## IMF Exchange rate Policy Advice—Status of Key Performance Benchmarks (_100608a)

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---

### Overview
- Updates implementation status of Board-endorsed IEO recommendations since the first PMR in January 2008.
- Examines implementation status for two management implementation plans (MIPs): IMF and Aid to Sub-Saharan Africa and IMF Exchange Rate Policy Advice: 1999-2005.
- Reports progress on outstanding recommendations from the first PMR and notes aspects implemented from the Structural Conditionality evaluation MIP.
- Contextual points:
  - Executive Board instituted the periodic monitoring report (PMR) in January 2007; first PMR discussed in January 2008.
  - IEO has completed 14 evaluations since 2001.
  - PMR is factual documentation of follow-up to IEO recommendations and does not evaluate effectiveness of follow-up measures.

### Background and Cross-Cutting Issues
- Common messages from past IEO evaluations:
  - Need to manage institutional change within the IMF; gaps between policy decisions and follow-through (IMF and aid to SSA; multilateral surveillance).
  - Need for greater clarity about goals of IMF initiatives and better external communications (IMF and aid to SSA; IMF’s role in PRSP and PRGF; exchange rate policy evaluation; structural conditionality).
  - Need to strengthen partnerships with IFIs and donors and develop clear metrics to assess impact of IMF policy advice (fiscal adjustment, PRSPs/PRGFs, technical assistance, aid to SSA, structural conditionality).
- Board reactions highlighted:
  - IMF aid to SSA: improve transparency and communications; focus on Fund core mandate; enhance collaboration with the World Bank; clarify policy on mobilization of aid, alternative scenarios, and pro-poor and pro-growth budget frameworks.
  - Exchange rate policy advice: broadly endorse IEO conclusion that Fund effectiveness during 1999-2005 was insufficient in some aspects; call for enhancing analysis, advice, dialogue, and addressing perceptions of asymmetry; better incorporate policy spillovers into regional and bilateral surveillance and strengthen coordinating mechanisms (Surveillance Committee and the CGER).
  - Structural conditionality: support parsimony and focus on measures critical to program objectives; require rigorous justification for conditions in program documentation and staff reports.

### Summary of Implementation Status — Key Points
- PMR reports key elements of implementation status for performance benchmarks; Annex tables contain additional details.
- MIP workstreams leverage synergies with the Fund’s broader work program and the Managing Director’s Strategic Directions medium-term priorities (including deeper analysis of macro-financial linkages, exchange rates, broader bilateral surveillance, and low-income country work).

### A. IMF’s Exchange Rate Policy Advice — Highlights of Progress
- Adoption and implementation
  - 2007 Decision on Bilateral Surveillance adopted (PIN No. 07/69) and being implemented.
  - Interim Guidance Note to staff on the 2007 Decision issued in June 2007.
  - Additional guidance on operational aspects informally discussed by the Board in July 2008 and published in August 2008.
  - Updated Surveillance Guidance Note expected after Board discussion of the Triennial Surveillance Review (TSR).
- Observed results and challenges
  - Progress in enhancing focus of surveillance and attention to exchange rate issues.
  - Difficulties with candor and clarity on external stability and exchange rate issues, including promoting evenhandedness.
  - “Ad hoc consultations” proposed where a member may not be observing a Principle or where its exchange rate may be fundamentally misaligned.
- CGER and analytical work
  - CGER priorities: assess performance of past CGER predictions and improve current methodology.
  - Work underway to expand CGER to low-income countries and producers of exhaustible resources; preliminary versions expected for the Spring of 2009.
  - Emphasis on departmental analytical work on exchange rates increased; Table A.2 summarizes recent Selected Issues Papers on exchange rate-related issues.
- Financial sector and mission participation
  - MCM’s participation in Article IV missions increased to about 60 missions in FY2008.
  - Following reprioritization amid resource constraints, level of mission participation expected to decline in FY2009.
  - Targeted training on financial sector issues for area departments and country desks/mission chiefs to maintain required mission team skills and expertise.
  - Decline expected to 45-50 consultations in FY09 (as noted in Table 1 entry).
- Reviews and Board discussions
  - TSR discussed by the Executive Board on September 26, 2008 (PIN No. 08/133); draft Statement of Surveillance Priorities for 2008-11 includes “exchange rate analysis and external stability risks” as one of four operational priorities.
  - Review of Exchange Arrangements, Restrictions, and Controls completed in 2007; informal Board seminar on Classification of Exchange Rate Arrangements held in April 2008.
  - Review of Data Provision to the Fund completed in May 2008.

### Table 1 — Status of Key Performance Benchmarks (selected items preserved verbatim)
- Adopt the 2007 Decision on Bilateral Surveillance
  - Decision adopted (Public Information Notice (PIN) No. 07/69) and being implemented.
- Revise Surveillance Guidance Note to reflect 2007 Surveillance Decision
  - Interim Guidance Note to staff was issued in June 2007.
  - Guidance on Operational Aspects of the Decision issued in July 2008 and published in August 2008 http://www.imf.org/external/np/pp/eng/2008/080408.pdf.
  - Updated Surveillance Guidance Note to be issued after Board discussion of the TSR.
- Conduct Review of the Stability of the System of Exchange Rates
  - Review to be completed in FY2009.
- Expand and improve CGER work (including refining methodologies and expanding it to key low-income countries and producers of exhaustible resources)
  - Priority in the CGER work program has been given to assessing the performance of past CGER predictions and improving the current methodology.
  - Work is also underway on expanding CGER to LICs and producers of exhaustible resources.
  - Preliminary versions of these methodologies are expected for the Spring of 2009.
- Develop surveillance agendas, seeking input from authorities
  - Surveillance agendas are prepared for all countries alongside the Article IV cycle.
- Develop initiatives to increase MCM participation in Article IV missions
  - MCM participation in Article IV missions increased to about 60 consultations in FY08.
  - A decline is expected in FY09 (45-50 consultations), but ongoing training on financial sector issues targeted to country desks and mission chiefs should help ensure that mission teams keep the right mix of skills and expertise.
- Conduct Review of Exchange Arrangements, Restrictions, and Markets
  - The Review was split in two. The Review of Exchange Arrangements, Restrictions, and Controls was completed in 2007.
  - An informal Board seminar on the Classification of Exchange Rate Arrangements was held in April 2008; a further Board discussion of classification issues, based on supplementary information, may take place later in 2008 if requested by Directors.
- Conduct Review of Data Provision to the Fund
  - Review completed in May 2008. Details are in the Annex.
- Conduct Triennial Surveillance Review
  - Board discussion for the TSR was held on September 26, 2008 (Public Information Notice No. 08/133).

### Selected Issues Papers on Real Exchange Rate Issues (coverage: July 2007 to September 2008)
- List of country/theme entries (date and paper title preserved exactly), including but not limited to:
  - South Africa — Jul. 2007 — I. Exchange Rate Volatility and Inflation Targeting: International Experience and Implications for South Africa
  - Arab Republic of Egypt — Nov. 2007 — II. External Competitiveness and the Real Exchange Rate in Egypt
  - Kingdom of Lesotho — Nov. 2007 — II. Assessing Lesotho’s Real Exchange Rate and Competitiveness
  - Myanmar — Nov. 2007 — I. Modernizing the Exchange Rate System
  - Sri Lanka — Nov. 2007 — II. Is Sri Lanka’s External Competitiveness of Concern?
  - ... (coverage continues through)
  - The Gambia — Sep. 2008 — I. External Stability and Competitiveness in The Gambia

### Implementation Status: Fund and Aid to Sub-Saharan Africa / Low-Income Countries (LICs)
- Role clarification and program design
  - Board clarified policy in July 2007 discussions on program design and aid and in October 2007 discussions on the IMF’s role in the PRS process and collaboration with donors.
  - Chapeau paper on “The Role of the Fund in LICs” discussed by the Board in July 2008 (PIN No. 08/125); Directors considered the proposed mission statement useful, suggested better reflection of instrument diversity for LICs, and underscored collaboration with the international community to support the Millennium Development Goals.
- Specific papers and actions
  - Fiscal Policy Response to Scaled-Up Aid and Role of the Fund in Aid Inflows: Board discussed July 2007 (PIN No. 07/83); AFR strengthening analysis on scaled-up aid implications and contributing to a UN-led MDG Africa Initiative.
  - The Role of the Fund in the PRSP and Donor Coordination Processes and The IMF’s Communications Strategy discussed (PIN No. 07/130); Directors emphasized alignment of communications with Fund-approved policies.
  - Follow-up to the Malan Report: Joint Management Action Plan (JMAP) to improve Bank-Fund collaboration presented October 2007 and being implemented.

### Structural conditionality in IMF-supported programs
- Operational Guidance Note on Conditionality (OGN)
  - Revised in July 2008 to emphasize parsimony and criticality; revisions improve program documentation linking program goals, strategies, and conditionality. An inter-departmental contact group set up in February 2008 developed these revisions.
- Annual reporting and monitoring
  - First annual report on the application of structural conditionality issued to the Board for information in July 2008; provides new data for 2005-07 and finds overall number of conditions unchanged relative to IEO evaluation, but conditions now more concentrated in IMF core and shared areas of expertise.
- Status of structural conditionality benchmarks (from Table 3)
  - Inter-departmental contact group set up in February; input to MIP and OGN revisions.
  - Revised OGN circulated to the Board for information in July 2008; published on IMF external website.
  - System to track goals and strategies and links to conditions put in place in July 2008.
  - First annual monitoring report circulated to the Board for information in July 2008; published on IMF external website.
  - Availability on IMF external website on track for completion by end-2008.

### Outstanding recommendations from the last PMR (Section D) — Key findings and status
- TSR and candor on risks
  - TSR finds about 60 percent of staff reports present the short-term economic outlook, including risks, in a substantiated way.
  - Close to three-quarters of reports offered a well-articulated, medium-term scenario, but fewer thorough discussions of risks surrounding this baseline.
  - Draft Statement of Surveillance Priorities for 2008-11 calls for refining tools to provide clear early warnings and more systematic analysis of major risks (including, where appropriate, high-cost tail risks).
- Human Resource policy on staff mobility
  - Progress impeded by recent downsizing and restructuring.
  - Data: 47 A9-A15 staff and 46 B-level staff from area departments volunteered to leave the Fund (amounting to a turnover ratio of 9 percent and 33½ percent, respectively).
  - Internal job market was frozen during downsizing; HRD anticipates substantial internal mobility; task force on enhanced career development resumed work.
- Fiscal adjustment evaluation and PSIA
  - FAD issued guidance note in January 2004 on presenting size, pattern, and composition of fiscal adjustment; led to more careful assessments in staff reports.
  - Elimination of the PSIA Unit in FAD reduced resources devoted to PSIA; stand-alone PSIA missions no longer feasible.
  - Fund will rely on work from other development agencies, particularly the World Bank.
- FSAP evaluation and focus
  - MCM’s Review of the FSAP scheduled for FY2010 to assess evolution and quality.
  - Current FSAP analyses focus on vulnerability issues, stress tests, regulatory issues, systemic liquidity and crisis management; World Bank leads integration of developmental issues.
- Fund Technical Assistance (TA)
  - Board paper "Enhancing the Impact of Fund Technical Assistance" outlines reforms: better integration with surveillance and lending, introduction of performance indicators, better costing, and stronger partnerships with donors.
  - Directors encouraged exploring ex post evaluations of internally financed TA; external evaluations for donor-financed TA to continue.
  - Review of Regional TA Centers (RTACs) scheduled for FY2010.

- Outstanding recommendations and implementation status (from Table 4)
  - Monitor candor on risks and political economy issues: TSR reports on candor.
  - Introduce measures to address excessive staff mobility: introduction impeded by downsizing; to be carefully examined and targeted.
  - Conduct periodic follow-up on external vulnerabilities: TSR provides assessment.
  - Assess fiscal adjustment and protection of social spending; incorporate costs of social safety nets: FAD continues support; reliance on other agencies increases.
  - Introduce external evaluations for TA: donor-financed TA evaluations continue externally; RTAC review scheduled for FY2010.
  - Establish systematic procedures to feed lessons into TA program: TA being organized primarily as projects starting in May 2008.
  - Conduct assessments of vulnerability and development issues in financial sector (FSAP): FSAPs emphasize vulnerability issues; Board review in FY2010.
  - Establish whether FSAP quality has improved over time: Review scheduled for FY2010 will assess evolution.

### Conclusions (Section E) and next steps
- No new remedial actions proposed at this time.
- All key performance benchmarks related to the MIPs covered in this report have either been met or are on track for timely completion.
- Most outstanding recommendations from the previous PMR were met as noted in Section D.
- Elimination of FAD’s PSIA Unit and refocusing of Fund activities has increased reliance on analysis provided by other agencies.
- Following downsizing and restructuring, measures to address excessive staff mobility will be carefully examined and targeted in the coming year.
- Next PMR will review status of performance benchmarks listed in Table 5 and any other MIPs for which sufficient time has elapsed following Board feedback on the MIP.

- Performance Benchmarks to be Reviewed in the Next PMR (from Table 5)
  1. Revise Surveillance Guidance Note to reflect 2007 Surveillance Decision and guidance on its implementation
  2. Conduct Review of the Stability of the System of Exchange Rates
  3. Review system on Classification of Exchange Rate Arrangements
  4. Expand and improve CGER work (including refining methodologies and expanding it to key low-income countries and producers of exhaustible resources)

*Source: IMF content unit "_100608a - 14.      Key performance benchmarks have been implemented (Table 2)."*

### 1.  IMF Exchange rate Policy Advice—Status of Key Performance Benchmarks...................  8

### 1.  IMF Exchange rate Policy Advice—Status of Key Performance Benchmarks...................  8

### Overview
- The report updates implementation status of Board-endorsed IEO recommendations since the first PMR in January 2008.
- The PMR examines implementation status for two management implementation plans (MIPs): IMF and Aid to Sub-Saharan Africa and IMF Exchange Rate Policy Advice: 1999-2005.
- The PMR also reports progress on outstanding recommendations from the first PMR and touches on aspects implemented from the Structural Conditionality evaluation MIP.
- Key contextual points:
  - The Executive Board instituted the periodic monitoring report (PMR) in January 2007.
  - The first PMR was discussed in January 2008.
  - The IEO has completed 14 evaluations since inception in 2001 covering topics including exchange rate policy advice and aid to Sub-Saharan Africa.
  - The PMR is factual documentation of follow-up to IEO recommendations and does not evaluate effectiveness of follow-up measures.

### Background and Cross-Cutting Issues
- Common messages from past IEO evaluations (as summarized in the source):
  - Need to manage institutional change within the IMF; gaps noted between policy decisions and follow-through (IMF and aid to SSA; multilateral surveillance).
  - Need for greater clarity about goals of IMF initiatives and better external communications (IMF and aid to SSA; IMF’s role in PRSP and PRGF; exchange rate policy evaluation; structural conditionality).
  - Need to strengthen partnerships with IFIs and donors and to develop clear metrics to assess impact of IMF policy advice (fiscal adjustment, PRSPs/PRGFs, technical assistance, aid to SSA, structural conditionality).
- Board reactions highlighted in the source:
  - IMF aid to SSA: Directors concurred on improved transparency and communications; focus on Fund core mandate; improve collaboration with development partners, particularly the World Bank; clarify policy on mobilization of aid, alternative scenarios, and pro-poor and pro-growth budget frameworks.
  - Exchange rate policy advice: Directors broadly endorsed IEO conclusion that during 1999-2005 the Fund was not as effective as needed in some aspects; called for enhancing analysis, advice, and dialogue and addressing perceptions of asymmetry; urged better incorporation of policy spillovers into regional and bilateral surveillance and strengthening coordinating mechanisms (Surveillance Committee and the CGER).
  - Structural conditionality: Directors supported parsimony and focus on measures critical to achieving program objectives; required rigorous justification for conditions in program documentation and staff reports.

### Summary of Implementation Status — Key Points
- The PMR reports key elements of implementation status for performance benchmarks; Annex tables contain additional details.
- Workstreams in MIPs leverage synergies with the Fund’s broader work program and the Managing Director’s Strategic Directions medium-term priorities (including deeper analysis of macro-financial linkages, exchange rates, broader bilateral surveillance, and low-income country work).

### A. IMF’s Exchange Rate Policy Advice — Highlights of Progress
- Adoption and implementation:
  - The 2007 Decision on Bilateral Surveillance (updates the 1977 Decision on Surveillance over Exchange Rate Policies) has been adopted (PIN No. 07/69) and is being implemented.
  - An Interim Guidance Note to staff on the 2007 Decision was issued in June 2007.
  - Additional guidance on operational aspects was informally discussed by the Executive Board in July 2008 and published in August 2008.
  - An updated Surveillance Guidance Note is expected to be issued after the Board discussion of the Triennial Surveillance Review (TSR).
- Observed results and challenges:
  - Progress in enhancing focus of surveillance and strengthening attention to exchange rate issues.
  - Difficulties related to candor and clarity on external stability and exchange rate issues, including promoting evenhandedness.
  - To address evenhandedness issues, “ad hoc consultations” were proposed where a member may not be observing a Principle or where its exchange rate may be fundamentally misaligned.
- CGER and analytical work:
  - CGER work program priorities: assess performance of past CGER predictions and improve current methodology.
  - Work underway to expand CGER to low-income countries and producers of exhaustible resources; preliminary versions of these methodologies are expected for the Spring of 2009.
  - Emphasis on analytical work on exchange rates at the departmental level has increased; Table A.2 in the source provides a summary of recent Selected Issues Papers on exchange rate-related issues.
- Financial sector and mission participation:
  - MCM’s participation in Article IV missions increased to about 60 missions in FY2008.
  - Following reprioritization amid resource constraints, level of mission participation expected to decline in FY2009.
  - Targeted training on financial sector issues for area departments and country desks/mission chiefs to maintain required mission team skills and expertise.
  - Decline expected to 45-50 consultations in FY09 (as noted in Table 1 entry).
- Reviews and Board discussions:
  - The Triennial Surveillance Review (TSR) was discussed by the Executive Board on September 26, 2008 (Public Information Notice No. 08/133); the draft Statement of Surveillance Priorities for 2008-11 includes “exchange rate analysis and external stability risks” as one of four operational priorities.
  - Review of Exchange Arrangements, Restrictions, and Controls was completed in 2007; an informal Board seminar on Classification of Exchange Rate Arrangements was held in April 2008 with possible further Board discussion later in 2008 if requested by Directors.
  - Review of Data Provision to the Fund completed in May 2008. Details are in the Annex.

### Table 1 — IMF Exchange rate Policy Advice: Status of Key Performance Benchmarks (as reported)
- Adopt the 2007 Decision on Bilateral Surveillance
  - Decision adopted (Public Information Notice (PIN) No. 07/69) and being implemented.
- Revise Surveillance Guidance Note to reflect 2007 Surveillance Decision
  - Interim Guidance Note to staff was issued in June 2007.
  - Guidance on Operational Aspects of the Decision issued in July 2008 and published in August 2008 http://www.imf.org/external/np/pp/eng/2008/080408.pdf.
  - Updated Surveillance Guidance Note to be issued after Board discussion of the TSR.
- Conduct Review of the Stability of the System of Exchange Rates
  - Review to be completed in FY2009.
- Expand and improve CGER work (including refining methodologies and expanding it to key low-income countries and producers of exhaustible resources)
  - Priority in the CGER work program has been given to assessing the performance of past CGER predictions and improving the current methodology.
  - Work is also underway on expanding CGER to LICs and producers of exhaustible resources.
  - Preliminary versions of these methodologies are expected for the Spring of 2009.
- Develop surveillance agendas, seeking input from authorities
  - Surveillance agendas are prepared for all countries alongside the Article IV cycle.
- Develop initiatives to increase MCM participation in Article IV missions
  - MCM participation in Article IV missions increased to about 60 consultations in FY08.
  - A decline is expected in FY09 (45-50 consultations), but ongoing training on financial sector issues targeted to country desks and mission chiefs should help ensure that mission teams keep the right mix of skills and expertise.
- Conduct Review of Exchange Arrangements, Restrictions, and Markets
  - The Review was split in two. The Review of Exchange Arrangements, Restrictions, and Controls was completed in 2007.
  - An informal Board seminar on the Classification of Exchange Rate Arrangements was held in April 2008; a further Board discussion of classification issues, based on supplementary information, may take place later in 2008 if requested by Directors.
- Conduct Review of Data Provision to the Fund
  - Review completed in May 2008. Details are in the Annex.
- Conduct Triennial Surveillance Review
  - Board discussion for the TSR was held on September 26, 2008 (Public Information Notice No. 08/133).

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2008/_100608a.pdf*

### 14.      Key performance benchmarks have been implemented (Table 2). The following

### Key performance benchmarks have been implemented (Table 2)

### Implementation highlights and Board discussions
- The recent chapeau paper on The Role of the Fund in Low-Income Countries took stock of the work at the Fund on LICs over the last four years and outlined a comprehensive approach for Fund engagement; the Board discussed the chapeau paper in July 2008 (Public Information Notice No. 08/125).  
  - Most Directors considered the proposed mission statement—affirming that the Fund aims to help LICs achieve the macroeconomic and financial stability needed to raise growth and reduce poverty—outlines useful guiding principles for the Fund’s engagement in LICs.  
  - Directors suggested the mission statement should better reflect that different instruments and approaches are sometimes required when working with LICs.  
  - Directors underscored that effective collaboration with the international community will help ensure the Fund’s work contributes to the attainment of the Millennium Development Goals.  
  - Directors looked forward to the follow-up paper laying out how the Fund’s work on LICs will be advanced.
- The Board discussed Fiscal Policy Response to Scaled-Up Aid and Role of the Fund in Aid Inflows and Impact on the Design of Fund-supported Programs (Executive Board discussion July 2007; PIN No. 07/83).  
  - Directors noted the papers provide important guidance for Fund engagement in LICs and stressed the need to integrate the proposals with other ongoing work to have a comprehensive operational framework on LICs.  
  - AFR is strengthening analysis and policy advice on scaled-up aid scenarios, contributing to a UN-led MDG Africa Initiative; staff reports and selected issues papers provide assessments of scaled-up aid implications.
- The Board discussed The Role of the Fund in the PRSP and Donor Coordination Processes and The IMF’s Communications Strategy (PIN No. 07/130).  
  - The donor coordination paper clarifies parameters of the Fund’s involvement with LICs in the PRSP and donor collaboration processes and in supporting Millennium Development Goals.  
  - The communications strategy aims to build understanding and support for the IMF’s role and reform agenda, integrate communications with operations, raise impact of materials, and rebalance outreach efforts; these were broadly endorsed by the Executive Board.  
  - Directors underscored the importance of ensuring communication efforts with LIC members are closely aligned with policies approved by the Fund.
- Follow-up to the Malan Report: A Joint Management Action Plan to improve Bank-Fund collaboration was presented to the Board in October 2007 and is being implemented to translate identified good-practice approaches into standard practices.

### Status of key performance benchmarks (summarized from Table 2)
- Prepare paper on The Role of the Fund in Managing Aid Inflows and Impact on the Design of Fund-supported Programs:  
  - Policy guidance on managing aid flows clarified at the July 2007 Board discussion of program design and aid. The Board discussed the chapeau paper “The Role of the Fund in LICs” in July 2008, which included a comprehensive work program on LIC-related issues.
- Prepare analysis of Fiscal Policy Response to Scaled-Up Aid:  
  - Executive Board discussed the paper in July 2007.
- Prepare paper on The Role of the Fund in the PRSP and Donor Coordination Processes:  
  - Issues addressed in the paper on the IMF’s role in the PRS process and collaboration with donors.
- Prepare joint management implementation plan as follow-up to Malan Report:  
  - A Joint Management Action Plan to improve Bank-Fund collaboration was presented to the Board in October 2007.
- Conduct 2010 Review of PRGF:  
  - Review to be prepared as planned.

### Structural conditionality in IMF-supported programs (Section C)
- Operational Guidance Note on Conditionality (OGN):  
  - Revised in July 2008 to emphasize rigorously applying parsimony and criticality when designing conditionality in Fund arrangements.  
  - Revisions also made to improve program documentation to clearly establish links between program goals, strategies, and conditionality. An inter-departmental contact group set up in February 2008 developed these revisions.
- Annual reporting and monitoring:  
  - The first annual report on the application of structural conditionality was issued to the Board for information in July 2008; it provides new data for the period 2005-07 and finds the overall number of conditions has remained unchanged relative to the findings of the IEO evaluation, but conditions are now more concentrated in the IMF’s core and shared areas of expertise.

### Status of structural conditionality benchmarks (summarized from Table 3)
- Creation of inter-departmental contact group:  
  - Contact group set up in February; provided inputs in the development of the MIP and revisions to the OGN.
- Revise OGN on conditionality:  
  - Revised OGN circulated to the Board for information in July 2008; published on the IMF’s external website.
- Modifications to the MONA database / Put in place a system to track goals and strategies and its links to conditions:  
  - System put in place in July 2008.
- First annual monitoring report:  
  - First annual report on the application of conditionality circulated to the Board for information in July 2008; published on the IMF’s external website.
- Availability in IMF external website:  
  - On track for completion by end-2008.

### Outstanding recommendations from the last PMR (Section D)
- TSR and candor on risks:  
  - The TSR reports on whether staff reports contain greater candor on macroeconomic risks and enhanced assessment of external vulnerabilities.  
  - TSR finds about 60 percent of staff reports present the short-term economic outlook, including risks, in a substantiated way. Close to three-quarters of reports offered a well-articulated, medium-term scenario, but fewer thorough discussions of risks surrounding this baseline. The draft Statement of Surveillance Priorities for the IMF for 2008-11 calls for refining tools to provide clear early warnings and more systematic analysis of major risks (including, where appropriate, high-cost tail risks).
- Human Resource policy on staff mobility:  
  - Progress impeded by recent downsizing and restructuring. Sufficient data not yet available to analyze staff mobility since the internal job market was frozen during downsizing. Due to oversubscription of volunteers during downsizing, HRD anticipates substantial internal mobility. Specifically, 47 A9-A15 staff and 46 B-level staff from area departments volunteered to leave the Fund (amounting to a turnover ratio of 9 percent and 33½ percent, respectively). The internal job market will be critical in the coming year. A task force on enhanced career development has resumed work to provide concrete proposals; introduction of measures to address excessive mobility will be carefully examined and very targeted.
- Fiscal adjustment evaluation and PSIA:  
  - FAD issued a guidance note in January 2004 on presenting size, pattern, and composition of fiscal adjustment; this led to more careful assessments in staff reports. No formal assessment of these analyses has been conducted or is scheduled in the immediate FAD work program. Elimination of the Poverty and Social Impact Analysis (PSIA) Unit in FAD has reduced resources devoted to PSIA; stand-alone PSIA missions will no longer be feasible. The Fund will continue to rely on work from other development agencies, particularly the World Bank. FAD, within a reduced budget envelope, continues to support area departments’ analysis of fiscal adjustment issues; results discussed in staff reports and selected issues papers.
- FSAP evaluation and focus:  
  - MCM’s Review of the FSAP scheduled for FY2010 will take stock of FSAP evolution and assess whether quality has improved. Current FSAP analyses focus significantly on vulnerability issues, including stress tests, regulatory issues, systemic liquidity and crisis management. The World Bank leads integration of developmental issues into FSAPs. Recent FSAPs apply new analytical methodologies and sophisticated tools.
- Fund Technical Assistance (TA):  
  - The Board paper Enhancing the Impact of Fund Technical Assistance outlines reforms to increase TA effectiveness, including better integration with surveillance and lending, introduction of performance indicators (including revisions to the TA Information Management System), better costing, and stronger partnerships with donors through fundraising. Directors encouraged exploring ex post evaluations of internally financed TA by units not providing the TA directly. External evaluations for donor-financed TA will continue under the Fund’s TA Evaluation Program. A review of Regional TA Centers (RTACs) is scheduled for FY2010, reporting on external evaluations for individual RTACs undertaken since FY2005.
- Outstanding recommendations and implementation status (summarized from Table 4):  
  - Monitor candor on risks and political economy issues: TSR reports on candor.  
  - Introduce measures to address excessive staff mobility: Introduction impeded by downsizing; to be carefully examined and targeted.  
  - Conduct periodic follow-up on external vulnerabilities: TSR provides assessment.  
  - Assess fiscal adjustment and protection of social spending; incorporate costs of social safety nets: FAD continues support; reliance on other agencies increases.  
  - Introduce external evaluations for TA: Evaluations for donor-financed TA will continue externally; RTAC review scheduled for FY2010.  
  - Establish systematic procedures to feed lessons into TA program: TA expected to become more systematic through a unified TA management approach; starting in May 2008, TA being organized primarily as projects.  
  - Conduct assessments of vulnerability and development issues in financial sector (FSAP): FSAPs emphasize vulnerability issues, quantitative stress tests, regulatory environment, systemic liquidity and crisis management; World Bank leads developmental integration; Board review in FY2010.  
  - Establish whether FSAP quality has improved over time: Review scheduled for FY2010 will assess evolution.

### Conclusions (Section E) and next steps
- No new remedial actions are proposed at this time.  
- All key performance benchmarks related to the MIPs covered in this report have either been met or are on track for timely completion.  
- Most outstanding recommendations from the previous PMR were met as noted in Section D.  
- The elimination of FAD’s PSIA Unit and refocusing of Fund activities has increased reliance on analysis provided by other agencies.  
- With completion of the recent downsizing and restructuring exercise, measures to address excessive staff mobility will be carefully examined and targeted in the coming year.  
- The next PMR will review the status of the performance benchmarks listed in Table 5, along with any other MIPs for which sufficient time has elapsed following the Board’s feedback on the MIP.

- Performance Benchmarks to be Reviewed in the Next PMR (from Table 5):  
  1. Revise Surveillance Guidance Note to reflect 2007 Surveillance Decision and guidance on its implementation  
  2. Conduct Review of the Stability of the System of Exchange Rates  
  3. Review system on Classification of Exchange Rate Arrangements  
  4. Expand and improve CGER work (including refining methodologies and expanding it to key low-income countries and producers of exhaustible resources)

*Source: IMF content unit "_100608a - 14.      Key performance benchmarks have been implemented (Table 2)."*

### 5. Conduct 2010 Review of PRGF

### 5. Conduct 2010 Review of PRGF

### Proposed Decision and Performance Benchmarks
- The Executive Board supports the conclusions in Paragraph 17 of the Periodic Monitoring Report on the Implementation Status of Board-Endorsed IEO Recommendations (PMR).
- The Executive Board approves the performance benchmarks to be reviewed in the next Periodic Monitoring Report set out in Table 5 of the PMR.

### Implementation Status: Exchange Rate Policy Advice (IEO Recommendations, 1999–2005)
- General outcome: adoption and implementation of the 2007 Decision on Bilateral Surveillance.
- I. Rules of the Game and Guidance to Staff
  - I.1: Decision adopted and being implemented.
  - I.2: Practical policy guidance actions and status:
    - a. Revised Surveillance Guidance Note (by end 2007; related guidance by October 2007). Guidance on operational aspects of the 2007 Surveillance Decision issued in July 2008 and published in August 2008. Updated Surveillance Guidance Note to be issued after Board discussion of the TSR.
    - b. Tentative review of the stability of the system of exchange rates in 2009. Review expected to be completed in FY2009.
    - c. Expand and improve CGER work (refine methodologies and expand to key low income countries and producers of exhaustible resources). Priority given to assessing performance of past CGER predictions and improving methodology. Preliminary versions expected for the Spring of 2009.
    - d. Knowledge dissemination: coordinated training plan to be developed by INS and PDR in 2008; information repository and training materials work proceeding and expected to be completed in the summer of 2008.
- I.3: Dialogue with authorities and staff incentives:
  - Surveillance agendas are prepared for all countries.
  - MCM participation in Article IV missions increased to about 60 consultations in FY08; a decline is planned in FY09 (40-50 missions).
  - Managing Director’s Strategic Directions paper signals an IMF more critical in assessments and more assertive in communicating concerns.

- II. Implementing Existing Policy Guidance
  - II.1: Exchange regime classification:
    - Guidance on operational aspects issued in July 2008 and published in August 2008. Review of Exchange Arrangements, Restrictions, and Controls completed in 2007. Informal Board seminar on Classification held in April 2008; further Board discussion may take place later in 2008 if requested.
    - Training by MCM on foreign exchange regime classification is being prepared.
  - II.2: Back-up analytic work for regime advice:
    - Guidance on expectations for exchange rate assessments in Article IV included in operational guidance.
    - Review of stability of the system of exchange rates expected to be completed in FY2009.
  - II.3: Exchange rate level assessment and CGER:
    - CGER expansion and methodology improvement ongoing; PDR working on real exchange rate benchmarks for oil exporting countries. Selected Issues Papers on exchange rate topics produced (see coverage).
  - II.4: Data provision for surveillance:
    - Review of data provision completed in May 2008. Directors noted approach largely effective but cited wide variance in staff handling; endorsed clarifying guidance to staff on steps when concerns arise about Article VIII, Section 5 compliance (PIN No. 08/60).
  - II.5: Incorporating spillovers into surveillance:
    - Theme received renewed emphasis in refocusing process and TSR. Managing Director’s Strategic Directions paper outlines initiatives to integrate a multilateral perspective in bilateral surveillance.

- III. Management of Work on Exchange Rates
  - Strengthened role of the Surveillance Committee and CGER to ensure focus and integration of global perspectives into Article IV consultations, especially in systemically important cases.
  - No departmental reorganization; ongoing initiatives to increase MCM participation in Article IV missions.

- IV. Confidentiality and Executive Board Oversight
  - No new initiatives planned pending discussion of Board’s Ad Hoc Committee on Confidential Information.
  - Directors emphasized management’s responsibility to provide the Executive Board with all information needed for surveillance while balancing confidentiality.

- V. Facilitating Multilateral Policy Coordination
  - Continued use of multilateral consultation vehicle.
  - Fund plays role in facilitating dialogue with Financial Stability Forum, Bank for International Settlements, standard-setting bodies, national authorities, and in coordinating with SWFs on best practices.

### Selected Issues Papers on Real Exchange Rate Issues (Coverage: July 2007 to September 2008)
- South Africa — Jul. 2007 — I. Exchange Rate Volatility and Inflation Targeting: International Experience and Implications for South Africa
- Arab Republic of Egypt — Nov. 2007 — II. External Competitiveness and the Real Exchange Rate in Egypt
- Kingdom of Lesotho — Nov. 2007 — II. Assessing Lesotho’s Real Exchange Rate and Competitiveness
- Myanmar — Nov. 2007 — I. Modernizing the Exchange Rate System
- Sri Lanka — Nov. 2007 — II. Is Sri Lanka’s External Competitiveness of Concern?
- Bulgaria — Nov. 2007 — II. An Assessment of Bulgaria’s External Stability Risks
- Burkina Faso — Dec. 2007 — II. Assessing Competitiveness in Burkina Faso
- Algeria — Jan. 2008 — II. Estimating the Equilibrium Real Exchange Rate in Algeria
- ECCU — Jan. 2008 — I. Assessing Exchange Rate Competitiveness in the Eastern Caribbean Currency Union
- Ecuador — Jan. 2008 — I. Estimation of the Equilibrium Real Exchange Rate for Ecuador
- France — Jan. 2008 — I. Recent French Export Performance: Is There a Competitiveness Problem?
- India — Jan. 2008 — I. Competitiveness and Exchange Rate Policy
- Islamic Rep. of Afghanistan — Jan. 2008 — III. The Exchange Rate and the Conduct of Monetary Policy in Afghanistan
- Israel — Jan. 2008 — I. Israel’s External Competitiveness: Assessing the Real Exchange rate
- Papua New Guinea — Jan. 2008 — III. Papua New Guinea: Export Performance and Competitiveness
- Republic of Montenegro — Jan. 2008 — D. Competitiveness of Montenegro’s Tourism Sector
- Greece — Mar. 2008 — I. Competitiveness and Saving-Investment Balance: An Update
- Jordan — Apr. 2008 — I. Assessment of the Level of the Exchange Rate
- Kingdom of Netherlands — Apr. 2008 — I. Maintaining Competitiveness in the Global Economy: Dutch Export Performance
- Republic of Lithuania — Apr. 2008 — I. Methodologies for Current Account Assessment
- New Zealand — Apr. 2008 — II. The Impact of Commodity Prices on New Zealand’s Equilibrium REER: Some Insights from GEM
- The State of Eritrea — Apr. 2008 — I. Exports and Competitiveness
- Republic of Croatia — May 2008 — B. Current Account Sustainability
- Guatemala — May 2008 — II. Real Equilibrium Exchange Rate and Competitiveness of Guatemala
- Thailand — May 2008 — II. Global Volatility, Exchange Rates in Asia and the Thai Foreign Exchange Market
- WAEMU — May 2008 — I. External Stability of the WAEMU; II. Determinants of Export Performance and Competitiveness
- Senegal — Jun. 2008 — I. Senegal—Assessment of the REER and External Competitiveness
- Romania — Jun. 2008 — I. Romania’s Exchange Stability Risks
- Mauritius — Jun. 2008 — I. Assessing the External Competitiveness of Mauritius
- Burundi — Jun. 2008 — II. Assessing External Competitiveness in Burundi
- Ethiopia — Jul. 2008 — III. External Stability and Competitiveness in Ethiopia
- Gabon — Jul. 2008 — I. External Competitiveness and Diversification in Gabon
- Morocco — Jul. 2008 — II. Assessment of Morocco’s Real Exchange Rate
- Saudi Arabia — Jul. 2008 — Box I.1. Empirical Evidence on Exchange Rate Pass-through
- CEMAC — Jul. 2008 — III. External Stability and Exchange Rate Assessment in an Oil-dependent Developing Region
- The Gambia — Sep. 2008 — I. External Stability and Competitiveness in The Gambia

### Implementation Status: Fund and Aid to Sub-Saharan Africa (IEO Recommendations)
- A. Role clarification and program design
  - Board clarified policy in July 2007 discussions on program design and aid and in October 2007 discussions on the IMF’s role in the PRS process and collaboration with donors.
  - A chapeau paper on “The Role of the Fund in LICs” was discussed by the Board in July 2008.
- A.2–A.7 (Aid inflows, PSIA, fiscal responses, expenditure composition)
  - Policies clarified during July 2007 and October 2007 Board discussions.
  - A JMAP to improve Bank-Fund collaboration—presented to the Board in October 2007—is being implemented.
- B. Monitoring, evaluation, and PRGF review
  - Directors welcomed establishing transparent mechanisms for monitoring and evaluating implementation of clarified policy guidance.
  - Review guidance note on ex-post assessments not in immediate work program (limited use; only one EPA (Kenya) undertaken since May 2007 (Ghana)).
  - 2010 Review of PRGF is on track.
- C. Resident representatives, mission chiefs, and local donor/civil society interactions
  - Issue addressed in June and October 2007 Board meetings on communication strategy and the IMF’s role in the PRS process and donor collaboration.
  - No expansion of resident representative program in the medium term budget.
- D. Communications and consistency
  - Directors noted need for improved and more realistic Fund communications; issues addressed in June 2007 Board discussion of the IMF’s communication strategy.
  - Directors supported greater clarity in external relations on what the Fund can and cannot do in LIC work and stepped-up internal communications.

*Source: _100608a - 5. Conduct 2010 Review of PRGF (IMF document pages excerpt).*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2008/_100608a.pdf_