## ppea2025029

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---

### EXECUTIVE SUMMARY — Overview of the Update (May 2022–April 2025)
- Period covered: May 2022 to April 2025.
- First periodic update following the 2022 Safeguards Assessments Policy Review.
- Main enhancements introduced in 2022 implemented and being rolled out:
  - establishment of a standalone governance pillar;
  - broader coverage of financial risks within central banks’ risk management;
  - a defined approach for addressing Central Bank Digital Currencies (CBDCs) in assessments;
  - strengthened modalities for Fiscal Safeguards Reviews (FSRs);
  - expanded outreach to member countries.
- Implementation status: enhancements are well underway.
- Assessments completed during the period: 44.
- Assessments in progress as of end-April 2025: 4.
- Limited safeguards procedures performed for Flexible Credit Line (FCL) arrangements: 7.
- Drivers of activity: post-COVID-19 pipeline due to surge in emergency financing during the pandemic and subsequent IMF arrangements.
- Monitoring intensity: monitoring of central bank safeguards intensified, reaching record levels in 2023 due to increased number of member countries with outstanding Fund credit.
- Risk-based streamlining continued to yield efficiency by reducing the number of assessments required.

### Implementation of 2022 Policy Review Proposals
- Governance pillar (GELRIC framework):
  - New GELRIC framework adds a dedicated “G” pillar to the previous ELRIC components; governance assessments focus on de facto practices and oversight bodies (Board, Audit Committee, Executive Management).
  - An internal methodology for governance assessments has been developed and applied in ten pilot assessments; methodology will be updated as needed.
  - Four guiding principles emphasized:
    - (i) alignment with safeguards policy objectives;
    - (ii) focus on practical governance complementing legal reviews;
    - (iii) evaluation of key decision-making bodies;
    - (iv) contextualization within mandate, autonomy, and accountability.
- Fiscal Safeguards Reviews (FSRs):
  - FSR Guidance Note adopted in 2024 to anchor conduct and consistency of FSRs.
  - FSR scope: applicable when a member requests exceptional access and at least 25 percent of IMF resources are directed to financing of the state budget; requirement broadened to include High Combined Credit Exposure (HCCE) cases.
  - FSRs are conducted by inter-departmental teams (Fiscal Affairs, Legal, Finance Departments); outcome is a stand-alone report subject to internal review and confidentiality similar to safeguards assessments.
  - FSR follow-up and monitoring procedures introduced; two FSRs initiated under the new guidance note are currently underway.
- Financial Risk Management (FRM):
  - Policy now requires broader coverage of financial risks across the entire balance sheet (foreign and domestic operations).
  - Most central banks continue to focus mainly on foreign reserves; only a few have dedicated FRM frameworks or are in early stages.
  - Staff tailoring recommendations to capacity and maturity; internal methodology being developed for consistency.
- Central Bank Digital Currencies (CBDC):
  - Internal assessment approach developed to analyze CBDC-related risks under GELRIC: (i) risks to operations; (ii) mitigating controls; (iii) governance for design, development, issuance.
  - One assessment during the period considered CBDC relevant and applied the internal methodology.

### Key Findings and Persistent Vulnerabilities
- Overall: While some improvements noted, persistent vulnerabilities remain across central banks under safeguards purview.
- Areas of improvement:
  - External audit practices: showed improvement.
  - Financial reporting: showed improvement.
- Areas requiring attention:
  - Oversight and governance arrangements: continue to require attention despite the new governance pillar.
  - Legal reforms: remain difficult because of complex and time-consuming legislative processes.
  - Internal audit functions: face systemic capacity constraints.
  - Internal controls: need further strengthening, particularly in foreign reserves (including gold management) and emergency liquidity assistance.
- Implementation of recommendations: implementation rate of safeguards recommendations was low during the period; factors include structural nature of reforms required and some programs going off-track.
- Staff engagement: ongoing engagement with authorities to improve traction, including through technical assistance (TA).

### Boxed Policy Conclusions (selected)
- GELRIC framework expands assessment to include governance as a standalone pillar.
- FSR trigger and applicability clarified and broadened to include HCCE cases; 25 percent budget financing threshold remains.
- Outreach and operational guidance to central banks intended to strengthen capacity and disseminate leading practices.
- FRM coverage broadened to entire balance sheet; internal methodologies being developed.
- CBDC risks to be assessed systematically where relevant.

### Geographic Distribution of Safeguards Assessments and Monitoring Activity
- Geographic distribution (period comparison to 2022 policy review period):
  - Africa (AFR): 43 percent of the assessments conducted, marking a 6 percent increase.
  - Middle East and Central Asia (MCD): 23 percent, broadly consistent with the previous period.
  - Asia Pacific (APD): 11 percent (compared to 10 percent during the 2022 policy review period).
  - Western Hemisphere (WHD): 14 percent (compared to 21 percent during the 2022 policy review period).
  - Europe (EUR): 9 percent (down from 11 percent in 2022).
- Monitoring activity and drivers:
  - Number of central banks under monitoring was 86 at end-April 2025, up from 82 at end-April 2022; monitoring had reached a record level in 2023.
  - Two safeguards monitoring missions were conducted during the period to address new safeguards vulnerabilities associated with the operational impacts of an IT incident and governance gaps.
  - Enhanced monitoring required due to deterioration in safeguards frameworks, delays in addressing vulnerabilities, and acute capacity constraints.
  - Heightened monitoring included follow-up on safeguards-related reforms and efforts to revive authorities' commitment—particularly in Fragile and Conflict-Affected States.
  - Other vulnerabilities prompting intensified monitoring: governance gaps with suboptimal oversight arrangements; significant monetary financing of the government in breach of statutory limits; weaknesses in controls related to program monetary data reporting and currency operations.
  - FIN staff, in collaboration with area departments, conducted special audits in response to uncovered irregularities or misuse risks.

### Safeguards Findings — Governance, Oversight, Audit, Legal, and Reporting
- Governance and oversight:
  - Five out of 44 central banks did not have an audit committee.
  - Recurring governance vulnerabilities: delays in filling Board vacancies; suboptimal Board compositions lacking a majority of independent non-executive members and including government officials.
  - Recommendations to strengthen oversight:
    - Adopt and revise Board charters to delineate responsibilities.
    - Update Audit Committee charters to ensure independence from executive management.
    - Implement annual work plans to guarantee timely and comprehensive coverage, reporting, and follow-up on key risks.
    - Establish structured onboarding and training programs for Board members to address skills gaps.
    - Expand Audit Committees' oversight scope to cover all areas under responsibility.
  - Executive management findings:
    - More than half of governance arrangements assessed as part of the new standalone governance pillar found executive management’s decision-making practices to be collaborative and well-structured.
    - Areas needing improvement: excessive concentration of powers in the Governor; bottlenecks and suboptimal delegation to internal committees and senior staff.
    - Recommendation: establish and review comprehensive delegation frameworks to define institutional responsibilities and strengthen checks and balances.
  - Ten safeguards assessments evaluated governance arrangements as a standalone pillar as part of the revised GELRIC framework; this coverage also incorporates earlier assessments under the previous ELRIC framework.
- External audit:
  - All but one central bank assessed were subject to external audits conducted in accordance with International Standards on Auditing (ISA).
  - Recommendations: formalize de facto sound practices through board-approved policies; introduce auditor rotation rules and multi-year appointments; prioritize technical qualifications over cost.
  - Emphasis on engaging partners with International Financial Reporting Standards (IFRS) experience and conducting quality reviews to ensure audit quality and independence.
- Legal structure and autonomy:
  - Comprehensive legal amendments were recommended in a majority of assessments; about one third required more targeted amendments.
  - Most legal recommendations anchored in program conditionality and facilitated by technical assistance.
  - Eight central banks either submitted draft amendments for Parliamentary consideration or enacted amendments in the period.
- Financial reporting:
  - Nearly 80 percent of the central banks assessed during this period apply either partial or full IFRS.
  - Assessments increasingly underscore the importance of quality disclosures.
  - Balance sheet reviews were recommended in some cases to assess potential recapitalization needs.

### Internal Audit, Internal Controls, and Risk Management
- Internal audit:
  - Internal audit functions face systemic capacity constraints undermining effectiveness.
  - Identified weaknesses: audit methodologies not aligned with international standards; under-staffing; limited professional certifications; insufficient expertise in IT and cybersecurity.
  - Concerns emerged about internal audit independence in some cases.
  - New Global Internal Audit Standards take effect in January 2025, increasing expectations for modernization of audit practices and emphasizing governance of internal audit functions.
- Internal controls:
  - Elevated internal control risks driven by governance arrangements, reserves management, and lending operations.
  - Key improvement areas: strengthen investment policies; enhance reserves management frameworks (e.g., establish middle-office functions); develop emergency liquidity assistance frameworks.
  - Need to unwind quasi-fiscal activities and strengthen controls and oversight over gold operations.
  - Weaknesses in compilation of program monetary data warranted recommendations for improved processes and coordination.
  - Risk management frameworks (business continuity planning and cybersecurity) are maturing but require further efforts to address vulnerabilities and enhance resilience.

### Implementation of Recommendations — Rates, Drivers, and Exact Figures
- Implementation rate of safeguards recommendations was low during the current period, including recommendations anchored in program conditionality and MEFP and LOI commitments.
- Three key factors behind low implementation:
  - Long-term, complex reforms (legal amendments, divestment from quasi-fiscal activities, transition to IFRS) face structural, political, and coordination challenges.
  - Implementation hindered when IMF-supported programs go off-track, weakening commitment to reforms.
  - Persistent capacity constraints, especially in Low-Income Countries and Fragile and Conflict-Affected States, leading to a mismatch between support and absorptive capacity.
- Overall implementation rates (since policy inception):
  - 88 percent for recommendations under program conditionality.
  - 78 percent for other recommendations.
  - 80 percent total since inception.
- Table 1 — Implementation of Safeguards Recommendations (numbers preserved exactly as in source):
  - Recommendations issued during the period: Program Conditionality and Commitments: 32; Other: 514; Total: 546
  - Less: Recommendations not yet due, not monitored, and no longer applicable: Program Conditionality and Commitments: (2); Other: (79); Total: (81)
  - Sub-total (due recommendations): Program Conditionality and Commitments: 30; Other: 435; Total: 465
  - Less: Implemented: Program Conditionality and Commitments: 11; Other: 194; Total: 205
  - Overdue: Program Conditionality and Commitments: 19; Other: 241; Total: 260
  - Implementation rate by percentage (current review period): Program Conditionality and Commitments: 37% ; Other: 45% ; Total: 44%
  - Implementation rate by percentage (2022 review period): Program Conditionality and Commitments: 82% ; Other: 68% ; Total: 69%
  - Implementation rate by percentage (2019 review period): Program Conditionality and Commitments: 80% ; Other: 65% ; Total: 67%
  - Implementation rate by percentage (2017 review period): Program Conditionality and Commitments: 57% ; Other: 50% ; Total: 51%
  - Implementation rate by percentage (2015 review period): Program Conditionality and Commitments: 84% ; Other: 70% ; Total: 72%
  - Implementation rate by percentage (since inception): Program Conditionality and Commitments: 88% ; Other: 78% ; Total: 80%

### Misreporting Risks, Program Monetary Data, and Mitigations
- Primary objective: mitigate risks associated with program monetary data reported to the Fund; Safeguards Assessment Policy applies only to program monetary data submitted by central banks (e.g., Net International Reserves) and does not cover fiscal deficits and debt.
- Ex-ante assessments identify potential issues in program definitions and compilation procedures; staff review annual reconciliations of program monetary data against audited financial statements.
- Key recurring themes:
  - Program Data Compilation Controls: Weaknesses identified in 16 assessments, including lack of internal coordination and inadequate documentation. In two cases, capacity constraints in internal audit necessitated outsourcing verification to external auditors.
  - Technical Memorandum of Understanding (TMU) Definitions: Staff identified 11 cases where definitions did not accurately capture elements of program monetary data (issues included treatment of non-convertible currencies, non-monetary gold, foreign currency deposits of government and state-owned enterprises, letters of credit, and poor-quality assets). These issues were resolved via collaboration with area departments resulting in revised TMU definitions.
- Mitigating measures recommended where additional assurances were needed:
  - Reviews of monetary data by external or internal auditors at test dates.
  - Establishment of committees or working groups within central banks to document compilation procedures and review program monetary data.
- No instances of program monetary data misreporting were identified during the current period.
- IMF Board reviewed one case originating in the prior period (addressed in the 2022 policy review); authorities implemented remedial measures including enhancing governance and transparency, and conducting a special audit to establish extent of misreporting and provide assurances on program monetary data.

### Fiscal Safeguards Reviews (FSRs) — Activity and Key Findings
- Four FSRs conducted during the period; findings underscore the need to strengthen safeguards over IMF resources directed toward budget support.
- Two FSR reports were issued since 2022; two reviews were in progress at the end of the period.
- Three FSRs were first-time exercises; one was an update of a previous review focusing on past issues and recent developments.
- Key vulnerabilities in first-time reviews: weaknesses in PFM systems (including Treasury Single Account operations), shortfalls in compliance with PFM laws, budget reporting, accounting, and internal and external audit functions.
- Some remedial measures were incorporated into IMF-supported programs, for example adoption and implementation of a strategy for establishing a Treasury Single Account.

### Outreach, Collaboration, and Capacity Building
- Outreach expanded:
  - Thematic regional governance forums held in Armenia, South Africa, and Ecuador (targeting Governors, Deputy Governors, non-Executive Board members).
  - Agendas focused on: skillsets for non-executive Board members; delegation mechanisms; audit committee design; role of board secretariats.
  - Objective: strengthen capacity to implement safeguards recommendations and disseminate good governance practices.
- Global and regional fora, seminars, and participation:
  - Participation in: International Operational Risk Working Group (IORWG) annual conference; IAASB-IESBA Consultative Advisory Group; Central Bank Audit Leadership Forum; ECCU Accountants Workshop; Two World Gold Council (WGC) Executive Forum workshops.
  - Two annual global forums on central bank governance conducted with the Hawkamah Institute for Corporate Governance; a third global forum hosted by the IMF Regional Office in Riyadh during 2025.
  - Regional safeguards seminars: Ten seminars held at IMF Regional Training Institutes; over 240 participants from more than 140 central banks participated in the seminars held during the period.
  - Collaboration with World Bank’s RAMP: contribution to three internal audit seminars during 2022 to 2024 and an accounting workshop; engaged leaders from roughly 30 central banks and three public institutions.
- Advisory support and technical input:
  - Continued demand for safeguards staff expertise in legal reforms, forensic audits, governance and risk management, financial position and recapitalization missions, and central bank transparency code reviews.
- Reporting to the Board and sharing:
  - Safeguards reports remain confidential; Executive Board updated primarily through relevant country staff reports.
  - Each staff report now includes a dedicated section or paragraph on safeguards matters for countries under monitoring.
  - Safeguards reports can be shared with the World Bank and the European Central Bank (ECB), subject to central bank consent.
  - Over this period, 29 reports were shared with the World Bank to support their fiduciary assessments related to development policy lending—an increase from previous years.
  - No requests were received from the ECB or donors in either period.
- Operational guidelines for central banks to build awareness of safeguards processes and leading practices are envisaged but not yet initiated due to prioritization constraints.

### Activities, Assessment Statistics, and Fiscal Year Breakdown
- Annex II — Safeguards activities during May 2022–April 2025 (calendar year highlights):
  - Safeguards Assessments — Calendar Year
    - 2025: Ethiopia 1
    - 2024: Ecuador, Honduras, Jordan, Lebanon, Liberia, Madagascar, Malawi, Maldives, Paraguay, Rwanda, Sierra Leone, Somalia, The Gambia (13)
    - 2023: Armenia, Barbados, BCEAO, Comoros, Djibouti, Egypt, Ghana, Guinea, Jamaica, Kosovo, Mauritania, Mongolia, Namibia, North Macedonia, Pakistan, Papua New Guinea, Sao Tome Principe, Serbia, Seychelles, Sri Lanka, Ukraine (21)
    - 2022: Argentina, Burundi, Cabo Verde, Eswatini, Georgia, Solomon Islands, Tanzania, Tunisia, Zambia (9)
  - Safeguards Monitoring Visits — Calendar Year
    - 2024: BEAC, Haiti (2)
  - Flexible Credit Line Limited Safeguards Procedures — Calendar Year
    - 2024: Chile, Colombia (2)
    - 2023: Morocco, Mexico (2)
    - 2022: Chile, Mexico, Peru (3)
  - Fiscal Safeguards Reviews — Calendar Year
    - 2024: Ecuador, Kenya (2)
    - 2023: Chad (1)
    - 2022: Benin (1)
- Annex III — Assessments completed and in progress by fiscal year:
  - During the period under review, 44 assessments were completed. This comprises 15 assessments conducted in FY2023, 19 assessments conducted in FY2024, and 10 assessments completed and four in progress in FY2025.
  - Fiscal Year (FY) listing (as presented):
    - FY 2025
      - 14 Completed: Ecuador, Ethiopia, The Gambia, Jordan, Lebanon, Liberia, Madagascar, Maldives, Paraguay, Sierra Leone
      - In Progress: Argentina, Democratic Republic of Congo, El Salvador, Kenya
    - FY 2024
      - 19: Armenia, Barbados, BCEAO, Comoros, Djibouti, Ghana, Guinea, Honduras, Kosovo, Malawi, Mauritania, Pakistan, Papua New Guinea, Rwanda, Sao Tome-Prince, Serbia, Seychelles, Somalia, Ukraine
    - FY 2023
      - 15: Argentina, Burundi, Cabo Verde, Egypt, Eswatini, Georgia, Jamaica, Mongolia, Namibia, North Macedonia, Solomon Islands, Sri Lanka, Tanzania, Tunisia, Zambia
    - FY 2022
      - 20: Albania, Bahamas, Bangladesh, BEAC, ECCB, Ghana, Lesotho, Malawi, Mauritania, Nepal, Nicaragua, Papua New Guinea, Paraguay, Rwanda, Samoa, Seychelles, South Africa, South Sudan, Tonga, Uzbekistan
    - FY 2021
      - 24: Afghanistan, Bosnia-Herzegovina, Democratic Republic of Congo, Costa Rica, Dominican Republic, Egypt, El Salvador, Ethiopia, Gambia, Guinea, Jordan, Kosovo, Kyrgyz Republic, Madagascar, Moldova, Montenegro, Mozambique, Nigeria, North Macedonia, Panama, Suriname, Tajikistan, Tunisia, Uganda
    - FY 2020
      - 11: Armenia, Comoros, Ecuador, Haiti, Honduras, Kenya, Liberia, Pakistan, Sao Tome-Prince, Somalia, Ukraine
    - FY 2019
      - 6: Angola, Argentina, Barbados, Malawi, Mauritania, Morocco
    - FY 2018
      - 9: BCEAO, BEAC, Ecuador, Gambia, Guinea, Jamaica, Mongolia, Seychelles, Sierra Leone
    - FY 2017
      - 13: Afghanistan, Bosnia-Herzegovina, Egypt, Guinea, Jordan, Madagascar, Moldova, Mozambique, Rwanda, Sri Lanka, Suriname, Tunisia, Vanuatu
    - FY 2016
      - 11: ECCB, Haiti, Iraq, Kenya, Kosovo, Kyrgyz Republic, Liberia, Nepal, Sao Tome-Prince, Sierra Leone, Ukraine
    - FY 2015
      - 13: Albania, Armenia, Bosnia-Herzegovina, Georgia, Ghana, Honduras, Madagascar, Morocco, Samoa, Serbia, Seychelles, Ukraine, Yemen

### Staff Resources, Workload, and Capacity
- Safeguards divisional staffing as of April 2025: management team (Division Chief and two deputies), 14 professional staff, and two staff coordinators (staffing complement largely unchanged).
- Staff engagement remained intense across core and emerging workstreams, including assessments, monitoring, FSRs, the 2022 safeguards policy review and implementation of its recommendations (e.g., regional governance forums), governance diagnostic assessments, updates to the Governance Assessment Tool, and central bank transparency code reviews.
- Monthly staff overtime averaged around 14 percent—slightly below the pandemic average of 15 percent but above the Fund target of 10 percent.
- Implementation of the 2022 safeguards policy review included the establishment and execution of regional governance forums and development of a methodology for assessing the new governance pillar; the methodology work involved one-time activities reflected in staff time during the reporting period.
- Note: FSRs are interdepartmental and resource intensive; the staff resource analysis here covers Finance Department staff only.

*Source: EXECUTIVE SUMMARY — ppea2025029 (Safeguards Assessments—2025 Update), May 2022–April 2025.*

### EXECUTIVE SUMMARY

### ppea2025029 - EXECUTIVE SUMMARY

### Overview of the Update (May 2022–April 2025)
- Period covered: May 2022 to April 2025.
- First periodic update following the 2022 Safeguards Assessments Policy Review.
- Main enhancements introduced in 2022 implemented and being rolled out: establishment of a standalone governance pillar, broader coverage of financial risks within central banks’ risk management, a defined approach for addressing Central Bank Digital Currencies (CBDCs) in assessments, strengthened modalities for Fiscal Safeguards Reviews (FSRs), and expanded outreach to member countries.
- Implementation status: enhancements are well underway.

### Safeguards Activity and Workload
- Assessments completed during the period: 44.
- Assessments in progress as of end-April 2025: 4.
- Limited safeguards procedures performed for Flexible Credit Line (FCL) arrangements: 7.
- Drivers of activity: post-COVID-19 pipeline due to surge in emergency financing during the pandemic and subsequent IMF arrangements.
- Monitoring intensity: monitoring of central bank safeguards intensified, reaching record levels in 2023 due to increased number of member countries with outstanding Fund credit.
- Risk-based streamlining: continued to yield efficiency by reducing the number of assessments required.

### Implementation of 2022 Policy Review Proposals
- Governance pillar:
  - New GELRIC framework adds a dedicated “G” pillar to the previous ELRIC components; governance assessments focus on de facto practices and oversight bodies (Board, Audit Committee, Executive Management).
  - An internal methodology for governance assessments has been developed and applied in ten pilot assessments; methodology will be updated as needed.
  - Four guiding principles emphasized: (i) alignment with safeguards policy objectives; (ii) focus on practical governance complementing legal reviews; (iii) evaluation of key decision-making bodies; (iv) contextualization within mandate, autonomy, and accountability.
- Fiscal Safeguards Reviews (FSRs):
  - FSR Guidance Note adopted in 2024 to anchor conduct and consistency of FSRs.
  - FSR scope: applicable when a member requests exceptional access and at least 25 percent of IMF resources are directed to financing of the state budget; requirement broadened to include High Combined Credit Exposure (HCCE) cases.
  - FSRs are conducted by inter-departmental teams (Fiscal Affairs, Legal, Finance Departments); outcome is a stand-alone report subject to internal review and confidentiality similar to safeguards assessments.
  - FSR follow-up and monitoring procedures introduced; two FSRs initiated under the new guidance note are currently underway.
- Financial Risk Management (FRM):
  - Policy now requires broader coverage of financial risks across the entire balance sheet (foreign and domestic operations).
  - Most central banks continue to focus mainly on foreign reserves; only a few have dedicated FRM frameworks or are in early stages.
  - Staff tailoring recommendations to capacity and maturity; internal methodology being developed for consistency.
- Central Bank Digital Currencies (CBDC):
  - Internal assessment approach developed to analyze CBDC-related risks under GELRIC: (i) risks to operations; (ii) mitigating controls; (iii) governance for design, development, issuance.
  - One assessment during the period considered CBDC relevant and applied the internal methodology.

### Key Findings and Persistent Vulnerabilities
- Overall: While some improvements noted, persistent vulnerabilities remain across central banks under safeguards purview.
- Areas of improvement:
  - External audit practices: showed improvement.
  - Financial reporting: showed improvement.
- Areas requiring attention:
  - Oversight and governance arrangements: continue to require attention despite the new governance pillar.
  - Legal reforms: remain difficult because of complex and time-consuming legislative processes.
  - Internal audit functions: face systemic capacity constraints.
  - Internal controls: need further strengthening, particularly in foreign reserves (including gold management) and emergency liquidity assistance.
- Implementation of recommendations: implementation rate of safeguards recommendations was low during the period; factors include structural nature of reforms required and some programs going off-track.
- Staff engagement: ongoing engagement with authorities to improve traction, including through technical assistance (TA).

### Outreach, Collaboration, and Capacity Building
- Outreach expanded:
  - Thematic regional governance forums held in Armenia, South Africa, and Ecuador (targeting Governors, Deputy Governors, non-Executive Board members).
  - Agendas focused on: skillsets for non-executive Board members; delegation mechanisms; audit committee design; role of board secretariats.
  - Objective: strengthen capacity to implement safeguards recommendations and disseminate good governance practices.
- Other collaboration:
  - FIN participated in FSRs and contributed to governance diagnostic assessments, central bank transparency code reviews, and TA on central bank legal reforms and governance.
  - New channels established to share examples and disseminate best practices on safeguards topics.
- Operational guidelines for central banks to build awareness of safeguards processes and leading practices are envisaged but not yet initiated due to prioritization constraints.

### Monitoring, Follow-up, and Staff Resources
- Monitoring intensified to record levels in 2023 due to more members with outstanding Fund credit.
- Follow-up mechanisms:
  - FSR Guidance Note introduces systematic follow-up and monitoring of FSR recommendations.
  - Safeguards assessment follow-up continues, with staff using TA and engagement to improve implementation.
- Staff resources:
  - FIN continues to lead safeguards work, including participation in inter-departmental FSR teams and related workstreams.

### Boxed Policy Conclusions (selected)
- GELRIC framework expands assessment to include governance as a standalone pillar.
- FSR trigger and applicability clarified and broadened to include HCCE cases; 25 percent budget financing threshold remains.
- Outreach and operational guidance to central banks intended to strengthen capacity and disseminate leading practices.
- FRM coverage broadened to entire balance sheet; internal methodologies being developed.
- CBDC risks to be assessed systematically where relevant.

*Prepared for and approved within the period covered by the update.*

*Source: EXECUTIVE SUMMARY — ppea2025029 (Safeguards Assessments—2025 Update), May 2022–April 2025.*

### 10.      During the period, the geographic distribution of safeguards assessments shifted

### ppea2025029 - 10.      During the period, the geographic distribution of safeguards assessments shifted

### Geographic distribution of safeguards assessments
- Africa (AFR) accounted for 43 percent of the assessments conducted, marking a 6 percent increase compared to the 2022 policy review period.
- The Middle East and Central Asia (MCD) region accounted for 23 percent, broadly consistent with the previous period.
- Asia Pacific (APD) contributed 11 percent of assessments (compared to 10 percent during the 2022 policy review period).
- Western Hemisphere (WHD) contributed 14 percent of assessments (compared to 21 percent during the 2022 policy review period).
- Europe (EUR) represented 9 percent of the assessments (down from 11 percent in 2022), continuing its decline since the global financial crisis.

### Monitoring activity and drivers
- Number of central banks under monitoring was 86 at end-April 2025, up from 82 at end-April 2022; monitoring had reached a record level in 2023.
- Safeguards monitoring remains an important component to follow up on outstanding recommendations and maintain awareness of central bank developments, using a risk-based methodological approach.
- Two safeguards monitoring missions were conducted during the period to address new safeguards vulnerabilities associated with the operational impacts of an IT incident and governance gaps.
- Enhanced monitoring was required due to deterioration in safeguards frameworks, delays in addressing vulnerabilities, and acute capacity constraints.
- Heightened monitoring included follow-up on safeguards-related reforms (such as legal amendments) and efforts to revive authorities' commitment—particularly in Fragile and Conflict-Affected States.
- Other vulnerabilities prompting intensified monitoring: governance gaps with suboptimal oversight arrangements; significant monetary financing of the government in breach of statutory limits; weaknesses in controls related to program monetary data reporting and currency operations.
- FIN staff, in collaboration with area departments, conducted special audits in response to uncovered irregularities or misuse risks.

### Safeguards findings — governance and oversight
- Five out of 44 central banks did not have an audit committee, resulting in an absence of oversight on audit mechanisms and central bank operations.
- Recurring governance vulnerabilities: delays in filling Board vacancies; suboptimal Board compositions that did not ensure a majority of independent non-executive members and included government officials.
- Recommendations to strengthen oversight:
  - Adopt and revise Board charters to delineate responsibilities.
  - Update Audit Committee charters to ensure independence from executive management.
  - Implement annual work plans to guarantee timely and comprehensive coverage, reporting, and follow-up on key risks.
  - Establish structured onboarding and training programs for Board members to address skills gaps.
  - Expand Audit Committees' oversight scope to cover all areas under responsibility.
- Executive management findings:
  - More than half of governance arrangements assessed as part of the new standalone governance pillar found executive management’s decision-making practices to be collaborative and well-structured.
  - Areas needing improvement: excessive concentration of powers in the Governor; bottlenecks and suboptimal delegation to internal committees and senior staff.
  - Recommendation: establish and review comprehensive delegation frameworks to define institutional responsibilities and strengthen checks and balances.
- Note: During the period, 10 safeguards assessments evaluated governance arrangements as a standalone pillar as part of the revised GELRIC framework; this coverage also incorporates earlier assessments under the previous ELRIC framework.

### External audit, legal structure, and financial reporting
- External audit:
  - All but one central bank assessed were subject to external audits conducted in accordance with International Standards on Auditing (ISA).
  - Recommendations included formalizing de facto sound practices through board-approved policies, introducing auditor rotation rules, multi-year appointments, and prioritizing technical qualifications over cost.
  - Emphasis on engaging partners with International Financial Reporting Standards (IFRS) experience and conducting quality reviews to ensure audit quality and independence.
- Legal structure and autonomy:
  - Comprehensive legal amendments were recommended in a majority of assessments; about one third required more targeted amendments.
  - Most legal recommendations anchored in program conditionality and facilitated by technical assistance.
  - Eight central banks either submitted draft amendments for Parliamentary consideration or enacted amendments in the period.
- Financial reporting:
  - Nearly 80 percent of the central banks assessed during this period apply either partial or full IFRS.
  - Assessments increasingly underscore the importance of quality disclosures.
  - Balance sheet reviews were recommended in some cases to assess potential recapitalization needs.

### Internal audit and internal controls
- Internal audit:
  - Internal audit functions face systemic capacity constraints undermining effectiveness.
  - Identified weaknesses: audit methodologies not aligned with international standards; under-staffing; limited professional certifications; insufficient expertise in IT and cybersecurity.
  - Concerns emerged about internal audit independence in some cases.
  - New Global Internal Audit Standards take effect in January 2025, increasing expectations for modernization of audit practices and emphasizing governance of internal audit functions.
- Internal controls:
  - Elevated internal control risks driven by governance arrangements, reserves management, and lending operations.
  - Key improvement areas: strengthen investment policies; enhance reserves management frameworks (e.g., establish middle-office functions); develop emergency liquidity assistance frameworks.
  - Need to unwind quasi-fiscal activities and strengthen controls and oversight over gold operations.
  - Weaknesses in compilation of program monetary data warranted recommendations for improved processes and coordination.
  - Risk management frameworks (business continuity planning and cybersecurity) are maturing but require further efforts to address vulnerabilities and enhance resilience.

### Implementation of recommendations — rates and drivers
- Implementation rate of safeguards recommendations was low during the current period, including recommendations anchored in program conditionality and MEFP and LOI commitments.
- Three key factors behind low implementation:
  - Long-term, complex reforms (legal amendments, divestment from quasi-fiscal activities, transition to IFRS) face structural, political, and coordination challenges.
  - Implementation hindered when IMF-supported programs go off-track, weakening commitment to reforms.
  - Persistent capacity constraints, especially in Low-Income Countries and Fragile and Conflict-Affected States, leading to a mismatch between support and absorptive capacity.
- Overall implementation rates (since policy inception):
  - 88 percent for recommendations under program conditionality.
  - 78 percent for other recommendations.
  - 80 percent total since inception.
- Table 1 — Implementation of Safeguards Recommendations (numbers preserved exactly as in source):
  - Recommendations issued during the period: Program Conditionality and Commitments: 32; Other: 514; Total: 546
  - Less: Recommendations not yet due, not monitored, and no longer applicable: Program Conditionality and Commitments: (2); Other: (79); Total: (81)
  - Sub-total (due recommendations): Program Conditionality and Commitments: 30; Other: 435; Total: 465
  - Less: Implemented: Program Conditionality and Commitments: 11; Other: 194; Total: 205
  - Overdue: Program Conditionality and Commitments: 19; Other: 241; Total: 260
  - Implementation rate by percentage (current review period): Program Conditionality and Commitments: 37% ; Other: 45% ; Total: 44%
  - Implementation rate by percentage (2022 review period): Program Conditionality and Commitments: 82% ; Other: 68% ; Total: 69%
  - Implementation rate by percentage (2019 review period): Program Conditionality and Commitments: 80% ; Other: 65% ; Total: 67%
  - Implementation rate by percentage (2017 review period): Program Conditionality and Commitments: 57% ; Other: 50% ; Total: 51%
  - Implementation rate by percentage (2015 review period): Program Conditionality and Commitments: 84% ; Other: 70% ; Total: 72%
  - Implementation rate by percentage (since inception): Program Conditionality and Commitments: 88% ; Other: 78% ; Total: 80%

### Misreporting risks and mitigation
- Primary objective: mitigate risks associated with program monetary data reported to the Fund; Safeguards Assessment Policy applies only to program monetary data submitted by central banks (e.g., Net International Reserves) and does not cover fiscal deficits and debt.
- Ex-ante assessments identify potential issues in program definitions and compilation procedures; staff review annual reconciliations of program monetary data against audited financial statements.
- Key recurring themes:
  - Program Data Compilation Controls: Weaknesses identified in 16 assessments, including lack of internal coordination and inadequate documentation. In two cases, capacity constraints in internal audit necessitated outsourcing verification to external auditors.
  - Technical Memorandum of Understanding (TMU) Definitions: Staff identified 11 cases where definitions did not accurately capture elements of program monetary data (issues included treatment of non-convertible currencies, non-monetary gold, foreign currency deposits of government and state-owned enterprises, letters of credit, and poor-quality assets). These issues were resolved via collaboration with area departments resulting in revised TMU definitions.
- Mitigating measures recommended where additional assurances were needed:
  - Reviews of monetary data by external or internal auditors at test dates.
  - Establishment of committees or working groups within central banks to document compilation procedures and review program monetary data.
- No instances of program monetary data misreporting were identified during the current period.
- IMF Board reviewed one case originating in the prior period (addressed in the 2022 policy review); authorities implemented remedial measures including enhancing governance and transparency, and conducting a special audit to establish extent of misreporting and provide assurances on program monetary data.

### Fiscal Safeguards Reviews (FSRs)
- Four FSRs conducted during the period; findings underscore the need to strengthen safeguards over IMF resources directed toward budget support.
- Two FSR reports were issued since 2022; two reviews were in progress at the end of the period.
- Three FSRs were first-time exercises; one was an update of a previous review focusing on past issues and recent developments.
- Key vulnerabilities in first-time reviews: weaknesses in PFM systems (including Treasury Single Account operations), shortfalls in compliance with PFM laws, budget reporting, accounting, and internal and external audit functions.
- Some remedial measures were incorporated into IMF-supported programs, for example adoption and implementation of a strategy for establishing a Treasury Single Account.

### Staff resources and workload
- Safeguards divisional staffing as of April 2025: management team (Division Chief and two deputies), 14 professional staff, and two staff coordinators (staffing complement largely unchanged).
- Staff engagement remained intense across core and emerging workstreams, including assessments, monitoring, FSRs, the 2022 safeguards policy review and implementation of its recommendations (e.g., regional governance forums), governance diagnostic assessments, updates to the Governance Assessment Tool, and central bank transparency code reviews.
- Monthly staff overtime averaged around 14 percent—slightly below the pandemic average of 15 percent but above the Fund target of 10 percent.
- Implementation of the 2022 safeguards policy review included the establishment and execution of regional governance forums and development of a methodology for assessing the new governance pillar; the methodology work involved one-time activities reflected in staff time during the reporting period.
- Note: FSRs are interdepartmental and resource intensive; the staff resource analysis here covers Finance Department staff only.

*Source: FINSA database.*

### 25.      Outreach with key stakeholders in the central banking community remains robust,

### ppea2025029 - 25.      Outreach with key stakeholders in the central banking community remains robust,

### Outreach activities and thought leadership
- Staff contributed to global discussions on governance, audit, accounting, risk management, and gold-related issues through fora aligned with the GELRIC framework, including:
  - International Operational Risk Working Group (IORWG) annual conference.
  - IAASB-IESBA Consultative Advisory Group.
  - Central Bank Audit Leadership Forum.
  - Eastern Caribbean Currency Union (ECCU) Accountants Workshop.
  - Two World Gold Council (WGC) Executive Forum workshops.
- WGC sessions emphasized gold domestic purchase programs and artisanal and small-scale mining, highlighting the importance of robust safeguards as central banks increasingly integrate gold into their reserves (see Section E).

### Global and regional fora, seminars, and participation
- High-level global governance forums:
  - Two annual global forums on central bank governance conducted in collaboration with the Hawkamah Institute for Corporate Governance.
  - A third global forum was hosted by the IMF Regional Office in Riyadh during 2025.
  - Focus areas: enhancing governance practices, board oversight and effectiveness, risks from technological innovations and Central Bank Digital Currencies (CBDCs).
- Regional safeguards seminars:
  - Ten seminars held at IMF Regional Training Institutes, including the Joint Vienna Institute, the Middle East Center for Economics and Finance, the Africa Training Institute, the Singapore Training Institute, and the Caribbean Regional Technical Assistance Center.
  - Target audience: senior technical central bank staff; topics included governance, audit arrangements, financial reporting, central bank operations, risk management, and CBDCs.
  - Over 240 participants from more than 140 central banks participated in the seminars held during the period.
- Collaboration with the World Bank’s Reserves Advisory and Management Program (RAMP):
  - Contribution to three internal audit seminars during 2022 to 2024 and an accounting workshop.
  - These events engaged leaders from roughly 30 central banks and three public institutions.
  - Audit seminars focused on proposed Global Internal Audit Standards and persistent challenges in the internal audit profession, and fostered dialogue on governance, oversight, and strategic evolution of internal audit functions.

### Advisory support and technical input
- Continued demand for safeguards staff expertise in advisory roles, particularly in:
  - Legal reforms (including contributions to LEG technical assistance on drafting amendments to central bank laws).
  - Forensic audits (development of terms of reference for forensic audits related to misuse of central bank resources).
  - Governance and risk management (presentations at two IMF Monetary and Capital Markets Department workshops).
- Additional support activities:
  - Participation in a mission evaluating a central bank’s financial position and recapitalization needs.
  - Participation in central bank transparency code reviews.

### Reporting to the Board and confidentiality / sharing of safeguards reports
- Safeguards reports remain confidential; Executive Board updated primarily through relevant country staff reports.
- Each staff report now includes a dedicated section or paragraph on safeguards matters for countries under monitoring (those with outstanding Fund credit or active arrangements), highlighting implementation status of priority safeguards recommendations and significant developments affecting central bank risk profiles.
- Sharing with external institutions:
  - In line with the Safeguards Assessments Policy, safeguards reports can be shared with the World Bank and the European Central Bank (ECB), subject to central bank consent.
  - Over this period, 29 reports were shared with the World Bank to support their fiduciary assessments related to development policy lending—an increase from previous years.
  - No requests were received from the ECB or donors in either period.

### Policy applicability and requirements (Annex I summary)
- Scope:
  - Safeguards assessments apply to members seeking financial arrangements with the IMF, with certain exceptions.
  - The policy applies to new and successor arrangements, including arrangements treated as precautionary.
  - Safeguards assessments also applied to PCIs and PSIs when members requested access to RST resources through a concurrent program (PCIs and PSIs eliminated since October 2023).
  - Safeguards assessments do not apply to financing extended through first credit tranche purchases.
- Emergency and liquidity instruments:
  - Safeguards assessment requirements apply to disbursements involving RCF, RFI, and a 6-month PLL; a commitment to a safeguards assessment is required.
  - Timing and modalities determined case-by-case; typically assessment must be completed before Executive Board approval of any subsequent arrangement to which the policy applies.
- Currency unions:
  - For members of currency unions with no autonomous national central banks, a periodic assessment cycle was established: BCEAO, BEAC, and ECCB assessed every four years.
- FCL and SLL:
  - Safeguards assessments are not conducted for members with FCL or SLL arrangements; limited safeguards procedures are conducted focused on review of central bank’s annual external audit results, including discussions with external auditors.
- Commitments and responsibilities (Table 1 highlights):
  - Central banks must cooperate with Fund staff to undergo an assessment, authorize external auditors to hold discussions with Fund staff, and provide requested information.
  - Timing: in principle, prior to Executive Board approval of a new arrangement but no later than the first program review (with instrument-specific timing provisions noted).

### Activities and assessment statistics (Annex II and III highlights)
- Annex II — Safeguards activities during May 2022–April 2025:
  - Safeguards Assessments — Calendar Year
    - 2025: Ethiopia 1
    - 2024: Ecuador, Honduras, Jordan, Lebanon, Liberia, Madagascar, Malawi, Maldives, Paraguay, Rwanda, Sierra Leone, Somalia, The Gambia (13)
    - 2023: Armenia, Barbados, BCEAO, Comoros, Djibouti, Egypt, Ghana, Guinea, Jamaica, Kosovo, Mauritania, Mongolia, Namibia, North Macedonia, Pakistan, Papua New Guinea, Sao Tome Principe, Serbia, Seychelles, Sri Lanka, Ukraine (21)
    - 2022: Argentina, Burundi, Cabo Verde, Eswatini, Georgia, Solomon Islands, Tanzania, Tunisia, Zambia (9)
  - Safeguards Monitoring Visits — Calendar Year
    - 2024: BEAC, Haiti (2)
  - Flexible Credit Line Limited Safeguards Procedures — Calendar Year
    - 2024: Chile, Colombia (2)
    - 2023: Morocco, Mexico (2)
    - 2022: Chile, Mexico, Peru (3)
  - Fiscal Safeguards Reviews — Calendar Year
    - 2024: Ecuador, Kenya (2)
    - 2023: Chad (1)
    - 2022: Benin (1)
- Annex III — Assessments completed and in progress by fiscal year:
  - During the period under review, 44 assessments were completed. This comprises 15 assessments conducted in FY2023, 19 assessments conducted in FY2024, and 10 assessments completed and four in progress in FY2025.
  - Fiscal Year (FY) listing (as presented):
    - FY 2025
      - 14 Completed: Ecuador, Ethiopia, The Gambia, Jordan, Lebanon, Liberia, Madagascar, Maldives, Paraguay, Sierra Leone
      - In Progress: Argentina, Democratic Republic of Congo, El Salvador, Kenya
    - FY 2024
      - 19: Armenia, Barbados, BCEAO, Comoros, Djibouti, Ghana, Guinea, Honduras, Kosovo, Malawi, Mauritania, Pakistan, Papua New Guinea, Rwanda, Sao Tome-Principe, Serbia, Seychelles, Somalia, Ukraine
    - FY 2023
      - 15: Argentina, Burundi, Cabo Verde, Egypt, Eswatini, Georgia, Jamaica, Mongolia, Namibia, North Macedonia, Solomon Islands, Sri Lanka, Tanzania, Tunisia, Zambia
    - FY 2022
      - 20: Albania, Bahamas, Bangladesh, BEAC, ECCB, Ghana, Lesotho, Malawi, Mauritania, Nepal, Nicaragua, Papua New Guinea, Paraguay, Rwanda, Samoa, Seychelles, South Africa, South Sudan, Tonga, Uzbekistan
    - FY 2021
      - 24: Afghanistan, Bosnia-Herzegovina, Democratic Republic of Congo, Costa Rica, Dominican Republic, Egypt, El Salvador, Ethiopia, Gambia, Guinea, Jordan, Kosovo, Kyrgyz Republic, Madagascar, Moldova, Montenegro, Mozambique, Nigeria, North Macedonia, Panama, Suriname, Tajikistan, Tunisia, Uganda
    - FY 2020
      - 11: Armenia, Comoros, Ecuador, Haiti, Honduras, Kenya, Liberia, Pakistan, Sao Tome-Principe, Somalia, Ukraine
    - FY 2019
      - 6: Angola, Argentina, Barbados, Malawi, Mauritania, Morocco
    - FY 2018
      - 9: BCEAO, BEAC, Ecuador, Gambia, Guinea, Jamaica, Mongolia, Seychelles, Sierra Leone
    - FY 2017
      - 13: Afghanistan, Bosnia-Herzegovina, Egypt, Guinea, Jordan, Madagascar, Moldova, Mozambique, Rwanda, Sri Lanka, Suriname, Tunisia, Vanuatu
    - FY 2016
      - 11: ECCB, Haiti, Iraq, Kenya, Kosovo, Kyrgyz Republic, Liberia, Nepal, Sao Tome-Prince, Sierra Leone, Ukraine
    - FY 2015
      - 13: Albania, Armenia, Bosnia-Herzegovina, Georgia, Ghana, Honduras, Madagascar, Morocco, Samoa, Serbia, Seychelles, Ukraine, Yemen

*Source: Safeguards Assessments—2025 Update*

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_Source: https://www.imf.org/-/media/files/publications/pp/2025/english/ppea2025029.pdf_