## pp032717-high-level-status-report-to-the-ieo-evaluation-of-funds-recurring-issues

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---

### EXECUTIVE SUMMARY — Introduction and Takeaways
- Purpose: high-level report documenting progress since 2014 in addressing the five recurring issues highlighted by the Independent Evaluation Office (IEO).
- Five recurring issues identified by the IEO:
  - (1) Executive Board Guidance and Oversight;
  - (2) Organizational Silos;
  - (3) Attention to Risks and Uncertainty;
  - (4) Country and Institutional Context;
  - (5) Evenhandedness.
- Scope: not a complete account of all initiatives; draws heavily from existing documents including the 2015 Seventh Periodic Monitoring Report, the 2014 Triennial Surveillance Review—Managing Director’s Action Plan, Initial Steps in Implementing the Managing Director’s Action Plan for the 2014 TSR, and The Managing Director’s Global Policy Agenda.
- Reporting cadence: Board endorsed staff prepare a separate high-level report, noting that the first staff report could be prepared within two years, followed by similar reports every five years thereafter.
- Overall conclusion: the Fund has made progress in addressing the recurring issues identified by the IEO, while acknowledging that actions to achieve related objectives remain ongoing and require continued monitoring.
- Management Implementation Plan (MIP) initiated consultation with the Evaluation Committee on merits and costs of continuing high-level reports.

### A. Executive Board Guidance and Oversight — progress and specific policy areas
- IEO finding summarized: recurring weakness in lack of clear guidance by the Executive Board on certain lending policies and policy advice on trade and capital account issues; broader concerns on Board oversight and IMF governance.
- Governance and Board processes:
  - Governance modernization post-effectiveness of the 14th General Review of Quotas; implementation of Board Reform Amendment.
  - 15th General Review of Quotas underway; timetable reset to complete the review by the Spring Meetings of 2019 and no later than the Annual Meetings of 2019.
  - Strengthened Board involvement in strategic priorities via Executive Directors’ input to the Managing Director’s Global Policy Agenda.
  - Secretary’s Department issued a revised Compendium of Executive Board Work Procedures in October 2015.
  - Minimum circulation periods:
    - Documents for formal country Board meetings remain required to meet a minimum circulation period of two weeks.
    - A four-week circulation period was implemented in June 2014 for policy and key administrative papers to be considered in formal Board meetings.
  - Standard practice since early 2016: presentation of Staff Discussion Notes (SDNs) on new issues in informal Board sessions to enhance early engagement.
- Specific policy areas and Board action:
  - 2015 Board discussion: comprehensive review of the role of trade in Fund work.
  - Capital account policy: IEO’s 2015 evaluation recognized the institutional view as a significant step; staff review of experience with the institutional view on capital flows to be discussed by the Board in December 2016.
  - Lending and sovereign debt:
    - Board approved significant reforms to the exceptional access lending framework (including removal of the systemic exemption) and to the Fund’s policy on arrears to official creditors.
    - Reform of the policy on public debt limits in Fund-supported programs.
    - Creation of the Catastrophe Containment and Relief Trust.
    - 50 percent increase in PRGT access norms and limits.

### B. Organizational Silos — integration, knowledge, and capacity development
- IEO finding summarized: insufficient integration across different parts of the IMF in some instances (e.g., TA delivery with surveillance and program work; macroeconomic with financial work; multilateral and bilateral surveillance).
- Leadership, culture and HR initiatives:
  - Leadership development framework (generated through an inclusive process between 2012 and 2014) to promote teamwork, clarify roles and behavioral competencies, and foster an open organizational culture where managers delegate, nurture innovation and risk-taking, and coach staff.
  - HR strategy under development to reinforce AIM; to be presented to the Board in March 2017.
- Institutional process improvements and integration measures:
  - Better integration and alignment of multilateral surveillance products, including the Global Policy Agenda.
  - Increased collaboration between multilateral and bilateral surveillance: enhanced review process effectiveness; linking the G-RAM and country RAMs.
  - Creation of interdepartmental groups and task forces to encourage cooperation and free exchange of ideas.
  - New reports integrating multilateral, regional, and bilateral perspectives (example: annual External Sector Reports).
  - Circulation of early drafts of the WEO, the GFSR, and the Fiscal Monitor for interdepartmental review.
  - Facilitation of staff mobility to promote cross-fertilization.
  - Revamp of the Surveillance Committee and growth in co-prepared papers across departments.
  - New SharePoint-based tool to track research projects across departments to promote collaboration and reduce duplication.
- Capacity development and surveillance synergies:
  - Following the 2014 TSR recommendation and the April 2016 Managing Director’s Global Policy Agenda, strengthened synergies in areas including revenue mobilization, GFS standards on reporting, data-gathering, inclusive growth, energy subsidy reform, social safety nets, and Islamic finance.
- STA and FAD integration with surveillance:
  - STA created the Strategy, Standards, and Review Division in 2015 to integrate STA’s data, methodological, and capacity development activities with Fund surveillance; focal division for coordination with area and functional departments.
  - An interdepartmental taskforce is developing a long-term strategy for data and statistics to integrate Fund-wide work streams on data provision by member countries, international statistical standards, capacity development, and data management.
  - FAD initiatives include launch of “how-to notes” providing policy-relevant practical advice to country teams and establishment of the Fiscal Analysis Support Team (FAST) to provide easier access to FAD databases and information.
- Institutional learning:
  - ICD created a dedicated Internal Economics Training (IET) Unit in 2014; IET developed a Structured Curriculum with courses in empirical methods, external sector assessment, fiscal, macro-financial, macro-surveillance, monetary, and statistics.
  - ICD IET program dedicated over 15 percent of its core training to new topics including inequality, gender issues, climate change, role of technology.

### Macro-financial support and mainstreaming in Article IV surveillance
- Functional departments intensified support to country teams on macro-financial issues through review processes and an initiative to mainstream macro-financial analysis in Article IV surveillance.
- Tools and training developed:
  - RES: desktop toolkit to check consistency between real sector and financial sector forecasts.
  - MCM: revamped financial toolbox, including tools to assess changes in the macro-financial environment and measure the resilience of the financial sector.
  - STA: working with teams to generate data sets to perform balance sheet analysis to explore links between the financial sector and other sectors.
  - ICD: launched a five-module course, as part of the Structured Curriculum, on key macro-financial topics.
- Implementation and coverage:
  - Management launched the integration initiative in late 2014.
  - Departments identified 24 Article IVs in 2015 with enhanced macro-financial coverage, rising to 67 reports in 2016.
  - Collaboration between SPR, MCM and country teams on topic brainstorming, tools provision, and report review is integral to the initiative.
  - The Board will discuss next Spring the Approaches to Macrofinancial Surveillance Board paper.
- Macro-financial pilots: 67 country staff reports in 2016 included macro-financial pilots.

### Knowledge management, AIM, and organizational integration
- Knowledge-sharing and organizational culture:
  - Management endorsed the Knowledge Management Working Group’s recommendation to strengthen the knowledge-sharing culture.
  - A knowledge management strategy and program are being implemented, supported by a newly created knowledge management unit.
  - Interdepartmental advisory groups support knowledge sharing among country teams and the development of Knowledge Exchange sites.
- AIM (Agile, Integrated, Member-focused) priorities and examples:
  - Fall 2015 Global Policy Agenda introduced AIM as a priority.
  - AIM examples from April 2016 Managing Director’s Global Policy Agenda:
    - Agile: broadening knowledge on migration, de-risking and the global trade slowdown; deepening analyses on structural reforms.
    - Integrated: integrated approach to assessing transition spillovers; efforts to integrate emerging issues into surveillance.
    - Member-focused: approval of the expansion of the SDR basket to include the renminbi; scaling up TA and training in low income countries.

### Attention to risks and uncertainty — institutional response, tools, and exercises
- IEO finding: Fund has in some instances provided insufficient consideration or acknowledgement of risks and uncertainty, including lack of candor and insufficient discussion of financial stability consequences.
- Risk governance and units:
  - Risk Management Unit (RMU) created in 2014 to analyze emergent risks and vulnerabilities for the Fund’s internal business framework; replaced the Advisory Committee on Risk Management.
  - RMU developed a tailored risk management framework with risk acceptance statements and key risk indicators across risk areas.
  - RMU produces regular reports; the 2015 and 2016 Risk Reports were discussed by the Executive Board.
  - Fund Risk Committee (FRC) established in 2016 to strengthen risk governance and feedback mechanisms between assessment and mitigation.
- Product and methodological changes:
  - RMU fosters development of new risk methodologies, portfolio analysis approaches, and scenario analysis; enhancements in cyber threat mitigation and monitoring under way.
  - July 2016: Board approved changes to Post Program Monitoring (PPM) policy to make it more risk based, including focusing on capacity to repay the Fund and applying quantitative analysis of risks and spillovers (e.g., using quantified scenarios).
  - Pilot exercise in 2014 to stress test the Fund’s way of doing business; a new exercise launched in October 2016 involving staff, management, and the Executive Board.
  - Interdepartmental groups created: Tail Risk Group and Spillover Taskforce.
  - ISD and 2015 Guidance Note for Surveillance improved analysis of risks and spillovers.
- Multilateral surveillance and prominent tools:
  - WEO increased attention to risks and alternative scenarios and integrated the former standalone Spillover Report since Fall 2016.
  - GFSR enhanced focus on risks and financial stability.
  - Fiscal Monitor increasingly focused on fiscal risks.
  - G-RAM: strengthened since mid-2015; circulated to the Executive Board for information; contains a time horizon, source of risks, and relative likelihood; updated regularly to guide country RAMs.
  - VE (Vulnerability Exercise): strengthened for evolving conditions, broader country coverage, and improved risk models; methodological convergence in real estate, corporate vulnerabilities, and financial sector risk assessments; adaptation of VEE elements into VE-LIC assessment for frontier economies.
- Additional methodological work and initiatives:
  - FAD paper "Analyzing and Managing Fiscal Risks – Best Practices" provided tools on fiscal risks.
  - Consultation to strengthen the debt sustainability framework for Low-Income Countries (LICs) is under way.
  - Second phase of the G20 Data Gaps Initiative began in January 2016 with enhanced focus on risk identification and spillovers.
  - SPR developed a tool to monitor disorderly market conditions.
- Ongoing analytical work:
  - Staff studied implications of exit from unconventional monetary policies for emerging markets and financial deepening (papers cited: "Emerging Market Volatility: Lessons from the Taper Tantrum," and "Rethinking Financial Deepening: Stability and Growth in Emerging Markets").
  - Supported by intensified internal training on macro-financial linkages and sharper analytical tools, financial issues have taken a more prominent role in surveillance.

### Country and institutional context, tailoring policy advice, and mission continuity
- IEO finding: Fund has sometimes provided insufficient country specificity and institutional context; needs better tailoring of policy advice to country circumstances while balancing cross-country experience.
- Steps to improve country and institutional context:
  - Periodic internal reviews and sharpened guidance on surveillance and capacity development.
  - Surveillance priorities: structural reforms, fiscal space, and emerging macro-critical issues; technical assistance widely available to support country-specific needs.
  - 2014 TSR and subsequent documents (2014 Action Plan of the Managing Director; 2015 "Initial Steps..." paper) documented progress and provided an action plan scorecard with specific advice on fiscal and structural policies.
  - 2015 Guidance Note for Surveillance emphasizes country circumstances in Article IV operational areas including risks and spillovers, and external sector assessment.
- Operationalizing structural and fiscal analysis:
  - Work to operationalize macro-structural analysis through compilation of analytical approaches and toolkits.
  - Staff guidance and cross-country analytical work for developing countries:
    - Staff Guidance Note on the Fund’s Engagement with Small Developing States.
    - Staff Guidance Note on Macroprudential Policy—Considerations for Low Income Countries.
    - Cross-country analysis in Regional Economic Outlooks.
    - Methodological Note on EBA-Lite for countries with special circumstances to adapt external sector assessments.
  - Structural reforms framework:
    - Staff note published in April 2016 set out a conceptual framework to prioritize reform measures considering income level, economic cycle position, and resource space.
    - IMF applied the framework to outline reform priorities for individual G-20 countries in July (staff note).
    - Ongoing work to operationalize the framework in surveillance, including a macrostructural toolkit.
  - Fiscal space assessment:
    - Paper on assessing fiscal space presented to the Board in June 2016, outlining considerations and indicators especially for advanced and emerging markets; revised post-Board discussion to operationalize the framework for a large set of countries in upcoming Article IV consultations.
- Emerging macro-critical issues and pilots:
  - Heads of Departments Retreat December 2015 agreed to work selectively on emerging macro-critical issues (gender, climate change, inequality) guided by country-specific macro-criticality, authorities’ views, and staff judgment.
  - Criteria and process in place: working/advisory groups, development of analytical frameworks (e.g., SDNs), selection of pilot cases, and integration into country work.
  - Interdepartmental advisory groups facilitate knowledge sharing and work with pilot country teams.
  - Mission chief tenure and handover:
    - Target mission chief tenure: three years.
    - Average mission chief tenure:
      - 2.4 years in FY 2013.
      - 2.3 years in FY 2014.
      - No subsequent change up to mid-FY 2015.
    - 2016 Risk Report: currently, one in 10 country teams have both the mission chief and all economists with less than one year of country-specific experience.
    - Departments issued guidelines and recommended best practices and began assessing staff and manager support for desk transitions.

### Box 1 — Operationalizing the Work on Emerging Macro-Critical Issues (summary)
- Criteria for topic selection (must meet all three):
  1) Material impact on macroeconomic stability, output, or welfare.
  2) Relevance for a significant share of the membership or systemic importance if limited.
  3) Amenable to change through well-defined economic policy instruments or institutional responses.
- Six topics currently being worked on: climate change, inequality, gender issues, demographics and migration, infrastructure investment, and labor markets.
- Process elements:
  - Creation of working groups or Advisory Groups to build expertise.
  - Possible hiring of outside experts and collaboration with other IFIs.
  - Development of analytical frameworks and selection of pilot cases to integrate analysis into country-specific work.
- Pilots and early operationalization:
  - Gender: 8 initial pilots, with 5 volunteers.
  - Inequality: 9 pilots, with 2 volunteers.
  - Energy/climate: 8 pilots, with 5 volunteers.
- Examples of pilot outcomes and country applications:
  - Iceland: ministry interest and requests for additional assistance on gender budgeting following Article IV consultation.
  - India: 2016 Article IV consultation included a presentation at the Ministry of Finance; working paper "Women Workers in India: Why so Few Among so Many?" received extensive media coverage.
  - Further planned gender analysis in Article IVs for Jordan, Niger, Rwanda.
  - Inequality cross-country studies forthcoming on links between gender inequality and growth, output diversification, income inequality, and human capital/productivity.
  - Other operational examples: domestic resource mobilization in Honduras; agricultural subsidy reform in Malawi; rural poverty and inclusive growth in Zambia; public tax and expenditure impacts in Togo; regional income inequalities in Poland; income polarization trends in the United States; inequality drivers and policy options in Mongolia.
  - Energy/climate pilot examples: sea level rise vulnerability in Seychelles; agriculture and infrastructure vulnerability in Zimbabwe; carbon/coal tax and trading evaluations in China; macro-fiscal climate risk framework in Sri Lanka; macro impact of natural disasters and fiscal implications in Myanmar.

### Capacity development activities and modalities
- MCM provides Technical Assistance (TA) on financial stability, Central Bank governance, Basel III implementation, and risk-based and consolidated supervision.
- FAD conducts TA missions on revenue administration, tax policy, and public financial management.
- STA delivers training and TA on data dissemination, real sector statistics, government statistics, financial sector statistics, external sector statistics, and related topics.
- LEG delivers training and TA on anti-money laundering, anti-corruption, and a number of other legal areas.
- ICD offers training to country officials on a broad range of topics—including monetary, fiscal, and financial issues—in a continued effort to respond to country-specific needs.
- The Fund has begun implementing a new approach tailored to the absorptive capacity of fragile states, with a focus on training and follow-up and results-based monitoring.
- Partnerships with donors, particularly through regional technical assistance centers and thematic trust funds, help leverage Fund capacity development to meet members’ needs.

### Evenhandedness — findings, framework, and governance links
- IEO Findings:
  - The IMF has been seen in some instances as lacking evenhandedness in its analysis or treatment of member countries.
  - Perceptions of a lack of evenhandedness are difficult to deal with.
  - Addressing the IMF’s governance deficiencies could help mitigate this perception.
  - The 2014 TSR confirmed that while there are no systematic evenhandedness issues, there is a perception among some member countries that there is an evenhandedness problem.
- Fund efforts and guidance:
  - Surveillance practices aim for the application of balanced views and advice to all members.
  - The 2015 Guidance Note for Surveillance under Article IV Consultations states that “policy advice for all members, and especially for systemic economies, should be clear, concrete, and actionable” and “for systemic economies, messages should be candid, properly reflecting their systemic implications.”
  - Managing Director’s Global Policy Agenda (April 2016) emphasizes that surveillance will focus on providing candid advice on policy setting and identifying where countries have the space to do more to reinforce growth.
- Evenhandedness framework and mechanism:
  - Board adopted the approach in “Evenhandedness of Fund Surveillance—Principles and Mechanism for Addressing Concerns.”
  - Assessment based on “inputs” (the way surveillance is conducted) rather than simply “outcomes” (policy advice).
  - Principle of “uniformity of treatment”: countries in similar circumstances should be treated similarly.
  - Examples of surveillance inputs to be adjusted and tailored to country circumstances include allocation of resources; depth of risk and spillovers analysis; analytical approaches and tools; selection of policy themes; reporting of the authorities’ views; approach to contentious issues.
  - Mechanism to assess concerns:
    - A mechanism to assess concerns reported by members on evenhandedness in surveillance has been adopted to serve as a backstop and promote better practices.
    - A dedicated mailbox to report these concerns is already operative.
    - The Evenhandedness Committee has been constituted in October 2016 and will operate under Management’s oversight.
  - Forward-looking: framework is new and untested and would need to adapt with experience; the 2019 Comprehensive Review of Surveillance would provide an opportunity for thorough evaluation.
- Governance reform and credibility:
  - Implementation of the 2010 quota and governance reform reinforces the credibility and representativeness of the Fund.
  - According to the IEO, the perception of lack of evenhandedness is rooted in the uneven distribution of decision-making power within the IMF.
  - The 2010 reform is a major step forward for IMF governance, increasing the role of dynamic EMDCs.

*High Level Status Report to the IEO Evaluation of Fund’s Recurring Issues — excerpts provided in source content.*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Introduction
- Purpose: high-level report documenting progress since 2014 in addressing the five recurring issues highlighted by the Independent Evaluation Office (IEO).
- Five recurring issues identified by the IEO: (1) Executive Board Guidance and Oversight; (2) Organizational Silos; (3) Attention to Risks and Uncertainty; (4) Country and Institutional Context; and (5) Evenhandedness.
- Scope: not a complete account of all initiatives; draws heavily from existing documents including the 2015 Seventh Periodic Monitoring Report, the 2014 Triennial Surveillance Review—Managing Director’s Action Plan, Initial Steps in Implementing the Managing Director’s Action Plan for the 2014 TSR, and The Managing Director’s Global Policy Agenda.
- Reporting cadence: Board endorsed staff prepare a separate high-level report, noting that the first staff report could be prepared within two years, followed by similar reports every five years thereafter. The MIP left open whether subsequent reports should be prepared every five years; the Evaluation Committee noted the forthcoming external evaluation of the IEO could look at monitoring mechanisms holistically to inform that decision.

### Takeaways
- Overall conclusion: the Fund has made progress in addressing the recurring issues identified by the IEO, while acknowledging that actions to achieve related objectives remain ongoing and require continued monitoring.
- The Management Implementation Plan (MIP) initiated consultation with the Evaluation Committee on the merits of continuing high-level reports, considering costs and existing monitoring mechanisms.

### A. Executive Board Guidance and Oversight
- IEO finding summarized: recurring weakness in lack of clear guidance by the Executive Board on certain lending policies and policy advice on trade and capital account issues; broader concerns on Board oversight and IMF governance.
- Progress and actions:
  - Governance modernization post-effectiveness of the 14th General Review of Quotas; implementation of Board Reform Amendment; reforms considered a major step toward reflecting the role of dynamic EMDCs.
  - 15th General Review of Quotas underway; timetable reset to complete the review by the Spring Meetings of 2019 and no later than the Annual Meetings of 2019.
  - Strengthened Board involvement in strategic priorities via Executive Directors’ input to the Managing Director’s Global Policy Agenda.
  - Secretary’s Department issued a revised Compendium of Executive Board Work Procedures in October 2015.
  - Minimum circulation periods: documents for formal country Board meetings remain required to meet a minimum circulation period of two weeks; a four-week circulation period was implemented in June 2014 for policy and key administrative papers to be considered in formal Board meetings.
  - Standard practice since early 2016: presentation of Staff Discussion Notes (SDNs) on new issues in informal Board sessions to enhance early engagement.
  - Specific policy areas:
    - 2015 Board discussion: comprehensive review of the role of trade in Fund work.
    - Capital account policy: IEO’s 2015 evaluation recognized the institutional view as a significant step; staff conducted a review of experience with the institutional view on capital flows to be discussed by the Board in December 2016.
    - Lending and sovereign debt: Board approved significant reforms to the exceptional access lending framework (including removal of the systemic exemption) and to the Fund’s policy on arrears to official creditors; reform of the policy on public debt limits in Fund-supported programs; creation of the Catastrophe Containment and Relief Trust; 50 percent increase in PRGT access norms and limits.

### B. Organizational Silos
- IEO finding summarized: insufficient integration across different parts of the IMF in some instances (e.g., TA delivery with surveillance and program work; macroeconomic with financial work; multilateral and bilateral surveillance).
- Staff- and institutional-level responses:
  - Leadership development framework (generated through an inclusive process between 2012 and 2014) to promote teamwork, clarify roles and behavioral competencies, and foster an open organizational culture where managers delegate, nurture innovation and risk-taking, and coach staff.
  - Institutional process improvements and integration measures:
    - Better integration and alignment of multilateral surveillance products, including the Global Policy Agenda.
    - Increased collaboration between multilateral and bilateral surveillance: enhanced review process effectiveness; linking the G-RAM and country RAMs.
    - Creation of interdepartmental groups and task forces to encourage cooperation and free exchange of ideas.
    - New reports integrating multilateral, regional, and bilateral perspectives (example: annual External Sector Reports).
    - Circulation of early drafts of the WEO, the GFSR, and the Fiscal Monitor for interdepartmental review.
    - Facilitation of staff mobility to promote cross-fertilization.
    - Revamp of the Surveillance Committee and growth in co-prepared papers across departments.
    - New SharePoint-based tool to track research projects across departments to promote collaboration and reduce duplication.
  - Capacity development and surveillance synergies:
    - Following the 2014 TSR recommendation and the April 2016 Managing Director’s Global Policy Agenda, strengthened synergies in areas including revenue mobilization, GFS standards on reporting, data-gathering, inclusive growth, energy subsidy reform, social safety nets, and Islamic finance.
  - STA and FAD integration with surveillance:
    - STA created the Strategy, Standards, and Review Division in 2015 to integrate STA’s data, methodological, and capacity development activities with Fund surveillance; focal division for coordination with area and functional departments.
    - An interdepartmental taskforce is developing a long-term strategy for data and statistics to integrate Fund-wide work streams on data provision by member countries, international statistical standards, capacity development, and data management.
    - FAD initiatives include launch of “how-to notes” providing policy-relevant practical advice to country teams and establishment of the Fiscal Analysis Support Team (FAST) to provide easier access to FAD databases and information.
  - Institutional learning:
    - ICD created a dedicated Internal Economics Training (IET) Unit in 2014; IET developed a Structured Curriculum with courses in empirical methods, external sector assessment, fiscal, macro-financial, macro-surveillance, monetary, and statistics.

*High Level Status Report to the IEO Evaluation of Fund’s Recurring Issues — EXECUTIVE SUMMARY*

### 18. Functional departments have intensified the support to country teams on macro-

### pp032717-high-level-status-report-to-the-ieo-evaluation-of-fund’s-recurring-issues - 18. Functional departments have intensified the support to country teams on macro-

### Macro-financial support and mainstreaming in Article IV surveillance
- Functional departments intensified support to country teams on macro-financial issues through review processes and an initiative to mainstream macro-financial analysis in Article IV surveillance.
- Tools and training developed:
  - RES: desktop toolkit to check consistency between real sector and financial sector forecasts.
  - MCM: revamped financial toolbox, including tools to assess changes in the macro-financial environment and measure the resilience of the financial sector.
  - STA: working with teams to generate data sets to perform balance sheet analysis to explore links between the financial sector and other sectors.
  - ICD: launched a five-module course, as part of the Structured Curriculum, on key macro-financial topics.
- Implementation and coverage:
  - Management launched the integration initiative in late 2014.
  - Departments identified 24 Article IVs in 2015 with enhanced macro-financial coverage, rising to 67 reports in 2016.
  - Collaboration between SPR, MCM and country teams on topic brainstorming, tools provision, and report review is integral to the initiative.
  - The Board will discuss next Spring the Approaches to Macrofinancial Surveillance Board paper.
- Macro-financial pilots: 67 country staff reports in 2016 included macro-financial pilots.

### Knowledge management, AIM, and organizational integration
- Knowledge-sharing and organizational culture:
  - Management endorsed the Knowledge Management Working Group’s recommendation to strengthen the knowledge-sharing culture.
  - A knowledge management strategy and program are being implemented, supported by a newly created knowledge management unit.
  - Interdepartmental advisory groups support knowledge sharing among country teams and the development of Knowledge Exchange sites.
- AIM (Agile, Integrated, Member-focused) priorities and examples:
  - Fall 2015 Global Policy Agenda introduced AIM as a priority.
  - HR strategy under development to reinforce AIM; to be presented to the Board in March 2017.
  - April 2016 Managing Director’s Global Policy Agenda examples:
    1) Agile: broadening knowledge on migration, de-risking and the global trade slowdown; deepening analyses on structural reforms.
    2) Integrated: integrated approach to assessing transition spillovers; efforts to integrate emerging issues into surveillance.
    3) Member-focused: approval of the expansion of the SDR basket to include the renminbi; scaling up TA and training in low income countries.

### Attention to risks and uncertainty: institutional response and tools
- IEO finding: Fund has in some instances provided insufficient consideration or acknowledgement of risks and uncertainty, including lack of candor and insufficient discussion of financial stability consequences.
- RMU and risk governance:
  - Risk Management Unit (RMU) created in 2014 to analyze emergent risks and vulnerabilities for the Fund’s internal business framework; replaced the Advisory Committee on Risk Management (which had supported implementation since 2006).
  - RMU developed a tailored risk management framework with risk acceptance statements and key risk indicators across risk areas.
  - RMU produces regular reports; the 2015 and 2016 Risk Reports were discussed by the Executive Board.
  - Fund Risk Committee (FRC) established in 2016 to strengthen risk governance and feedback mechanisms between assessment and mitigation.
- Risk tools, methodologies and product changes:
  - RMU fosters development of new risk methodologies, portfolio analysis approaches, and scenario analysis; enhancements in cyber threat mitigation and monitoring under way.
  - July 2016: Board approved changes to Post Program Monitoring (PPM) policy to make it more risk based, including focusing on capacity to repay the Fund and applying quantitative analysis of risks and spillovers (e.g., using quantified scenarios).
  - Long-term trends and uncertainty work:
    - Pilot exercise in 2014 to stress test the Fund’s way of doing business.
    - New exercise launched in October 2016 involving staff, management, and the Executive Board.
  - Interdepartmental groups created: Tail Risk Group and Spillover Taskforce.
  - ISD and 2015 Guidance Note for Surveillance improved analysis of risks and spillovers.
  - Multilateral surveillance products:
    - WEO increased attention to risks and alternative scenarios and integrated the former standalone Spillover Report since Fall 2016.
    - GFSR enhanced focus on risks and financial stability.
    - Fiscal Monitor increasingly focused on fiscal risks.
- Prominent risk tools and exercises:
  - G-RAM: strengthened since mid-2015; circulated to the Executive Board for information; contains a time horizon, source of risks, and relative likelihood; updated regularly to guide country RAMs.
  - VE (Vulnerability Exercise): strengthened for evolving conditions, broader country coverage, and improved risk models; methodological convergence in real estate, corporate vulnerabilities, and financial sector risk assessments; adaptation of VEE elements into VE-LIC assessment for frontier economies.
  - Additional methodological work:
    - FAD paper "Analyzing and Managing Fiscal Risks – Best Practices" provided tools on fiscal risks.
    - Consultation to strengthen the debt sustainability framework for Low-Income Countries (LICs) is under way.
    - Second phase of the G20 Data Gaps Initiative began in January 2016 with enhanced focus on risk identification and spillovers.
    - SPR developed a tool to monitor disorderly market conditions.
- Ongoing work on financial and macro-financial risks:
  - Staff studied implications of exit from unconventional monetary policies for emerging markets and financial deepening (papers cited: "Emerging Market Volatility: Lessons from the Taper Tantrum," and "Rethinking Financial Deepening: Stability and Growth in Emerging Markets").
  - Supported by intensified internal training on macro-financial linkages and sharper analytical tools, financial issues have taken a more prominent role in surveillance.

### Country and institutional context, tailoring policy advice, and mission continuity
- IEO finding: Fund has sometimes provided insufficient country specificity and institutional context; needs better tailoring of policy advice to country circumstances while balancing cross-country experience.
- Steps to improve country and institutional context:
  - Periodic internal reviews and sharpened guidance on surveillance and capacity development.
  - Surveillance priorities: structural reforms, fiscal space, and emerging macro-critical issues; technical assistance widely available to support country-specific needs.
  - 2014 TSR and subsequent documents (2014 Action Plan of the Managing Director; 2015 "Initial Steps..." paper) documented progress and provided an action plan scorecard with specific advice on fiscal and structural policies.
  - 2015 Guidance Note for Surveillance emphasizes country circumstances in Article IV operational areas including risks and spillovers, and external sector assessment.
- Operationalizing structural and fiscal analysis:
  - Work to operationalize macro-structural analysis through compilation of analytical approaches and toolkits.
  - Staff guidance and cross-country analytical work for developing countries:
    - Staff Guidance Note on the Fund’s Engagement with Small Developing States.
    - Staff Guidance Note on Macroprudential Policy—Considerations for Low Income Countries.
    - Cross-country analysis in Regional Economic Outlooks.
    - Methodological Note on EBA-Lite for countries with special circumstances to adapt external sector assessments.
  - Structural reforms framework:
    - Staff note published in April 2016 set out a conceptual framework to prioritize reform measures considering income level, economic cycle position, and resource space.
    - IMF applied the framework to outline reform priorities for individual G-20 countries in July (staff note).
    - Ongoing work to operationalize the framework in surveillance, including a macrostructural toolkit.
  - Fiscal space assessment:
    - Paper on assessing fiscal space presented to the Board in June 2016, outlining considerations and indicators especially for advanced and emerging markets; revised post-Board discussion to operationalize the framework for a large set of countries in upcoming Article IV consultations.
- Emerging macro-critical issues and pilots:
  - Heads of Departments Retreat December 2015 agreed to work selectively on emerging macro-critical issues (gender, climate change, inequality) guided by country-specific macro-criticality, authorities’ views, and staff judgment.
  - Criteria and process in place: working/advisory groups, development of analytical frameworks (e.g., SDNs), selection of pilot cases, and integration into country work.
  - Interdepartmental advisory groups facilitate knowledge sharing and work with pilot country teams.
  - ICD IET program dedicated over 15 percent of its core training to new topics including inequality, gender issues, climate change, role of technology.
- Mission chief tenure and handover:
  - Target mission chief tenure: three years.
  - Average mission chief tenure:
    - 2.4 years in FY 2013.
    - 2.3 years in FY 2014.
    - No subsequent change up to mid-FY 2015.
  - 2016 Risk Report: currently, one in 10 country teams have both the mission chief and all economists with less than one year of country-specific experience.
  - Departments issued guidelines and recommended best practices and began assessing staff and manager support for desk transitions.

### Box 1 — Operationalizing the Work on Emerging Macro-Critical Issues (summary)
- Criteria for topic selection (must meet all three):
  1) Material impact on macroeconomic stability, output, or welfare.
  2) Relevance for a significant share of the membership or systemic importance if limited.
  3) Amenable to change through well-defined economic policy instruments or institutional responses.
- Six topics currently being worked on: climate change, inequality, gender issues, demographics and migration, infrastructure investment, and labor markets.
- Process elements:
  - Creation of working groups or Advisory Groups to build expertise.
  - Possible hiring of outside experts and collaboration with other IFIs.
  - Development of analytical frameworks and selection of pilot cases to integrate analysis into country-specific work.
- Pilots and early operationalization:
  - Gender: 8 initial pilots, with 5 volunteers.
  - Inequality: 9 pilots, with 2 volunteers.
  - Energy/climate: 8 pilots, with 5 volunteers.
- Examples of pilot outcomes and country applications:
  - Iceland: ministry interest and requests for additional assistance on gender budgeting following Article IV consultation.
  - India: 2016 Article IV consultation included a presentation at the Ministry of Finance; working paper "Women Workers in India: Why so Few Among so Many?" received extensive media coverage.
  - Further planned gender analysis in Article IVs for Jordan, Niger, Rwanda.
  - Inequality cross-country studies forthcoming on links between gender inequality and growth, output diversification, income inequality, and human capital/productivity.
  - Examples of operational work in other areas:
    - Domestic resource mobilization in Honduras.
    - Agricultural subsidy reform in Malawi.
    - Rural poverty and inclusive growth in Zambia.
    - Public tax and expenditure impacts in Togo.
    - Regional income inequalities in Poland.
    - Income polarization trends in the United States.
    - Inequality drivers and policy options in Mongolia.
    - Energy/climate pilot examples: sea level rise vulnerability in Seychelles; agriculture and infrastructure vulnerability in Zimbabwe; carbon/coal tax and trading evaluations in China; macro-fiscal climate risk framework in Sri Lanka; macro impact of natural disasters and fiscal implications in Myanmar.

*High Level Status Report to the IEO Evaluation of Fund’s Recurring Issues — excerpts provided in source content.*

### 41. Departments are involved in capacity development activities on topical issues

### 41. Departments are involved in capacity development activities on topical issues

### Capacity development activities and modalities
- MCM provides Technical Assistance (TA) on financial stability, Central Bank governance, Basel III implementation, and risk-based and consolidated supervision.
- FAD conducts TA missions on revenue administration, tax policy, and public financial management.
- STA delivers training and TA on data dissemination, real sector statistics, government statistics, financial sector statistics, external sector statistics, and related topics.
- LEG delivers training and TA on anti-money laundering, anti-corruption, and a number of other legal areas.
- ICD offers training to country officials on a broad range of topics—including monetary, fiscal, and financial issues—in a continued effort to respond to country-specific needs.
- The Fund has begun implementing a new approach tailored to the absorptive capacity of fragile states, with a focus on training and follow-up and results-based monitoring.
- Partnerships with donors, particularly through regional technical assistance centers and thematic trust funds, help leverage Fund capacity development to meet members’ needs.

### Evenhandedness — findings and institutional response
- IEO Findings:
  - The IMF has been seen in some instances as lacking evenhandedness in its analysis or treatment of member countries.
  - Perceptions of a lack of evenhandedness are difficult to deal with.
  - Addressing the IMF’s governance deficiencies could help mitigate this perception.
  - The 2014 TSR confirmed that while there are no systematic evenhandedness issues, there is a perception among some member countries that there is an evenhandedness problem.
- Fund efforts to limit the perception of lack of evenhandedness:
  - Surveillance practices aim for the application of balanced views and advice to all members.
  - Recent actions have clarified the Fund’s approach to evenhandedness in surveillance and improved institutional governance.
- Managing Director and Board actions:
  - The 2014 Managing Director Action Plan called for progress in addressing evenhandedness and detailed how the recommendations of the 2014 TSR were to be taken forward.
  - The 2015 paper Initial Steps in Implementing the Managing Director’s Action Plan for the 2014 Triennial Surveillance Review showed progress on evenhandedness.
  - The 2014 TSR recommended developing a clearer understanding of how to gauge “evenhandedness of surveillance” by using equal risk-adjusted “inputs” to bilateral surveillance, where inputs are calibrated to country circumstances based on domestic and cross-country risks.
  - The 2015 Guidance Note for Surveillance under Article IV Consultations states that “policy advice for all members, and especially for systemic economies, should be clear, concrete, and actionable” and “for systemic economies, messages should be candid, properly reflecting their systemic implications.”
  - The Managing Director’s Global Policy Agenda (April 2016) emphasizes that surveillance will focus on providing candid advice on policy setting and identifying where countries have the space to do more to reinforce growth.

### Evenhandedness framework and mechanism
- Board adoption:
  - The Board adopted an approach following the recommendation of the 2014 TSR in the paper “Evenhandedness of Fund Surveillance—Principles and Mechanism for Addressing Concerns.”
  - The approach assesses evenhandedness based on “inputs” (the way surveillance is conducted) rather than simply “outcomes” (policy advice).
  - Principle of “uniformity of treatment”: countries in similar circumstances should be treated similarly.
- Examples of surveillance inputs to be adjusted and tailored to country circumstances:
  - (i) allocation of resources;
  - (ii) depth of risk and spillovers analysis;
  - (iii) analytical approaches and tools;
  - (iv) selection of policy themes;
  - (v) reporting of the authorities’ views;
  - (vi) approach to contentious issues; among others.
- Mechanism to assess concerns:
  - A mechanism to assess concerns reported by members on evenhandedness in surveillance has been adopted to serve as a backstop and promote better practices.
  - A dedicated mailbox to report these concerns is already operative.
  - The Evenhandedness Committee has been constituted in October 2016 and will operate under Management’s oversight.
- Forward-looking note:
  - The framework is new and untested and would need to adapt and evolve as the Fund gains experience.
  - The 2019 Comprehensive Review of Surveillance would provide the appropriate opportunity for a thorough evaluation of the principles and mechanism.

### Governance reform and credibility
- The implementation of the 2010 quota and governance reform reinforces the credibility and representativeness of the Fund.
- According to the IEO, the perception of lack of evenhandedness is rooted in the uneven distribution of decision-making power within the IMF.
- The 2010 reform is a major step forward for IMF governance, increasing the role of dynamic EMDCs.

*HIGH LEVEL STATUS REPORT TO THE IEO EVALUATION OF FUND’S RECURRING ISSUES*

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_Source: https://www.imf.org/-/media/files/publications/pp/pp032717-high-level-status-report-to-the-ieo-evaluation-of-funds-recurring-issues.pdf_