## EXTENSION OF CONSULTATION CYCLES DUE TO COVID–19 PANDEMIC — Section 1 (ppea2020027) ## Source details **Canonical URL:** [EXTENSION OF CONSULTATION CYCLES DUE TO COVID–19 PANDEMIC — Section 1 (ppea2020027)](https://www.imf.org/-/media/files/publications/pp/2020/english/ppea2020027.pdf) ## Other formats - [Markdown version](/-/media/files/publications/pp/2020/english/ppea2020027.pdf.md) - [Structured JSON version](/-/media/files/publications/pp/2020/english/ppea2020027.pdf.json) --- ### Executive summary - The COVID-19 pandemic is placing an enormous strain on the membership and the global economic and financial system, with pervasive uncertainty over the scale and duration of the shock. - The Fund is responding to unprecedented demand for financing and crisis support; proceeding with Article IV consultations and mandatory Financial Stability Assessments (FSAs) is problematic because of resource pressures and the high likelihood that published reports will become rapidly outdated. - Management implemented a temporary postponement of staff work on Article IV consultations and mandatory FSAs, with a few exceptions. - Proposal: extend by six months the expected deadlines for Article IV consultations for all members and for discussions with each of the currency unions to avoid inadvertently triggering remedial procedures under the excessive delays framework. - Legal basis: the Articles of Agreement do not establish any specific frequency for Article IV consultations; deadlines are established by the Board and expressed as an expectation rather than a firm obligation. - Document date: April 13, 2020. ### Context - Key observations: - The global economic and financial system is under severe strain and the outlook is subject to significant uncertainty due to COVID-19, deterioration in financial market conditions, and a precipitous decline in commodity prices. - The Fund has received an unprecedented number of financing requests—accounting for nearly half of the membership—in a very short period of time. - Proceeding with Article IVs and mandatory FSAs would limit resources available for crisis management and risk producing rapidly outdated staff reports of limited value. ### Legal framework - Surveillance obligations: - Surveillance is mandatory for both the Fund and its members under Article IV, Sections 3(a) and (b). - Bilateral surveillance assesses how a member’s exchange rate and domestic economic and financial policies promote the member’s balance of payments (BOP) and domestic stability. - Members are obliged to consult with the Fund when requested and to provide the information necessary to conduct surveillance (Article IV, Section 3(b); Article VIII, Section 5). - For members of currency unions, the Fund holds regular discussions with union-level institutions as part of Article IV consultations. - For countries with systemically important financial centers, mandatory FSAs are part of Article IV surveillance. - Frequency and Board authority: - The Articles do not set a particular frequency for Article IV consultations; frequency is operationalized through Executive Board decisions (e.g., Integrated Surveillance Decision (ISD) and decision on consultation cycles). - Under the ISD, consultations under Article IV shall in principle take place annually; a three-month grace period applies to the standard 12-month consultation cycle. - The Executive Board has authority, by decision of general applicability, to establish or extend consultation cycles for all countries or groups of countries. - The deadlines are expressed as expectations; the Fund’s framework on excessive delays applies where consultations or mandatory FSAs are not held by the expected deadline, regardless of reason. The excessive delays framework includes three steps: (i) letter from the Managing Director to the member; (ii) publishing a list of members with seriously delayed Article IV consultations; and (iii) holding an informal briefing to the Executive Board on the economy of the member with a seriously delayed consultation or FSA. ### Extension of consultation cycles — rationale and scope - Management action: - Implemented a temporary postponement of staff work on Article IV consultations and mandatory FSAs (also applies to voluntary FSAPs), with exceptions. - Exceptions where work may continue: - Near-complete FSAs: where FSA mission work has concluded and Aide Memoires are with authorities; staff may complete FSAs, provide revised text in appropriate sections as resources allow, and draft Financial Sector Stability Assessments building on revised Aide-Memoires. The Board meeting to discuss FSAs may occur separately from Article IVs (possibly on a lapse-of-time basis). - Countries where completion of the Article IV consultation is a pre-requisite for an FCL/PLL request or review, or the Executive Board’s “extension of a SLL offer,” because qualification requires the member’s most recent Article IV consultation to show a “very positive assessment” (FCL/SLL) or a “generally positive assessment” (PLL). - Proposed operational change: - Extend Article IV consultation deadlines for all members by six months to allow additional time for consultations, refocus priorities toward crisis response, and prevent members from falling into excessive delays and triggering remedial procedures. - The extension will be factored into calculations of consultation cycles for all members; following the next Article IV consultation, consultation cycles would be reestablished by the Board in accordance with the decision on consultation cycles. - Examples of cycle adjustments: - A member on the 12-month Article IV consultation cycle with a 3-month grace period (i.e., up to 15 months) would have a further 6 months incorporated (extending from 15 months up to a total of 21 months). - For a member on the extended 24-month cycle (no grace period), the cycle would temporarily be extended to 30 months. - The proposed extension may result in some countries’ consultation cycles exceeding 24 months, the maximum envisaged under current policies. - Related adjustments: - Deadlines for mandatory FSAs will be automatically adjusted following any extension to Article IV consultation cycles. - For discussions on common policies of currency unions, the expected next Board discussion is extended by six months for each of the four currency unions to avoid doubt regarding Board expectations. - Continuity of obligations and engagement: - The temporary extension does not alter members’ obligations under Article IV or the Fund’s commitment to provide advice; members retain obligations to consult upon request and to provide necessary information, subject to capacity constraints. - Country teams will continue to support members, offering tailored and focused policy advice, leveraging technology and alternative modalities to sustain ongoing dialogue. - Communication: - If adopted, area departments will notify members of the decisions and the change in surveillance-cycle expectations; decisions will also be communicated on the Fund’s website. - Review: - The Board may need to re-evaluate the decisions prior to the end of the six-month period, as circumstances warrant. ### Proposed Decisions (summary) - Decision 1: Temporary Extension of Consultation Cycles for Article IV Consultations - Notwithstanding Decision No. 14747-(10/96) adopted on September 28, 2010, as amended, the Article IV consultation cycle for each member shall be extended by six months. This extension shall apply only to the consultation cycle for the upcoming Article IV consultation for each member. - Decision 2: Temporary Extension of Expected Deadlines for Discussions with Regional Institutions Responsible for Common Policies in Currency Unions - Staff hold annual discussions with regional institutions responsible for common policies of: (i) the Central African Economic and Monetary Union; (ii) the Eastern Caribbean Currency Union; and (iii) the West African Economic and Monetary Union pursuant to Decision No. 13654-(06/1), Decision No. 13655-(06/1), and Decision No. 13656-(06/1), as amended, respectively. The next Board discussion with the regional institutions of each currency union will take place within six months following the expected deadline established at the time of the last Board discussion for the respective currency union. - Pursuant to Decision No. 12899-(02/119), as amended, staff holds twice-yearly staff discussions with EU institutions responsible for common policies in the euro area, in the context of Article IV consultations with member countries. Further, there is an annual staff report and Board discussion on Euro-Area Policies in the context of Article IV consultations with member countries. ### Timing of Next Board Discussion (Section 2) - The next Board discussion on Euro-Area Policies will be held within six months following the expected deadline established at the time of the last Board discussion on Euro-Area policies. *Source: ppea2020027 (April 13, 2020).* ### Section 1 ### EXTENSION OF CONSULTATION CYCLES DUE TO COVID–19 PANDEMIC — Section 1 ### Executive summary - The COVID-19 pandemic is placing an enormous strain on the membership and the global economic and financial system, with pervasive uncertainty over the scale and duration of the shock. - The Fund is responding to unprecedented demand for financing and crisis support; proceeding with Article IV consultations and mandatory Financial Stability Assessments (FSAs) is problematic because of resource pressures and the high likelihood that published reports will become rapidly outdated. - Management implemented a temporary postponement of staff work on Article IV consultations and mandatory FSAs, with a few exceptions. - Proposal: extend by six months the expected deadlines for Article IV consultations for all members and for discussions with each of the currency unions to avoid inadvertently triggering remedial procedures under the excessive delays framework. - Legal basis: the Articles of Agreement do not establish any specific frequency for Article IV consultations; deadlines are established by the Board and expressed as an expectation rather than a firm obligation. - Document date: April 13, 2020. ### Context - Key observations: - The global economic and financial system is under severe strain and the outlook is subject to significant uncertainty due to COVID-19, deterioration in financial market conditions, and a precipitous decline in commodity prices. - The Fund has received an unprecedented number of financing requests—accounting for nearly half of the membership—in a very short period of time. - Proceeding with Article IVs and mandatory FSAs would limit resources available for crisis management and risk producing rapidly outdated staff reports of limited value. ### Legal framework - Surveillance obligations: - Surveillance is mandatory for both the Fund and its members under Article IV, Sections 3(a) and (b). - Bilateral surveillance assesses how a member’s exchange rate and domestic economic and financial policies promote the member’s balance of payments (BOP) and domestic stability. - Members are obliged to consult with the Fund when requested and to provide the information necessary to conduct surveillance (Article IV, Section 3(b); Article VIII, Section 5). - For members of currency unions, the Fund holds regular discussions with union-level institutions as part of Article IV consultations. - For countries with systemically important financial centers, mandatory FSAs are part of Article IV surveillance. - Frequency and Board authority: - The Articles do not set a particular frequency for Article IV consultations; frequency is operationalized through Executive Board decisions (e.g., Integrated Surveillance Decision (ISD) and decision on consultation cycles). - Under the ISD, consultations under Article IV shall in principle take place annually; a three-month grace period applies to the standard 12-month consultation cycle. - The Executive Board has authority, by decision of general applicability, to establish or extend consultation cycles for all countries or groups of countries. - The deadlines are expressed as expectations; the Fund’s framework on excessive delays applies where consultations or mandatory FSAs are not held by the expected deadline, regardless of reason. The excessive delays framework includes three steps: (i) letter from the Managing Director to the member; (ii) publishing a list of members with seriously delayed Article IV consultations; and (iii) holding an informal briefing to the Executive Board on the economy of the member with a seriously delayed consultation or FSA. ### Extension of consultation cycles — rationale and scope - Management action: - Implemented a temporary postponement of staff work on Article IV consultations and mandatory FSAs (also applies to voluntary FSAPs), with exceptions. - Exceptions where work may continue: - Near-complete FSAs: where FSA mission work has concluded and Aide Memoires are with authorities; staff may complete FSAs, provide revised text in appropriate sections as resources allow, and draft Financial Sector Stability Assessments building on revised Aide-Memoires. The Board meeting to discuss FSAs may occur separately from Article IVs (possibly on a lapse-of-time basis). - Countries where completion of the Article IV consultation is a pre-requisite for an FCL/PLL request or review, or the Executive Board’s “extension of a SLL offer,” because qualification requires the member’s most recent Article IV consultation to show a “very positive assessment” (FCL/SLL) or a “generally positive assessment” (PLL). - Proposed operational change: - Extend Article IV consultation deadlines for all members by six months to allow additional time for consultations, refocus priorities toward crisis response, and prevent members from falling into excessive delays and triggering remedial procedures. - The extension will be factored into calculations of consultation cycles for all members; following the next Article IV consultation, consultation cycles would be reestablished by the Board in accordance with the decision on consultation cycles. - Examples of cycle adjustments: - A member on the 12-month Article IV consultation cycle with a 3-month grace period (i.e., up to 15 months) would have a further 6 months incorporated (extending from 15 months up to a total of 21 months). - For a member on the extended 24-month cycle (no grace period), the cycle would temporarily be extended to 30 months. - The proposed extension may result in some countries’ consultation cycles exceeding 24 months, the maximum envisaged under current policies. - Related adjustments: - Deadlines for mandatory FSAs will be automatically adjusted following any extension to Article IV consultation cycles. - For discussions on common policies of currency unions, the expected next Board discussion is extended by six months for each of the four currency unions to avoid doubt regarding Board expectations. - Continuity of obligations and engagement: - The temporary extension does not alter members’ obligations under Article IV or the Fund’s commitment to provide advice; members retain obligations to consult upon request and to provide necessary information, subject to capacity constraints. - Country teams will continue to support members, offering tailored and focused policy advice, leveraging technology and alternative modalities to sustain ongoing dialogue. - Communication: - If adopted, area departments will notify members of the decisions and the change in surveillance-cycle expectations; decisions will also be communicated on the Fund’s website. - Review: - The Board may need to re-evaluate the decisions prior to the end of the six-month period, as circumstances warrant. ### Proposed Decisions (summary) - Decision 1: Temporary Extension of Consultation Cycles for Article IV Consultations - Notwithstanding Decision No. 14747-(10/96) adopted on September 28, 2010, as amended, the Article IV consultation cycle for each member shall be extended by six months. This extension shall apply only to the consultation cycle for the upcoming Article IV consultation for each member. - Decision 2: Temporary Extension of Expected Deadlines for Discussions with Regional Institutions Responsible for Common Policies in Currency Unions - Staff hold annual discussions with regional institutions responsible for common policies of: (i) the Central African Economic and Monetary Union; (ii) the Eastern Caribbean Currency Union; and (iii) the West African Economic and Monetary Union pursuant to Decision No. 13654-(06/1), Decision No. 13655-(06/1), and Decision No. 13656-(06/1), as amended, respectively. The next Board discussion with the regional institutions of each currency union will take place within six months following the expected deadline established at the time of the last Board discussion for the respective currency union. - Pursuant to Decision No. 12899-(02/119), as amended, staff holds twice-yearly staff discussions with EU institutions responsible for common policies in the euro area, in the context of Article IV consultations with member countries. Further, there is an annual staff report and Board discussion on Euro-Area Policies in the context of Article IV consultations with member countries. *© 2020 International Monetary Fund. April 13, 2020.* ### Section 2 ### ppea2020027 - Section 2 ### Extension of Consultation Cycles Due to COVID-19 Pandemic - EXTENSION OF CONSULTATION CYCLES DUE TO COVID-19 PANDEMIC ### Timing of Next Board Discussion - the next Board discussion on Euro-Area Policies will be held within six months following the expected deadline established at the time of the last Board discussion on Euro-Area policies. *INTERNATIONAL MONETARY FUND* --- _Source: https://www.imf.org/-/media/files/publications/pp/2020/english/ppea2020027.pdf_