, on matters as contemplated by the General Agreement. If such cases arise, the Chairman of the CONTRACTING PARTIES will notify the Managing Director of the Fund of each particular instance in which the CONTRACTING PARTIES desire consultation and will furnish the Fund with all information available which may assist the Fund in considering the question. Since various provisions of the General Agreement call for consultation between the CONTRACTING PARTIES and the Fund, it might be necessary in particular cases to await a meeting of the contracting parties before formal consultation could be undertaken. However, the CONTRACTING PARTIES have authorized their Chairman to initiate requests, either at the direction of the CONTRACTING PARTIES or on the Chairman’s own initiative if the contracting parties are not in session, for the Fund to consult with the CONTRACTING PARTIES in accordance with the provisions of the General Agreement. This arrangement should make it possible for the Fund to undertake with a minimum of delay such studies as may be necessary and should afford the Fund opportunity to become familiar with the subject matter involved in advance of consultation with the CONTRACTING PARTIES in particular cases.
The Fund may from time to time wish to request consultation with the CONTRACTING PARTIES on matters of common interest, and, in such cases, the CONTRACTING PARTIES will be prepared to consult upon such requests.
Any request for consultation by either the Fund or the CONTRACTING PARTIES shall be accompanied by available information that would contribute to the effectiveness of the consultation. In such cases, due regard shall be paid to the need to safeguard confidential information and to any special obligations of the Fund and the CONTRACTING PARTIES in this respect.
The particular procedures in implementation of these arrangements can be worked out case by case until sufficient experience has been acquired on the basis of which more formal procedures can be developed if necessary.
If the foregoing arrangements are acceptable to the Fund, a reply to that effect would be appreciated.
Chairman of the Contracting Parties to the
General Agreement on Tariffs and Trade
Committee on Liaison with ITO
Document No. 11
I beg to acknowledge receipt of your letter of September 9, 1948, concerning the future cooperation between the International Monetary Fund and the CONTRACTING PARTIES to the General Agreement on Tariffs and Trade in carrying out the provisions of the General Agreement.
The Fund agrees with you that an elaborate agreement on cooperation is not necessary at this time and that this informal arrangement of an administrative character constitutes a satisfactory basis for consultation and cooperation between the International Monetary Fund and the CONTRACTING PARTIES.
I take pleasure in agreeing on behalf of the International Monetary Fund to the provisions of your letter of September 9, 1948.
Chairman of the Contracting Parties
to the General Agreement on Tariffs and Trade
European Office of the United Nations
Palais des Nations
The IMF-World Bank Concordat (SM/89/54, Rev. 1)
March 31, 1989
To: Members of the Executive Board
From: The Acting Secretary
Subject: Bank-Fund Collaboration in Assisting Member Countries
The President of the World Bank and the Managing Director of the International Monetary Fund have reached agreement on the attached text. This document, jointly prepared by the managements of the Bank and the Fund, reviews the current status of cooperation between the Fund and the Bank and provides for the administrative and procedural steps that are necessary to secure a constructive and stronger collaboration between them.
The purposes and mandates of the Bank and the Fund are defined in their Articles of Agreement, as interpreted by their respective Boards. Operating within the framework of the Articles, the managements of both institutions believe that it is of the utmost importance to ensure the closest possible collaboration and working relations between the two institutions in order to serve member governments with maximum effectiveness in meeting their development needs and in providing support for macroeconomic and structural change.
The guidelines contained in the attached document are intended to achieve this objective and should help avoid administrative friction and facilitate orderly resolution of differences of views. Both of us recognize that the advice, suggestions and support of each institution for the other are essential if they are to discharge their responsibilities effectively and promptly. Smooth and effective working relations between the two institutions have assumed special importance in view of the contribution that both of them are expected to make to policy formulation and sustained economic growth in their member countries.
The staff will be instructed to implement the guidelines embodied in this document in a spirit of close collaboration. This matter will be brought to the agenda for discussion on a date to be announced.
Attachment Memorandum to the Executive Board of the International Monetary Fund and the Board of Executive Directors of the World Bank March 30, 1989
FROM: The Managing Director
SUBJECT: Bank-Fund Collaboration in Assisting Member Countries
1. Guidelines for collaboration between our two institutions have been in place since 1966. They have been reviewed and strengthened on a number of occasions since then.1 We, and our colleagues in the management of both institutions, have recently reviewed the experience with collaboration under existing policy and practices.
2. The problems faced by our member countries are severe. They are struggling to restore stability, to adjust their economies to a more rapidly changing and less benign international environment, and to restore growth, while they continue to grapple with their massive debt overhangs and limited availability of both concessional funds and commercial capital. The majority of the members of our two organizations face serious problems. Many of them face the urgent need for change in policies, institutions, and the incentive framework. All are entitled, in our view, to the best advice our highly competent staffs can provide—each by drawing on their specialized technical expertise and experience. It is our responsibility, and that of our Boards, to ensure that the procedures in place make possible, to the fullest extent practicable, comprehensive analyses by our staffs, early exchange of views on differences, and a system to refer remaining differences to the appropriate level of management for resolution. Proposals to improve our capacity to achieve these objectives are set forth in this paper.
3. The existing guidelines lay down principles which remain sound and provide a firm basis on which to build. They provide the Bank with “…primary responsibility for the composition and appropriateness of development programs and project evaluation, including development priorities.” The Fund is assigned “…primary responsibility for exchange rates and restrictive systems, for adjustment of temporary balance of payments disequilibria, and for evaluating and assisting members to work out stabilization programs as a sound basis for economic advance.” The guidelines further provide that “in between these two clear-cut areas of responsibility …there is a broad range of matters which are of interest to both institutions. This range includes such matters as the structure and functioning of financial institutions, the adequacy of money and capital markets, the actual and potential capacity of the member to generate domestic savings, the financial implications of economic development programs, both for the internal financial position of the country and for its external situation, foreign debt problems, and so on.”
4. The same guidelines also stipulate that “[on those matters in the area of primary responsibility of the Bank], the Fund, and particularly the field missions of the Fund, should inform themselves of the established views and position of the Bank and adopt those views as a working basis for their own work. This does not preclude discussions between the Bank and the Fund as to those matters, but it does mean that the Fund (and Fund missions) will not engage in a critical review of those matters with member countries unless it is done with the prior consent of the Bank.” Corresponding provisions were made for the Bank and Bank missions.
5. While we reaffirm the principles of these guidelines, the overlap of activities of the two institutions has grown rapidly in the 1970s and 1980s as the Bank and the Fund have attempted to respond to the massive financing and adjustment requirements of members in a more difficult economic environment. In recognition of the longer-term and supply-oriented nature of the adjustment process, the Fund increased its consideration of structural issues in stand-by arrangements; extended the repayment period of extended arrangements to 10 years; and introduced the concessional and relatively long-term Structural Adjustment Facility (SAF) and the Enhanced Structural Adjustment Facility (ESAF). In response to the serious balance of payments problems affecting many developing countries stemming from the sharp deterioration of the terms of trade and from the weakness in domestic policies and institutions, the Bank introduced Structural Adjustment Loans (SALs) in 1980 that provided financing in support of policies to promote structural, economy-wide changes and, subsequently, Sector Adjustment Loans (SECALs), which focused on structural changes in specific sectors.
6. There is continuous and successful cooperation between the Bank and the Fund. Close contacts between the two staffs contribute to a better understanding of economic problems and policy options, and normally lead to improved and consistent policy advice; better coordination of the amounts, forms, and timing of financial assistance; and a greater effectiveness in mobilizing additional financial support.
7. Yet, given the complexity of the problems faced by our members and the perspectives of the two institutions, it is not unusual that differences of view may sometimes arise. In a few cases, some significant differences about country priorities and policy have emerged. In some cases, they have spilled into discussions by the staff with country authorities. Differences of view have concerned a number of areas, including exchange rate, the level of external assistance sufficient to provide reasonable prospects for sustained and successful adjustment efforts and resumption of growth, the speed of adjustment, and the need to maintain adequate levels of public sector development expenditures. At other times, differences of view between the staffs of the two institutions have centered on the trade-off between efficiency gains from certain structural measures to be accrued over time and balance of payments and budgetary impacts.
8. With the growing contiguity of the activities of the Bank and the Fund, we believe it is essential to strengthen collaboration, to ensure that conflicts of views are resolved at an early stage, do not surface in contacts with country authorities, and do not result in differing policy advice to member countries.
9. The Fund has among its purposes the promotion of economic conditions conducive to growth, price stability, and balance of payments sustainability and is required to exercise surveillance on a continual basis over the performance of its members as defined by Article IV. The Fund is empowered to provide temporary balance of payments financing to members to enable them to correct maladjustments in their balance of payments without resorting to measures destructive of national or international prosperity. Thus, the Fund has focused on the aggregate aspects of macroeconomic policies and their related instruments—including public sector spending and revenues, aggregate wage and price policies, money and credit, interest rates and the exchange rate. The Fund has to discharge responsibilities with respect to surveillance, exchange rate matters, balance of payments, growth-oriented stabilization policies and their related instruments. These are the areas in which the Fund has a mandate, primary responsibility, and a record of expertise and experience.
10. The Bank has the objective of promoting economic growth and conditions conducive to efficient resource allocation, which it pursues through investment lending, sectoral and structural adjustment loans. Thus, the Bank has focused on development strategies; sector and project investments; structural adjustment programs; policies which deal with the efficient allocation of resources in both public and private sectors: priorities in government expenditures; reforms of administrative systems, production, trade and financial sectors; the restructuring of state enterprises and sector policies. Moreover, as a market-based institution, the Bank also concerns itself with issues relating to the creditworthiness of its members. In these areas, except for the aggregate aspects of the economic policies mentioned in the previous paragraph, the Bank has a mandate, primary responsibility, and a record of expertise and experience.
11. While it is important to strengthen the framework for collaboration and to reduce the risk of conflict and duplication, both the Bank and the Fund must be allowed to explore their legitimate concerns with regard to macroeconomic and structural issues and to take them into account in their policy advice and lending operations. The 1966 guidelines stipulate that views on matters clearly within the area of “primary responsibility” of one or the other of the two institutions “should be expressed to members only by or with the consent of that institution.” This provision remains appropriate. The procedures for enhanced collaboration spelled out below are designed to assure resolution of issues. It is, of course, equally important that borrowing countries be aware of the responsibility of the institution for policy advice in the areas of its primary responsibility.
12. The objective of the enhanced collaboration procedures is to avoid differing policy advice, but this does not mean that one institution should not engage in analyses in the areas of primary responsibilities of the other institution. On the contrary, the institutions and borrowing members normally stand to benefit from analyses from different perspectives, and thorough discussions between the two staffs are encouraged. In the event differences of view persist at the staff level even after a thorough common examination of them, and should the differences not be resolved by the management, the institution which does not have the primary responsibility would, except in exceptional circumstances, yield to the judgment of the other institution. In those cases, which are expected to be extremely rare, the managements will wish to consult their respective Executive Boards before proceeding. Also, in the interest of efficiency of staff resource use, each institution should rely as much as possible on analyses and monitoring of the other institution in the areas of primary responsibilities of the latter, while safeguarding the independence of institutional decisions.
Procedures for Enhanced Collaboration
13. Given the complexity of the problems handled, the differences in the mandates of the Bank and the Fund and the unique perspectives brought to bear on the assessment of country situations by the staffs of the two institutions, it is expected that differences of view will sometimes arise. Existing procedures and practices of Bank-Fund collaboration are designed to ensure the quality of analysis and policy advice, as well as thorough explorations of any differences of view that may emerge between the staffs. Typically, differences are worked out at the working level and are resolved satisfactorily in the large majority of cases. However, in order to further strengthen existing procedures on Bank-Fund collaboration and to facilitate the resolution of any remaining differences of view, new or more formal steps have been agreed in the following areas:
I. Strengthening Collaboration
14. The daily interactions and ad hoc contacts involving managements and staffs (and monthly, as well as ad hoc, meetings between the Managing Director and the President) will be supplemented with regular meetings of the senior staff of each institution. In particular, there should be regular meetings between Bank Regional Vice Presidents and the corresponding Fund Area Department Directors to review current operational concerns. These meetings should anticipate and thus reduce the differences of view between staffs of the two organizations. In addition, meetings would be held at the senior level as required to review the strategies of each institution for countries of common concern. These meetings would normally be chaired by the Deputy Managing Director of the Fund and the Senior Vice President, Operations, of the Bank supported by a few senior staff on each side.
15. Whenever conditionality or advice to countries on major issues is involved, agreement should be sought promptly, beginning with working level staffs sharing information and views at the earliest possible stages, and involving their respective superiors when resolution at the working level cannot be achieved. It will be the responsibility of the managers to seek a resolution of any major differences of view between the institutions before the matter is discussed with the member, and before either staff makes proposals to the member. The Deputy Managing Director of the Fund and the Senior Vice President, Operations, of the Bank will meet to discuss any issues not resolved at the Fund Director/Bank Regional Vice President Level and advise, if necessary, the Managing Director and the President if any differences remain.
16. Existing procedures should be strengthened by a more systematic exchange of information on future country work and mission plans by country. Area Departments and Regions would be expected to maintain a forward-looking calendar of at Least one year that would be updated periodically. Deviations from the work plan or calendar would be communicated to the other institution without delay.
17. We also stand ready to establish, under the direction of the Fund’s Director of Research and the Bank’s Vice President, Development Economics, ad hoc study groups to examine analytical issues which may arise in the areas of common work between the two institutions.
18. In the low-income countries, PFP discussions should continue to be handled jointly and, whenever possible, with a single mission chief at an appropriate rank, on the basis of pre-agreed terms of reference. The decision on whether the chief of such joint missions should be from the Bank or from the Fund will be determined on a case-by-case basis. When parallel missions are in the field, they would be expected to cooperate fully and meet jointly with the country authorities, following positions clearly agreed on in advance. Assuming members agree, the Fund management could issue an invitation for one or more Bank staff to be attached to missions involving the use of Fund resources in SAF/ESAF-eligible countries where the Bank was also financially active. Comparable provisions would be made to invite Fund staff to participate in Bank appraisal missions for SALs or SECALs in the same countries.
II. Improved Collaboration to Support Adjustment Programs
19. Under existing procedures, the Bank staff includes a discussion of the Fund’s financial relations, the status of any negotiations for the use of Fund resources, and the results of any recent Fund reviews in the President’s Report to the Bank’s Executive Board on a proposed adjustment loan, since adjustment lending operations are not normally undertaken unless an appropriate Fund arrangement is in place. In the absence of a Fund arrangement, the Bank staff should ascertain whether the Fund has any major outstanding concerns about the adequacy of macroeconomic policies prior to formulating its own assessment in connection with the approval of the draft loan documents.1 The Fund’s assessment of macroeconomic policies is also taken into account in the Bank’s assessment of its conditions prior to the release of subsequent tranches.
20. While the existing procedure functions well in most cases,2 it is desirable to strengthen the coordination between the two institutions in this area. Such a need is particularly strong in the context of providing the Fund’s assessment of macroeconomic policies for member countries where there are no existing Fund arrangements. Nonetheless, the economic situation or policies of the member may have changed significantly between consultations. In these cases the Bank will ask the Fund’s views, leaving time for consultations with the country authorities as needed. In comparable circumstances, the Fund management will ask the Bank’s staff views prior to recommending approval of an adjustment program involving the use of Fund resources.
III. A PFP-Like Document for Middle-Income Countries
21. Some Directors have suggested that consideration be given to preparing PFP-like documents for some middle-income countries requesting the use of Fund resources, particularly those requesting arrangements under the EFF.1 While the preparation of medium-term plans could be useful for non-SAF-eligible countries where the member seeks a multi-year commitment of resources from its creditors or where structural changes are prominent in the programs (e.g., under the EFF), this matter would be presented to the Executive Boards for consideration after further consultations between the two staffs and managements.
IV. Collaboration in the Context of the Debt Strategy
22. In the context of the debt strategy, the Fund is looked to by the commercial and official financing communities for an assessment of balance of payments prospects and financing requirements of member countries undertaking stabilization programs. Bank views are sought with respect to Longer-term external resource requirements and growth prospects. In certain cases menu items play an important role in providing financing and contributing to a viable debt service profile over the medium term. Both institutions have an interest in this aspect of the member’s external position as it affects the member’s medium-term balance of payments prospects and creditworthiness. Therefore, in order to better coordinate our assistance to debtor countries faced with the need to develop financial menu items and other innovative forms of financing, including those aimed at debt reduction, we will establish a task force to promote cooperation, analysis, and the exchange of information on the financing techniques by our institutions.
V. Collaboration in the Presence of Overdue Obligations
23. Both the Bank and the Fund urge members with overdue obligations to one or both institutions to become current with both. In practice, if a member country has overdue obligations to one institution, this will affect the other institution’s assessment of the justification for extending its own financial assistance. Each institution’s policies require that it review the ability of a member to meet its financial obligations in light of that member’s discharge of its obligations to the other; Fund management would find it difficult to present a request for a Fund arrangement to the Executive Board for a member with overdue obligations to the Bank, both because of its implications for ability to meet Fund obligations and because continued access to Bank or IDA Lending is often necessary to ensure that an adjustment program is adequately financed. Fund management, therefore, proposes to seek the views of the Bank in all cases where the use of Fund resources was requested by a member with overdue obligations to the Bank, and would not be prepared to support such a request when arrears to the Bank were an indication that the resources of the Fund would not be safeguarded. Similarly, Bank management would advise its Board with regard to countries with overdue obligations to the Fund and would not be prepared to recommend approval of an IBRD or IDA loan, if the overdue obligations to the Fund were an indication that the resources of the Bank would not be safeguarded. Furthermore, the two managements will act in the full spirit of solidarity when one of the institutions is confronted with arrears, as such arrears constitute a major challenge to the cooperative nature of the institutions. They will, in such instances, provide their good offices and support to help eliminate those arrears.
VI. Independence of Institutional Decisions
24. The Executive Directors of the Bank and the Fund have stressed repeatedly the need to avoid cross-conditionality: each institution must continue to proceed with its own financial assistance according to the standards laid down in its Articles of Agreement and the policies adopted by its Executive Board. Thus, although the Bank’s assessment of structural and sectoral policies will continue to be an important element in decisions regarding Fund lending, the ultimate decision on whether to support the program rests with the Fund’s Executive Board. Similarly, although the Fund’s assessments will continue to be an important element in decisions regarding Bank adjustment lending, the ultimate decision rests with the Bank’s Executive Directors.
25. Nevertheless, in the event that Fund management were to decide to submit a program for approval in spite of the Bank’s reservations about structural policies or in the presence of arrears to the Bank, Fund management would present the case to an informal meeting of the Fund’s Executive Board for discussion prior to communicating its decision to the member concerned. Bank management would adopt the corresponding procedure.
VII. Dealing with Other Institutions
26. Not only have the activities and roles of the Fund and the Bank expanded in relation to their members, coordinating activities to assist member countries in mobilizing resources have grown rapidly, as has the interest of other groups (the OECD, DAC, UN) in matters of debt and the resumption of growth. To avoid conflicting views from being expressed in reports to such organizations, to the maximum extent feasible, the draft reports prepared by either institution will be sent to the other well in advance of the circulation date for review and comments. This will provide an additional opportunity to identify possible problems and to resolve them.
VIII. Longer-Term Promotion of Mutual Understanding
27. To better acquaint staff of the two institutions with the thinking practices and constraints within which each institution operates, we propose to initiate an exchange of staff on two- to three-year secondments at the senior professional levels. During the period of the secondment, staff members would be wholly integrated into the regular staff of the institution to which they have been seconded. For administrative reasons, there might need to be some limit on the number of secondments at any one time.
28. While the measures set out above should go a long way toward resolving emerging differences of view and limiting potential areas of conflict, both the Fund and the Bank remain committed to a process of strengthening their collaboration in a longer-term perspective.
Fund/Bank Collaboration: Invitation to the Bank to Send a Staff Member as an Observer Executive Board Meeting 70/30, April 10, 1970
2. The Executive Board authorizes the issuance of a general invitation to the International Bank for Reconstruction and Development to send a staff member as an observer to attend Fund Board discussions on staff reports on missions relating to Article VIII and Article XIV consultations and use of Fund resources in areas of common interest.
The Chairman’s Summing Up at the Conclusion of the Discussion on Fund-Bank Collaboration and the Adjustment Process—Issues for Consideration Executive Board Meeting 84/171, November 28, 1984
The proposal for attendance at Board discussions in each institution of appropriate staff member(s) from the other seemed basically to be aimed at obtaining a fuller understanding of the involvement of the other institution in countries to which both the Bank and the Fund were providing financial assistance. As far as Bank staff attendance at Fund Board meetings is concerned, I understand that Directors are prepared to reaffirm the invitation extended in 1970, for ad hoc, selective attendance at discussions of countries in which both the Fund and the Bank have programs of financial assistance. A number of Directors expressed the expectation of reciprocity on the part of the Bank with regard to staff attendance at Board meetings of the other institution. That applies also to the exchange of notes suggested in the staff paper as a way to facilitate the expression of specific concerns and questions by Executive Directors. Active participation in Fund Board meetings by Bank staff, as opposed to attendance as observers, has not received the necessary support in the Executive Board.
Concluding Remarks by the Acting Chairman—Bank-Fund Collaboration—Report of the Managing Director and the President; and Review of Collaboration in Strengthening Financial Systems Executive Board Meeting 98/102, September 22, 1998
I shall summarize the constructive and useful discussion of the two papers on Bank-Fund collaboration in two parts. First, I will offer remarks on the Report of the Managing Director and the President on Bank-Fund Collaboration in which I have tried to capture the spirit of the views expressed by Directors. Second, I will provide a summary of the discussion on the review of Bank-Fund Collaboration in strengthening financial systems, which includes Directors’ comments on the issues and proposals on which their views were sought.
Report of the Managing Director and the President on Bank-Fund Collaboration
This has been a constructive and useful discussion.
Directors generally agreed that the 1989 Concordat still provides a valid framework for Bank-Fund collaboration. Nevertheless, some Directors considered that there might be a need to more fully reflect present realities, in which macroeconomic and sectoral issues were becoming increasingly intertwined. Directors noted that recent experience pointed to some areas where collaboration could be further strengthened. In this context, while welcoming the further clarification of responsibilities between the Bank and the Fund outlined in the Report, Directors stressed the even greater importance of developing practical mechanisms to ensure close coordination and to manage the unavoidable overlaps that will remain in some areas between the two institutions. In that regard, many Directors welcomed the emphasis given to reinforcing the culture of collaboration among the staffs. Directors equally underscored the importance of effective implementation of the existing guidelines as well as the spirit in which that was done. They welcomed the commitment of the heads of both institutions to enhancing collaboration.
Directors regarded the framework set out for the interaction of the two institutions in surveillance, policy advice, lending operations, and crisis management as helpful. Important lessons had been learnt from the Asian crisis, and it was essential that those lessons were applied to other countries that could be vulnerable to the turmoil in world financial markets. The need to seek out the Bank’s advice in its areas of expertise at an early stage and to the maximum extent feasible was emphasized. Equally, it was important for the Bank to respond in a timely fashion. Those two elements were essential ingredients for the quick delivery of advice on integrated stabilization and structural reform policies and programs.
Directors welcomed the Bank’s efforts to undertake more intensive structural assessments and to enhance its capacity to respond quickly to deliver policy advice. Directors endorsed the proposals for strengthening collaboration in the financial sector. Collaboration in public sector work was also considered a priority, especially on social sector issues. Directors also welcomed the pilot program in enhanced Bank-Fund collaboration in low-income countries that was in the process of being launched.
Directors agreed with the proposals for improving operational procedures for enhancing collaboration, but stressed the importance of the culture of collaboration to ensure that those procedures were followed. Access to the right people and to timely information were key to coordination. Most Directors also supported the establishment of the joint electronic information system. Those, and other mechanisms, were seen as useful complements to, but not substitutes for, open communication between staff. In that regard, cross-participation in missions was important, and some Directors felt that, when appropriate, joint missions could be considered.
Several Directors felt that the Report should give more attention to the role of the authorities. Those Directors stressed that the framework for Bank-Fund collaboration should give more emphasis to: taking account of the needs of the country; making the delineation of responsibilities and the designation of key decision-makers clear to the authorities; and involving the country in the collaborative efforts of the Fund and the Bank. Indeed, the Bank and the Fund exist to serve their shareholders according to the highest possible standards, and the needs of the member country should be the driving force of our activities.
Some Directors felt that an important contribution to Bank-Fund collaboration was strengthened coordination between the Executive Boards of the two institutions, and we will come back to the proposals that have been put forward in this area.
Let me assure you that the managements of both institutions are personally committed to strengthening Bank-Fund collaboration. We frequently discuss issues of common concern and work through any disagreements that emerge. Given the strong links between the areas of our work and overlaps in certain sectors, it is inevitable that differences of view will arise. To manage these differences constructively, it is important to keep the channels of communication between the two institutions open and to maintain a dialogue. We will continue to keep an open dialogue.
Finally, we will consider how we can best reflect your comments in the Report to the Interim Committee and to the Development Committee and consult with our Bank colleagues on the points raised in their Board discussion. I see two areas where we can strengthen the Report, namely, by emphasizing the culture of collaboration and better reflecting the role of country authorities.
Review of Bank-Fund Collaboration in Strengthening Financial Systems
I will now try to summarize the useful discussion we have had on collaboration in strengthening financial systems.
Executive Directors welcomed the opportunity to discuss the collaboration experience over the past year and proposals for new and improved procedures for further cooperation between the Bank and the Fund in financial sector work. Directors generally agreed that the broad division of responsibilities prescribed by the 1989 Concordat, and further elaborated in the paper presented to the Boards of the two institutions in August 1997, continues to provide a valid framework. However, recent experiences, especially in crisis situations, had exposed problems in operational coordination and highlighted the need to improve collaboration procedures. In that connection, Directors agreed that the distinction in the mandates of the two institutions—the Fund to exercise surveillance over macroeconomic and stabilization policies and the Bank to promote overall economic development, structural and sectoral reforms—should continue to provide the basis for the delineation of responsibilities in financial sector work. However, as attested by the recent experience in Asia, Directors underscored that it might not be possible to delineate responsibilities between the Bank and the Fund along functional lines in all areas and at all times. Financial sector strengthening was such an area, in which the distinction between macroeconomic and sectoral/developmental issues was inherently blurred. Thus, while agreeing that, where possible, the staff should continue to identify areas that allow clearer delineation, they stressed the need to strengthen the implementation of the existing guidelines, particularly by addressing how best to manage unavoidable overlaps of responsibilities. Noting that the staff paper provided a useful starting point for the Board’s review of those issues, Directors urged the staff to build on this work with a view to further clarifying and specifying the operational aspects of coordination and collaboration.
Directors emphasized that in crisis situations and short-term stabilization programs, the Fund should continue to take responsibility for the overall stabilization exercise, including the adoption of urgent structural adjustment measures. This would be particularly important in those cases in which financial sector issues have macroeconomic implications and when Bank input is not immediately available. Directors stressed, nevertheless, that engagement of the Bank should begin at an early stage, or at least from the time problems emerge. Noting that mismatches in the operational time schedules of the Bank and the Fund had complicated past coordination efforts, Directors stressed that improved coordination would require a timely response from the Bank. In this regard, they welcomed the efforts by the Bank to expedite the delivery of its policy advice and assistance. Directors stressed that, in less critical circumstances, the Bank should be consulted on aspects of program formulation that pertain to structural issues where the Bank has primary responsibility. The country’s longer-term program in the financial sector would be worked out over time by the Bank and the country, taking into account the requirements of stabilization objectives, and this would feed into the review process of the programs supported by the Bank and the Fund.
Directors supported staff proposals to strengthen operational procedures to improve collaboration. In particular, they emphasized the importance of cross-participation in missions. Such efforts could help alleviate the pressure on staff resources on both institutions, and ease the burden on national authorities. Directors also called for greater sharing of information, while stressing the need to preserve confidentiality of data. The possibilities for some formal linkages between Fund-supported programs and related Bank sectoral work was noted, in view of the many implications of structural reforms in the financial area for macroeconomic stability and the success of Fund-supported programs. Directors considered that such procedures could serve to avoid duplication of work and assure complementary in policy advice.
Directors supported the establishment of a Bank-Fund Financial Sector Liaison Committee to reinforce the collaboration process. They agreed that this Committee should focus in the first instance on facilitating coordination in financial sector work, improving the efficiency of the use of staff resources and experts in this area, and resolving disagreements. The Committee should in particular assist in prioritizing assignments and quickly delineating work in overlapping areas to country-specific situations, in order to avoid inconsistent advice or duplication of work. Directors agreed with the proposed organization of the Committee, but cautioned that the Committee should be used as a flexible instrument where needed, and not regarded as a panacea for improved collaboration. A few Directors suggested that a joint subcommittee of Executive Directors could be formed to enhance accountability and transparency, especially on disagreements between the two institutions. More fundamentally, however, Directors considered that strengthened collaboration would require staff in the field to work together and resolve their own differences. It was also suggested by some Directors that the management of the Fund and the Bank report to the Bank and the Fund Boards periodically on the working of the Committee and that its activities be reviewed in light of experience.
Directors considered that the Bank and the Fund should play a catalytic role in developing commonly-accepted policies and good practices. In that respect, they noted that neither the Bank nor the Fund should take the lead in developing standards and good practices in areas outside their core fields of responsibility; rather, that they should rely on more specialized agencies to do so. An important function of the Bank and the Fund in this area would be to participate in the elaboration of standards and good practices where they have relevant expertise, provide guidelines for adapting them to country-specific circumstances, and disseminate commonly accepted principles among their member countries.
Directors agreed that the Fund could, with the prior consent of the concerned authorities, seek to augment internal resources by drawing on experts from national and other international organizations for the monitoring of financial systems under Article IV surveillance. They underscored the need for the Bank and the Fund to collaborate closely in the dissemination of standards and good practices and the delivery of associated technical assistance. They stressed that such efforts should be well coordinated from the start to ensure the effectiveness of technical assistance and efficient use of expert resources as well as to avoid the risks of overlapping requests for technical assistance, conflicting advice to countries, and suboptimal use of expert resources. They also underscored the need to adopt appropriate policies in this area to ensure confidentiality. In that respect, Directors felt that outside experts should be held to the same standards as the staff.
Some Directors thought that peer review procedures could provide a useful arrangement for following up on the findings of Article IV surveillance missions on financial sector issues in countries where substantial actual and potential problems had been identified. Some Directors suggested that the institutional arrangement for operating peer reviews could be located in, and coordinated by, the Fund in collaboration with other international bodies, including the Bank for International Settlements and the World Bank, and requested that a paper be prepared for Board consideration on the organizational and other aspects of peer reviews. They noted that peer reviews would require prior consent from the authorities of the countries concerned. They encouraged the staff to explore possible approaches to coordinating peer review procedures.
The Acting Chair’s Summing Up—Strengthening IMF-World Bank Collaboration on Country Programs and Conditionality—Progress Report Executive Board Meeting 04/26, March 17, 2004
Executive Directors welcomed the opportunity to review progress on IMF-World Bank collaboration on country programs and conditionality, the second review of its kind since the new operational framework on collaboration was set out in August 2001. They reiterated that close collaboration between the Bank and the Fund is indispensable for providing effective support to member countries in promoting financial stability, sustainable growth, and poverty reduction. Bank-Fund collaboration is of particular importance to ensure the effectiveness of the Fund’s efforts in assisting low-income countries with the implementation of reform programs, based on strong country ownership, in the context of the PRGF/HIPC Initiative framework, and helping them make progress toward the Millennium Development Goals. In this context, several Directors also highlighted the importance of effective collaboration between IMF/World Bank staff, on the one hand, and other multilateral and bilateral organizations, on the other hand.
Directors emphasized that effective collaboration between the Bank and the Fund requires a clear demarcation of responsibilities based on their respective mandates and comparative advantages. They also stressed that the focus of conditionality should be on reforms that are critical to program success. Directors highlighted the importance of two main elements of the coordination framework: the designation of one of the two institutions as lead agency in particular policy areas; and systematic information-sharing between the institutions. They underscored the need for early engagement between Bank and Fund staffs to harmonize the two institutions’ respective roles.
Directors found it useful to discuss the current state of Bank-Fund collaboration on the basis of survey responses from national authorities and from Bank and Fund staff, while noting that the results of these surveys need to be interpreted with sufficient caution. They were encouraged by indications that Bank country directors and Fund mission chiefs typically share a common perspective regarding the country’s critical areas for reform, and that the division of labor is now clearer than in the past.
Directors were encouraged by the indications—in the responses of national authorities—that Bank-Fund collaboration is increasingly serving to strengthen national ownership, while stressing that continued progress in this area remains critical to the success of reform programs. Both institutions also appear to be showing increased sensitivity to social and political constraints, and close collaboration between them is helping to reduce the time spent in program negotiations. At the same time, Directors underscored that national authorities perceive a need for further progress in aligning program design and conditionality with a country’s own reform priorities and implementation capacity.
While the survey results provide renewed support for the existing operational framework on collaboration, Directors stressed that there is no room for complacency. They noted that the survey results point to scope for further improvements with regard to the implementation of the agreed division of labor, the coordination in the interaction with government authorities with a view to further strengthening country ownership, and the information-sharing between the staffs of the two institutions. In particular, the survey findings reinforce some perceptions of continued tensions in the collaborative process regarding the coverage and application of conditionality and the scope and pace of reforms. Directors recognized that some of these findings may reflect differences in the responsibilities and organizational structures of the two Bretton Woods institutions. Given these differences, sustained efforts to strengthen collaboration within the agreed framework remain indispensable. In particular, increased upstream engagement, including during surveillance or pre-program situations, and coordination in program design should help ensure that priorities are appropriately set and the division of labor is clearly established, while ensuring that all important reform areas are adequately covered. Directors stressed that strong cooperation at the country level remains key to effective Bank-Fund collaboration, with some Directors highlighting the importance of providing the right incentives to the staffs in this regard.
Most Directors welcomed the decision by the Bank and Fund managements to strengthen the role of the Joint Implementation Committee (JIC) as a mechanism for collaboration at the senior staff level, while cautioning against creating bureaucratic layers. They expected the revamped and streamlined JIC to be an effective instrument for monitoring and further improving collaboration and communication between the staffs of the two institutions, including on cross-country analytical work where close collaboration is required. Accordingly, the JIC, which will now be expanded to cover matters affecting both low- and middle-income countries, is called on to be a useful complement to the broad-based mechanisms for institutional coordination that already exist at the management and staff levels. Some Directors noted that further enhancements of collaboration should duly take account of resource constraints. It was also noted that formal mechanisms for collaboration should not substitute for early and informal consultations between the two staffs and the authorities to enhance communication and avoid duplication of work.
Directors welcomed the emphasis on thematic areas for Bank-Fund collaboration. Important progress in this area is already underway in the context of the joint work on public expenditure and financial management, carried out by Bank and Fund staff with the participation of other development partners. Most Directors looked forward to strengthened coordination on the preparation of poverty and social impact analysis (PSIA), which they viewed as a critical instrument to help ensure the effectiveness of the Fund’s role in low-income countries. Directors underscored that the Fund should look to the Bank to assist on PSIA for reforms in Fund-supported programs, as this would be the best way of fully utilizing the relative strengths of each institution. At the same time, most Directors acknowledged that some in-house capability in this area will be necessary, in particular, to facilitate the integration of PSIA into PRGF-supported programs. Directors also suggested several other thematic areas in which strengthened Bank-Fund collaboration could usefully be pursued, and which will be carefully considered going forward.
Directors highlighted the important role that the formal mechanisms for collaboration, embedded in the PRSP process, are playing in strengthening Bank-Fund collaboration on low-income countries. They recognized that formal arrangements are not always well suited for middle-income countries, given the diversity of these countries’ circumstances and the differences in the degrees and timing of the engagement by each institution in these countries. They reaffirmed, however, that the principles for collaboration remain the same: a coherent program of support based on a country-owned strategy; early consultation on program conditionality and effective information sharing; and a clear division of responsibilities based on respective mandates.
Directors underscored that, consistent with the lead agency concept, the Executive Board of each institution needs to be kept well-informed of the other institution’s views in relevant policy areas. Documents prepared for each Board need to specify the areas in which the Bank and the Fund have a leading role and provide a candid analysis of the policy challenges faced by member countries. They should report on the other institution’s engagement in specific reform areas and its views regarding reform priorities, program conditionality, and progress with program implementation. Directors looked forward to continued rigorous implementation of the guidance provided to the staff regarding best practices for the preparation of annexes on Bank and Fund relations in Board documents. To ensure that these annexes present each institution’s most current assessment, they supported the proposal to use assessment letters to convey the Fund’s views of macroeconomic conditions of member countries in cases in which the PIN or the Chairman’s statement is not sufficiently up-to-date. To further strengthen the lead agency concept, while at the same time facilitating donor coordination, some Directors saw merit in keeping under review the possibility of including in Fund staff reports a comprehensive policy table of structural reforms being undertaken in a country, identifying the lead agency and the sequencing and timing of the reform steps.
Directors stressed that progress on Bank-Fund collaboration will remain an ongoing challenge, requiring steady implementation and sustained commitment, in particular by the country teams of each institution. They looked forward to keeping progress under review, and considered that, to usefully allow for sufficient additional experience under the enhanced framework for collaboration, the next review should take place by 2007. In this context, it was suggested that future reviews should include a larger set of case studies to continue to draw lessons from a variety of experiences. Directors also looked forward to reviewing progress on collaboration in the context of the periodic reviews of the two institutions’ work on thematic issues. Some Directors suggested that, at some point, an external review of Fund-Bank collaboration might be useful. The forthcoming review of conditionality will also provide an opportunity to return to several issues raised today, including on country ownership and the streamlining of conditionality.
The Acting Chair’s Summing Up—Operational Framework for Debt Sustainability Assessments in Low-Income Countries—Further Considerations Executive Board Meeting 05/34, April 11, 2005
Executive Directors welcomed the opportunity to consider the outstanding issues regarding the joint Fund-World Bank operational framework for the debt sustainability assessments (DSAs) in low-income countries. They underscored the importance of such a framework for helping low-income countries avoid an unsustainable buildup of debt in their pursuit of the Millennium Development Goals. Directors reiterated their broad support for the key elements of the framework: (i) country-specific, policy-dependent external debt-burden thresholds to guide debt sustainability assessments; (ii) forward-looking simulations of debt and debt service under a baseline scenario and in the face of shocks; and (iii) prudent borrowing strategies to contain risks of debt distress. Most Directors agreed that the operational framework is now ready to be incorporated in Fund operations.
Directors endorsed the proposed country-specific thresholds for external debt-burden indicators, including the classification of countries based on policy and institutional performance. They noted that the empirical evidence indicates that a country’s ability to carry debt is correlated with the quality of its policies and institutions, and agreed that this should be reflected in the debt-burden thresholds. Directors also maintained that the need for prudence in external borrowing calls for a conservative approach in setting the thresholds. Directors felt that the staffs’ preferred option is consistent with these criteria. They also saw centering the thresholds on the operational threshold of the HIPC Initiative as essential to preserve the coherence of the international community’s approach to debt sustainability. Directors noted, moreover, that the preferred option does not require as high a share of grant financing, the availability of which is not assured, as the alternatives considered.
Directors again cautioned that the thresholds should be seen as guideposts for informing debt sustainability assessments rather than as rigid ceilings, and that individual country circumstances, including the burden of domestic public sector debt, need to be factored into the assessments. In this regard, some Directors expressed concern that the framework could be implemented rigidly, resulting in foregone development opportunities if additional grant financing or debt relief does not materialize; but some others stressed the need to avoid perceptions that the thresholds can be consistently exceeded because they are only indicative.
Directors stressed that the framework does not imply that countries with lower debt should borrow up to their thresholds. A few Directors noted the importance of adequate conditionality being attached to grants, to reduce any moral hazard implicit in the framework. Some Directors also stressed the need to avoid using over-optimistic export projections in the DSAs. Some Directors continued to express some reservations about the use of the World Bank’s Country Policy and Institutional Assessment (CPIA) to classify the quality of policies and institutions, but most Directors supported its use, subject to periodic review, and while recognizing that CPIA thresholds should not be used mechanically in country assessments.
Directors welcomed the proposed transitional arrangements for the use of the new DSA framework for HIPCs, while the HIPC Initiative is still under way. They recognized that there are fundamental differences between DSAs under the HIPC Initiative and those under the new framework, the former being a backward-looking calculation for the purpose of determining debt relief, while the latter is a forward-looking exercise to inform future borrowing and policy decisions. While these differences would need to be clarified, Directors felt that applying the new framework to HIPCs as soon as possible is important to guide HIPCs in their borrowing decisions and provide creditors and donors with a clear view of these countries’ debt sustainability outlook. Directors also stressed the importance of a well-designed communications strategy to accompany the introduction of the framework.
Directors supported the preparation of a joint DSA for each low-income country and welcomed the proposed modalities of collaboration between Fund and World Bank staffs for achieving these objectives. Most Directors felt that the proposed modalities are in line with previous Board discussions of this topic and the respective mandates of the two institutions. They noted that, in almost all cases, Fund and World Bank staffs are expected to agree on the baseline for the DSA and the assessment of the risk of debt distress; and only in highly exceptional cases would they be unable to reach agreement on the underlying DSA baseline or the assessment of debt distress risks. Directors agreed that in such cases the different views of the staffs should be reported to the country authorities at an early stage, and later to the Boards in the DSA document. They urged the staffs, however, to avoid this outcome to the extent possible, and a number of Directors were of the view that the production of a single DSA is critical for the framework’s credibility. Directors noted that minor revisions to DSAs would only be made in cases where both staffs agreed that the revision was minor, and would not in any case change the overall assessment or lead to two separate and inconsistent DSAs. Some Directors urged a clearer definition of what would be considered a minor update under the framework that would not warrant the production of a new joint DSA.
Directors noted that the framework would be an important addition to the Fund’s toolkit to assess the appropriate balance between adjustment, lending, grants, and debt restructuring/relief in low-income countries. They also underlined the importance of the Fund and Bank staff working closely with other IFIs and donors to allow a coordinated approach to concessionality decisions and to ensure that the proposed framework guides the decisions of donors and creditors, including the Fund. Directors also saw a key role for the Fund and Bank staff in integrating country-led approaches into the process and building broad country ownership of the analytical underpinnings of the framework, which would be essential to enhance its effectiveness.
Directors asked the staffs to report to them after a six- to twelve-month period on the results of the country application of the proposed framework after sufficient experience has been gained and welcomed the staffs’ intention to update the framework in light of these results. Directors provided a number of suggestions for guiding the implementation of the proposed framework and the Fund’s continuing work in this area, which the staff will take into account.
European Central Bank—Observer Status
1. The European Central Bank (ECB) shall be invited to send a representative to meetings of the Executive Board on:
Euro-area policies in the context of the Article IV consultations with member countries under Decision No. 12899-(02/119);
Fund surveillance under Article IV over the policies of individual euro-area members;
Role of the euro in the international monetary system;
World economic outlook;
Global financial stability reports; and
World economic and market developments.
2. In addition, the ECB shall be invited to send a representative to meetings of the Executive Board on agenda items recognized by the ECB and the Fund to be of mutual interest for the performance of their respective mandates.
It is understood, for purposes of this paragraph and provided that there is no objection from the member concerned, that the ECB shall be invited to send a representative to meetings of the Executive Board on:
Fund surveillance under Article IV over the United States of America and Japan;
Fund surveillance under Article IV over the non-euro area member countries of the European Union; and
Fund surveillance over the policies of, and on use of Fund resources by, members that are accession countries to the European Union. Currently, the following members are accession countries to the European Union: Bulgaria, Croatia, Macedonia, former Yugoslav Republic of, Romania, and Turkey. The Executive Board will be informed by management, after consultation with the Presidency of the Council of the European Union, of any changes to that list.
3. At Executive Board meetings, the representative of the ECB will have the status of observer and, as such, will be able to address the Board with the permission of the Chairman on matters within the responsibility of the ECB.
4. The Fund shall communicate to the ECB (i) the agenda for all Board meetings and (ii) the documents for the Executive Board meetings to which the ECB has been invited.
5. The Board notes that the ECB has agreed to preserve the confidentiality of all information and documents communicated by the Fund to the ECB, as specified by the Fund, and that any such information and documents shall be solely for the internal use of the ECB.
Decision No. 12925-(03/1),
December 27, 2002,
as amended by Decision Nos. 13414-(05/01), December 23, 2004
December 22, 2005
Guidelines/Framework for Fund Staff Collaboration with the New World Trade Organization
The Executive Board decides that the draft guidelines/framework for Fund staff collaboration with the World Trade Organization (WTO), set forth in EB/CGATT/95/1, Supplement 1 (4/18/95), may be used by the staff to discuss cooperation with the WTO staff, with the goal of reaching agreement on collaboration between the institutions.
Decision No. 10968-(95/43),
April 21, 1995
EB/CGATT/95/1 Supplement 1
Guidelines/Framework for Fund Staff Collaboration with the World Trade Organization
This note is intended to provide Fund staff with guidelines for cooperation with the World Trade Organization (WTO), established on January 1, 1995. It builds upon the close, formal and informal collaboration that existed between the Fund and the GATT. These guidelines will be periodically reviewed and extended or modified as necessary, in the light of the evolution of the collaborative relationship between the Fund and the WTO.
The ministerial Declaration included in the Final Act concluding the Uruguay Round called upon the Director-General of the WTO to consult with the heads of the Fund and the World Bank on enhanced inter-institutional cooperation, especially with a view to achieving greater coherence in global economic policymaking. Cooperation between the Fund and the WTO is expected to cover the following areas:
balance of payments consultations
coherence in global economic policymaking
consistency of policy advice and obligations
resolution of open jurisdictional issues
research and information exchange
Balance of payments consultations
An important aspect of Fund/WTO collaboration is through the Fund’s participation in the consultations of the WTO Committee on Balance of Payments Restrictions with common members. A WTO member applying restrictions on trade in goods and/or services to safeguard its balance of payments must consult with the WTO Committee. In carrying out these consultations, the WTO Committee is required to consult with the Fund regarding the member’s macroeconomic situation, particularly its balance of payments position and level of international reserves. In reaching its decision as to whether the trade restrictions are justified on balance of payments grounds, the WTO Committee must accept the Fund’s findings of statistical and other facts relating to foreign exchange, monetary reserves, and balance of payments, and its determination as to the seriousness of the member’s international reserve situation. Thus the Fund should stand ready to provide the WTO Committee timely information and assessment of the consulting member’s balance of payments situation. Towards this end, the Fund and WTO will consult on the appropriate timing of the consultation. The Fund will provide the WTO Committee on a timely basis the latest RED report of the consulting member. When a recent RED is not available or where there have been significant changes in the country’s external position since the last RED, the Fund will provide updated information on recent economic developments; transmittal of such supplementary information is submitted for Board approval on a lapse of time basis. In the case of a full consultation by the WTO Committee (when detailed discussion of the external financial justification for the restrictions is required), the Fund representative will also provide a statement that has been cleared by the Fund’s Executive Board.
Coherence in global economic policymaking
The WTO’s charter calls for cooperation with the Fund and the Bank with a view to achieving greater coherence in global economic policymaking. The Fund, given its responsibilities in the macroeconomic policy area, including with respect to exchange rates, can contribute to assessing issues of coherence between macroeconomic and trade policies. The Fund can also contribute to greater policy coherence by taking into account in its work the concerns of the WTO in the trade area. In the period ahead, Fund and WTO staffs will work closely to define better the elements and mechanisms for achieving coherence in economic policymaking, including formal and informal channels for communication between the Fund and the WTO.
Consistency of policy advice and obligations
In the conduct of their surveillance functions, the Fund and the WTO should ensure policy consistency and avoid duplication. In its surveillance, the Fund examines a member country’s trade policy, along with its other economic and financial policies, with respect to their impact on the member’s own adjustment and on other Fund members. The WTO exercises surveillance over specific aspects of trade policies (such as the implementation of the Multifiber Arrangement) and over individual countries’ overall trade policy (through the trade policy review mechanism (TPRM)) with a view to enhancing the transparency of the trade regime. In surveillance, Fund staff should place greater emphasis on specific macroeconomic/trade linkages. The staff should also take into account the WTO’s views of the trade stance of particular member countries, as enunciated, for example, in the WTO’s conclusions of the Trade Policy Reviews (TPRs) with individual countries; when TPR reports are out of date or not available, the staff could seek the relevant information from the WTO Secretariat including in some cases through informal staff visits. The WTO Secretariat’s reports for the TPR contain as background information the macroeconomic environment of the consulting member. To assist the WTO’s surveillance, Fund staff should stand ready to provide information on the macroeconomic policies of common members in the preparation of TPR reports. This would be particularly so in cases where a recent Article IV consultation report is not available.
Fund staff need also to ensure that, in the context of surveillance and use of Fund resources (UFR), and bearing in mind the aim of achieving medium-term external viability, recommended policy measures and program conditionality are consistent with the member’s agreements under the auspices of the WTO. This has assumed particular importance in the light of the more extensive commitments undertaken by members under the Uruguay Round. To promote structural reform, Fund policy advice often encompasses features that require reforms that are consistent with (though they may go beyond) a member’s undertakings in the WTO. For example, tariffs may be reduced under a Fund-supported program to below levels “bound” in the relevant WTO agreements; this would promote economic efficiency without conflict with obligations under these agreements. However, if tariffs were to be raised above bound levels, this would breach the member’s obligations in the agreements under the auspices of the WTO. To avoid such situations, Fund staff should seek information from the member and from the WTO on the nature and level of its tariff obligations under WTO-administered agreements, and take this information into account in policy formulation. Internal staff review procedures should assist in identifying potentially inconsistent policy measures. Where there is ambiguity or doubt about the WTO-consistency of specific measures, Fund staff should consult with WTO staff on member countries’ WTO obligations and would expect WTO staff to provide the necessary input promptly so as to allow timely implementation of Fund-supported adjustment programs. The authorities should also be urged to consult with the WTO to clarify potential conflicts before the measures are implemented.
Fund-supported programs should continue to avoid cross conditionality. That is, Fund-supported programs should continue to avoid directly linking the use of Fund resources to the performance of obligations under the WTO-administered agreements. Fund-supported programs may include reductions in subsidies or trade barriers that are consistent with or go beyond the commitments undertaken under the Uruguay Round when the Fund finds that such measures are necessary to achieve the objectives of the Fund-supported program, but not to enforce commitments to agreements under the auspices of the WTO. Thus, for example, under the Uruguay Round, countries are required in principle to reduce their agricultural export subsidies over a six year period by certain percentages from those prevailing during a specified base period. Fund-supported programs may also call for a reduction in such subsidies, which could be more rapid and comprehensive than under the Uruguay Round, if this is necessary to achieve the program’s fiscal and resource allocation objectives. Moreover, provisions in a Fund arrangement constitute conditions for the member’s use of Fund resources and do not alter obligations vis-à-vis other WTO members. For example, if program design calls for a reduction in applied tariffs to below WTO “bound” levels, this does not constitute a requirement by the Fund for the member to “bind” its WTO-administered commitments at the lower applied level. Fund staff will continue to consult and coordinate with Bank staff in the design of trade reforms included in Fund-supported adjustment programs.
Resolution of open jurisdictional issues
The Final Act of the Uruguay Round includes a Declaration on the Relationship of the World Trade Organization with the International Monetary Fund, which confirms the continued application of Article XV of GATT 1947 (now GATT 1994) on collaboration with the Fund in the area of trade in goods. Article XV requires the WTO to seek cooperation with the Fund in order for the WTO and the Fund to pursue a coordinated policy with regard to exchange questions within the jurisdiction of the Fund and questions of quantitative restrictions and other trade measures within the jurisdiction of the WTO. These provisions also recognize the right of a WTO member that is a Fund member to maintain exchange controls or restrictions in accordance with the Fund’s Articles. Similarly, in the area of services, Article XI of the General Agreement on Trade in Services (GATS) safeguards the rights and obligations of Fund members under the Fund’s Articles with respect to restrictions on current international transactions. Thus, it is expected that the WTO will not authorize countermeasures against exchange measures that are consistent with the Fund’s Articles, or find measures consistent with the Fund’s Articles to violate one of the Multilateral Agreements on Trade in Goods or the GATS, or subject exchange measures to remedies in the absence of violation for “nonviolation, nullification or impairment.” The Fund and the WTO will work on clarifying jurisdictional issues in order that the rights and obligations of Fund members are protected.
Effective cooperation and interaction among the two staffs will be crucial in ensuring that policy inconsistencies and duplication are avoided, and there is full mutual awareness of the interests and concerns of each institution. The Fund’s Geneva Office will continue to provide liaison between the Fund and the WTO on an ongoing basis, supplemented by contacts at headquarters. This will include periodic meetings (at least annually) between appropriately senior staff of the Fund and the WTO to identify issues of common concern and the means of dealing with them, including specifically the manner of enhancing collaboration. Bank staff will be invited to some of these meetings for trilateral discussions on issues of mutual interest. Meetings at head of institution level would be arranged as needed. In cases involving important trade policy issues, there should be more active use of informal Fund staff visits to exchange views with WTO staff, for example en route to Article IV and/or UFR consultations. Similarly, WTO staff should be encouraged to visit Fund headquarters periodically to informally discuss specific country cases (including in the context of preparing TPR reports) or policy issues. Staff secondments could also be given consideration.
Observer status in the WTO and the Fund is under discussion.
It is envisaged that representation in the Fund could be on several levels. The Director-General of the WTO (or his representative) could be regularly invited as an observer to the meetings of the Interim and Development Committees and to the joint Annual Meetings by the Chairman of the relevant Committee. The WTO Director General (or his representative) would also be invited as an observer in selected meetings covering general trade policy issues of the Fund’s Executive Board, and there would also be some contact with the Committee on Liaison with the WTO (CWTO). In parallel with arrangements for Bank staff observers, the WTO staff representative could be invited to intervene in Fund Board/CWTO meetings by an Executive Director or the Chairman. The WTO Secretariat would be expected to treat the deliberations of the Fund Board/CWTO as strictly confidential information not available to other organizations or to the public. Similarly, Fund staff would be expected to treat the deliberations of the WTO with strict confidentiality.
As mentioned earlier, the Fund will transmit to the WTO Committee on Balance of Payments Restrictions the latest RED report or similar document on the consulting member (in addition to a Fund statement where relevant). The Director-General of the WTO will be regularly provided, for the confidential use of the Secretariat, Article IV Consultation reports (staff reports and REDs) on common members. For these members, consideration might be given in the future to transmitting the Chairman’s Summing-Up of the Board discussion to the WTO Director-General, as long as the concerned Executive Director raises no objection. For Fund members that are seeking accession to the WTO, consideration might also be given to transmitting to the WTO Director-General Article IV Consultation reports, provided that the concerned Executive Director raises no objection. Fund staff will also ensure that an up-to-date assessment of a country’s macroeconomic situation is available to WTO staff at the time of preparation of the latter’s TPR reports or as needed; where there is considerable interval between the Article IV discussion and the TPR, Fund staff should be able to provide WTO staff updated factual information on the macroeconomic situation. As in arrangements with the GATT, Fund staff expect to continue to receive on a confidential basis most WTO documents (i.e., minutes and reports of councils and other bodies, the reports of member countries to these bodies, and TPR reports).
Research and information exchange
Fund staff will seek the WTO Secretariat’s views on selected reports in which international trade policy issues are prominently featured. Fund staff expect to be able to comment on selected WTO staff reports in which macroeconomic issues are discussed. Joint studies on topics of mutual interest could be considered from time to time. Fund and WTO staff could participate in seminars at respective institutions involving topics of mutual interest. To improve awareness and reduce duplication, Fund and WTO staffs could make greater use of each other’s basic data, taking into account confidentiality requirements of the respective organizations. This could also help reduce the burden on officials in member countries caused by duplication of requests for basic information. With a view to better investigating the economic and financial implications of the Uruguay Round on individual countries,1 Fund staff have requested access to the WTO’s Integrated Database; this should not involve setting up new communications links as Fund staff would be able to obtain relevant data from the World Bank which has already been granted access to the Integrated Database.
Exchange of Documents with Other International Agencies
Staff reports pertaining to: (i) surveillance under Article IV, Section 3(a and (b), and (ii) the use of Fund resources by members; and (iii) technical assistance reports may be transmitted by the Managing Director to international agencies having specialized responsibilities within the Fund’s field of interest, subject to the reciprocal transmittal of comparable documents of the recipients to the Fund, and on the understanding with the recipients of the reports that the reports will be kept confidential. Such transmittals and exchanges of documents shall be carried out in accordance with the criteria set forth in SM/90/120 (6/20/90) and Correction 1 (7/17/90), and in SM/93/24 (1/28/93), and in the light of the discussion and summing up of EBM/90/105 and EBM/90/106 (7/2/90).
In addition, documents referred to in paragraph 11 of the Agreement between the Fund and the World Trade Organization may be transmitted to the World Trade Organization Secretariat on the sixth working day after their circulation to Executive Directors, provided that there is no objection by the member concerned.
Decision No. A-9786-(93/20),
February 11, 1993,
as amended by Decision No. A-10615-(96/105),
November 25, 1996
(a) Criteria for access
The following three basic criteria would seem relevant in considering the appropriateness of access to Fund documents:
(i) Commonality of operational interest and need: documents would in principle be available to official international organizations that share with the Fund a current operational and financial interest in the particular member country concerned. Thus, organizations that are or will be providing substantial financial assistance to Fund members, primarily balance of payments support whose effectiveness is dependent on the macroeconomic environment, would a priori meet this criterion. Organizations would also have to be deemed to have an operational need for the information in Fund documents.
(ii) Reciprocity: recipient organizations would need to be prepared to make arrangements as appropriate to ensure reciprocity of comparable country papers. The staff will need to explore the scope and nature of these papers in the case of each organization.
(iii) Confidentiality: recipient organizations would need to assure the Fund that the documents provided will not be used for any purpose other than that specified in the organization’s request and would be kept confidential. A senior official of the organization would submit a request to the Secretary of the Fund for the regular transmittal of documents, and provide assurance that the material in the documents was for the internal and exclusive use by staff only and that it would not be quoted from, either in whole or in part, or used in publication.
The agencies which meet these criteria at this time, and which could be expected to request regular transmittal of country documents, would include the AfDB, AsDB, Arab Monetary Fund, CDB, IsDB, IDB, EC Commission (see also Section V), EIB, and the UNDP on countries that are receiving technical assistance under the executing agency arrangement with the Fund. However, this indicative list can be expected to evolve over time with the agencies’ scope of financial operations, and in terms of the countries of concern for each agency. For example, it might also be appropriate to include in this list at some point in the future the newly founded European Bank for Reconstruction and Development. Thus, the staff would keep agency and country indicative lists under periodic review in light of the basic criteria listed above.
Given the clear need for a more timely release of country documents, certain modifications in the procedures set out in SM/92/90 may be helpful. These do not alter the guidelines and principles of the Board’s decision of July 1990. The request for clearance of the document’s transmittal could be made, on a “no objection” basis, in the Secretary’s cover note to the document when it is first circulated to Executive Directors (see sample in Attachment III), with a considerable saving of paperwork and time. In this way, the document could be prepared for transmittal shortly after its circulation, and dispatched at a time indicated on the cover note. This time could be, according to the circumstances and on the basis of requirements to be indicated by the area department, either immediately following consideration by the Board or, in what are expected to be exceptional cases, at a specific date before the Board discussion. The need to consider release prior to Board discussion could arise when the early availability of a document is seen to be required, for instance, in order to make available background information when preparations are being made for the provision by donors or other agencies of financial or technical assistance to members, or to facilitate Paris Club rescheduling discussions.1
The modified procedures for clearing the release of country documents will apply only to the transmittal of staff reports and REDs sent to various agencies on a regular basis. Ad hoc requests for country documents will continue to be cleared in the same way as in the past, with the area and issuing department, and with the concurrence of the Executive Director concerned.
Summing Up by the Chairman—Policy Orientation and Balance of Payments Assistance of Bilateral and Multilateral Aid Agencies Executive Board Meeting 90/106, July 2, 1990
To facilitate a greater exchange of information on country operations with multilateral agencies that are providing financial support for economic reforms, Directors agreed that the current procedures for release of Fund country documents should be modified to allow access to a wider range of such documents and for a larger group of recipient organizations, provided the confidentiality of the documents would be properly safeguarded. The changes in procedures would comprise staff reports for Article IV consultations, as well as staff papers on requests for and reviews of the use of Fund resources, and papers on recent economic developments. In all cases of documents involving the use of Fund resources, letters of intent and/or policy memoranda, as well as relevant decisions and texts of arrangements, would be deleted; and in certain exceptional cases, perhaps a summary of especially sensitive information would be provided. Directors endorsed the proposal for such a modification on the basis of the criteria set out in the staff paper (SM/90/120).1
Additional collaboration procedures were added to the original guidelines in 1970, and guidelines, as expanded, were reviewed and affirmed by managements of both institutions in 1980, and by the Fund in 1984 and the Bank in 1985.
SM/88/249 (11/14/88), pp. 4–6.
Both the staff reports and summings up of Article IV consultations are made available to the Bank staff. Between consultations, the Bank staff is kept aware of the Fund staff’s views and the results of other relevant Executive Board discussions on a continuous basis.
See BUFF/88/92 (5/13/88), pp. 2–3; and “Proposals for Extending the Policy Framework Paper (PFP) Process to Middle-Income Debtors” (EBD/88/144, 5/31/88).
Such investigations would also help assessment of possible adverse effects of the Round on particular developing countries as recognized by the WTO ministerial decision.
See, for example, requests to provide economic reviews on states of the former Soviet Union to the EC, the EBRD, the EIB, the OECD, and the BIS (EBD/92/44, 3/6/92), and staff reports on the use of Fund resources by Estonia, Latvia, and Lithuania to the EC (EBD/92/185, 8/28/92, and EBD/92/237, 10/2/92).
Ed. Note: Not included in this volume.