## _120209a

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### Background and mandate
- G-20 Leaders in Pittsburgh (September 2009) launched a “framework for strong, sustainable, and balanced growth.”
- G-20 members committed to: adopt medium-term policies to achieve strong, sustainable, and balanced global growth while maintaining fiscal responsibility and sustainability, increase growth potential and job creation, and avoid asset price bubbles and unsustainable global financial flows.
- The Fund was asked to assist the mutual assessment process by providing “analysis of how the G-20’s respective national and regional policy frameworks fit together” and to “…develop a forward-looking analysis of whether policies pursued by individual G-20 countries are collectively consistent with more sustainable and balanced trajectories for the global economy.”

### Nature and scope of the mutual assessment process
- Time horizon and submissions:
  - G-20 members agreed to share medium-term (next 3–5 years if possible) national and regional policy frameworks, plans, and projections in an agreed template.
- Fund analytical responsibilities:
  - identifying the inconsistencies and incoherence of national assumptions in G-20 submissions;
  - analyzing the multilateral compatibility of country submissions;
  - analyzing the aggregate impact of national policies on global economic prospects;
  - identifying additional policy commitments that might be needed to reach G-20 objectives.
- Qualitative and quantitative coverage:
  - Contribution will be both quantitative and qualitative, covering short-term and medium-term aspects, including macro-financial reforms, regulatory capital and liquidity cushion requirements, and frameworks for handling systemically-important institutions, markets and instruments.
  - Short-term policy issues with longer-term implications (e.g., size and timing of exit from fiscal stimulus, bank recapitalization) will be considered.

### Three-round delivery plan (staff outputs and timing)
- Round 1 (spring/April 2010):
  - Fund staff—led by the Research Department with area and functional departments—will prepare a report for Deputies and Finance Ministers and Central Bank Governors in April 2010.
  - The report will contain the Fund staff’s forward-looking assessment (next 3–5 years) of global economic prospects conditional upon G-20 national policy frameworks and plans, indicate policy issues or gaps, and possibly propose alternative policy scenarios for exploration.
- Round 2 (post-April outcome):
  - Staff will provide more concrete analysis of how medium-term global prospects could be enhanced through collective policy actions.
  - G-20 Deputies will develop a menu of policy options for Finance Ministers and Central Bank Governors and subsequently for Leaders at the June 2010 summit.
- Round 3 (refinement by end-August leading to November 2010 summit):
  - After initial phase, G-20 members would refine mutual assessment and policy recommendations.
  - Fund staff would provide a refined and updated analysis to G-20 members by end-August, possibly based on G-20 country updates.
  - G-20 Deputies would prepare a revised mutual assessment and policy recommendations for Leaders at their summit in November 2010.

### Operational stages (Box 1)
- Stage I — Assessing individual G-20 submissions:
  - G-20 country desks receive input from country authorities by end-January, including policy plans and medium-term macroeconomic projections.
  - Desks assess coverage and internal consistency, including comparison with the January WEO update.
  - A 2-week window in early February for clarifying open questions with G-20 country authorities.
- Stage II — Assessing multilateral consistency:
  - Staff will construct two global scenarios:
    - a “raw” global scenario aggregating country submissions directly (provided sufficient data);
    - a globally consistent “base case” scenario adjusting countries’ projections to remedy inconsistencies (e.g., different oil prices, interest rates, external demand) and imposing an adding up constraint on countries’ current account projections.
  - Staff will assess whether additional policy adjustments are necessary to reach stated growth objectives and ensure financial stability.
- Stage III — Policy recommendations:
  - Staff will draft an initial assessment using the “base case” scenario, focusing on multilateral ramifications of inconsistencies and initial suggestions for additional measures (April).
  - Following the Spring Meetings, staff will explore alternative scenarios that could help achieve the G-20’s growth objectives.

### Role of other international institutions
- Fund staff will draw on expertise from other organizations as appropriate:
  - FSB on financial policies;
  - ILO on labor market policies;
  - WTO on trade policies;
  - OECD and UNCTAD where appropriate;
  - World Bank to advise on progress in promoting development and poverty reduction as part of rebalancing global growth.

### Implications for the Fund: legal basis, relation to surveillance, and resources
- Legal basis and voluntariness:
  - The engagement is best regarded as technical advice provided under Article V, Section 2 (b), authorizing the Fund to provide technical or financial services “upon request.” The essential quality is voluntariness for both Fund and member.
  - For the initiative to be classified as multilateral surveillance (Article IV, Section 3), the Fund would have to initiate, design, and control the process and could require members to engage and provide necessary information.
- Interaction with Fund multilateral products and Article IV:
  - WEO and GFSR are Fund multilateral products based on independent projections, analysis, and assessments of Fund staff and management as discussed and concluded by the Board.
  - Fund inputs to the mutual assessment will draw upon and benefit from WEO and GFSR and will rely on existing WEO infrastructure during aggregation and multilateral consistency checks.
  - The G-20 process is separate and distinct from Article IV consultations, though they should complement each other; Article IV schedules largely have to be taken as given during the first round.
- Resource implications:
  - New work includes additional submissions to the Research Department, greater coordination across departments, new systems to assess cross-country consistency of financial sector policies, and additional interaction with authorities.
  - Staff’s highly tentative estimate: resource costs for the mutual assessment process in the first year could require additional full-time equivalents in the single digits, with a lesser burden once the annual process is established.
  - Current staff sense: additional needs can be met by reallocating staff and filling vacancies.

### Framework for Executive Board involvement and oversight
- Proposed Board actions:
  - The Executive Board would endorse the overall framework for the delivery of technical advice to the G-20 members under the mutual assessment process, as specified in this paper.
  - When staff’s assessments are sent to the G-20 members (for the April, June, and November meetings), these assessments would be sent to the Board at the same time.
  - Subsequently, staff would present these assessments to the Executive Directors in an informal briefing, ahead of the Ministerial meetings.
  - The Executive Board would be briefed on the outcome of the G-20 Ministerial meetings as well as the Leaders’ June and November Summits.
  - The Executive Board will review the experience with the implementation of the framework after one year.
  - Fund staff’s assessments would also be shared with the IMFC once these have been sent to the G-20 to keep the IMFC informed about the G-20 process.
- Rationale:
  - Board involvement along these lines would help preserve the G-20 members’ ownership of the mutual assessment process.
  - More intrusive Board involvement (discussing staff analyses before they are sent to the G-20) could reduce G-20 ownership.

### Indicative Fund timetable for the Mutual Assessment Process (actions and timing)
- Completion and submission of template – countries to submit national policy frameworks and plans to Fund staff, and share with others.
  - End-January, if possible
- Fund staff interaction with G-20 countries – a two-week period to clarify submissions to the Fund staff.
  - Mid-February
- Fund staff completes analysis of country frameworks and submits an initial report to Deputies, Finance Ministers and Central Bank Governors prior to the meeting in April.
  - Mid-February-April
- Informal briefing to the Board after the Fund staff's report is submitted to the G-20 members but prior to the Ministers' and Governors' meeting in April.
- Fund staff produces policy scenarios based on Finance Ministers' decisions taken in April and provides more concrete analysis of how medium-term objectives could be reached.
  - April-June
- Informal briefing to the Board after Fund staff's analysis is submitted to the G-20 members but prior to the Ministers' and Governors' meeting in June.
- June Summit
  - Briefing on the outcome of the June Summit to the Board.
- Fund staff refines and updates its analysis and policy scenarios. Fund staff submits revised report to Finance Ministers and Central Bank Governors by end-August.
  - June-November
- Informal briefing to the Board after the Fund staff's report is submitted to the G-20 members but prior to the Ministers' and Governors' meeting in November.
- November Summit
  - Briefing on the outcome of the November Summit to the Board.

### Concluding findings and staff recommendation
- The mutual assessment process initiated by the G-20 in Pittsburgh provides a framework to further enhance international policy dialogue and cooperation among the G-20 members.
- The process involves assessing and monitoring whether or not individual countries’ policies and plans are collectively consistent with the G-20’s main objective of restoring high, sustainable and balanced global growth.
- This objective is fully consistent with the Fund’s own economic priorities for surveillance recently approved by the Board.
- The mutual assessment process is separate and distinct from Fund surveillance, but the mutual assessment process and Fund surveillance will benefit from each other.
- For the Fund, involvement offers an opportunity to deepen policy discussion with, and reinforce the traction of its bilateral and multilateral surveillance of G-20 members.
- For the G-20, the Fund’s input offers an opportunity to draw on independent, technical advice and expertise necessary to inform an effective mutual assessment process.
- Activities in support of this process would have modest resource implications, and can be met by reallocating staff and filling vacancies.
- Staff recommends endorsement of the Fund’s involvement in the G-20 mutual assessment process as described in this paper.
- Proposed decision text:
  - The Executive Board adopts the general framework for the Fund's involvement in the G-20 mutual assessment process described in the paper, “The G-20 Mutual Assessment Process and the Role of the Fund.”

*Source: _120209a - 24. Accordingly, staff would propose the following framework for Board involvement*

### 1.  G-20 Mutual Assessment Process: What Does the Fund Do? .......................................5

### 1.  G-20 Mutual Assessment Process: What Does the Fund Do?

### Background: G-20 framework and request to the Fund
- G-20 Leaders in Pittsburgh (September 2009) launched a “framework for strong, sustainable, and balanced growth.”
- G-20 members committed to: adopt medium-term policies to achieve strong, sustainable, and balanced global growth while maintaining fiscal responsibility and sustainability, increase growth potential and job creation, and avoid asset price bubbles and unsustainable global financial flows.
- The Fund was asked to assist the mutual assessment process by providing “analysis of how the G-20’s respective national and regional policy frameworks fit together” and to “...develop a forward-looking analysis of whether policies pursued by individual G-20 countries are collectively consistent with more sustainable and balanced trajectories for the global economy.”

### Nature and scope of the mutual assessment process
- G-20 Finance Ministers and Central Bank Governors (St. Andrews) agreed on the process and a timetable for the first year of implementation.
- G-20 members agreed to share medium-term (next 3–5 years if possible) national and regional policy frameworks, plans, and projections in an agreed template; the template includes salient policy commitments and projections for key economic variables.
- Regional inputs (e.g., European institutions) would be provided where appropriate and in line with areas of competence.
- The Fund’s analytical input would include:
  - identifying the inconsistencies and incoherence of national assumptions in G-20 submissions;
  - analyzing the multilateral compatibility of country submissions;
  - analyzing the aggregate impact of national policies on global economic prospects;
  - identifying additional policy commitments that might be needed to reach G-20 objectives.
- The Fund’s contribution will be both quantitative and qualitative, covering short-term and medium-term aspects; some policy plans (e.g., macro-financial reforms, regulatory capital and liquidity cushion requirements, frameworks for handling systemically-important institutions, markets and instruments) require qualitative assessment.
- Short-term policy issues with longer-term implications (e.g., size and timing of exit from fiscal stimulus, bank recapitalization) will be considered in the mutual assessment.

### What the Fund staff plans to deliver (three-round expectation)
- Round 1 (spring/April 2010):
  - Fund staff—led by the Research Department with area and functional departments—will prepare a report for Deputies and Finance Ministers and Central Bank Governors in April 2010.
  - The report will contain the Fund staff’s forward-looking assessment (next 3–5 years) of global economic prospects conditional upon G-20 national policy frameworks and plans, indicate policy issues or gaps, and possibly propose alternative policy scenarios for exploration.
- Round 2 (post-April outcome):
  - Staff will provide more concrete analysis of how medium-term global prospects could be enhanced through collective policy actions.
  - G-20 Deputies will develop a menu of policy options for Finance Ministers and Central Bank Governors and subsequently for Leaders at the June 2010 summit.
- Round 3 (refinement by end-August leading to November 2010 summit):
  - After initial phase, G-20 members would refine mutual assessment and policy recommendations.
  - Fund staff would provide a refined and updated analysis to G-20 members by end-August, possibly based on G-20 country updates.
  - G-20 Deputies would prepare a revised mutual assessment and policy recommendations for Leaders at their summit in November 2010.

### Role of other international institutions
- Fund staff will draw on expertise from other organizations as appropriate:
  - FSB on financial policies;
  - ILO on labor market policies;
  - WTO on trade policies;
  - OECD and UNCTAD where appropriate;
  - World Bank to advise on progress in promoting development and poverty reduction as part of rebalancing global growth.

### Box 1 — Operational stages (concise summary)
- Stage I — Assessing individual G-20 submissions:
  - G-20 country desks receive input from country authorities by end-January, including policy plans and medium-term macroeconomic projections.
  - Fund staff’s global assumptions will have been circulated in advance to country authorities for their information.
  - Desks assess coverage and internal consistency, including comparison with the January WEO update.
  - A 2-week window in early February for clarifying open questions with G-20 country authorities.
- Stage II — Assessing multilateral consistency:
  - Staff will construct two global scenarios:
    - a “raw” global scenario aggregating country submissions directly (provided sufficient data);
    - a globally consistent “base case” scenario adjusting countries’ projections to remedy inconsistencies (e.g., different oil prices, interest rates, external demand) and imposing an adding up constraint on countries’ current account projections.
  - Staff will assess whether additional policy adjustments are necessary to reach stated growth objectives and ensure financial stability.
- Stage III — Policy recommendations:
  - Staff will draft an initial assessment using the “base case” scenario, focusing on multilateral ramifications of inconsistencies and initial suggestions for additional measures (April).
  - Following the Spring Meetings, staff will explore alternative scenarios that could help achieve the G-20’s growth objectives.

### How the process may evolve after the initial year
- G-20 members envisage an annual mutual assessment exercise with continued Fund assistance, likely broadly in line with the initial-year framework.
- The Pittsburgh Leaders’ Statement requested the Fund to report regularly to both the G-20 and the IMFC on global economic developments, key risks, and concerns with respect to patterns of growth.

### Implications for the Fund — legal basis and relation to core Fund products
- Nature of Fund engagement:
  - The mutual assessment process is initiated and largely controlled by G-20 members; Fund involvement is based on a request for assistance that the Fund may accept or decline; necessary information will be provided voluntarily by G-20 members.
  - The envisaged engagement is best regarded as technical advice provided under Article V, Section 2 (b), authorizing the Fund to provide technical or financial services “upon request.” The essential quality is voluntariness for both Fund and member.
- Multilateral surveillance distinction:
  - For the initiative to be classified as multilateral surveillance (Article IV, Section 3), the Fund would have to initiate, design, and control the process and could require members to engage and provide necessary information.
- Interaction with surveillance:
  - Although technical advice, the mutual assessment could inform bilateral and multilateral surveillance; information and analysis undertaken can be used as inputs for surveillance (similar approach to FSAPs, which are voluntary and provided under Article V, Section 2(b)).
  - Over time, the Fund may consider initiating its own multilateral surveillance process with G-20 members, taking into account experience from the mutual assessment.
- Relation to WEO and GFSR:
  - WEO and GFSR are Fund multilateral products based on independent projections, analysis, and assessments of Fund staff and management as discussed and concluded by the Board.
  - Fund staff’s inputs to the mutual assessment are based on G-20 members’ inputs and the assessment is undertaken and conclusions drawn by G-20 members.
  - Fund inputs will draw upon and benefit from WEO and GFSR and will rely on existing WEO infrastructure during aggregation and multilateral consistency checks.
- Relation to Article IV process:
  - The G-20 process is separate and distinct from Article IV consultations, though they should complement each other.
  - Policy frameworks developed in the G-20 process should enrich policy discussions in Article IVs; Article IV in-depth analysis will provide critical input to the G-20 assessment.
  - During the first round, Article IV schedules largely have to be taken as given; many G-20 Article IVs will be concluded shortly after the G-20 Summit in June next year.
  - Some clustering of Article IVs could be considered for the longer term where practical.
- Resource implications:
  - Fund involvement will have resource implications that are hard to estimate ex ante; building on existing processes will minimize costs.
  - New work includes additional submissions to the Research Department, greater coordination across departments, new systems to assess cross-country consistency of financial sector policies, and additional interaction with authorities.
  - Staff’s highly tentative estimate: resource costs for the mutual assessment process in the first year could require additional full-time equivalents in the single digits, with a lesser burden once the annual process is established.
  - Current staff sense: additional needs can be met by reallocating staff and filling vacancies.

### Role envisaged for the Executive Board and the IMFC
- Historical practice:
  - Since 1991, technical advice provided in response to specific member requests no longer requires Executive Board approval; the Board has established general frameworks (e.g., FSAP) that control management response to such requests.
- Possible Board action:
  - The Executive Board could adopt a decision establishing a framework governing how the Fund’s advice is to be provided to G-20 members under the mutual assessment process.
- Information and oversight:
  - It is important for the Executive Board to receive sufficient and timely information about the content of advice delivered and progress under the G-20 process.
  - Such information will help the Board take mutual assessment developments into account when conducting Article IV consultations for all Fund members and performing multilateral surveillance via WEO and GFSR.

*Source: IMF staff paper summarizing the Fund’s role in the G-20 mutual assessment process.*

### 24.      Accordingly, staff would propose the following framework for Board involvement

### 24.      Accordingly, staff would propose the following framework for Board involvement

### Framework for Board involvement (summary of proposed actions)
- The Executive Board would endorse the overall framework for the delivery of technical advice to the G-20 members under the mutual assessment process, as specified in this paper.
- When staff’s assessments are sent to the G-20 members (for the April, June, and November meetings), these assessments would be sent to the Board at the same time.
- Subsequently, staff would present these assessments to the Executive Directors in an informal briefing, ahead of the Ministerial meetings.
- The Executive Board would be briefed on the outcome of the G-20 Ministerial meetings as well as the Leaders’ June and November Summits. The exact form of such briefings would be determined as the process unfolds.
- The Executive Board will review the experience with the implementation of the framework after one year.
- Fund staff’s assessments would also be shared with the IMFC once these have been sent to the G-20 to keep the IMFC informed about the G-20 process.

### Rationale and implications for Board timing and ownership
- Board involvement along these lines would help preserve the G-20 members’ ownership of the mutual assessment process—a key to its success.
- A structure under which the Board would discuss the staff’s analyses before they are sent to the G-20 would imply closer Board involvement than under Article IV consultations, and could also reduce the G-20’s ownership of the process.

### Table 1 — Indicative Fund Timetable for the Mutual Assessment Process (actions and timing)
- Completion and submission of template – countries to submit national policy frameworks and plans to Fund staff, and share with others.
  - End-January, if possible
- Fund staff interaction with G-20 countries – a two-week period to clarify submissions to the Fund staff.
  - Mid-February
- Fund staff completes analysis of country frameworks and submits an initial report to Deputies, Finance Ministers and Central Bank Governors prior to the meeting in April.
  - Mid-February-April
- Informal briefing to the Board after the Fund staff's report is submitted to the G-20 members but prior to the Ministers' and Governors' meeting in April.
- Fund staff produces policy scenarios based on Finance Ministers' decisions taken in April and provides more concrete analysis of how medium-term objectives could be reached.
  - April-June
- Informal briefing to the Board after Fund staff's analysis is submitted to the G-20 members but prior to the Ministers' and Governors' meeting in June.
- June Summit
  - Briefing on the outcome of the June Summit to the Board.
- Fund staff refines and updates its analysis and policy scenarios. Fund staff submits revised report to Finance Ministers and Central Bank Governors by end-August.
  - June-November
- Informal briefing to the Board after the Fund staff's report is submitted to the G-20 members but prior to the Ministers' and Governors' meeting in November.
- November Summit
  - Briefing on the outcome of the November Summit to the Board.

### Concluding remarks (key findings and staff recommendation)
- The mutual assessment process initiated by the G-20 in Pittsburgh provides a framework to further enhance international policy dialogue and cooperation among the G-20 members.
- The process involves assessing and monitoring whether or not individual countries’ policies and plans are collectively consistent with the G-20’s main objective of restoring high, sustainable and balanced global growth.
- This objective is fully consistent with the Fund’s own economic priorities for surveillance recently approved by the Board.
- The mutual assessment process is separate and distinct from Fund surveillance. But the mutual assessment process and Fund surveillance will benefit from each other.
- For the Fund, involvement in the G-20 mutual assessment process offers an opportunity to deepen its policy discussion with, and reinforce the traction of its bilateral and multilateral surveillance of G-20 members.
- For the G-20, the Fund’s input offers an opportunity to draw on the independent, technical advice and expertise necessary to inform an effective mutual assessment process.
- The Executive Board will be kept fully informed of progress under the G-20 process, and the staff’s inputs into it. Staff’s involvement in the G-20 process would in no way limit the topics the Fund would cover in bilateral and multilateral surveillance.
- Activities in support of this process would have modest resource implications, and can be met by reallocating staff and filling vacancies.
- Staff recommends endorsement of the Fund’s involvement in the G-20 mutual assessment process as described in this paper.

### Proposed decision (text for Board adoption)
- Set out below is a proposed decision, that may be adopted by a majority of votes cast, under which the Executive Board would endorse the overall framework that will guide Fund participation in the G-20 mutual assessment process.
- The Executive Board adopts the general framework for the Fund's involvement in the G-20 mutual assessment process described in the paper, “The G-20 Mutual Assessment Process and the Role of the Fund.”

*Source: _120209a - 24. Accordingly, staff would propose the following framework for Board involvement*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2009/_120209a.pdf_