Journal Issue

Independent Evaluation Office: Evaluators look at prolonged IMF borrowing, fiscal reforms, and capital account crises

International Monetary Fund. External Relations Dept.
Published Date:
January 2002
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The Independent Evaluation Office (IEO), established by the IMF’s Executive Board in July 2001, provides objective and independent evaluations of IMF policy and operations. It is independent of IMF management and operates at arm’s length from the IMF’s Executive Board. It enhances the learning culture of the IMF, promotes understanding of its work, and supports the IMF’s Executive Board in its governance and oversight. There is a strong presumption that the IEO’s evaluation reports will be published after their consideration by the IMF’s Executive Board.

Since it started its operations in the fall of 2001, the IEO has been working on three projects.

Prolonged use of IMF resources. Some 25 countries have been indebted to the IMF for more than 30 years out of the past 50. Sixteen countries have been under IMF-supported programs for 12 years or more out of the past 18. Such prolonged use contradicts the mandate set forth in the IMF’s Articles of Agreement. Drawing on case studies of Pakistan, Senegal, and the Philippines, along with cross-country analyses, this project aims to answer the following questions: What are the causes of this pattern of repeat use of IMF resources? Are there specific program-design or other weaknesses that might have contributed to the pattern? What costs has repeat use entailed for the borrowers, for the IMF, and for the rest of the membership? The project will also assess possible remedies—whether in the design of lending facilities and programs, in the IMF’s internal governance, or in the division of labor with providers of long-term financing. The IEO released a final issues paper and terms of reference on the prolonged use of IMF resources in March 2002.

Fiscal adjustment in IMF-supported programs. Fiscal adjustment, especially in low-income countries, has long been the subject of criticism largely because it involves severe trade-offs between stability and growth, or stability and social expenditures. Often, these trade-offs are not adequately articulated or quantified and involve distributional issues that are highly sensitive politically. Based on a sample of (mainly low-income) countries that have limited access to private international capital markets, the study is examining the major features of fiscal program design, the dialogue between IMF staff and the country authorities and other groups, the extent of country ownership, and the results in terms of the efficiency, sustainability, and social impact of the fiscal adjustment. The IEO released a final issues paper and terms of reference for the evaluation of fiscal adjustment in IMF-supported programs in mid-June 2002.

Role of the IMF in a group of recent capital account crises cases. Beginning with Mexico in 1994, a number of emerging market economies have been affected by currency crises, against the background of increasing financial market integration in recent years. When the IMF was called in to help resolve these crises, it was sometimes criticized for failing to mitigate the adverse consequences of the associated rapid and substantial capital flow reversals. The severity of output loss in some of the affected countries and the impact the crises had on the global economy have generated interest in how the IMF handled the past crises and how it should handle future ones. The study, focusing on Brazil, Indonesia, and Korea, evaluates the effectiveness of both the IMF’s role in spotting vulnerabilities during the pre-crisis period and of IMF-supported programs in resolving the crises. The proposed country cases represent contrasting examples of the factors underlying a crisis and also of outcomes. The IEO released a final issues paper and terms of reference for the capital account crises cases evaluation in mid-June, 2002.

More information on the scope of these projects and on the IEO’s work program is available on the IEO’s website at

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