Front Matter

Front Matter

International Monetary Fund. Independent Evaluation Office
Published Date:
January 2015
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Independent Evaluation Office of the International Monetary Fund


IMF Response to the Financial and Economic Crisis

© 2014 International Monetary Fund

Cover design: Steve Coleman, IMF Multimedia Services

Cataloging-in-Publication Data

Joint Bank-Fund Library

IMF response to the financial and economic crisis. – Washington, D.C. : International Monetary Fund, 2014.

pages ; cm

At head of title: IEO, Independent Evaluation Office of the International Monetary Fund.

“This report was prepared by an IEO team led by Ruben Lamdany and Sanjay Dhar.”

Includes bibliographical references.

ISBN: 978-1-49830-517-4

1. Global Financial Crisis, 2008–2009. 2. Economic policy—International cooperation. 3. International Monetary Fund. I. Lamdany, Ruben, 1954– II. Dhar, Sanjay. III. International Monetary Fund. Independent Evaluation Office.

HB3722.L34 2014

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This report explores how the IMF performed during the Great Recession. It is the natural follow up to the IEO evaluation of the IMF’s surveillance during the run-up to the global financial crisis, which was published in 2011. That evaluation concluded that the IMF had fallen short in delivering on its key objective of warning member countries about systemic risks and vulnerabilities.

So how did the IMF respond once the crisis took hold? This evaluation found many positive aspects. IMF-supported programs were timely and appropriately designed for the circumstances of the crisis: financial packages were large, disbursements were front-loaded, and conditionality was streamlined. This response was enabled by a quadrupling of credit capacity albeit through borrowing rather than quota increases. The IMF also coordinated closely and effectively with other entities; but member countries wanted greater clarity on roles and accountabilities to safeguard the IMF’s independence and help ensure uniform treatment across its membership.

The IMF’s call for coordinated fiscal stimulus in 2008 was timely and influential. But the evaluation argues that the Fund’s endorsement in 2010–12 of a shift to fiscal consolidation in some of the largest advanced economies was premature. And while the IMF appropriately endorsed ultra-expansionary monetary policies, the ensuing policy mix of fiscal consolidation and monetary expansion was less than fully effective in promoting recovery and exacerbated adverse spillovers. Financial sector analysis was strengthened following the crisis and the approach to diagnosing risks and vulnerabilities was substantially revamped, although the IMF was still unable to provide timely warnings of subsequent important systemic risks.

The report includes recommendations to enhance the IMF’s ability to respond to future crises and to strengthen its ability to warn about mounting risks. It also calls on the Fund to remain a focal point of debate and discussion and continue to encourage an environment that is open to alternative perspectives.

The crisis has again reminded us of the need for an effective and well-equipped IMF. I hope this evaluation will contribute to this endeavor.

Moises J. Schwartz


Independent Evaluation Office

IMF Response to the Financial and Economic Crisis

This report was prepared by an IEO team led by Ruben Lamdany and Sanjay Dhar. The IEO team included Louellen Stedman, Carlos de Resende, Shinji Takagi, Ling Hui Tan, and Alisa Abrams. The team was assisted by contributions from Luca Barbone, Thomas Bernes, Colin Bradford, Eduard Brau, Marek Dabrowski, Ross Levine, Francesco Luna, Thomas Reichmann, David Robinson, Marko Škreb, Paulo Vieira da Cunha, and Nancy Wagner. The report benefited from comments from Jack Boorman, José Luis Escrivá, Masahiro Kawai, Malcolm Knight, Rachel Lomax, Marcelo Selowsky, and Edwin Truman. The team is grateful to Franz Loyola, Tam Nguyen, and Jérôme Prieur for research assistance, and Rachel Weaving, Roxana Pedraglio, and Esha Ray for editorial and production management assistance. Arun Bhatnagar, Annette Canizares, and Amy Gamulo provided administrative assistance. This report was approved by Moises Schwartz.

The evaluation team benefited from discussions with participants in workshops in Berlin in August 2013—organized jointly with the Federal Ministry for Economic Cooperation and Development (BMZ) and DEval, and in Washington in November 2013 and June 2014.



Anti-Money Laundering and Combating the Financing of Terrorism


Consultative Group on Exchange Rates


European Bank for Reconstruction and Development


European Commission


European Central Bank


Extended Fund Facility


emerging market and developing country


emerging market economy


European Union


Early Warning Exercise


Flexible Credit Line


Financial Sector Assessment Program (IMF-World Bank)


Financial Stability Board


Financial System Stability Assessment


Canada, France, Germany, Italy, Japan, United Kingdom, and United States


A grouping composed of major advanced economies and systemically important emerging market and developing countries


General Arrangements to Borrow


gross domestic product


Global Financial Stability Report


Global Policy Agenda


General Resources Account


Global Risk Assessment Matrix


International Monetary and Financial Committee


Integrated Surveillance Decision


low-income countries


Mutual Assessment Process (G20)


Monetary and Capital Markets Department (IMF)


New Arrangements to Borrow


Organization for Economic Cooperation and Development


Precautionary Credit Line


Precautionary and Liquidity Line


Poverty Reduction and Growth Trust


quantitative easing


Risk Working Group


Stand-By Arrangement


special drawing right


Triennial Surveillance Review


World Economic and Market Developments


World Economic Outlook

The following conventions are used in this publication:

  • An en dash (–) between years or months (for example, 2013–14 or January–June) indicates the years or months covered, including the beginning and ending years or months; a slash or virgule (/) between years or months (for example, 2013/14) indicates a fiscal or financial year, as does the abbreviation FY (for example, FY2009).

  • “Billion” means a thousand million; “trillion” means a thousand billion.

As used in this publication, the term “country” or “economy” does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.

Some of the documents cited and referenced in this report were not available to the public at the time of publication of this report. Under the current policy on public access to the IMF’s archives, some of these documents will become available 3 or 5 years after their issuance. They may be referenced as EBS/YY/NN and SM/YY/NN, where EBS and SM indicate the series and YY indicates the year of issue. Certain other types of documents may become available 20 years after their issuance. For further information, see

Executive Summary

The IMF played an important role within the global response to the crisis. It reformed its lending toolkit and ramped up nonconcessional lending, from almost nil to about $400 billion in 2008–13. IMF-supported programs reflected many lessons from past crises and helped member countries cope with the crisis. The increased lending was enabled by a resource mobilization effort that quadrupled the IMF’s resources to about $1 trillion by 2013. But the agreed doubling of quotas has not become effective, leaving the IMF dependent on borrowing arrangements for more than two-thirds of its total credit capacity.

The IMF’s record in surveillance was mixed. Its calls for global fiscal stimulus in 2008–09 were timely and influential, but its endorsement in 2010–11 of a shift to consolidation in some of the largest advanced economies was premature. At the same time the IMF appropriately recommended monetary expansion in these countries if needed to maintain the recovery. However, this policy mix was less than fully effective in promoting recovery and exacerbated adverse spillovers. As time progressed and the growth outlook worsened, the IMF showed flexibility in reconsidering its fiscal policy advice and called for a more moderate pace of fiscal consolidation.

The IMF launched many initiatives to strengthen macro and financial sector surveillance, and expanded its tools and processes to identify and warn about risks and vulnerabilities. Authorities interviewed for this evaluation were largely supportive of these efforts, but they indicated that the number of such initiatives has grown beyond their capacity to absorb the results. Moreover, they highlighted that they would have appreciated earlier and clearer warnings regarding recent critical risks. There are also questions on whether IMF surveillance is currently well placed to detect emerging financial sector vulnerabilities in systemic financial centers in time to warn authorities and the membership at large.

The IMF collaborated with other organizations in important initiatives including the G20 Mutual Assessment Process and the Financial Stability Board. These collaborations were largely effective in addressing aspects of the crisis and also enhanced the traction of IMF advice. Looking forward, to protect the institution’s independence and to ensure uniform treatment of the entire membership, the IMF should develop guidelines for structuring such collaboration arrangements that clarify the parties’ roles and accountabilities.

Two reforms would enhance the IMF’s ability to warn about emerging systemic risks. First, the IMF needs to consolidate the initiatives aimed at identifying risks and vulnerabilities, and it should better disseminate their findings to authorities. Second, it should focus its financial sector surveillance on the five to seven truly systemic financial centers. For these centers, a Financial Sector Stability Assessment should be updated annually in conjunction with the Article IV consultation.

To be better positioned to respond to the next crisis, the IMF should aim to have resources in place in advance of a need arising, relying primarily on member quotas to reduce uncertainty and to strengthen its legitimacy.

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