Public Information Notice: IMF Executive Board Reviews Progress in Members' Provision of Data to the Fund for Surveillance Purposes
May 27, 2008
Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.
May 27, 2008
On May 2, 2008, the Executive Board of the International Monetary Fund (IMF) considered the staff paper Review of Data Provision to the Fund for Surveillance Purposes.
The IMF keeps data provision by members under periodic review since timely, accurate, and comprehensive data are essential for surveillance, the process of economic and financial monitoring and policy advice that the Fund conducts with its member countries. The framework for data provision to the Fund for surveillance purposes is based on the Articles of Agreement and relevant decisions of the Executive Board, and relies on a cooperative approach. It has three main components:
- Article VIII, Section 5, together with the Board's 2004 Decision on Strengthening the Effectiveness of Article VIII, Section 5, define a set of data categories that members are required to provide to the Fund, which constitute the minimum deemed necessary for surveillance and other Fund activities. The requirement to provide the data is subject to the varying capacity of members. Fund surveillance (bilateral or multilateral) may entail additional data requirements, varying according to members' individual circumstances and over time. While in practice the Fund has not formally required such additional information, most members provide data to the Fund that far exceed the required set.
- In the context of Article IV consultations, staff is enjoined to assess the adequacy of data provided to the Fund, the implications of data inadequacies, and the scope for improvement. Monitoring of data provision by members is anchored on a Table of Common Indicators Required for Surveillance (TCIRS), which summarizes information on the periodicity and timeliness of most of the core indicators required by Article VIII, Section 5 and the 2004 Decision.
- In the rare cases where staff is concerned that a member is failing to provide data, or to provide accurate data, to the Fund, despite having the capacity to do so, procedures for follow-up are defined in the 2004 Decision. These procedures rely importantly on a cooperative approach.
Taking into account important changes in the data provision framework approved at the time of the last review of data provision and in the 2004 Decision, the staff paper examined the trends in members' provision of data. It also reviewed how data issues are treated in surveillance; that is, whether weaknesses in data provision are treated candidly and diligently, so that it is clear when staff's analysis and advice is subject to significant uncertainty on account of data weaknesses, and with a view to fostering appropriate action. Finally, staff considered evolving data needs for surveillance, including in light of recent developments in the world economy, such as global imbalances and the credit market turmoil.
Executive Board Assessment
Executive Directors welcomed the opportunity to review progress in members' provision of data to the Fund for surveillance purposes, and the expanded data list adopted under the 2004 Decision on Strengthening the Effectiveness of Article VIII, Section 5. Directors stressed that timely and good quality data are crucial to Fund surveillance. Directors agreed with the thrust of the staff paper's analysis and findings, and broadly endorsed the staff's recommendations.
Data Provision Trends
Directors welcomed the progress made by members in providing adequate data to the Fund. They noted that significant data challenges remain in developing countries that have yet to attain market access, particularly in low-income or small countries. These challenges will require continued capacity building by the countries themselves, as well as the coordinated support of the international community. In this connection, Directors stressed the importance of targeted Fund technical assistance, within the established budgets, and of promoting dissemination of the core indicators required for surveillance under the General Data Dissemination System. They also encouraged donors to provide more targeted support to strengthening countries' capacity to produce and disseminate statistics.
Treatment of Data Issues
Directors considered that there is room for improvement in the treatment of data issues in Article IV staff reports, and called for more candid assessments of data adequacy across countries. They agreed that, in cases where shortcomings in data provision significantly hamper surveillance, staff should highlight the implications of these deficiencies for its analysis and policy conclusions. In addition, in cases of severe deficiencies and where staff have had to construct key data based on limited information, staff should discuss with the authorities specific and prioritized remedial measures, and should report on this discussion. Most Directors supported the proposed new classification system for data adequacy as set out in paragraph 19 of the paper. Directors also supported the proposal that Statistical Issues Appendices be more focused and expanded to include financial sector data issues where warranted.
Handling of Potential Breaches of Article VIII, Section 5
Directors stressed that members should abide by their obligation to provide the Fund with data covered under Article VIII, Section 5 to the best of their ability. They encouraged management and staff to address vigorously this responsibility of members, while emphasizing the importance of a cooperative approach and of paying due attention to capacity limitations. Directors noted that the approach followed in recent years has been largely effective in resolving concerns that members may not be sharing data to the best of their ability. They pointed, however, to the wide variance in staff's handling of such cases as an area for improvement, and stressed that staff must follow up expeditiously in cases where concerns arise. They endorsed the proposal to clarify guidance to staff regarding steps to follow when there is a concern that a member may not be complying with Article VIII, Section 5, to ensure consistent and evenhanded treatment. In cases of non-provision of data, most Directors agreed that there should be no delay in implementing the formal procedures specified under the 2004 Decision-including the "letter stage" where management notifies the member of its intention to inform the Board of a breach of obligation-once the criteria for moving to the letter stage are met, namely where the data are not provided and the member appears to have the capacity to provide the data. However, some Directors emphasized that staff should take care not to move to the letter stage prematurely. In cases where there are concerns that data are being provided late or inaccurately, staff should prepare a plan and timetable for following up on these concerns, including moving to the letter stage when necessary.
Evolving Data Needs
Directors had a wide-ranging discussion on how best to meet the evolving data needs of surveillance to keep pace with the changing global economic environment. Ongoing data initiatives have focused appropriately on positions and exposures across domestic sectors and vis-à-vis the rest of the world. These data are critical in assessing vulnerabilities, and have gained further prominence in light of recent global economic developments. Directors therefore broadly agreed that priority should remain on moving current initiatives forward and adapting them to absorb the new data provision requirements, rather than creating new ones. At the same time, a number of Directors noted the costs of enhanced data initiatives, for both the Fund and member countries, and emphasized that the costs and benefits of additional data collection should be carefully assessed. Many Directors stressed the importance of data on cross-border and intersectoral exposures and risks in advanced economies.
Directors were broadly supportive of the proposed approach to evolving data needs related to Sovereign Wealth Funds (SWFs), Currency Composition of Official Foreign
Exchange Reserves (COFER), and assessing financial sector stability. On SWFs, many Directors supported the various data initiatives the Fund is undertaking as part of a wider effort to facilitate and coordinate work on a set of voluntary principles for SWFs, while at the same time, many Directors emphasized that data initiatives should not run ahead of collaborative and voluntary efforts to identify such principles. Noting the importance of COFER data for surveillance over the global economy and reserve currency economies, a number of Directors encouraged members who do not yet report such data to do so. Some Directors stressed that provision of COFER data should remain voluntary and confidential. In view of the increasing importance of data on intersectoral positions and exposures, Directors agreed that high priority should be attached to increasing the number of countries that report monetary and financial data using the Standardized Report Forms (SRFs), expanding the coverage of financial institutions in the monetary and financial statistics, and introducing additional information in SRFs for assessing financial sector stability. Current and planned efforts in the Fund with regard to Financial Soundness Indicators (FSIs) will also support better financial sector surveillance.
Directors endorsed the proposals in paragraph 42 of the paper to clarify and enhance the requirements for data provision to the Fund. Most Directors supported the proposal to incorporate International Investment Position (IIP) data into the Table of Common Indicators Required for Surveillance, although a number of Directors cautioned that close monitoring of reporting of IIP data should be accompanied by continued regard for the capacity constraints many countries face in producing them, and some Directors did not support the proposal on this account. Directors also agreed to expand the coverage of reserve liabilities and derivatives in the Annex of the 2004 Decision to include those linked to a foreign currency but settled in domestic currencies, for closer alignment with the practice in the template for International Reserves and Foreign Currency Liquidity-the internationally accepted methodology for reserve reporting.
Directors agreed that with the discussions today, the Board concluded the review of Annex A envisaged under the 2004 Decision, and that future reviews of Annex A should be conducted together with the reviews of data provision to the Fund for surveillance purposes. The next reviews are expected to be conducted in 2013, unless a need arises earlier.