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Credible Start, Untested Impact

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
March 2004
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THE ESTABLISHMENT of the IEO was an extremely important step in efforts to increase the IMF’s transparency and accountability. The previous practice of internal review—supplemented by the occasional external review—was widely seen by the civil society community as a back-patting exercise that failed to address crucial issues. But an independent review body that conducts flawed assessments, or is ignored by the institution it is supposed to influence, would also be of little use. A look at how the IEO, after its first full year of conducting evaluations, has met its objectives is another important undertaking.

Friends of the Earth had long advocated the establishment of an office that would conduct independent evaluations of the IMF. When an ad hoc external review process was launched in 1997, we monitored its implementation, commented on the reviews, and offered input into the review process and its implementation, which we viewed as flawed for falling short of its promised two to three reviews a year. We continued to argue for a permanent body.

We therefore welcomed the announcement, at the 2000 IMF-World Bank spring meeting, of the establishment of the Independent Evaluation Office. In between that announcement and the decisions to be made at the Annual Meetings that fall, we made recommendations to IMF staff and Executive Directors about the office’s structure. Our main concerns were that the office be independent and that it report to the Board of Directors. It was also a priority, in our view, that the IEO have as few constraints as possible on its authority to select review topics.

We were particularly concerned about the Chairman’s concluding remarks after an August 3, 2000, board discussion that “policies and procedures under active discussion in the Fund and current Fund programs would not be appropriate areas for EVO [its original acronym] evaluation.” We perceived this statement as an effort to limit the new office’s mandate. In a letter to Managing Director Horst Köhler, several international nongovernmental organizations (NGOs) wrote that the Chairman’s remarks represented a departure from the background papers on the evaluation office, which called for no “a priori” restrictions on its mandate. Civil society groups also wanted to participate in the development of the new office’s work program and supported the hiring of an external staff with field expertise.

In our assessment of the IEO, we looked at its structure, the review process, and the topics selected for review.

Structure

The result was quite pleasing for groups like Friends of the Earth. The IEO would report directly to the Board and would have no a priori restrictions on its mandate, although it was told to avoid “interfering” with operational activities. The Board also committed to bringing in the majority of the IEO’s staff from outside the IMF and decided that its director could not take an appointment at the IMF thereafter. We considered this an important indicator of the director’s ability and willingness to be free from undue influence by IMF management.

While some NGOs, including Friends of the Earth, had originally suggested that a committee directorship might give the new office added prestige, it is now clear that this would have been cumbersome. Under its director, the IEO has operated professionally and efficiently. In its first year, it has produced three deeply researched and extensively evaluated studies on contentious topics. The Board did not promise to publicly release all reviews but indicated a bias toward disclosure, and, in fact, all three reviews that went to the Board have been released.

Process

Nevertheless, there are still outstanding issues. While the IEO is committed to ensuring that a majority of its staff will come from the outside, information about the staff and their backgrounds is not easily accessible. Some of the external hires came from the World Bank—hardly the infusion of new ideas and perspectives that many civil society groups had hoped for. The IEO may also hire outside consultants to supplement staff expertise, but it is difficult to evaluate those hires and whether they are adequately supplementing staff expertise.

While the IEO makes genuine efforts to be open and has responded favorably to requests for meetings from Friends of the Earth and our colleagues, some room for improvement remains. The IEO should take a proactive stance and reach out to civil society groups, particularly in the developing world. The majority of its consultations have taken place in Washington, D.C., or in the capitals of the other major industrial countries. In its first year, the IEO spent less than one-third of its budget line item on outreach seminars. Admittedly, its staff is small and may not have the resources for outreach. The IEO may also be reluctant, justifiably, to depend on the IMF’s External Relations Department to conduct this outreach. It wants to establish itself as an evaluation body and not as part of the IMF’s external relations effort. Nevertheless, the IEO could work more through international civil society organizations to organize consultations. It could also use civil society gatherings, such as the World Social Forum or parallel events around trade ministerials or similar meetings, to broaden its outreach. Such efforts would enable the IEO to contribute more to the objectives of promoting understanding of the IMF and, potentially, of strengthening the IMF’s external credibility.

Some complaints have been voiced about the scope for civil society groups to suggest topics for review. Although the IEO has diligently solicited comments on its draft work plans, it is unclear whether outside input has actually influenced the final work program. In fall 2001, the IEO posted on its website a long menu of evaluation topics; parallel to its request for input, a “second stage” document, with a shorter list of topics, was sent to some NGOs, creating an impression of two standards for consultation. The NGOs felt they were commenting on outdated information that no longer formed the basis for decision making.

Outside parties had also requested—before and after the IEO’s inception—that an evaluation office provide a formal mechanism for outside stakeholders to raise concerns about IMF programs and procedures and to receive formal responses. For civil society, this would do the most to boost the IMF’s external credibility.

Review content

The IEO’s reviews have been extremely comprehensive and have certainly boosted my understanding of the IMF’s work. The IMF’s Executive Board also has reacted positively to the IEO’s reports. However, staff responses are worrying in that they do not appear to genuinely welcome the opportunity to enhance the IMF’s learning. For example, the staff response to the fiscal adjustment study is a triumphant vindication of the IMF’s fiscal stance. The staff response to the prolonged use study is defensive: the first paragraph emphasizes that the staff grapples with these issues every day and already implements many of the IEO’s recommendations. The impression it gives is one of “thanks for your concern, but we have it under control.” The staff task force report on the study fails to address many key issues raised in the report, such as the recommendation that IMF staff offer alternative policy options for countries to debate. The staff should have heard this before because NGOs have made the same recommendation for the Poverty Reduction Strategy Paper reviews. Other important recommendations are often deferred to ongoing internal evaluations and review efforts, yet staff responses do not consider whether the substantive point raised by the IEO is being addressed in the IMF’s internal processes.

“The IEO should not be prevented from assessing how the IMF is incorporating lessons from previous programs in current arrangements.”

One concern about the IEO’s operations to date is that it has too narrowly interpreted its mandate not to interfere with IMF lending programs and therefore has essentially limited its reviews to evaluating the programs after the fact. For example, in its capital account crisis evaluation, the IEO elected not to include the current Indonesia or Brazil programs. In its proposal to assess Turkey’s Stand-By Arrangement with the IMF, the IEO’s draft work plan is careful to say that it will evaluate the program that was canceled in February 2002 and not the arrangement set to expire in December 2004. Given the debate about its mandate, the IEO may feel pressured not to evaluate current programs. Although it should not interfere with the staff’s negotiation and monitoring of ongoing programs, the IEO should not be prevented from assessing how the IMF is incorporating lessons from previous programs in current arrangements. This may limit the IEO’s contribution to the IMF’s culture of learning.

Going forward

The IEO has made an excellent start in setting a high quality of work and tackling issues that are highly relevant for the IMF. There will likely be two main challenges as the IEO goes forward. One is implementation. Will the IEO’s recommendations be taken seriously and be adequately considered? Will the agreed-on recommendations be implemented throughout IMF operations? If they are ignored, will the IEO soften its criticism or tackle less central issues?

The other challenge is scope. Will IEO studies be seen mainly as evaluations of completed activities? If so, this would allow inaction, with the excuse that business is already changing. Will those affected by IMF policies see such studies as irrelevant to their struggles and agitate instead for a substitute, such as a grievance mechanism? In one year of full operation, the IEO has achieved a good deal. No one should diminish its significance, and no stakeholder—the Executive Board, the staff, management, and those affected by IMF operations—can afford to waste an opportunity to get the most out of it.

Carol Welch is Director of International Programs at Friends of the Earth.

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