In FY2008, two evaluations were completed, and were subsequently discussed by the Executive Board of the IMF. These were “Structural Conditionality in IMF-Supported Programs” and “Governance of the IMF.” For the Structural Conditionality evaluation the Executive Board also discussed the MIP in response to Board-endorsed recommendations arising from that report.

In FY2008, two evaluations were completed, and were subsequently discussed by the Executive Board of the IMF. These were “Structural Conditionality in IMF-Supported Programs” and “Governance of the IMF.” For the Structural Conditionality evaluation the Executive Board also discussed the MIP in response to Board-endorsed recommendations arising from that report.

The Executive Board also had a number of other discussions related to IEO reports in FY2008. The report of the evaluation of “IMF Exchange Rate Policy Advice,” which was completed in FY2007, was initially discussed by the Executive Board in May 2007, and the MIP was discussed in September 2007. The Board also discussed the MIP for the evaluation of “The IMF and Aid to Sub-Saharan Africa” in June 2007.

Structural Conditionality in IMF-Supported Programs

Against the backdrop of continuing debate over the use and effectiveness of structural conditions, the IEO evaluated the use of structural conditionality in IMF-supported programs. The evaluation focused on two distinct issues: the effectiveness of structural conditionality at bringing about lasting economic change and the impact of the 2000 streamlining initiative to achieve greater focus in the use of conditionality in Fund arrangements.

The evaluation found that during the period 1995–2004 there was extensive use of structural conditionality in IMF-supported programs, with an average of 17 conditions per program/year. Most of these conditions had little structural depth and only about half of them were met on time. Compliance was only weakly correlated with subsequent progress in structural reform. Ownership of the reform program by the economic team and by the line ministries in charge of the specific measures was necessary both for compliance and for continuity of the reform. Compliance and effectiveness were higher in the areas of IMF core competency, such as public expenditure management and tax-related issues, and lower in areas such as privatization and reform of the wider public sector.

The evaluation also found that the streamlining initiative did not reduce the volume of conditionality, partly because structural conditions continued to be used to monitor other initiatives such as donors’ support programs and the European Union accession process. But it helped to shift the composition of conditionality toward IMF core areas and new areas of basic fiduciary reform. At the same time, the IMF moved away from controversial areas where it had little impact and that largely fall within the World Bank’s areas of expertise. Nonetheless, Fund arrangements still included conditions that seem not to have been critical to program objectives.

Recommendations arising from the evaluation included reaffirming the need to reduce the volume of structural conditionality. As a practical first step, the evaluation argued that a notional cap could be set, possibly at four or five conditions per year—half the current average for performance criteria and prior actions. The evaluation also proposed that the use of structural benchmarks should be discontinued and measures with low structural content should not be part of conditionality. Normally, conditionality should be restricted to the core areas of IMF expertise. In other critical areas such as the wider public sector, the IMF should play a subsidiary role to that of the World Bank, which has greater expertise in these areas. Explicit Board guidance would be needed when reforms in noncore areas are deemed critical but effective cooperation with the Bank is unlikely to crystallize in time. The evaluation recommended that the Fund develop a monitoring and evaluation framework linking conditions to reforms and goals, which would provide a more robust basis for assessing program results. Program documents should explain how the proposed conditionality is critical to achieve explicit objectives. For Poverty Reduction and Growth Facility programs in particular, requests should be accompanied by an operational roadmap covering the length of the program, explaining the proposed reforms, their sequencing, and expected impact.

Executive Board discussion and follow-up

The Executive Board discussed the report in December 2007. Directors broadly agreed with the IEO’s findings, and noted that the IEO assessment gives a useful impetus to the ongoing effort to make the Fund more focused and relevant. However, not all of the specific recommendations were endorsed by Executive Directors.

The MIP4 was released in April 2008. In its discussion in May 2008, the Executive Board generally considered that the plan laid out an appropriate strategy, and that “its specificity and compactness would facilitate the monitoring of its implementation.”

Governance of the IMF

The IEO evaluation “Governance of the IMF” assessed the degree to which Fund governance is effective and efficient, and whether it provides sufficient accountability and channels for stakeholders to have their views heard. The focus was on institutional structures as well as on the formal and informal relationships between the Fund’s main bodies of governance: the Executive Board, Management, and the International Monetary and Financial Committee (IMFC). The evaluation noted that for much of the past six decades, gradual reforms in its governance allowed the IMF to remain relevant in a changing world economy. But the reforms have not kept pace with changes in the environment in which it operates. Today, the institution’s legitimacy and relevance are being questioned. Much attention has recently been focused on quotas and voting power, but broader governance reform also holds the potential to strengthen the Fund’s legitimacy, accountability, and effectiveness. The evaluation found that, overall, effectiveness has been the strongest aspect of Fund governance, allowing fast and consistent action particularly in times of systemic crisis. On the other hand, accountability and voice have been its weakest aspects, which if left unaddressed would likely undermine effectiveness over the medium term.

The evaluation had four broad conclusions and recommendations, and it proposed a series of detailed measures specific to each of the main governance bodies. First, the evaluation found that there is a lack of clarity on the respective roles of the different governance bodies, and in particular between the Board and Management. To strengthen the IMF’s effectiveness and to facilitate accountability, the IEO recommended that the roles and responsibilities of each of its governance bodies need to be clarified with a view to minimizing overlaps and addressing possible gaps.

Second, the evaluation argued that the Fund needs more systematic ministerial involvement. The IMFC, as an advisory body, lacks a mandate for setting strategic directions and providing high-level oversight of the institution. To fulfill these functions, the evaluation called for the activation of the Council, as contemplated in the Articles of Agreement, which should operate with a high degree of consensus, perhaps through the use of special majorities.

Third, the evaluation found that the Board’s effectiveness is hindered by excessive focus on executive, rather than supervisory, functions. The evaluation recommended that the Board should reorient its activities towards a supervisory role, playing a more active part in formulating strategy, monitoring policy implementation to ensure timely corrective actions, and exercising effective oversight of Management. To this end, the Board would need to change many of its working practices, shifting away from executive, day-to-day operational activities, including through more delegation to committees and possibly to Management.

Finally, the evaluation called for a framework to be put in place to hold Management accountable for its performance, noting that work is under way to set up such a framework, which should specify criteria and a process for regular assessments.

Joint Statement by the Executive Board and the IMF Managing Director

Following the Executive Board’s discussion of the report in May 2008,5 the Executive Board and the IMF Managing Director, Dominique Strauss-Kahn, made a statement6 responding to the report. They welcomed the IEO report “as a very useful contribution to their efforts to help strengthen the Fund’s governance.” They also emphasized that “many of the issues raised by the report are complex, interrelated, and need to be discussed holistically. They will take time to address. The report’s findings should thus be seen as the beginning of a broader discussion. This discussion will require the engagement of all parties at many different levels involving not only the Executive Board and Management, but also the Fund’s membership and other stakeholders more broadly.” The statement also noted that “we are committed to working together in the coming months to build on this discussion with a view to developing broadly shared ideas among the membership that will enable us to advance further in building a stronger more effective IMF.”

The IMF and Aid to Sub-Saharan Africa

On June 29, 2007, the Executive Board discussed the MIP7 for the evaluation “The IMF and Aid to Sub-Saharan Africa.” In the discussion, Directors reaffirmed that the IEO report had provided “a valuable input into the process of adapting and clarifying the Fund’s work in this area, and noted the relevance of Fund-Bank collaboration.” Directors also supported the intention to build on a number of distinct but complementary work streams, key elements of which they noted were already in the IMF’s work plan.

IMF Exchange Rate Policy Advice

The Executive Board’s discussion of the report on the evaluation of “IMF Exchange Rate Policy Advice” took place in May 2007. While statements issued by the staff and Management were critical of the report,8 Executive Directors welcomed it. They broadly endorsed the conclusion that during 1999–2005 the Fund was not as effective as it needs to be in some important aspects of the Fund’s exchange rate policy advice, and that the Fund should aim at enhancing the effectiveness of its analysis, advice, and dialogue with member countries, as well as address any perception of asymmetry in its exchange rate surveillance.

In September, 2007, the Executive Board discussed the MIP9 arising from that report. In their discussion, Directors agreed that “the implementation plan constitutes a broadly appropriate strategy to address the Board-endorsed IEO recommendations, and is a tangible step forward in the Fund’s efforts to improve its surveillance.”


While the date of the statement falls into FY2009, it has been included in this report for completeness.