Chapter 3 Cross-Cutting Issues
- International Monetary Fund. Independent Evaluation Office
- Published Date:
- October 2008
A number of common messages emerging from earlier evaluations were identified in previous IEO Annual Reports. The evaluations of “The IMF and Aid to Sub-Saharan Africa” and “IMF Exchange Rate Policy Advice, 1999–2005” highlight the need for improvements in managing the process of institutional change within the IMF. The former also stresses some of the messages that had been brought up by previous evaluations that focused on low-income country issues—Prolonged Use of IMF Resources, Poverty Reduction Strategy Papers and the Poverty Reduction and Growth Facility, Fiscal Adjustment in IMF-Supported Programs, and IMF Technical Assistance. These messages include the need to clarify the role of the IMF in various areas and the importance of strengthening partnerships with other international financial institutions (IFIs) and donors. The evaluation of IMF Exchange Rate Policy Advice also reached conclusions similar to those made in previous evaluations, such as the need to provide clear yardsticks to facilitate the assessment of the impact of IMF advice. These common messages are discussed below.
There is a need for better management of institutional change at the IMF. The evaluation of the IMF and Aid to SSA pointed to gaps between Executive Board policy decisions and management’s guidance to and follow-through with staff aimed at ensuring that practices were adapted and aligned effectively with new directions. The evaluation found that the initially ambitious plans for the PRGF, in terms of analysis and mobilization of aid, were not followed through partly because of a loss of momentum. The multilateral surveillance evaluation pointed out that because of a “silo” structure at the IMF there was insufficient cooperation among departments, which, among other things, hindered fuller integration between macroeconomic and financial sector surveillance (as well as between bilateral and multilateral surveillance).
There is a need for greater clarity about the goals of various IMF initiatives and a properly aligned external communications policy. The evaluation of the IMF and Aid to SSA found ambiguity and confusion about IMF work in low-income countries, a point that had also been highlighted by the evaluation of the IMF’s Role in PRSPs and the PRGF. The IMF had, in both its public pronouncements and publications, “overpromised” on what it could deliver to the PRS process. Ultimately, the IMF failed to follow through on the initiatives, such as those elaborated in the “key features of PRGF-supported programs,” and the PRSP did not inform PRGF program design, as required for the new approach to be effective in poverty reduction. The exchange rate policy evaluation found inadequate appreciation of the formal role of the IMF in exchange rate surveillance, and that this has a deleterious effect on the effectiveness of the IMF’s advice. The negative impact of insufficient clarity of the IMF’s role on the dialogue with member countries had also been voiced in the earlier evaluations, “The IMF and Recent Capital Account Crises” and “The IMF’s Approach to Capital Account Liberalization.”
The IMF needs to strengthen partnerships with other IFIs and donors. The previous evaluations focusing on low-income countries, notably Fiscal Adjustment in IMF-Supported Programs, the IMF’s Role in PRSPs and the PRGF, and IMF Technical Assistance, as well as the recent one on Aid to SSA, have highlighted the importance of effective partnerships. They have noted that successful IMF engagement in low-income countries requires collaboration with other IFIs and donors and, in particular, the World Bank. Although the evaluation of the IMF and Aid to SSA has found areas where FundBank collaboration has worked well—notably fiscal governance—World Bank inputs in many other areas, such as PSIA, have not been effectively sought and incorporated. It was suggested that an effective partnership between the IMF and the World Bank must be based on clear understandings of each institution’s responsibilities for the delivery of inputs.
The absence of clear metrics impedes the assessment of the impact of IMF policy advice and whether the IMF is meeting its commitments to countries. Earlier evaluations have noted that although the IMF has responded rapidly to the demands of a changing global environment by introducing new products—notably the PRGF—there has been less emphasis on monitoring and assessing the IMF’s performance. The PRSP and PRGF evaluation attributed this lack of emphasis to the failure to define what the IMF’s deliverables in the PRS process were vis-à-vis those of other players. The recent evaluation of the IMF and Aid to SSA has recommended that the Executive Board reaffirm or clarify IMF policies underlying performance thresholds for the spending and absorption of additional aid, mobilization of aid, alternative scenarios, PSIA, and pro-poor and pro-growth budget frameworks.