In the remainder of the paper, the term "misreporting" includes the provision of inaccurate information and the failure or refusal of the authorities to provide complete information in a timely manner.
The delays in reporting essential information in some countries (reserves and other data in Mexico during 1994 and Thailand and Korea in 1997) hampered the Fund's efforts to detect emerging vulnerabilities and prevent financial crises. In some countries, the nonprovision of critical information continues to be a problem (Box 1).
The two sets of Misreporting Guidelines, applicable to the Fund's general resources and the PRGF, were revised in 2000. See: EBS/00/12, EBS/00/13, and BUFF/00/48; and EBS/00/121, including Supplements 1 and 2, and BUFF/00/129. The legal framework governing misreporting in the context of assistance delivered under the HIPC initiative was strengthened in March 2002. See: EBS/02/18; EBS/02/36, including Supplement 1, and BUFF 02/50 (March 28, 2002).
See: Summing Up by the Acting Chairman, Strengthening Safeguards on the Use of Fund Resources and Misreporting of Information to the Fund—Policies, Procedures, and Remedies—Preliminary Considerations (EBM/00/32, 3/23/00).
Article VIII, Section 5 does not apply to the provision of information that is required for the purposes of Fund financial assistance under the PRGF or the HIPC Initiative. See Misreporting of Information in the context of Fund Surveillance and Fund Financial Assistance- Present Legal Framework (EBS/00/13, 2/2/00), page 18: "The provision of information under a PRGF arrangement does not fall within the scope of Article VIII, Section 5. PRGF resources are held in an administered account and the obligations of a member using such resources are not governed by the Fund's Articles (Article V, Section 2 (b)). The obligations of a member using PRGF resources are governed exclusively by the terms of the PRGF Trust Instrument, which are incorporated by an explicit reference into the terms of each PRGF arrangement. Accordingly, the Fund, under a PRGF arrangement, cannot require a member to provide the Fund with information for the purposes of Article VIII, Section 5, and the failure of a member to provide information for the purposes of a PRGF arrangement cannot give rise to the application of sanctions under Article XXVI, Section 2, as it is not a breach of obligation under the Articles of Agreement."
See Summing Up by the Chairman—Strengthening Fund Surveillance—Provision of Statistical Data by Members (EBM/95/32, 4/3/95).
While many of the proposals set out in the paper focus on the provision of information in the context of surveillance, the paper is not limited exclusively to the reporting of information in this context. Information that members provide in the context of surveillance may be used for other purposes—for example, in determining whether to extend financial assistance to a member. Specific proposals regarding the reporting of information under a Fund arrangement are set out in Section IIB. Moreover, the remedial framework proposed in Section B would apply to all cases of misreporting under Article VIII, Section 5, regardless of the context.
SeeEBS/00/13, page 9.
See Summing Up—Strengthening Fund Surveillance-Provision of Statistical Data by Members (SUR/95/34, 6/7/1995).
See: Data Provision to the Fund for Surveillance Purposes (SM/02/126, 4/26/02 and Correction 1, 7/11/02); and Summing Up by the Acting Chair, Data Provision to the Fund for Surveillance Purposes (SUR/02/054, 5/16/02).
The Executive Board has no authority to eliminate categories or exempt members. This conclusion follows because the Articles of Agreement themselves identify each category of information listed in the provision as the "minimum necessary for the effective discharge of the Fund's duties."
The Board could exempt a member from the obligation to provide information required under Article VIII, Section 5 (other than items specified in Article VIII, Section 5) if the requirement was set out in a country-specific decision but not in a decision of general applicability.
In the context of surveillance, the Fund has generally not declared members to be in breach of Article VIII, Section 5 and has not pursued legal approaches to such cases. To date, Czechoslovakia is the only example where such a finding was made outside of the context of Fund financial assistance. Following the resolution of the Board of Governors of September 28, 1954, Czechoslovakia was required to withdraw from the Fund on December 31, 1954. In addition, facing a possible finding of breach of obligation and declaration of ineligibility to use Fund resources, Cuba withdrew from the Fund on April 2, 1964. See J. Keith Horsefi eld, The International Monetary Fund 1945-1965, Volume I: Chronicle. Washington, DC: International Monetary Fund, 1969, pp. 359-364 and pp. 548-550.
See: Misreporting of Information in the Context of Fund Surveillance and Fund Financial Assistance—Present Legal Framework (EBS/00/13, 2/2/00), page 7.
The member will normally have greater difficulty demonstrating an incapacity to provide information that is needed to verify observance of a PC under a Fund arrangement. In proposing that particular variables be established as PCs, Fund staff normally seeks to ensure that the member has the ability to provide, in an accurate and timely manner, the information necessary to assess observance.
See Development of International Investment Position Statistics (SM/02/263, 8/15/02, and Supplement 1, 10/10/02).
This is recognized by the status accorded to IIP data as a prescribed category in the SDDS.
The obligation to report information under Article VIII, Section 5 is subject to the qualification that members are not under any obligation "to furnish information in such detail that the affairs of individuals or corporations are disclosed."
A more expansive variant of the hybrid approach would supplement a general Board decision with country-specific decisions for all the Fund's members. Such an approach would prove unnecessary and unworkable and is not recommended. Yet another approach would be to group countries according to levels of development, access to markets or other characteristics. As a mandatory requirement, this approach would pose several difficulties: distinctions drawn between different groups would inevitably involve elements of arbitrariness and may lose their relevance over time.
See Summing Up—Data Provision to the Fund for Surveillance Purposes (SUR/02/54, 5/16/02) and Data Provision to the Fund for Surveillance Purposes (SM/02/126, 4/26/02), Annex V. See also Summing Up—Strengthening Fund Surveillance—Provision of Statistical Data by Members, (SUR/95/34, 6/7/1995).
It should be noted that there are some country-specific differences with respect to some of the more detailed aspects of the definitions adopted in reporting the data.
Following generally accepted statistical definitions, international reserves are "external assets that are readily available and controlled by the monetary authorities for direct financing of payments imbalances, for indirectly regulating the magnitudes of such imbalances through intervention in exchange markets to affect the currency exchange rate, and/or for other purposes." See Balance of Payments Manual, 5t Edition (BPM5), paragraph 424. The BPM5 lists among reserve assets these instruments: foreign exchange, monetary gold, special drawing rights (SDRs), reserve position in the Fund, and certain other claims. On the basis of this definition, assets redeemable in nonconvertible foreign currencies cannot be reserve assets. See International Reserves and Foreign Currency Liquidity: Guidelines for a Data Template (Washington, DC: International Monetary Fund, 2001), paragraphs 64-74.
The complete list of categories in the core list for surveillance that are closely related to categories that are listed in Article VIII, Section 5 comprises: (i) international reserves (related to holdings of gold and foreign exchange); (ii) GDP or GNP (related to national income); (iii) CPI (related to indices of commodity prices in retail markets); (iv) external current account balance (which forms part of the international balance of payments); and (v) exports/imports (which include total exports and imports of merchandise).
See Summing Up by the Acting Chairman—Second Review of the Special Data Dissemination Standard—Further Considerations (BUFF/99/40, 3/23/99).
Under Article VIII, Section 5, members have the obligation to report whatever information that is required and that they are able to provide.
Understandings on the information to be provided (see paragraph 37) would be expected to cover, where available, discount rates, money market rates, treasury bill, note and bond rates, deposit rates, and lending rates.
The general government includes the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
The public sector comprises the general government and public enterprises.
The country's external debt and debt service would comprise the debt and debt service of both the public and private sectors.
The currency coverage of external public financial assets would be the same as that underlying the calculation of international reserves. See footnote 23.
Broader lists have been established in the context of the Fund's voluntary data standards initiatives. A list of 16 indicators was presented in the context of the discussions of Data Standards (July 1995). See Standards for the Provision of Economic and Financial Data to the Public (SM/95/175, 7/17/1995). A list of 17 data categories reflecting the coverage of the GDDS was presented in August 2000. See Data Dimension of the GDDS, Data Categories and Indicators, Amendments to the Special Data Dissemination Standard and the General Data Dissemination System (SM/00/195, 8/21/2000). Finally, a list of 18 data categories reflecting the coverage of the SDDS was presented in August 2000. See Data Dimension of the SDDS, Amendments to the Special Data Dissemination Standard and the General Data Dissemination Standard (SM/00/195, 8/21/2000).
SDDS requirements for the provision of data on international reserves and foreign currency liquidity and external debt were established as benchmarks for the membership as a whole in June 2000. Accordingly, the core statistical indicators that members are to report, International Reserves and External Debt, were modified in May 2002.
See Summing Up—Data Provision to the Fund for Surveillance Purposes (BUFF/00/93, 7/10/00).
Of course, the member would be in breach of obligation if it misreported information that was otherwise required under Article VIII, Section 5—for example, because the relevant category of information is listed in Article VIII, Section 5.
When information is required in a Fund arrangement for the purposes of assessing observance of a PC, it is normally subject to a detailed definition.
Three criteria for assessing data quality are listed in the staff guidance note for the 1995 paper: (i) coverage of both institutions and transactions should be as comprehensive as possible, and gaps in coverage should be identified and their impact on data assessed. Gaps in coverage that substantially affect the accuracy and reliability of the data should be filled in the short run by estimates developed jointly by staff and the authorities, on the expectation that reliable reporting on missing institutions and transactions will be developed as soon as possible; (ii) data should be methodologically sound, that is, they should conform to the extent possible to international standards with regard to analytical framework, identification of sectors, and classification of transactions and balances; and (iii) data should be intersectorally consistent; this is critical for an understanding of the relationships among policy variables and forecasting the impact of policy measures on target variables. Subsequently, the Board has encouraged the staff to continue working on data quality (see Summing Up by the Acting Chairman—Progress Report on the Provision of Information to the Fund for Surveillance, SUR/97/132, 12/11/1997). The Data Quality Assessment Framework (DQAF) was endorsed by the Board for use in data ROSCs in June 2001 (see Fourth Review of the Fund's Data Standards' Initiatives, SM/01/..., July 2, 2001). Work is currently under way to produce a new guidance note.
For instance, fiscal data in many countries are routinely revised according to a predetermined schedule.
One example is the switch from Laspeyres to chain weighting in calculating the CPI.
For instance, conforming with the new standards for the compilation and reporting of fiscal data set forth in the GFSM2001 requires extensive investment by members, and technical assistance by the Fund to help members with low statistical capacity. In some cases, however, the definition contained in a PC may contemplate the use of a particular accounting technique.
As under existing procedures, no breach of obligation would be regarded as having occurred when the information being revised consists of estimates made by Fund staff.
In the data modules of the Reports on the Observance of Standards and Codes (ROSCs), countries are assessed as to whether they have a pre-specified revisions policy as one of the elements of data serviceability.
In practice, such informal understandings are already in place with respect to information that is already required and reported under Article VIII, Section 5 or with respect to many statistical indicators that are not currently subject to Article VIII, Section 5.
The obligation to provide information on performance criteria, however, is subject to the two general qualifications of Article VIII, Section 5 regarding the provision of information on the affairs of individuals or corporations and the need to take into account the member's capacity to provide the information.
In the staff report relating to Ukraine (EBS/00/177), paragraph 12, it is noted that: "First, a member that misreports information may be found in breach of its obligation under Article VIII, Section 5 even if the misreporting does not affect the observance of a performance criterion."
Under this approach, the case of Thailand discussed above would be covered under Article VIII, Section 5.
Under Article XXVI, the Executive Board has the authority to declare a member ineligible or to suspend its voting rights; it is, however, up to the Board of Governors to require a member to withdraw membership in the Fund.
Rule K-2, however, provides that, "whenever the Executive Board is authorized by the Articles to declare a member ineligible to use the general resources of the Fund it may refrain from making the declaration and indicate the circumstances under which, and the extent to which, the member may make use of the general resources."
A complaint may be issued by the Executive Board, an Executive Director, or the Managing Director. For a more complete discussion of the procedural issues associated with the issuance of a complaint, see Compulsory Withdrawal from the Fund—Legal Aspects (EBS/97/19, 2/10/97).
If management were to delay completion of the consultation in this situation, the Executive Director representing the member could also present the views of the authorities; in these circumstances it would ultimately be for the Board to decide whether the consultation should be delayed.
Shaded elements indicate new proposals.
At each stage of the strengthened approach, informal contacts by staff, management, and the Board would, in addition to the steps contemplated below, be used to seek to ensure compliance with members' obligations under Article VIII, Section 5.
Cases involving a noncomplying purchase in the GRA would also be subject to the procedures set out in the Guidelines on Misreporting. The Managing Director's Report on the noncomplying purchase required under the Misreporting Guidelines could be issued at the same time as the report under Rule K-l.
If factual clarification is required, the Board would need to specify a deadline for such clarification.
Procedurally, the imposition of sanctions under Article XXVI requires the filing of a complaint. The procedures could specify that, within a pre-announced time frame, the Managing Director would issue a complaint recommending the imposition of sanctions. A separate Board decision will be required to impose sanctions.
Staff will identify in country reports instances where technical assistance is needed to facilitate the compilation and reporting of required data with adequate periodicity and timeliness.