## _040808

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---

### IEO recommendations and Board reaction — summary of key findings
- IEO report findings echo aspects of the 2005 Conditionality Review: evidence of a substantive shift in the composition of structural conditionality towards Fund core areas and narrower program coverage.
- IEO argued conditionality may have covered areas not critical to Fund-supported program goals, implying scope to strengthen parsimony and criticality in the 2002 Conditionality Guidelines (CG).
- Six categories of IEO recommendations:
  - policy review (numbers and focus of structural conditions);
  - program and conditionality design;
  - cooperation with the World Bank in non-core areas;
  - development of a monitoring and evaluation framework;
  - Board documentation and information;
  - IMF outreach activities.
- Key IEO recommendations (verbatim as in source):
  - Clarify what is expected in terms of numbers and focus of structural conditions, including the introduction of a notional cap per program year.
  - Identify the goals of each program and set structural conditions (SC) that contribute significantly to these goals; the expectation is that conditions should pertain to core areas of Fund responsibility. Structural benchmarks should be discontinued.
  - Ensure the Fund plays a subsidiary role to that of the World Bank in setting SC in areas where the latter has primary responsibility; Board guidance is required in non-core critical areas if World Bank cooperation is unlikely to materialize.
  - Develop a framework for monitoring and evaluation linking conditions to reforms and specified goals, and improve and make public the MONA database.
  - Make program documentation explicit about the objectives being supported by the Fund and how the measures being proposed would help achieve these objectives; in the case of PRGFs, a roadmap of reform for the length of the program is needed.
  - Intensify outreach efforts to clarify how structural conditions are set and by whom.
- Executive Board reaction:
  - Broad agreement with IEO emphasis on parsimony and criticality.
  - Did not support specific recommendations on: the notional cap on number of structural conditions, elimination of structural benchmarks, and a subsidiary role to the World Bank in non-core areas.
  - Majority preferred achieving parsimony by focusing on criticality and requiring rigorous justification for conditions.

### Board-endorsed follow-up principles and staff commitments
- Under the 2002 Conditionality Guidelines (CG), program-related conditions will be established on measures that are:
  - (i) critical for achieving the goals of the program,
  - (ii) critical for monitoring program implementation,
  - (iii) necessary for implementing specific provisions of the Articles of Agreement or policies adopted under them.
- Parsimony requires setting program-related conditions at the minimum necessary to achieve the above three categories.
- Staff will:
  - Propose changes to the Operational Guidance Note (OGN) to highlight the importance of a clear and thorough justification of the criticality of SC—covering to the extent possible the life of the program.
  - Assess the need for additional changes to the OGN to highlight parsimony and criticality while minimizing subjectivity (including dealing with donor-driven conditionality and conditions introduced at the request of country authorities).
  - At pre-brief meetings, propose the program strategy necessary to achieve program goals and indicate anticipated SC to the extent possible.
  - Strengthen justification of SC in briefing papers and Board documents; link SC to program goals and strategies and anchor future SC discussions in originating program documents.
  - For PRGF arrangements, require a roadmap describing sequencing and linkage of conditions to stated program goals.

### Board positions on contested recommendations (explicit)
- Not supported by Board: set a notional cap on number of structural conditions per program year.
- Not supported by Board: restrict SC to core IMF responsibility only.
- Not supported by Board: discontinue use of structural benchmarks.
- Supported or accepted with clarifications: clarify expected numbers/focus of SC via parsimony/criticality; improve links among goals, strategies, and conditions; develop MONA links and disclosure; improve program documentation including roadmaps for PRGFs.
- Outreach: some Directors supported greater outreach but many emphasized clearer program documents as main vehicle.

### Implementation plan — deliverables and dates
- Deliverable 1: Creation of inter-departmental contact group — February 2008
- Deliverable 2: Revise OGN on conditionality — July 2008
- Deliverable 3: Modifications to the MONA database:
  - Put in place a system to track goals and strategies and its links to conditions — July 2008
  - First annual monitoring report — August 2008
  - Availability in IMF external website — End-2008

### Inter-departmental contact group role and proposed practices
- Contact group composition: representatives from area departments, PDR and LEG, and representatives from key functional departments (FAD, MCM, and RES).
- Emphasized objectives:
  - Achieve greater parsimony and criticality in setting conditionality.
  - Improve program documentation via explicit links between program goals, strategies, and conditionality.
- Proposed operational steps:
  - Program-related conditions to be established only on measures meeting the three CG criteria (i, ii, iii above).
  - Staff to propose policy strategy at pre-brief stage and indicate prospective SC; briefing paper approved by management to elaborate rationale.
  - Require clear and full justification of the criticality of SC in briefing papers and program documents—covering, to the extent possible, the life of the program—describing sequencing and linkages with program goals and strategies.
  - Use of an appendix table (best practice example to be added to the OGN) as a way of describing links; appendix not required and excluded from usual word count limits.
  - When possible, staff should attempt to quantify the impact of SC implementation on the macroeconomic framework, recognizing limitations ex ante.
  - All UFR Board documents will present justification of SC at approval and when new conditions are introduced during reviews; expansions of SC scope outside the originating reform framework must be justified in staff reports.
  - Programs of longer duration may define SC at later stages but within the specified reform framework; program documents should reflect and justify any redefinition during reviews (e.g., due to revised PRSP or unforeseen developments).

### Monitoring, MONA enhancements, and disclosure
- MONA enhancements:
  - Enhance MONA to cover documentation of conditionality in Board papers, including descriptions of links between goals and strategies.
  - Make a qualitative assessment of these linkages during conditionality reviews.
  - Produce summary statistics on conditionality and their documentation on an annual basis for circulation to the Board (information only) and review officers.
  - Make the MONA database available on the Fund’s external website for staff reports in the public domain.
  - Provide annual updates of the MONA database on the Fund’s external website shortly after the annual report with summary statistics on the application of SC in Fund-supported programs is issued.
- Monitoring deliverables and timing:
  - First annual report (August 2008) will provide an update of application of structural conditionality as of end-2007, extending by three years the programs and reviews covered by the IEO report.
  - Information regarding the link between program goals, strategies, and structural conditions will be reported in the annual report to be issued in calendar year 2009.
- Knowledge dissemination and Bank-Fund collaboration (JMAP):
  - Limit knowledge dissemination to initiatives already in progress, including implementation of the Joint Management Action Plan (JMAP) to enhance Bank-Fund collaboration.
  - Implement JMAP to strengthen Bank-Fund collaboration and improve the knowledge base for implementing critical reforms.
  - Engage jointly in country-level discussions of work programs to guide Fund and Bank operational work.
  - Country teams in both institutions are expected to agree on instruments, macro-critical sectoral issues, and the specific knowledge inputs needed from the other institution to prepare operational work.

### Documentation practices and OGN revision
- Contact group will review and propose OGN changes to:
  - highlight the importance of clear and thorough justification of SC criticality;
  - clarify links between goals and strategies;
  - assess need for additional guidance on parsimony, criticality, donor-driven conditionality, and conditions requested by authorities.
- Revised OGN will:
  - include language consistent with the 2002 CG and Board-endorsed approach;
  - include a best practice example of an appendix table (appendix excluded from word count limits);
  - be circulated to the Board for information and posted on the PDR website.
- Internal assessment note:
  - A qualitative assessment of staff reports approved in 2004–05–60 staff reports were evaluated; this assessment did not find that the existence of a text box improved clarity of reform framework in terms of links between goals and strategies and supporting SCs.

### Costs and resource implications
- One-time resource costs amount to US$75,000, largely associated with the revision of the OGN and enhancing the MONA database; annual monitoring costs are small ($10,000).
- The inter-departmental contact group will recommend changes to the OGN before mid-2008 that could strengthen parsimony and criticality, and serve to improve program documentation along the lines discussed in this MIP.
- The cost of the revision to the OGN and preparatory work is estimated at $30,000 in FY2009.
- To implement the MONA enhancements, the cost in IT expenses is estimated at $35,000 in FY2009. This includes putting in place a system to track goals and strategies and their links to conditionality.
- The preparation of an annual monitoring report and making available the MONA database on the external website is expected to cost an additional $10,000 per year.

### Conclusion
- The implementation plan builds on prior efforts since CG adoption and aims to incorporate Board-endorsed IEO recommendations, focusing on parsimony through criticality and rigorous justification.
- Key components and timing:
  - inter-departmental contact group — February 2008;
  - revised OGN — July 2008;
  - MONA modifications, first monitoring report — August 2008;
  - MONA availability on IMF external website — End-2008.
- The revised OGN and MONA changes will be consistent with Board guidance and the 2002 CG; details to be finalized after the contact group meetings.

*Source: Implementation plan for Board-endorsed recommendations arising from the IEO Evaluation of Structural Conditionality in IMF-Supported Programs (text as provided).*

### 1.      This paper presents an implementation plan for Board-endorsed

### _040808 - 1.      This paper presents an implementation plan for Board-endorsed

### IEO recommendations and Board response — summary of key findings
- IEO report findings echo aspects of the 2005 Conditionality Review: evidence of a substantive shift in the composition of structural conditionality towards Fund core areas and narrower program coverage.
- IEO argued conditionality may have covered areas not critical to Fund-supported program goals, implying scope to strengthen parsimony and criticality in the 2002 Conditionality Guidelines (CG).
- Six categories of IEO recommendations:
  - policy review (numbers and focus of structural conditions);
  - program and conditionality design;
  - cooperation with the World Bank in non-core areas;
  - development of a monitoring and evaluation framework;
  - Board documentation and information;
  - IMF outreach activities.
- Key IEO recommendations (verbatim as in source):
  - Clarify what is expected in terms of numbers and focus of structural conditions, including the introduction of a notional cap per program year.
  - Identify the goals of each program and set structural conditions (SC) that contribute significantly to these goals; the expectation is that conditions should pertain to core areas of Fund responsibility. Structural benchmarks should be discontinued.
  - Ensure the Fund plays a subsidiary role to that of the World Bank in setting SC in areas where the latter has primary responsibility; Board guidance is required in non-core critical areas if World Bank cooperation is unlikely to materialize.
  - Develop a framework for monitoring and evaluation linking conditions to reforms and specified goals, and improve and make public the MONA database.
  - Make program documentation explicit about the objectives being supported by the Fund and how the measures being proposed would help achieve these objectives; in the case of PRGFs, a roadmap of reform for the length of the program is needed.
  - Intensify outreach efforts to clarify how structural conditions are set and by whom.
- Executive Board reaction:
  - Broad agreement with IEO emphasis on parsimony and criticality.
  - Did not support specific recommendations on: the notional cap on number of structural conditions, elimination of structural benchmarks, and a subsidiary role to the World Bank in non-core areas.
  - Majority preferred achieving parsimony by focusing on criticality and requiring rigorous justification for conditions.

### Board-endorsed follow-up principles and staff commitments
- Under the 2002 Conditionality Guidelines (CG), program-related conditions will be established on measures that are:
  - (i) critical for achieving the goals of the program,
  - (ii) critical for monitoring program implementation,
  - (iii) necessary for implementing specific provisions of the Articles of Agreement or policies adopted under them.
- Parsimony requires setting program-related conditions at the minimum necessary to achieve the above three categories.
- Staff will:
  - Propose changes to the Operational Guidance Note (OGN) to highlight the importance of a clear and thorough justification of the criticality of SC—covering to the extent possible the life of the program.
  - Assess the need for additional changes to the OGN to highlight parsimony and criticality while minimizing subjectivity (including dealing with donor-driven conditionality and conditions introduced at the request of country authorities).
  - At pre-brief meetings, propose the program strategy necessary to achieve program goals and indicate anticipated SC to the extent possible.
  - Strengthen justification of SC in briefing papers and Board documents; link SC to program goals and strategies and anchor future SC discussions in originating program documents.
  - For PRGF arrangements, require a roadmap describing sequencing and linkage of conditions to stated program goals.

### Board positions on contested recommendations (explicit)
- Not supported by Board: set a notional cap on number of structural conditions per program year.
- Not supported by Board: restrict SC to core IMF responsibility only.
- Not supported by Board: discontinue use of structural benchmarks.
- Supported or accepted with clarifications: clarify expected numbers/focus of SC via parsimony/criticality; improve links among goals, strategies, and conditions; develop MONA links and disclosure; improve program documentation including roadmaps for PRGFs.
- Outreach: some Directors supported greater outreach but many emphasized clearer program documents as main vehicle.

### Implementation plan — deliverables and dates (as presented)
- Deliverable 1: Creation of inter-departmental contact group — February 2008
- Deliverable 2: Revise OGN on conditionality — July 2008
- Deliverable 3: Modifications to the MONA database:
  - Put in place a system to track goals and strategies and its links to conditions — July 2008
  - First annual monitoring report — August 2008
  - Availability in IMF external website — End-2008

### Inter-departmental contact group role and proposed practices
- Contact group composition: representatives from area departments, PDR and LEG, and representatives from key functional departments (FAD, MCM, and RES).
- Emphasized objectives:
  - Achieve greater parsimony and criticality in setting conditionality.
  - Improve program documentation via explicit links between program goals, strategies, and conditionality.
- Proposed operational steps:
  - Program-related conditions to be established only on measures meeting the three CG criteria (i, ii, iii above).
  - Staff to propose policy strategy at pre-brief stage and indicate prospective SC; briefing paper approved by management to elaborate rationale.
  - Require clear and full justification of the criticality of SC in briefing papers and program documents—covering, to the extent possible, the life of the program—describing sequencing and linkages with program goals and strategies.
  - Use of an appendix table (best practice example to be added to the OGN) as a way of describing links; appendix not required and excluded from usual word count limits.
  - When possible, staff should attempt to quantify the impact of SC implementation on the macroeconomic framework, recognizing limitations ex ante.
  - All UFR Board documents will present justification of SC at approval and when new conditions are introduced during reviews; expansions of SC scope outside the originating reform framework must be justified in staff reports.
  - Programs of longer duration may define SC at later stages but within the specified reform framework; program documents should reflect and justify any redefinition during reviews (e.g., due to revised PRSP or unforeseen developments).

### Monitoring, MONA, and disclosure
- Establish a framework within MONA to monitor links between goals, reforms, and structural conditionality.
- Issue annual updates (Board information) on the application of SC.
- Make data in MONA available on the Fund external website—only for staff reports that are in the public domain.
- First annual report (August 2008) will provide an update of application of structural conditionality as of end-2007, extending by three years the programs and reviews covered by the IEO report; information regarding the link between program goals, strategies, and structural conditions will be reported in the annual report to be issued in calendar year 2009.

### Documentation practices and OGN revision
- Contact group will review and propose OGN changes to:
  - highlight the importance of clear and thorough justification of SC criticality;
  - clarify links between goals and strategies;
  - assess need for additional guidance on parsimony, criticality, donor-driven conditionality, and conditions requested by authorities.
- Revised OGN will:
  - include language consistent with the 2002 CG and Board-endorsed approach;
  - include a best practice example of an appendix table (appendix excluded from word count limits);
  - be circulated to the Board for information and posted on the PDR website.
- Note from internal assessment: a qualitative assessment of staff reports approved in 2004–05–60 staff reports were evaluated; this assessment did not find that the existence of a text box improved clarity of reform framework in terms of links between goals and strategies and supporting SCs.

### Conclusion and resource implications (as presented)
- The implementation plan builds on prior efforts since CG adoption and aims to incorporate Board-endorsed IEO recommendations, focusing on parsimony through criticality and rigorous justification.
- Key components: inter-departmental contact group (February 2008); revised OGN (July 2008); MONA modifications, first monitoring report (August 2008), and MONA availability on IMF external website (End-2008).
- The revised OGN and MONA changes will be consistent with Board guidance and the 2002 CG; details to be finalized after the contact group meetings.

*Source: Implementation plan for Board-endorsed recommendations arising from the IEO Evaluation of Structural Conditionality in IMF-Supported Programs (text as provided).*

### 7.      A framework for monitoring (within MONA) the links between goals, strategies,

### _040808 - 7.      A framework for monitoring (within MONA) the links between goals, strategies,

### Monitoring framework and MONA enhancements
- The current system for monitoring structural conditionality (MONA database) will be enhanced to cover the documentation of conditionality in Board papers; e.g., the inclusion of a description of the links between goals and strategies.
- A qualitative assessment of these linkages will be made during conditionality reviews.
- Summary statistics on conditionality and their documentation will be produced on an annual basis for circulation to the Board (information only) and review officers.
- The MONA database will be made available on the Fund’s external website for staff reports in the public domain.
- Annual updates of the MONA database will be made available in the Fund’s external website shortly after the annual report with summary statistics on the application of SC in Fund-supported programs is issued.

### Knowledge dissemination and Bank-Fund collaboration (JMAP)
- Knowledge dissemination will be limited to initiatives already in progress, including the implementation of the Joint Management Action Plan (JMAP) to enhance Bank-Fund collaboration.
- Work is underway to implement the JMAP to strengthen Bank-Fund collaboration to achieve an improved knowledge base for implementing critical reforms.
- A central element of JMAP is to engage jointly in country-level discussions of work programs to guide Fund and Bank operational work.
- Country teams in both institutions are expected to agree on instruments, macro-critical sectoral issues, and the specific knowledge inputs needed from the other institution to prepare operational work.

### Estimated costs
- One-time resource costs amount to US$75,000, largely associated with the revision of the OGN and enhancing the MONA database; annual monitoring costs are small ($10,000).
- The inter-departmental contact group will recommend changes to the OGN before mid-2008 that could strengthen parsimony and criticality, and serve to improve program documentation along the lines discussed in this MIP.
- The cost of the revision to the OGN and preparatory work is estimated at $30,000 in FY2009.
- To implement the MONA enhancements, the cost in IT expenses is estimated at $35,000 in FY2009. This includes putting in place a system to track goals and strategies and their links to conditionality.
- The preparation of an annual monitoring report and making available the MONA database on the external website is expected to cost an additional $10,000 per year.

*Source: _040808 - 7.      A framework for monitoring (within MONA) the links between goals, strategies,*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2008/_040808.pdf_