5. Management and Accountability
  • 1 0000000404811396https://isni.org/isni/0000000404811396International Monetary Fund

Abstract

The 2007 evaluation found shortcomings in the management of work on exchange rate issues, including a lack of clarity around responsibility and accountability among the area and functional departments, as well as questions about whether there was sufficient accountability to the Executive Board for advice.

The 2007 evaluation found shortcomings in the management of work on exchange rate issues, including a lack of clarity around responsibility and accountability among the area and functional departments, as well as questions about whether there was sufficient accountability to the Executive Board for advice.

IMF management and staff have introduced several new mechanisms for organizing their work on exchange rate policy and related issues as part of implementing the ISD and the new approach to external sector assessments. An external sector coordinating group comprised of area and functional departments prepares the ESR, integrating analysis from multilateral and bilateral surveillance with the goal of producing a consistent, institution-wide view. Discussions within this group are iterative, with attention to individual country assessments as well as the overall view, in order to help ensure consistency between the ESR and Article IV staff reports. The group is led by the RES in collaboration with the Strategy, Policy, and Review Department (SPR) and coordinating with area and other functional departments, helping enhance the connection between advances in theory and modeling tools and the execution of analysis and advice. IMF management is actively involved in the process. The coverage of exchange rate and external sector issues in Article IV staff reports for ESR and non-ESR countries and the quality and consistency of analysis and advice are also subject to review by other departments, with particular focus on external sector issues as well as the overall analysis and advice. An internal website on issues related to external sector assessments provides access to operational guidance, tools, and resources.

Staff interviewed for this update felt that the interdepartmental cooperative arrangement for undertaking external sector assessments generally worked well. They described hashing out different views and adding texture to the ESR narrative, for instance to reflect the role of capital flows in the 2016 ESR. This process was seen as time-consuming but necessary. Staff also reported active engagement between country teams and the methodological experts, particularly on EBA-lite, including via the Knowledge Exchange, an internal system for information sharing. Examples of good practice in external assessments have been made available to country teams via the intranet, as part of the follow-up on the 2014 TSR. Nonetheless, a few staff interviewed for the evaluation noted challenges in developing and maintaining a consistent IMF position on the external sector assessment and appropriate policies for their country. Even after a view was agreed for the Article IV staff report, they said, they felt the need to fight the tendency for others in the institution to advocate a different line in multilateral products or public remarks.

Beyond the organization of IMF staff work on exchange rate issues, the 2007 evaluation raised questions about accountability for exchange rate policy advice. The evaluation acknowledged the tension between providing confidential advice to build trust and increase traction with policy makers in member countries, on the one hand, and fully informing the Board about discussions, on the other. The evaluation nonetheless expressed concern about the absence of a mechanism for Board oversight of advice provided by staff that was not discussed in Article IV staff reports.48

The balance between confidential advice and accountability to the Executive Board appears to remain at the discretion of staff and management. A few IMF staff interviewed for this update confirmed that advice is provided to member countries on exchange rate issues on a confidential basis and not reported in Article IV staff reports. These staff members noted that they kept management informed, and that any judgment about sharing information with the Board would be up to management. A number of Executive Directors also indicated that not all discussions on exchange rate policy issues are included in Article IV staff reports; these Directors felt this was appropriate. The “2013 Review of the Fund’s Transparency Policy” discussed the principles underlying disclosure of information to the Executive Board, indicating that IMF staff and management were expected to share with the Board the authorities’ policy positions and plans in areas that are relevant for Fund surveillance or financial assistance but not hypothetical courses of action discussed informally with the authorities (IMF, 2013a). This paper included an appendix with additional details on the legal framework for the treatment of confidential information. Nonetheless, the question raised by the 2007 evaluation about accountability for policy advice provided without the oversight of the Board has not been addressed.

On a related governance matter, while there has been progress in advancing Board and membership consensus on some key issues raised by the 2007 evaluation, Board engagement on these issues has in some cases been limited, raising issues for accountability. For instance, the Board has not engaged in a formal discussion of issues such as regime choice and exchange rate intervention but instead held informal seminars on these topics.49 Such informal discussions provide the opportunity for early engagement by the Board, but if this is not followed by a formal Board discussion, IMF policy in key areas may remain uncodified or evolve without the endorsement of the membership. Similarly, the first five ESRs, three of which were pilots, were discussed by the Board only in informal sessions for Executive Directors “to engage,” with no subsequent summing up to reflect Directors’ views. As noted above, the recent formal Board discussion of the 2017 ESR and publication of a “summing up” in which Directors expressed their support for the process while raising questions about some aspects of the methodology and resulting advice, is an important step that has the potential to enhance the IMF’s engagement and impact on global imbalances.

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