2014 Triennial Surveillance Review - Stakeholders Perspectives on IMF Surveillance1

2014 Triennial Surveillance Review - Stakeholders Perspectives on IMF Surveillance


2014 Triennial Surveillance Review - Stakeholders Perspectives on IMF Surveillance

Evolution Of Traction Of Fund Surveillance: Report On Interviews With Long-Standing Policymakers2

Staff interviewed officials from ten countries who have been interacting with the Fund for a long period of time and have substantial familiarity with Fund surveillance.3 This note summarizes the responses to two sets of questions posed during these interviews. Overall, traction appears to have improved in recent years, but some long-standing challenges persist and new ones have arisen.

A. How Has the Traction of Fund Surveillance Evolved in Recent Years?

1. Interviewees see a positive evolution in the Fund’s engagement with its membership. In their view, the Fund has become a less dogmatic and more collaborative institution. Staff is more willing to engage in a genuine dialogue and is more responsive to country needs. Fine-tuning policy advice at the institutional level, particularly with regard to fiscal policy and the management of capital flows, is also seen as a welcome development.

2. Recent initiatives to strengthen and widen engagement have played an important role in building trust. More specifically, the organization of seminars during missions on issues chosen by country authorities has helped strengthen the relevance of advice. Outreach has also contributed to establishing a broader understanding the Fund.

3. This said, achieving traction of bilateral surveillance has become more challenging in recent years. In advanced markets the Fund has become one of many sources of analysis and advice, and in other countries stronger institutional capacity has reduced countries’ need for traditional advice. As a result, countries are increasingly looking to the Fund for expert rather than generalist advice. In contrast to this need, the participation of experts in bilateral surveillance has diminished in recent years, and the profile of mission teams is now tilted more towards macroeconomists with limited specialty knowledge. Moreover, countries see the Fund’s hands-on cross-country experience on various policy issues as a main value added of surveillance. However, they believe that we have not been able to leverage it effectively in policy advice. These features of Fund surveillance have adversely impacted traction.

4. Furthermore, while multilateral surveillance products are highly appreciated, senior policymakers have difficulty absorbing the large amount of material. The volume is substantial, and while each document is targeted to a different audience, nuances in the messages can often be understood only by the authors.

B. How Can the Fund Strengthen the Traction of Surveillance?

5. Country authorities see substantial room for changes that would help enhance traction. They would like to see more concrete and actionable advice, based on cross-country experience and expert knowledge, with greater attention to country specificities and the authorities’ interests and views. They would also like the Fund to engage in a more evenhanded evaluation of past advice, including through self-assessment, and to be candid vis-à-vis all countries including the largest ones. Finally, in large advanced markets, the traction of Fund surveillance may benefit from management involvement.

6. Suggestions for enhancing traction in bilateral surveillance:

  • Provide concrete advice and leverage cross-country knowledge. Precise and actionable advice, backed by more in-depth analysis and cross-country policy experiences would raise the value added of Fund surveillance. This may require a change in the incentive structure facing Fund staff, as well as greater expert participation in bilateral surveillance.

  • Strengthen staff’s expertise in financial sector issues. While discussions on macroeconomic issues are often enriching, there is scope to deepen Fund staff’s knowledge of financial sector issues, particularly at the micro level.

  • Take into account country specificities. Better preparation of staff at headquarters, particularly when new staff joins a team. Ensure that staff is well aware of country characteristics and institutional features, including institutional set-ups in currency unions. To set the tone, staff should also signal to the authorities a willingness to learn about country-specific features.

  • Take into account country authorities’ interests and views. Ask country authorities sufficiently ahead of time which issues they are particularly interested in, and address these issues as much as possible. Engage in a genuine dialogue with country authorities, including by asking about their overall goals and views on specific issues, and discuss these in staff reports.

  • Introduce critical self-evaluation. In addition to following up on implementation of past Fund advice, evaluate the quality of past Fund advice (360º assessment), be open about changes in advice, and acknowledge authorities’ successes even if it results from policies that are different from past Fund advice.

  • Strengthen communications. High-level policymakers could benefit from a streamlined communication of the key points raised in various multilateral surveillance products. At the same time, providing more targeted communications on specific multilateral issues to senior country authorities’ technical level staff would raise the value added of Fund surveillance. Communication would also benefit from more candor, management involvement in surveillance on large advanced countries, and outreach in understandable (i.e., less technical) language. Staff should be trained to act as sales persons for Fund surveillance.

Surveys Of Stakeholders4


7. Overview. This paper summarizes the views of country authorities (CAs), IMF Executive Directors (EDs), IMF mission chiefs (MCs) and Civil Society Organizations (CSOs) on the coverage and quality of Fund surveillance.

8. Scope and Methodology. The surveys of CAs, EDs and MCs covered the same topics, with questions tailored to each group. All surveys were anonymous, with participants providing broad demographic information to enable a breakdown of results by (i) income level—advanced markets (AMs), emerging markets (EMs), and low-income countries (LICs)—(ii) region (Africa—AFR, Asia-Pacific—APD, Europe—EUR, Middle East and Central Asia—MCD, Americas—WHD), and (iii) whether countries have a program relationship with the Fund.5 The views of CSOs were solicited through a meeting in the margins of the 2014 IMF/World Bank Spring Meetings and a web-based survey.

9. Structure. This paper is organized as follows. Section B lays out stakeholders’ overall views on the scope, value added and traction of Fund surveillance. Section C presents findings on progress by the Fund toward establishing the integrated surveillance framework recommended in the 2011 TSR. Section D focuses on issues that have emerged since the crisis. It provides views on the evolution of the overall analytical framework guiding the Fund’s policy advice (“policy compass”), and the implications this might have for the consistency and focus of Fund advice. It also conveys stakeholders’ views on how Fund surveillance should adapt to challenges posed by medium-term sustainability, against a backdrop of debt overhangs and weak global growth.

B.Scope, Value Added, and Traction of IMF Surveillance

This section presents overall conclusions about the effectiveness of Fund surveillance through stakeholders’ views about where the Fund adds the most value, where it should focus its efforts in the future, and what steps would help to increase the traction of surveillance.


Perceptions of Changes in IMF Surveillance

(Compared with 2011 TSR; in percent of respondents)

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

10. All stakeholder groups judge that Fund surveillance has improved since the 2011 TSR, although the strength of views varies. CAs are the most positive, with 14 percent—mainly from EMs and LICs— reporting a great improvement and a further three-quarters seeing some improvement.6 Most EDs believe that there has been some improvement. MCs are more guarded: those working on EMs and LICs are more positive about developments, whereas over 40 percent of those working on AMs see no change.7

Value Added of Surveillance

11. Stakeholders generally see the most value added coming from country-specific advice. CAs find the Fund’s advice on country-specific policy issues most valuable, followed by its assessment of domestic risks, lessons from other countries’ experiences, and depth of expertise on the Fund’s core areas. EDs also rate country-specific advice highly, but emphasize at least as strongly the value added from analysis of the impact of external developments and risks, i.e., actual and potential spillovers.

12. Stakeholders also value the Fund’s medium-term approach. CAs believe that the Fund adequately takes into account the implications of its policy advice for medium-term sustainability, dampening concerns that the Fund may have become overly focused on the short term during the crisis. To a lesser extent, they also find that Fund advice is well justified and takes into account linkages across sectors. EDs are generally more critical, although they welcome the Fund’s efforts to account for the medium-term implications of its advice.


IMF Policy Advice Takes into Account...

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

1/ Responses "to some extent" and "to a great extent".

13. MCs identify a number of practical barriers to effective surveillance. These include data gaps, insufficient information sharing across IMF departments, and gaps in specialty knowledge. To strengthen cross-country work, mission chiefs suggest expanding the number of cross-country analytical studies, greater availability of cross-country data, and establishing a database with cross-country policy experience.

Country Authorities’ Responses by Region

While CAs’ responses on many issues are broadly similar across regions, some differences emerge:

Africa: is the most comfortable with the change in the Fund’s “policy compass”; calls on the Fund to work harder to listen to and understand the authorities’ views;

Americas: has the strongest concerns about evenhandedness;

Asia: thinks the Fund could best improve its policy advice by providing more focused and detailed advice;

Europe: most familiar with the Integrated Surveillance Decision; most likely to see Fund surveillance improving “to some extent” but least likely to respond “to a great extent”;

Middle East and Central Asia: most likely to find the Fund’s advice on country-specific issues of value; and strongly favors an expansion of the Fund’s work on structural issues.

It’s Mostly Financial, Fiscal and Risk

14. Turning to specific policy areas, stakeholders see the Fund’s greatest value added coming from its work on financial vulnerabilities, fiscal policy, and risk assessments (Figure 1):

Figure 1.
Figure 1.

Areas Where IMF Surveillance Adds Value

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

1/ Responses "to some extent" and "to a great extent".
  • CAs and EDs both stress the importance of the Fund’s work on financial sector vulnerabilities as contributing to their understanding of issues or providing new insights. CAs in AMs are particularly appreciative, with nearly 70 percent saying that the Fund’s work in this area has contributed to some or a great extent to their understanding of issues.

  • The work on fiscal developments and policy is rated highest by CAs, but somewhat lower by EDs. This is a traditional area of strength—past TSR surveys have invariably ranked the Fund’s fiscal work in first place in terms of relative value added. EMs continue to rate fiscal work in first place, though AMs and LICs rank it somewhat lower.

  • EDs give their equal highest rating in terms of value added to the Fund’s risk assessments. CAs overall, notably AMs, are less positive, though EMs and LICs find this work more useful.

  • Stakeholders attach some weight to the Fund’s work on spillovers and linkages, although it is seen as offering less value added than the areas highlighted above. Analysis of macro-financial linkages is generally seen as offering more value added than spillover analysis. Still, this assessment represents an improvement over the results of surveys in 2011.

  • Work on external sector assessments also receives some recognition, especially from EMs and LICs. Work on capital flow management is of less interest, with nearly half of CAs seeing limited or no value added.

  • As in past surveys, views on monetary policy differ sharply. EDs see this as one of the top three areas of Fund surveillance in terms of value added. This viewpoint is not universally shared by CAs; AMs attach less weight to the Fund’s work in this area, which may partly reflect the views of a number of European countries that are in the euro area.

15. In the period ahead, CAs would like the Fund to continue to focus on its core areas— fiscal, financial and monetary—albeit with some differences in emphasis across income groups (Figure 2):

Figure 2.
Figure 2.

Country Authorities: Looking Forward, Areas where IMF Surveillance Should Focus

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

1/ Responses "to some extent" and "to a great extent".
  • Almost all CAs want the Fund to focus on fiscal and monetary developments and policy issues, financial sector vulnerabilities, and risk assessments.

  • Relative to other groups, AMs put greater emphasis on macro-financial linkages and external sector assessments, and of the three groups they are the most interested in work on outward spillovers.

  • EMs are the most interested in risk assessments and financial sector vulnerabilities.

  • LICs are the most interested in the Fund doing work on fiscal and monetary policy, and for surveillance to address country-specific needs. LICs (particularly in the Middle East) are also the most interested of the three income groups in macro-social issues, although it is not the most important issue for them in absolute terms.

  • CAs with Fund-supported programs are especially keen for surveillance to focus on macro-social issues, and somewhat less enthusiastic than others about the Fund’s work on external sector issues.

Steps to Strengthen Traction

16. The surveys provide evidence on the traction of Fund surveillance and suggest how it might be strengthened. Traction entails countries being receptive to Fund advice, which depends upon the quality of the advice and members’ trust in the Fund. Trust, in turn, is influenced by perceptions of the Fund’s transparency, evenhandedness and willingness to enter into a genuine dialogue.8

17. A large share of CAs, particularly in EMs and LICs, see the Fund as their key external advisor on macro-policy decisions. Consistent with past research, EMs and LICs are most likely to turn to the Fund for advice on macro-critical policy decisions. No other institution comes close to that position with the exception of the World Bank for LICs (and, from a regional perspective, for CAs in the Americas). EMs and LICs are more likely to turn to the Fund for ad-hoc advice (i.e., outside of regular consultations), with nearly 90 percent of LIC and 60 percent of EM respondents indicating that they have approached the Fund outside the Article IV consultation cycle versus 40 percent of AMs.

18. Evidence on the extent to which countries’ policies match Fund advice, and the reasons for differences, is also encouraging.

  • How consistent are policies? Some 90 percent of CAs see their policies as consistent with Fund advice, with relatively little difference across income and geographical groups. MCs are somewhat less convinced, however, especially those working on EMs.

  • Reasons for difference. CAs (and MCs) generally put any differences down more to differing views or political constraints (more pronounced in countries with Fund arrangements), rather than a lack of detail in advice from the Fund or implementation capacity constraints for the authorities. However, capacity constraints emerge as an issue for some LICs.

19. However, the level of trust, proxied by CAs’ willingness to disclose confidential information to IMF staff, varies sharply across income groups and regions. Around a quarter of members provide no information beyond Article IV requirements and publicly available information, with a higher ratio in the Middle East (around 40 percent). LICs, countries in AFR or those with Fund arrangements show the greatest trust—proxied by early disclosure of policy intentions or full disclosure—while AMs and G20 countries in general are less prepared to trust Fund staff with confidential information.

20. Stakeholders want the Fund to understand their views better and give more politically realistic advice. CAs and EDs encourage the Fund to work harder to listen to and understand the authorities’ views, and take greater account of political constraints, notably EMs and LICs. CAs call for more focused and detailed advice, and (especially in Asia) also suggest that teams undertake more analysis requested by the authorities. CAs also believe that the value added of surveillance missions would be strengthened by earlier engagement on their scope, more fact-checking from headquarters, and by the Fund fielding missions with greater in-depth specialist knowledge.9 MCs suggest strengthening engagement through more frequent missions, but this has little support from either CAs or EDs.


What Would Strengthen the Value-Added of Missions?

(In percent of respondents)

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

21. The overall level of engagement between mission teams and the nongovernmental sector is seen as broadly right, while stakeholders had suggestions for where the Fund should focus its engagement. Country authorities (30 percent overall and 55 percent of LICs) are more likely than MCs (10 percent) to see scope for greater engagement with local academics. Countries with Fund-supported programs are more open to greater engagement, with 50 percent of them calling for more work with local academics, and 45 percent favoring more engagement with parliamentarians. CSOs consider that the Fund should make a stronger effort to reach out to stakeholders during country visits.

22. Close coordination with the Fund’s technical assistance (TA), in those countries that use it, supports the traction of Fund surveillance. Most CAs who have used Fund TA report that subsequent advice from the IMF in the context of Article IV consultations has been more persuasive. This result is especially strong for LICs. EDs generally see surveillance discussions with Fund teams adequately reflecting, and being consistent with, the findings of Fund-provided TA.

C. Progress in Integrating Surveillance

This section discusses progress made by the Fund in establishing an integrated surveillance framework. It covers the priorities set out in the 2011 TSR, which called for deeper analysis of spillovers and macro-financial linkages, a sharper focus on risks, strengthened financial sector surveillance and a renewed emphasis on external stability.

Integrating Bilateral and Multilateral Surveillance Effectively

23. All stakeholders acknowledge that the Fund has begun to integrate bilateral and multilateral surveillance, but see further room for progress:

  • EDs are the most critical: more than 25 percent of them view bilateral and multilateral surveillance as still fragmented, whereas only a negligible share of CAs and less than 10 percent of MCs respond so negatively. A further 25 percent of EDs point to the need for more progress to incorporate global and regional issues into bilateral surveillance.

  • While over 40 percent of MCs detect progress at integrating bilateral and multilateral surveillance, around a quarter of them—especially in EMs and LICs—believe that things may have gone too far, and emphasize the need for a renewed focus on country-specific issues.

24. MCs—particularly those working on EMs and LICs—also think that the timely integration of surveillance necessitates a reallocation of resources. They call for greater support from functional departments either on Article IV missions or on a continuous basis (Figure 3). This comes against a backdrop of reductions in both the experience of teams (especially in AMs and EMs) and in functional department support for certain area departments. Nearly half of MCs working on EMs and LICs (particularly in MCD and AFR) report a marginal or substantial decline in support from functional departments, whereas AM MCs report no change (60 percent) or a marginal improvement (33 percent).

Figure 3.
Figure 3.

Mission Chiefs: How to Better Integrate Bilateral and Multilateral Surveillance

(In percent of respondents)

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

25. Financial sector expertise is in wide demand, though largely unmet for teams working on EMs and LICs. While 70 percent of EUR country teams have financial sector experts, the ratio drops to around 30 percent in AFR and MCD. A significant share of mission teams in AMs (mainly in EUR and WHD) have a permanent MCM economist, whereas EM and LIC teams rely on economists from their departments.

Spillovers and Linkages

26. The Fund’s spillover analysis is seen as improving, although further progress is needed. The perception of the Fund’s spillover analysis has improved significantly compared with the 2011 TSR when it received poor ratings from CAs and EDs, particularly for outward spillovers. Nevertheless, spillover analysis is still among the areas where the Fund’s contribution to countries’ understanding of issues is among the lowest, again especially for outward spillovers. The Integrated Surveillance Decision (ISD) only came into force in early 2013 and much of the membership remains unfamiliar with its implications (see Box 2).

Impact of the Integrated Surveillance Decision (ISD)

Awareness of the Integrated Surveillance Decision (ISD) remains uneven, over a year since its adoption. While all G20 respondents are familiar with the ISD, awareness levels are much lower amongst non-G20 CAs, and fall below 30 percent amongst LICs. This is despite the fact that the ISD was introduced in part to address the impact of spillovers from systemic countries on EMs and LICs.


Country Authorities: Familiarity with the ISD

(In percent of respondents)

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

CAs familiar with the ISD are generally positive about its impact. They believe that the Fund has made progress in integrating bilateral and multilateral surveillance. Overall, AMs and EMs believe that the IMF should make more progress on incorporating global and regional issues in bilateral surveillance, whereas LIC authorities emphasize the need to restore some of the focus on country-specific issues. The survey results indicate progress in integrating surveillance compared to the 2011 TSR when CAs ranked the contribution of inward and outward spillovers the lowest across different policy areas.


Executive Directors: Contribution of New Multilateral Reports to IMF Surveillance

(In percent of respondents)

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001


Mission Chiefs and Executive Directors: Are Bilateral and Multilateral Surveillance Better Integrated?

(Since adoption of the ISD; in percent of respondents)

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

27. Stakeholders rank the WEO and GFSR as the best sources of spillover analysis. WEO is ranked highest by non-European CAs; GFSR is ranked highest by EDs and European CAs. Newer reports—the Spillover Report, the pilot External Sector Report, and Cluster Reports—are rated higher (in terms of spillover analysis) by authorities from AMs than from EMs and LICs, in part reflecting the Spillover Report’s focus on systemically important countries but also notably lower readership among other countries.

28. Looking forward, EDs give higher priority to the analysis of inward spillovers, while outward spillover analysis is seen as less important. The need for a more in-depth discussion of the impact of systemically important countries’ policies on the rest of the world is widely seen as the priority for strengthening spillover analysis (Figure 4). Some 30 percent of EDs representing EMs favor strengthening the Fund’s mandate so it can respond more effectively to cross-border spillovers affecting global economic and financial stability.

Figure 4.
Figure 4.

Country Authorities and Executive Directors: How to Strengthen Spillover Work

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

1/ Responses "to some extent" and "to a great extent".2/ S5: five systemically important economies, comprising China, the Euro Area, Japan, the United Kingdom, and the United States.

Risk Assessments

29. The Fund’s work on risks is highly rated by both CAs and EDs. CAs in AMs (EUR) particularly appreciate the assessment of external risks (potential spillovers), whereas EMs and LICs (AFR and MCD) put more emphasis on domestic risks. As in the 2011 TSR, the Fund’s risk analysis in WEO and GFSR receive the strongest ratings, and this time the analyses in FSSAs, Article IV reports and REOs are also well appreciated. There is broad support for continuing to strengthen work in this area, with nearly half of all EDs in favor. A large share of country authorities, particularly EMs and LICs, also call for a major focus on risk assessment in the Fund’s future work.

30. Around 70 percent of CAs agree with the Fund’s risk assessments of their country, although EDs are more critical. CAs in Africa and Europe are particularly supportive of the Fund’s risk assessments. In contrast, opinion is split in the Middle East and the Americas, where about 20 percent see the Fund’s assessments as too sanguine, but around 30 percent see them as too alarmist. Around a quarter of EDs see the Fund’s risk assessments as overly alarmist; the ratio rose to 40 percent for EDs representing LICs.

31. Stakeholders see a greater focus on the transmission channels of shocks and quantification of risks and their likely impacts as the key steps to strengthen risk assessments. This had previously been identified as a weak area in the 2011 TSR, where half of EDs pointed to insufficient discussion of transmission channels. In the current surveys, CAs and EDs call for greater efforts to quantify assessments of risks and impacts. Greater emphasis on countries’ domestic political issues is also seen as important by MCs, particularly those working on LICs (AFR and MCD) and EMs.

Financial Sector Surveillance

32. Respondents view financial sector surveillance as a high priority area that has added value to Fund surveillance and should receive greater focus in the future. Akin to the survey results of the 2011 TSR, which recognized the Fund’s contribution to the understanding of financial sector vulnerabilities and regulatory and supervisory issues, CAs and EDs agree that the Fund promotes understanding and new insights in these areas, in particular in financial sector vulnerabilities. EMs and LICs are the most positive, whereas CAs in WHD are the most critical.

33. Stakeholders are divided in their assessment of the Fund’s work on macro-financial and other linkages. On one hand, CAs are fairly positive, with 57 percent of them assessing the Fund’s work on real-financial linkages as very good. On the other hand, some 70 percent of EDs indicate that Fund work on macro-financial linkages has contributed only to some extent to their understanding of issues. MCs are the most reserved, with 56 percent of them assessing the analysis of real-financial linkages as only satisfactory, with those working on AMs the most critical.

34. Some modest progress has been made in most of the pillars of the Financial Surveillance Strategy (FSS). The FSS was established in 2012 to guide improvements in financial sector surveillance in line with a key recommendation of the 2011 TSR, and comprises three pillars: improving risk identification and macrofinancial policy analysis; fostering an integrated view of financial sector risks in products and instruments; and, engaging more effectively with stakeholders:

  • Risk identification and macrofinancial policy analysis. EDs find that the most progress has been made in the areas of cross-border linkages, macroprudential analysis, capital flows and policies to contain sovereign-bank feedback loops (Figure 5). Areas where there has been less improvement include assessing the implications of exit from extraordinary macrofinancial policies, global regulatory reforms, and work on financial deepening.

Figure 5.
Figure 5.

Executive Directors: Views on Financial Sector Surveillance

(In percent of respondents)

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

  • Instruments and products. EDs identify progress in FSAP follow-up and the overall quality of financial sector analysis in Article IVs, with around a third of EDs detecting significant improvements. By contrast, there seems to have been much less progress in terms of frequency of FSAPs, with a third of EDs reporting no change in this area.

  • Engaging effectively with stakeholders. While the Fund’s work on assessing systematic risks receives recognition, its contributions to the global regulatory reform agenda and data provision for surveillance, receive fewer plaudits. There has been no material improvement in collaboration with the World Bank.

35. Looking forward, there is broad support to strengthen further work on financial and macro-financial issues, including structural financial issues. Most EDs believe that the Fund should be more proactive in assessing the macroeconomic effects of regulatory reforms (taking as given the existing division of responsibility between the Financial Stability Board and the Fund), and that the Fund should improve work on financial deepening and exit from extraordinary macrofinancial policies.

External Sector and Capital Flows

36. CAs and EDs agree that the Fund has contributed to their understanding of a broad range of external sector issues, although there is room for improvement. As in the 2011 TSR, the Fund’s contribution and analysis in this area received somewhat less favorable ratings than some other core areas of expertise. EM and LIC authorities, particularly from AFR and EUR, find the Fund’s contribution most valuable, whereas WHD authorities are significantly more critical. Nevertheless, external sector analysis is an important area for further improvement, and nearly 80 percent of EDs believe that the Fund should focus on this area to a great extent in the future.

37. The quality of analysis and discussions of external sector issues falls short of expectations. Surveillance has focused more on reserve adequacy, and also on foreign exchange intervention and capital flow issues. Nevertheless, EDs are skeptical about the broad-based improvement in the quality of exchange rate assessment (particularly those representing EMs and LICs), whereas CAs are not entirely convinced that the Fund is basing its external sector assessments on a sufficiently wide range of indicators. MCs lament that their exchange rate assessments only marginally influence the authorities’ policies, even though assessments are candid, help shape staff views on the overall policy mix and contribute to the dialogue with the authorities (Figure 6).

Figure 6.
Figure 6.

Mission Chiefs: View on Exchange Rate Assessments

(In percent of respondents)

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

38. The Pilot External Sector Report has yet to attain a wide readership. While over 60 percent of G20 CAs use this report to a great extent, only 11 percent of non-G20 CAs indicate the same, and 25 percent of the latter respond that they do not read this report at all.

39. CAs’ assessment of the Fund’s contribution to the understanding of capital flow management is less favorable than their view on external sector assessment, particularly that of AMs. EDs’ rating of the Fund’s contribution in the area of the management of capital inflows is also somewhat lower than in other policy areas, and they put less emphasis on this area for the Fund’s future work. EDs from EMs generally find that Fund advice on managing capital flows has been more effective than do those representing LICs or AMs.

D. Consistency and Focus of Policy Advice

A number of new policy challenges have come onto the agenda as the crisis has evolved. This section summarizes stakeholders’ views on the evolution of the analytical framework that guides the Fund’s policy advice (“policy compass”) and the implications this has for the consistency and perceived evenhandedness of Fund advice. It also presents views on how Fund surveillance should adapt in a period where weak growth and debt overhangs pose risks to medium-term sustainability.

Policy Compass

40. The change in Fund advice, particularly to AMs, raises the question as to whether there has been a fundamental shift in the Fund’s “policy compass”. The Fund’s support for unconventional monetary policy (UMP) in key systemic countries, and for more gradual approaches to fiscal consolidation, are cases in point. To understand the extent and merit of any changes, stakeholders were asked whether they felt the Fund had changed its advice on key policy questions both to the membership as a whole—and whether they see any changes in the way the Fund treats their country in particular.

41. Stakeholders agree that the Fund is now more likely to recommend more gradual fiscal adjustments, and generally see this as a positive development (Figure 7).

Figure 7.
Figure 7.

Views on the IMF’s Policy Advice to the Membership as a Whole

(In percent of respondents)

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

  • Opinions are starkest as regards the Fund’s advice to its membership as a whole, with a near consensus that the Fund is now recommending more gradual fiscal adjustments. EDs and MCs strongly support this advice.

  • Stakeholders’ views are slightly less pronounced when it comes to their own country or constituency, with around 75 percent of CAs (along with 60 percent of EDs and 65 percent of MCs) seeing the Fund as more likely now to recommend more gradual fiscal adjustment. About three-quarters of EDs believe that this advice is appropriate for their constituency.

42. The Fund is also viewed as somewhat more likely to recommend larger fiscal deficits than was the case in the past, although support for this is more fitful.

  • Around three-quarters of MCs believe that the Fund is increasingly likely to recommend larger fiscal deficits for the membership as a whole, while half of EDs and one third of CAs detect such a change (around 25 and 40 percent see no change, respectively). Around two-thirds of MCs are supportive of larger deficits, while EDs are more skeptical, with around 35 percent of them in favor.

  • Respondents generally observe less change when it comes to the Fund’s advice to their country. While half of the CAs (and 90 percent in Africa) indicate that the Fund is recommending larger fiscal deficits than in the past, over 60 percent of MCs have seen no change. This result holds across income groups (AMs, EMs, and LICs) and regions—apart from the Middle East, where 50 percent of MCs say that the Fund is more likely to recommend larger fiscal deficits. Similarly, around 40 percent of EDs think that the Fund is no more likely to recommend larger fiscal deficits for their constituencies, versus a quarter who detect some change. Just under 30 percent of EDs believe that larger fiscal deficits would be appropriate for countries in their constituency.

Inflation and Monetary Policy

43. The Fund is seen as more likely than before to recommend more accommodative monetary policy, a position that commands some support. As in the case of fiscal policy, views diverge on the likelihood of the Fund recommending accommodative monetary policy for the Fund membership as a whole—which is seen as likely by 80 percent of CAs, EDs, and MCs—relative to its stance with regards to their own country, for which the ratio drops to about 60 percent of CAs and EDs, and only 35 percent of MCs. Around 80 percent of MCs consider more accommodative monetary policy as appropriate for the Fund membership as a whole, whereas only a slim majority of EDs are in favor for the membership as a whole, and their own constituencies.

44. Views on the likelihood and merits of the Fund advocating higher inflation targets are even more divided. Around half of MCs, and a third of EDs, see the Fund as more likely to recommend higher inflation targets for the membership as a whole. However, around three-quarters of MCs and EDs believe that there has been no change in the likelihood of the Fund advocating higher inflation targets for their countries. A majority of EDs are against the Fund recommending higher inflation targets; a slim majority of MCs are supportive at the membership level, but most see no change in the likelihood of their own country team changing direction.

Capital Controls

45. Reflecting the new institutional view on capital flows, there is broad agreement that the Fund is now more likely to recommend capital controls to the Fund membership as a whole. This change in advice has broad support: around 80 percent of MCs and 60 percent of EDs agree that the Fund’s recommendations on capital flow management measures (CFMs) are appropriate when it comes to the wider membership.

46. Views are more mixed when it comes to their own country. Only a quarter of MCs think that their own teams are more likely to recommend CFMs (three-quarters see no change), with only a marginally higher ratio for MCs working on EM countries. Similarly, less than 10 percent of EDs detect any increase in the likelihood of Fund recommending capital controls for countries in their constituency (three-quarters see no change in likelihood).


47. These changes call into question whether the Fund’s advice has been consistent. This raises complex conceptual questions. For instance, a shift in policy advice to reflect changing conditions might be interpreted by some as evidence of consistency, and by others as inconsistent but warranted. Respondents were therefore asked to take into account changing economic circumstances, and countries’ income and development levels in their assessments.

48. Most MCs ascribe recent shifts in Fund policy advice to changing economic circumstances. Around two-thirds of them interpret the Fund’s advice since the crisis as being based on the same analytical framework as in the past, but taking into account changed circumstances. Only 17 percent see the Fund’s advice as being based on a new analytical framework, and 15 percent see the Fund’s advice as ad hoc.


Consistency of IMF Policy Advice

(In percent of respondents)

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

49. CAs believe that the Fund should do even more to take into account changing circumstances. The majority view is that Fund policy advice took changing economic circumstances into account “to some extent”. While they believe that new circumstances are taken into account in the Fund’s advice on larger fiscal deficits, the pace of fiscal adjustment, accommodative monetary policy, and more proactive policies to prevent risks from materializing, they are skeptical that the Fund takes adequate account of changing circumstances in others areas.

50. Respondents tend to see Fund advice as somewhat more consistent over time than across countries. Roughly half of respondents see advice in both dimensions as consistent “to some extent.”

  • On advice over time, those who do not answer “to some extent” are fairly evenly split between those seeing advice as consistent “to a great extent” and those who indicate only “to a limited extent.”

  • Respondents are less convinced that the Fund is consistent across countries, with more answering “to a limited extent” (about one-third). EDs and MCs for G20 countries are more likely to see Fund advice as consistent than those representing or working on non-G20 countries.

51. Some of those who feel that the Fund is being inconsistent ascribe this to a perceived lack of evenhandedness.10 Issues raised include more lenient treatment of large shareholders and undue differences in the Fund’s advice on fiscal policy to AMs (particularly in Europe) versus EMs. Some saw differential treatment in a program context as well, in terms of financing and policy advice, including the magnitude and pacing of fiscal consolidation.11


52. A significant minority of CAs and EDs perceive the Fund not to be evenhanded in its policy advice, especially with respect to its treatment of large AMs:

  • Although a majority of CAs agree that the Fund treats them evenhandedly relative to other countries in their region or in similar circumstances, around 20 percent of them feel that they are not being treated evenhandedly by the Fund in comparison to AMs. They question whether the Fund is as strict in its advice to G20 AMs as it is to them, and raise issues of equal treatment in certain cases including European program countries. These views are particularly strongly held in the Americas, and to a lesser extent Asia Pacific. Concerns seem to be more subdued in other regions and—in Europe and the Middle East—prompted more by the perceived differential treatment of members with Fund-supported programs.


Who Gets an Easy Ride? Concerns On Evenhandedness of IMF Policy Advice

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

1/ Replying “disagree” or “strongly disagree” that advice is evenhanded, when comparing advice to certain other groups with advice to their own country.
  • Similarly, some 40 percent of EDs—mainly representing Africa, Asia Pacific, and the Americas— do not believe that the Fund is evenhanded with respect to G20 AMs (compared with 32 percent seeing the Fund as evenhanded—mainly from Europe—and 27 percent neutral). Some 40 percent of EDs also think that the Fund’s risk assessments for G20 AMs are too sanguine.


CAs: Evenhandedness Concerns by Region

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

1/ Replying “disagree” or “strongly disagree” that advice is evenhanded, when comparing advice tocertain other groups with advice to their own country.

53. EDs with concerns about evenhandedness flag the tone and substance of policy recommendations, the treatment of authorities’ views and the degree of intrusiveness of Fund surveillance.

  • The tone of policy recommendations is a concern for just under half of all EDs, with a quarter of them pinpointing biases in favor of other groups. Tone is a particular concern for those representing EMs, three-quarters of whom detect biases in favor of other countries.

  • Similarly, around 45 percent of EDs have concerns about the evenhandedness of the substance of policy recommendations. This is a particular concern for EDs representing LICs and EMs, who highlight biases in favor of other countries.

  • The treatment of authorities’ views is an issue for 40 percent of EDs, but they tend to put more emphasis on biases against their constituency. EDs representing LICs have the strongest concerns, with two-thirds of them seeing some bias. This is the only area of significant concern for EDs representing AMs, a third of whom see some bias.

  • The degree of intrusiveness is an issue for EDs representing LICs and to a lesser extent EMs. Three-quarters of EDs representing LICs see this is an issue, while this ranks somewhat lower on the concerns of EDs representing EMs.

54. MCs generally believe that the Fund is evenhanded in terms of the substance of its surveillance, but have more sympathy with concerns about intrusiveness and tone of reports. Around 70 percent of them see overall assessments as evenhanded to some or a great extent, and believe that the Fund is evenhanded in its presentation of the authorities’ views (suggesting a tension with EDs’ perceptions). MCs are more concerned about a lack of evenhandedness in the degree of intrusiveness (only 40 percent replying “to some extent” or “to a great extent” with stronger concerns reported by those working in LICs and the Americas) the objectivity/candor (50 percent) of Fund surveillance (particularly in the Americas), and the tone of reports in the Middle East and the Americas (45 percent).


55. A significant minority of MCs report pressure by the authorities to restrict coverage of sensitive issues in staff reports. Although a majority report little or no pressure to restrict discussions in staff reports, 20 percent of MCs report pressure “to some extent” and 9 percent “to a great extent.” Results do not differ significantly according to the region, size or influence of their countries. CAs most often attempt to restrict discussion of “negative assessment(s) of sensitive issues by staff”, followed by “risks to the financial sector.” Pressure is exerted either directly during missions, or indirectly through modification requests outside the scope of the Transparency Policy.

Supporting Sustainability through Structural Reforms

56. Stakeholders generally see the Fund as taking medium-term issues into account, but some question whether it gives sufficient emphasis to policies supporting growth. Against this backdrop, CAs generally appreciate the Fund’s advice on structural issues. Around three-quarters of them believe it is focused and well integrated into the Fund’s other advice on macroeconomic policies. It is seen to a somewhat lesser extent as being of high quality, anchored on cross-country characteristics, and addressing implementation issues as well as the choice of reforms.

The Fund’s major weakness in this area is a lack of coordination with other agencies. LICs seem to appreciate the Fund’s advice the most, with higher assessments for quality, focus on implementation issues, and integration. MCs are also positive, but a third to half of them also raise concerns about the limited focus on country circumstances and implementation (Asia), quality (the Americas), and use of cross-country experience (Africa). CSOs welcome the increased focus on issues relating to inclusive growth, macro-critical social issues and income distribution (Box 3).

Consultation with Civil Society Organizations

With the goal of gathering the views of Civil Society Organizations (CSOs) on IMF surveillance, IMF staff launched a public consultation, which comprised:

  1. A survey on the IMF’s external website, open from February 24 to April 30, 2014, in English, French, and Spanish.

  2. A meeting between representatives of ten CSOs and IMF staff on April 9, 2014 in the context of the Civil Society Policy Forum that took place in the margins of the 2014 IMF/World Bank Spring Meetings.1/ 2/

The four main takeaways were:

  1. CSOs welcomed the increased focus of Fund surveillance on issues related to inclusive growth, macro-critical social issues, and income distribution.

  2. CSOs stated that Fund documents remain difficult to understand. They believed that more accessibility of key Fund documents could help strengthen the dialog between CSOs and the Fund. To this end, some CSOs suggested publishing executive summaries written for non-expert audiences to accompany the release of Fund documents.

  3. CSOs suggested ongoing consultations with civil society on surveillance—not only every three years— especially in countries with resident representatives.

  4. CSOs felt that the Fund should make a stronger effort to reach a wide variety of stakeholders during country visits.

1/ Information about the public consultation, which was translated into Spanish and French, was sent to over 3,000 members of civil society. In addition, social media was used to promote the consultation. Feedback received through the online survey can be found at http://www.imf.org/external/np/exr/consult/2014/tsr/.2/ All CSOs attending the Spring Meetings were invited to the forum. The following CSOs were represented: Anticorruption Action Center, ATD Fourth World, Kosovar Foundation for Civil Society, CRES/Tunisia, FUSADES, International Centre for Development Initiatives, Jubilee USA, New Rules for Global Finance, Youth Diplomats of Canada, Institute for Liberty and Democracy. UNICEF also attended.

Should the IMF Expand Work on Structural Issues?

(In percent of respondents)

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

57. Views differ sharply on whether the Fund should do more work on structural issues, with EDs less positive than CAs or MCs. CAs, albeit less so in Asia, find that the Fund should do more on structural issues. The level of support is strongest among LICs, although it is also significant among AMs (which traditionally have not sought Fund advice in this area) and EMs. While MCs are supportive of increased work in this area, EDs—who were asked a slightly different question—come out against, with a vast majority of them finding that the Fund should not do “much more”, perhaps reflecting their greater awareness of trade-offs (alternative priorities, staff’s expertise, and resource constraints). EDs for Africa and the Americas are concerned that the Fund did not go far enough to examine policies to raise growth, while MCs working on AMs and EMs question whether advice is adequately backed by comprehensive analysis.


Regional Responses: Should the IMF Expand Work on Structural Issues?

(In percent of respondents who replied “yes”)

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

58. Country circumstances shape views on where the Fund should direct its structural work (Figure 8). CAs (and MCs) would like the Fund to focus on its core areas of expertise: financial sector, public expenditure management, taxation and to a lesser extent labor market policies. EDs generally support this ranking, although disagree with the inclusion of public expenditure management.

Figure 8.
Figure 8.

Priorities for Structural Reforms

(In percent of respondents)

Citation: Policy Papers 2014, 050; 10.5089/9781498342957.007.A001

  • AMs. Reflecting their current needs to boost growth while undertaking fiscal adjustments, CAs in AMs highlight public expenditure, financial sector policies, and taxation.

  • EMs. Financial markets and fiscal structural, and safety nets and social policies (predominantly for Middle Eastern countries).

  • LICs. Financial sector, taxation, public expenditure management.

59. Several factors may constrain an intensification of staff work on structural areas. MCs identify lack of expertise as the most binding constraint to expanding Fund work on structural issues, followed by resource constraints (notably in EMs and LICs), and to a much lesser extent data and time constraints. Reflecting the Fund’s limited experience in this area, staff collaborates to a certain extent with the World Bank and to a much lesser extent with regional development banks (mainly in Asia, the Americas, and Africa) and other international institutions (ILO, BIS, and OECD).

Annex 1. Methodology

1. Surveys for the 2014 Triennial Surveillance Review (TSR) solicited views across different groups of stakeholders on various aspects of surveillance. This study reports results of surveys of member country authorities (CAs); IMF Executive Directors (EDs); and IMF country mission chiefs (MCs).

2. All surveys were anonymous, with participants providing broad demographic information to enable a breakdown of results. Results are available according to four breakdowns:

  • (i) Income level: advanced markets (AMs), emerging markets (EMs), and low-income countries (LICs);

  • (ii) Region: Africa, Asia-Pacific, Europe, Middle East and Central Asia, Americas;

  • (iii) Size: G20 or non-G20; and;

  • (iv) Program status: whether countries have a program relationship with the Fund.

3. The surveys of CAs, EDs and MCs covered the same core topics, but with questions tailored to the specific group. The 2014 surveys built on the methodology used in previous TSRs, including the “Health Check” for the 2011 TSR, but structured according to the themes in the 2014 TSR Concept Note, namely:

  • (i) Integration of bilateral and multilateral surveillance;

  • (ii) Spillovers;

  • (iii) Risks;

  • (iv) Consistency and evenhandedness of policy advice;

  • (v) Medium-term sustainability and growth; and

  • (vi) Traction.

Surveys for EDs also sought feedback on the Fund’s surveillance of the financial and external sectors, and its role in the international financial architecture. Mission chiefs were asked about the candor of Fund surveillance.

4. Response rates varied across stakeholder groups (text table).

  • CAs: two surveys were sent to each member country, according to contact information provided by the office of that country’s ED. The overall CA participation rate is 32 percent (114 responses). Participation is higher for European countries (49 percent) than for other regions (in a range of 23–29 percent). Response rates are higher for AMs (57 percent) than for EMs (23 percent) and LICs (34 percent).

  • EDs: response rate is 96 percent (23 responses received from the IMF’s 24 EDs).

  • MCs: response rate is 60 percent (96 responses received). Responses are roughly evenly distributed by geographical region of country assignment (between 16 and 22 responses for each region).

  • Other stakeholders: shorter versions of the surveys were also sent to financial market participants and media, but results are not reported because of low response rates.

Stakeholder Survey Sample Universe and Response Rates - Comparison with 2011 TSR

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As some country authorities and mission chiefs did not identify their regional classifications, the number of respondents by region adds up to less than the total number of respondents.

Annex 2. Survey Results