Public Information Notice: IMF Approves Decisions Strengthening the Effectiveness of the Legal Framework for the Provision of Information to the Fund
February 23, 2004
Strengthening the Effectiveness of Article VIII, Section 5
May 2, 2003
Strengthening the Effectiveness of Article VIII, Section 5 — Proposed Decisions
November 26, 2003
Articles of Agreement of the IMF
Article VIII - General Obligations of Members
Section 5. Furnishing of information
The following changes have been made:
1. The staff's proposals are now set out in a single decision, with the additional information to be provided under Article VIII, Section 5 set forth in an Annex to the decision.
2. With regard to Annex A listing the additional national data to be provided, the revised text would:
3. In the body of the decision, the revised text would:
4. During the Board discussions, a number of Directors were of the view that the Managing Director should be required (and not merely empowered) to recommend one of the remedial actions under paragraph 11(d) and a declaration of censure under paragraph 12, and to issue complaints under paragraphs 14 to 16, when the conditions specified in those paragraphs are met. Under the revised draft decision, these steps remain discretionary rather than mandatory.
The main reason why the staff continues to recommend this approach is that, with respect to remedial actions, declaration of censure, and complaints, the greater flexibility inherent in this approach will avoid the automatic application of rules that may lead to undesirable results. For instance, requiring the Managing Director to make a complaint in any case in which a member has failed to take all remedial actions specified by the Executive Board could result in complaints against members in situations that would not warrant the imposition of a sanction under Article XXVI, e.g., when a member that has cured the breach of obligation by providing the required information has simply failed to take some other remedial action that may be of lesser importance.
There are also reasons that are specific to each type of measure contemplated in these paragraphs. First, with respect to decisions of the Board on remedial actions (paragraph 11(d)) or censure (paragraph 12), the Managing Director's recommendation is not a condition for a Board decision; the language is not "the Board may decide upon the recommendation of the Managing Director" (which would have made it a condition) but "the Managing Director may recommend and the Board may decide" (which allows the Board to specify a remedial action other than the action recommended by the Managing Director or to adopt a decision under paragraphs 11(d) or 12 without a recommendation by the Managing Director; it also allows the Board not to take a decision even if the Managing Director makes a recommendation). Second, with respect to complaints, under the proposed framework and pursuant to Rule K-1, the Managing Director is obligated to report to the Executive Board any case in which it appears to him that a member is not fulfilling its obligations under the Articles of Agreement; under the draft decision, when remedial actions need to be taken within a specified period, the Managing Director is also obligated to report to the Board on whether or not these actions have been taken by the member. Third, where the Managing Director does not make a complaint against a member that has breached Article VIII, Section 5, it is well established in the practice of the Fund that any member of the Fund (e.g., through its Executive Director) or the Executive Board itself may issue a complaint for the imposition of sanctions against a member under Article XXVI (see Compulsory Withdrawal from the Fund—Legal Aspects (EBS/97/19)).
Accordingly, the following draft decision, which may be adopted by a majority of the votes cast, is proposed for adoption by the Executive Board:
Strengthening the Effectiveness of Article VIII, Section 5
1. Pursuant to Article VIII, Section 5, the Fund decides that all members shall provide the information listed in Annex A to this decision, which is necessary for the Fund to discharge its duties effectively. Members shall provide the data specified in Annex A for the periods commencing after December 31, 2004. Annex A shall be reviewed no later than December 31, 2007.
2. When a member fails to provide information to the Fund as specified in Article VIII, Section 5 or in a decision of the Fund adopted pursuant to that Article including information listed in Annex A (hereinafter "information required under Article VIII, Section 5"), the procedural framework set forth in paragraphs 5 through 17 below shall apply. Failure to provide information includes both the nonprovision of information and the provision of inaccurate information.
3. A member has an obligation to provide information required under Article VIII, Section 5 to the best of its ability. Therefore, there is no breach of obligation if the member is unable to provide information required under Article VIII, Section 5 or to provide more accurate information than the information it has provided. However, a member that is unable to provide final data is obligated to provide provisional data to the best of its ability until it is in a position to provide the Fund with final data. When assessing a member's ability to provide information, the Fund will give the member the benefit of any doubt.
4. In the context of performance criteria associated with the use of the Fund's general resources, a member may be found in breach of its obligation under Article VIII, Section 5 only if (i) it has reported that a performance criterion was met when in fact it was not, or that a performance criterion was not observed by a particular margin and it is subsequently discovered that the margin of non-observance was greater than originally reported, and (ii) a purchase was made on the basis of the information provided by the member, or the information was reported to the Executive Board in the context of a review which was subsequently completed or of a decision of the Executive Board to grant a waiver for non-observance of the relevant performance criterion.
Procedures prior to report by the Managing Director to the Executive Board
5. Whenever it appears to the Managing Director that a member is not providing information required under Article VIII, Section 5, the Managing Director shall call upon the member to provide the required information; before making a formal representation to the member, the Managing Director shall inform, and enlist the cooperation of, the Executive Director for the member. If the member persists in not providing such information and has not demonstrated to the satisfaction of the Managing Director that it is unable to provide such information, the Managing Director shall notify the member of his intention to make a report to the Executive Board under Rule K-1 for breach of obligation unless, within a specified period of not less than a month, such information is provided or the member demonstrates to his satisfaction that it is unable to provide such information.
6. Whenever it appears to the Managing Director that a member has provided inaccurate data on information required under Article VIII, Section 5, the Managing Director shall consult with the member to assess whether the inaccuracy is due to a lack of capacity on the part of the member. If, after consulting with the member, the Managing Director finds no reason to believe that the inaccuracy is due to a lack of capacity on the part of the member, he shall notify the member of his intention to make a report to the Executive Board for breach of obligation under Rule K-1 unless the member demonstrates to his satisfaction within a period of not less than one month that it was unable to provide more accurate information.
7. If the Managing Director concludes that the nonprovision of information or the provision of inaccurate information is due to the member's inability to provide the required information in a timely and accurate fashion, he may so inform the Executive Board. In that case, the Executive Board may decide to apply the provisions of paragraph 10 below.
Report by the Managing Director
8. After the expiration of the period specified in the Managing Director's notification to the member, the Managing Director shall make a report to the Executive Board under Rule K-1 for breach of obligation, unless the Managing Director is satisfied that the member's response meets the requirements specified in his notification. The report shall identify the nature of the breach and include the member's response (if any) to the Managing Director's notification , and may recommend the type of remedial actions to be taken by the member.
Consideration of the report
9. Within 90 days of the issuance of the Managing Director's report, the Executive Board will consider the report with a view to deciding whether the member has breached its obligations. Before reaching a decision, the Executive Board may request from the staff and the authorities additional clarification of the facts respecting the alleged breach of obligation; the Executive Board will specify a deadline for the provision of such clarification.
10. If the Executive Board finds that the member's failure to provide information required under Article VIII, Section 5 is due to its inability to provide the information in a timely and accurate fashion, the Executive Board may call upon the member to strengthen its capacity to provide the required information and ask the Managing Director to report periodically on progress made by the member in that respect. The member may request technical assistance from the Fund.
11. (a) If the Executive Board finds that the member has breached its obligation, the Executive Board may call upon the member to prevent the recurrence of such a breach in the future and to take specific measures to that effect. Such measures may include the implementation of improvements in the member's statistical systems or any other measures deemed appropriate in view of the circumstances.
(b) In addition, if the Executive Board finds that the member is still not providing the required information, the Executive Board will call upon the member to provide such information.
The data referred to in paragraph 1 of this decision are the national data on the following matters:
1The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.
2Gross external debt is the outstanding amount of those actual current, and not contingent liabilities that require payment(s) of principal and/or interest by the debtor at some point(s) in the future and that are owed to nonresidents by residents of an economy.