Views and Commentaries for 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 | 1998

THE IMF: WORKING FOR A MORE TRANSPARENT WORLD
HOW NEW TECHNOLOGY AND THE IMF ARE BRINGING A NEW OPENNESS TO
NEW FINANCIAL MARKETS
A Commentary

By Shailendra J. Anjaria
Director of the International Monetary Fund's (IMF's) External Relations Department

The Journal of Information Policy
January 11, 1999

Reproduced with the permission of The Journal of Information Policy

The Asian financial crisis has driven home, in no uncertain terms, the world's need for timely, accurate, and comprehensive financial and economic information. Indeed, there is reason to wonder whether the recent problems in Asia-and in Mexico in late 1994 and early 1995-would have reached crisis proportions with all the subsequent contagion if the international community had had more information. A few examples:

• What if we had known, precisely on time, how low Mexico's foreign exchange reserves were?

• What if we had known, right on time, how large the Thai central bank's forward transactions were in 1997?

• What if we had known, punctually, how much of Korea's foreign exchange reserves had actually been lent out to Korean banks in late 1997?

• What if we had had, at the time, a better measure of the size of Indonesia's huge private sector indebtedness and the interlinkages among the government, banks, and corporations?

Certainly, transparency, along with better data, is by no means a silver bullet. But it can enhance economic performance in a variety of ways. It encourages a more widespread discussion and analysis of policies by the public. It enhances the accountability of policymakers and the credibility of policies, thus contributing to good governance. And it facilitates the orderly and efficient functioning of financial markets. For in a world of sizable, sometimes extremely volatile, private capital flows, financial markets must be able to respond more continuously and smoothly to economic developments if dramatic corrections are to be avoided.

That is why "transparency" has become the new buzzword of the international community, cropping up in all the official communiqués. And that is why the U.S. Congress recently asked the IMF to spearhead efforts for greater openness-both among the 182 member countries and on the IMF's own operations-when it approved the U.S. share of the IMF's quota increase. Interestingly, the early calls for transparency primarily focused on the Fund's members and on the operations of the multilateral institutions themselves. But now the calls are broadening to embrace not only individual countries but also financial and corporate institutions.

New Initiatives in Openness

What exactly is the IMF doing to promote greater transparency? Five key initiatives stand out, involving both the IMF's operations and member countries' policies.

Establishing and refining standards. One of the most important steps post-Mexico was the establishment in 1996 of standards to guide countries in publishing a regular and timely flow of comprehensive economic and financial data. The goal: to reduce surprises for markets and aid policymakers in implementing sound economic policies.

Market participants and the general public can now access a bulletin board maintained by the IMF at its World Wide Web site on the Internet (http://dsbb.imf.org) that describes the statistical practices of countries subscribing to the Special Data Dissemination Standard-a voluntary standard aimed at providing guidance to countries participating in the international financial markets, or aspiring to do so. At this point, 47 countries have signed up, representing a mix of industrial and emerging market economies. And since April 1997, electronic links have been established for 17 countries that allow data users to move quickly between the bulletin board and the actual data maintained by subscribers at their Internet sites. In light of the Asian crisis, these standards will now be beefed up, especially in the areas of international reserves and private external debt. The IMF's members are also looking into whether additional disclosure requirements or regulations are needed on the operations of institutional investors, including highly leveraged ones.

The data project is part of a pioneering effort in the Fund and the international community to establish helpful guidelines in a variety of areas. The belief is that these standards would serve as the cornerstone of greater transparency, in that standards should give countries a benchmark to meet and-if adherence can be monitored and certified-a further incentive to improve policies. In recent years, the IMF has been helping to disseminate a set of "best practices"-as developed by the Basle Committee-in the banking supervision area, and earlier this year, the Fund adopted a code of good practices on fiscal transparency. This code is no mere "wish list" of government behavior, since it is backed up with a manual, a questionnaire, and other tools to help members achieve the recommended practices (these, too, are available on the IMF website). The IMF plans to craft a similar code on financial and monetary policies. Standards will also be needed in other important areas, such as accounting, auditing, disclosure, asset valuation, bankruptcy, and corporate governance, but these domains will be primarily the responsibility of other agencies.

Releasing policy documentation. Since 1994, the IMF has been releasing background papers on recent economic developments in individual countries, thus disseminating information and analysis assembled for the use of the IMF Executive Board (which oversees the institution's day-to-day operations) during annual country consultations. In recent years, the IMF has also been encouraging countries to publish summary statements by the staff issued to the authorities at the end of such consultations-and a number of countries have done so. The same applies to statements of governments' policy intentions (or "letters of intent") and Policy Framework Papers, both of which underpin Fund-supported programs of economic reform.

Publishing Executive Board assessments. One recent initiative, taken in May 1997, is the dissemination of "Public Information Notices," or PINs. Through this vehicle the public is able, for the first time, to obtain a sense of the ongoing deliberation of the IMF's Executive Board regarding a country's economic policies. The PINs include a background section containing factual information on the member's economy, along with the IMF's assessment of the member's economic prospects and policies. They are unedited, except for deletions of market sensitive, national security, or proprietary information, which in practice have been rare. And the release of these notices is voluntary-that is, at the discretion of the relevant country. But encouragingly, in the past 18 months, an increasing number of countries have agreed to their publication, with some 80 percent of all recent annual country consultations resulting in the release of a PIN. And the Fund is considering also issuing PINs on policy papers and regional economic reviews.

This raises a point, however, that in the end, the IMF can only be as transparent as its members allow it to be. Of course, we welcome support in persuading others that it is in their national interest to open up, and the presumption will be in favor of the release of information, except where release might compromise confidentiality. In that spirit, a number of other measures are being implemented or are in the pipeline for consideration by our Executive Board, including providing monthly summaries of the Board's activities, a shortening of the waiting period for access to the Fund's archives, the publication of information on the IMF's liquidity position and members' accounts, and the release of country documents connected with the debt initiative for the heavily indebted poor countries. In fact, the Group of Seven industrial countries and other fora are even calling for the Fund to prepare transparency reports that would assess to what extent member countries were meeting internationally recognized codes and standards of transparency and disclosure.

Conducting external evaluations. Another way that the IMF has tried to open up in recent years has been through inviting a group of independent experts to review Fund policy and operations. In 1997, such an evaluation was conducted on the IMF's concessional lending facility, the Enhanced Structural Adjustment Facility, or ESAF. The experts were afforded full access to documents, data, and staff of the IMF, and interviewed many national officials and representatives of the private sector and civil society. We published the external evaluators' report and other documents connected with the exercise, and widened the process further by asking the general public to comment. Another external evaluation is now under way, this time on IMF surveillance, the bread and butter work of the Fund whereby we review each member country's economic policies.

Putting the IMF on the Internet. No doubt the greatest leap in the Fund's accessibility has come through its establishment of a website on the Internet (http://www.imf.org), which now has over two million visitors each month. Users can access a wealth of institutional information and data, including members' financial positions vis-à-vis the Fund, numerous letters of intent and Policy Framework Papers, PINs, speeches by management, transcripts of press conferences, the IMF publications database, and the full text of hundreds of IMF publications. (The contents of the site are updated daily, fully indexed, cross-referenced, and searchable, and users' comments are invited.)

As the IMF continues to open itself up to greater public scrutiny, we look forward to a richer debate on how the world's nations can derive the greatest benefits from the increasingly globalized world.