## _051511 — 2011 Triennial Surveillance Review (TSR) — Report on interviews with country authorities

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---

### Summary of conclusions
- Views on Fund bilateral surveillance were generally positive, but authorities differed on what they want from it:
  - Many want more attention to the implications of regional and international developments for their country and more cross-country experiences relevant to their situation.
  - Some called for greater flexibility by mission chiefs who at times seemed too wedded to briefs prepared in Washington.
  - In many cases, staff received good marks for interactions with country officials before consultation missions and for responding to requests to develop background material and analysis on issues within the Fund's competence.
- FSAPs were commented on favorably by most authorities, though many wanted better integration of FSAPs and technical assistance with the surveillance work of area departments. One authority found its FSAP “too diffuse, lacking analytical depth, and excessively resource intensive and time consuming.”
- Most authorities were unhappy with the 2007 Surveillance decision, seeing it as narrowing surveillance toward the exchange rate at the cost of attention to other macroeconomic issues. Authorities emphasized embedding exchange rate analysis in a broader macroeconomic and structural context and, within that, some called for sharper focus and greater candor on exchange rate policies of surplus countries.
- Many called for greater staff awareness of the history, culture, politics and institutions of their country, and greater appreciation of economic thought outside the Anglo-Saxon tradition; some suggested greater national diversity among staff.
- Virtually all welcomed greater transparency and outreach by the Fund; most appreciated candor in private settings, but noted tensions between the Fund’s roles as confidential advisor and as “ruthless truth teller.”
- Unhappiness remains about perceived lack of traction and evenhandedness in surveillance over advanced economies. Several authorities supported efforts—most prominently within the G20—to incorporate quantitative norms or indicators into surveillance; staff assistance in these efforts was appreciated.
- Echoes of the IEO criticisms on weaknesses of the WEO and GFSR in the lead-up to the crisis were reported; both products remain much appreciated but some urged better integration of macro and financial analyses and better coordination of the reports.
- New multilateral tools—the Early Warning Exercises (EWE), the Vulnerability Exercise for Advanced Economies (VEA), and ongoing spillover exercises—were broadly welcomed, though some saw them as indicative of deficiencies in the WEO and GFSR. Frustration existed among those excluded from restricted IMFC sessions about lack of information on EWE conclusions; some suggested greater involvement of executive directors in propagating messages from these exercises.
- Organizational and coordination issues, both internal to the Fund and between the Fund and other organizations, were frequently raised; many saw a persistent “silo” mentality and called for stronger leadership by Management.
- Views differed on the legitimacy and effectiveness of the G20 as a surveillance forum and on the Fund’s role vis-à-vis the G20, ranging from seeing the G20 as an opportunity to “make its reputation” on surveillance to concern that the Fund’s surveillance of largest members might be displaced.

*Prepared by Jack Boorman and Teresa Ter-Minassian; May 15, 2011.*

### I. Bilateral surveillance — overall assessment and themes

- Value-added
  - Many authorities valued the Fund’s provision of an overall integrated or “holistic” view of main economic and financial challenges facing the country.
  - Fund discussions provide senior policy makers opportunity to step back from day-to-day issues and reflect on policy inter-connections.
  - Fund advice was often used to reinforce policy messages with stakeholders and the public.
  - A few larger shareholders felt Article IV discussions rarely provided significant new insights.
  - Smaller, emerging and low income countries often valued specific technical inputs and the role of missions in bringing government agencies together.
  - Several authorities requested more efforts by staff to present relevant international comparisons and experiences, including more detailed discussion based on quantified scenarios of risks posed by international developments and appropriate policy responses.

- Focus and analytical content
  - Views on analytical quality varied:
    - Some advanced-country authorities found staff analytical papers technically elegant but of limited usefulness because they addressed topics of interest to staff rather than pressing policy issues.
    - Most interviewees indicated staff kept a fluid dialogue with authorities between consultations and consulted on analytical agendas before Article IV missions.
  - Financial sector emphasis:
    - Authorities were generally positive about increased emphasis on financial sector issues and risks, but called for better analysis of linkages between financial and macro variables and advice on macro-prudential policies tailored to country circumstances.
    - FSAPs were appreciated by a large majority, though some found their FSAPs diffuse and lacking depth; most wanted more follow-up of FSAP recommendations in Article IVs.
    - Some perceived a disconnect between area departments and FSAP staff and limited area-department familiarity with FSAP issues.
  - Exchange rate focus:
    - Unhappiness was expressed with the Fund’s increased focus on exchange rate issues after the 2007 Surveillance decision, especially by countries with pegged or heavily managed exchange rates.
    - Virtually all interviewees emphasized the need for a broad view of domestic and international policies; some urged increased candor on exchange rate and reserve accumulation policies of surplus countries.
  - Structural and social issues:
    - Some authorities sought greater emphasis on unemployment, poverty, healthcare, education, and the environment, and suggested staff utilize more inputs from the World Bank, OECD, regional MDBs, or other institutions.
  - Practicality and policy implementation:
    - Some authorities felt many staff lacked hands-on policy implementation experience, producing advice that was too generic (e.g., recommending more exchange rate flexibility without how-to guidance).
    - More specific advice was sometimes found in TA or FSAPs but was not always reflected in surveillance discussions.
    - Perceived organizational “silo mentality” was cited as contributing to lack of coordination and integration; some requested TSR reflections and Management follow-up.
  - Use of outside experts:
    - Views differed on using outside experts in Article IVs:
      - Some feared confidentiality risks or doubted experts could rapidly acquire sufficient country-specific understanding.
      - Limited enthusiasm for the IEO recommendation to have outside experts present to the Board during Article IVs.
      - Several representatives commended use of outside experts in seminars for country authorities as useful background input.

- Communication and traction
  - Improved communication of Fund advice seen as key to increasing effectiveness and traction:
    - Some authorities saw Fund advice as still reflecting a traditional “Washington consensus” approach and the influence of “efficient markets theory” and de-regulation ideas prevalent in the U.S. and some other countries.
    - Emerging and low income country representatives urged greater staff sensitivity to institutional, social and cultural conditions and called for increased diversity in staff nationality, including at senior levels; some suggested adding sociologists and political scientists.
    - Most praised increased outreach in bilateral surveillance (e.g., press conferences after Article IV missions, Resident Representatives’ outreach to parliamentarians and stakeholders), but noted variability in Resident Representatives’ performance.
    - Staff sometimes lacked political savvy to gain traction among policy makers, stakeholders and public opinion; clearer articulation of rationale, assumptions and value judgments was suggested.
    - Some mission chiefs were perceived as delivering overly prescriptive messages or arriving with pre-formed views resistant to change; complaints also that authorities’ views were not always carefully portrayed in staff reports.
    - Candor: authorities welcomed candid advice in restricted policy discussions when grounded in sound theory and understanding of local realities; many worried about market sensitivity and political fallout from public criticism of policies, though a few large-country interviewees did not share that concern.
    - Timing: several interviewees stressed appropriate timing of missions, arguing that public criticism of recently announced policy decisions was unhelpful and that staff could gain more traction by offering advice in advance of government decisions (not all authorities agreed).

### Perceptions of Fund surveillance and bilateral interactions (Section 2 highlights)
- Some authorities saw staff missions prior to the preparation of the budget as excessive interference.
- Several authorities noted that acceptance of candid advice would be enhanced by a perception of greater evenhandedness in Fund surveillance; they viewed the Fund as too uncritical of the policies of its major shareholders.
- Perceptions of unevenness in surveillance and lack of traction on major shareholders' policies are pervasive among emerging and low income country authorities interviewed and were said to negatively impact those countries' reactions to Fund advice.
- Many authorities raised issues of the Fund’s cooperation with other institutions (IBRD, OECD, EC, ECB, BIS and FSB):
  - Perception that Article IV mission teams are sometimes not well acquainted with analytical work and advice provided to the country by these institutions.
  - This can lead to duplication of efforts and occasionally to conflicting advice.
  - Authorities called for improved communication, exchange of relevant information, and analytical cooperation leveraging comparative advantages in expertise.

### II. Multilateral surveillance issues — focus, quality and effectiveness
- Overall perspectives
  - Authorities generally supported the increased focus by the Fund on multilateral surveillance and the strengthening of analytical tools in recent years.
  - Perspectives varied significantly with country size:
    - Representatives of smaller countries viewed WEO, GFSR, Fiscal Monitor and REOs primarily as valuable sources of information on global and regional trends and risks for national macro projections and scenarios.
    - Representatives of larger, more systemic countries were more interested in the Fund’s analysis of cross-border spillover effects, related policy recommendations, and the effectiveness of such recommendations.

- Focus and quality (II.a)
  - Most authorities complimented the quality and relevance of the traditional products (WEO and GFSR) and welcomed the more recent introduction of the Fiscal Monitor.
  - Observations and suggestions:
    - GFSR thought to have substantially improved in recent years.
    - Consistency of messages across outputs has improved; a few wanted further progress, including joint preparation of the first chapters of WEO and GFSR and joint discussion in a single board meeting.
    - Need for further integration of financial sector analysis with macro-analysis, including:
      - Better integration of the WEO and GFSR.
      - Modeling transmission channels of financial disturbances domestically and across borders.
      - Tracing impact of real sector disturbances through the financial sector.
    - Calls for greater focus on the role and impact of large complex financial institutions (LCFI).
    - Continued close cooperation with other institutions (FSB, BIS, regional supervisory networks) emphasized.
  - Systemic risk analysis:
    - Increased focus on analysis of systemic risks welcomed, especially risks stemming from the financial sector.
    - Further progress needed in identifying risks, especially tail risks, and in tracing effects of their realization (“connecting the dots”).
    - Concern that risk scenarios could become self-fulfilling if viewed as predictions by economic agents.
  - Familiarity and transparency of newer tools:
    - Most interviewees had limited familiarity with newer tools: Vulnerability Exercise for Advanced Countries (VEA) and the Early Warning Exercise (EWE), reflecting restricted access to such documents.
    - Some felt the trade-off between confidentiality and traction was too skewed toward confidentiality.
    - Suggested experimenting with publishing a “sanitized” version of the EWE presented to Ministers at the IMFC breakfast (e.g., not referring to individual country risks) to provide stronger analytical basis for public policy recommendations.
    - Noted that the breakfast presentations had aroused significant interest among senior policy makers but produced little feedback to others in government or to other member governments.
  - Exchange rate focus:
    - Most welcomed reduced focus on exchange rate issues, viewing exchange rates as one source of global imbalances and one policy tool among others.
    - Some authorities remained strongly concerned with spillovers from other countries’ exchange rate policies and wanted continued or increased Fund pressure and public comment on those policies.

- Effectiveness (II.b)
  - Spillover reports:
    - Most welcomed preparation of spillover reports for five systemic countries and the Euro Area in principle.
    - Some thought a sharper focus and more comprehensive analysis of spillovers in WEO and GFSR would make separate spillover reports redundant.
    - Concerns expressed:
      - Unable to assess quality or prospective traction of these reports at present.
      - Fund staff would need significant experience for reports to become effective surveillance tools.
      - Important to integrate spillover reports fully into bilateral Article IV discussions to ensure consistency of policy recommendations.
      - Work would require greater internal coordination between bilateral and multilateral surveillance, increased cooperation among Fund departments, and stronger management direction.
      - Closer coordination with other relevant institutions, especially the FSB, seen as needed.
  - Importance of perceptions of evenhandedness:
    - Especially among EMEs and LICs, perceptions of unevenness significantly affect effectiveness and traction of surveillance.
    - Negative perceptions persist among both large and small EMEs.
    - Example concern: Fund attempting to stipulate “rules of good conduct” for capital controls affecting recipients of capital inflows (mainly EMEs) without setting rules for originators of such flows (especially advanced countries).
    - Some advanced country respondents perceived Fund surveillance as favoring economic management models influenced by US policies, institutions, and traditions and by dominance of U.S. academic thought.
    - Those critical felt significant increases in traction would hinge on governance changes fostering greater involvement and commitment of all members.

### III. Governance issues related to surveillance
- G20 and forum legitimacy
  - A broad range of views expressed on governance issues, including relation of IMF surveillance with the G20 MAP process, the EWE and the forthcoming Spillover Exercise.
  - G20 members’ perspective:
    - Greater effectiveness of mutual surveillance in G20 attributed to:
      - Personal involvement of highest level leadership.
      - Leaders speaking on behalf of their own country, not of a constituency.
      - Voluntary nature of participation fostering ownership.
      - Absence of weighted voting, reliance on consensus building, and feeling of "collective responsibility".
    - Progress toward quantitative indicators of imbalances and G20 mandate for the Fund to analyze systemic economies seen as an opportunity to increase traction by focusing on cross-border effects.
    - Praised quality and usefulness of Fund staff inputs to the G20 (surveillance notes, MAP contributions, work on indicators and norms).
  - Non-G20 members’ perspective:
    - Underscored legitimacy deficit of the G20 given its limited and somewhat arbitrary country coverage compared with near-universal Fund and IMFC coverage.
    - Attitudes varied:
      - Some smaller countries: if G20 is currently the most effective forum for international policy cooperation, the Fund should support it fully and the Executive Board should voice views more effectively on G20 agenda items and staff analyses; regional and global forums (e.g., G24) seen as vehicles to influence agenda.
      - Some larger non-G20 members: critical of G20 undermining Fund’s efforts to gain traction; saw peer-pressure-based surveillance without legal standing as effective mainly under crisis conditions and likely to lose focus as environment normalizes.
      - These authorities favored transformation of the IMFC into a Council (as foreseen in the Articles of Agreement), potentially formed through merger of G20 Ministers and Governors functions (related to economic and financial issues) and IMFC functions, an idea recently advocated in the Palais Royal Report.

- Strengthening internal governance (III.b)
  - Recent governance changes (doubling of quotas, shift towards dynamic EMEs and under-represented countries, an all-elected Executive Board, greater EME representation) seen as promising for increasing institutional effectiveness.
  - Concerns and recommendations:
    - Little change might occur without increased member commitment to involve themselves more actively in the institution’s work, especially surveillance.
    - Some view surveillance as primarily a staff and management function rather than a "collective responsibility" of the membership.
    - Questions raised about involvement and accountability of IMFC members and concern that active G20 decision-making on IMF matters has weakened the IMFC by presenting decisions effectively already made elsewhere.
    - Greater use of restricted sessions has strengthened the IMFC, but exclusion of non-IMFC members from important parts of meetings raises issues.
    - Suggested increased role for the Board in involving the rest of the membership through detailed Board discussion of the EWE, prospective spillover reports, and staff contributions to the MAP.
    - Others argued little would change without merging functions of the IMFC and the G20 Ministers and Governors.

### Appendix — Countries Interviewed
- Australia
- Brazil
- France
- Germany
- India
- Israel
- Jamaica
- Japan
- Lithuania
- Mexico
- Morocco
- Peru
- PNG
- Netherlands
- Russia
- Slovenia
- Tanzania
- UAE
- UK
- US

*Source: _051511 — Report on interviews with country authorities (2011 Triennial Surveillance Review).*

### Section 1

### 2011 Triennial Surveillance Review (TSR) — Report on interviews with country authorities (Section 1)

### Summary of conclusions
- Views on Fund bilateral surveillance were generally positive, but authorities differed on what they want from it:
  - Many want more attention to the implications of regional and international developments for their country and more cross-country experiences relevant to their situation.
  - Some called for greater flexibility by mission chiefs who at times seemed too wedded to briefs prepared in Washington.
  - In many cases, staff received good marks for interactions with country officials before consultation missions and for responding to requests to develop background material and analysis on issues within the Fund's competence.
- FSAPs were commented on favorably by most authorities, though many wanted better integration of FSAPs and technical assistance with the surveillance work of area departments. One authority found its FSAP “too diffuse, lacking analytical depth, and excessively resource intensive and time consuming.”
- Most authorities were unhappy with the 2007 Surveillance decision, seeing it as narrowing surveillance toward the exchange rate at the cost of attention to other macroeconomic issues. Authorities emphasized embedding exchange rate analysis in a broader macroeconomic and structural context and, within that, some called for sharper focus and greater candor on exchange rate policies of surplus countries.
- Many called for greater staff awareness of the history, culture, politics and institutions of their country, and greater appreciation of economic thought outside the Anglo-Saxon tradition; some suggested greater national diversity among staff.
- Virtually all welcomed greater transparency and outreach by the Fund; most appreciated candor in private settings, but noted tensions between the Fund’s roles as confidential advisor and as “ruthless truth teller.”
- Unhappiness remains about perceived lack of traction and evenhandedness in surveillance over advanced economies. Several authorities supported efforts—most prominently within the G20—to incorporate quantitative norms or indicators into surveillance; staff assistance in these efforts was appreciated.
- Echoes of the IEO criticisms on weaknesses of the WEO and GFSR in the lead-up to the crisis were reported; both products remain much appreciated but some urged better integration of macro and financial analyses and better coordination of the reports.
- New multilateral tools—the Early Warning Exercises (EWE), the Vulnerability Exercise for Advanced Economies (VEA), and ongoing spillover exercises—were broadly welcomed, though some saw them as indicative of deficiencies in the WEO and GFSR. Frustration existed among those excluded from restricted IMFC sessions about lack of information on EWE conclusions; some suggested greater involvement of executive directors in propagating messages from these exercises.
- Organizational and coordination issues, both internal to the Fund and between the Fund and other organizations, were frequently raised; many saw a persistent “silo” mentality and called for stronger leadership by Management.
- Views differed on the legitimacy and effectiveness of the G20 as a surveillance forum and on the Fund’s role vis-à-vis the G20, ranging from seeing the G20 as an opportunity to “make its reputation” on surveillance to concern that the Fund’s surveillance of largest members might be displaced.

*Prepared by Jack Boorman and Teresa Ter-Minassian; May 15, 2011.*

### Main Report — I. Bilateral surveillance

#### a. Overall assessment of value-added
- Many authorities valued the Fund’s provision of an overall integrated or “holistic” view of main economic and financial challenges facing the country.
- Fund discussions provide senior policy makers opportunity to step back from day-to-day issues and reflect on policy inter-connections.
- Fund advice was often used to reinforce policy messages with stakeholders and the public.
- A few larger shareholders felt Article IV discussions rarely provided significant new insights.
- Smaller, emerging and low income countries often valued specific technical inputs and the role of missions in bringing government agencies together.
- Several authorities requested more efforts by staff to present relevant international comparisons and experiences, including more detailed discussion based on quantified scenarios of risks posed by international developments and appropriate policy responses.

#### b. Focus and analytical content
- Views on analytical quality varied:
  - Some advanced-country authorities found staff analytical papers technically elegant but of limited usefulness because they addressed topics of interest to staff rather than pressing policy issues.
  - Most interviewees indicated staff kept a fluid dialogue with authorities between consultations and consulted on analytical agendas before Article IV missions.
- Financial sector emphasis:
  - Authorities were generally positive about increased emphasis on financial sector issues and risks, but called for better analysis of linkages between financial and macro variables and advice on macro-prudential policies tailored to country circumstances.
  - FSAPs were appreciated by a large majority, though some found their FSAPs diffuse and lacking depth; most wanted more follow-up of FSAP recommendations in Article IVs.
  - Some perceived a disconnect between area departments and FSAP staff and limited area-department familiarity with FSAP issues.
- Exchange rate focus:
  - Unhappiness was expressed with the Fund’s increased focus on exchange rate issues after the 2007 Surveillance decision, especially by countries with pegged or heavily managed exchange rates.
  - Virtually all interviewees emphasized the need for a broad view of domestic and international policies; some urged increased candor on exchange rate and reserve accumulation policies of surplus countries.
- Structural and social issues:
  - Some authorities sought greater emphasis on unemployment, poverty, healthcare, education, and the environment, and suggested staff utilize more inputs from the World Bank, OECD, regional MDBs, or other institutions.
- Practicality and policy implementation:
  - Some authorities felt many staff lacked hands-on policy implementation experience, producing advice that was too generic (e.g., recommending more exchange rate flexibility without how-to guidance).
  - More specific advice was sometimes found in TA or FSAPs but was not always reflected in surveillance discussions.
  - Perceived organizational “silo mentality” was cited as contributing to lack of coordination and integration; some requested TSR reflections and Management follow-up.
- Use of outside experts:
  - Views differed on using outside experts in Article IVs:
    - Some feared confidentiality risks or doubted experts could rapidly acquire sufficient country-specific understanding.
    - Limited enthusiasm for the IEO recommendation to have outside experts present to the Board during Article IVs.
    - Several representatives commended use of outside experts in seminars for country authorities as useful background input.

#### c. Communication and traction
- Improved communication of Fund advice seen as key to increasing effectiveness and traction:
  - Some authorities saw Fund advice as still reflecting a traditional “Washington consensus” approach and the influence of “efficient markets theory” and de-regulation ideas prevalent in the U.S. and some other countries.
  - Emerging and low income country representatives urged greater staff sensitivity to institutional, social and cultural conditions and called for increased diversity in staff nationality, including at senior levels; some suggested adding sociologists and political scientists.
  - Most praised increased outreach in bilateral surveillance (e.g., press conferences after Article IV missions, Resident Representatives’ outreach to parliamentarians and stakeholders), but noted variability in Resident Representatives’ performance.
  - Staff sometimes lacked political savvy to gain traction among policy makers, stakeholders and public opinion; clearer articulation of rationale, assumptions and value judgments was suggested.
  - Some mission chiefs were perceived as delivering overly prescriptive messages or arriving with pre-formed views resistant to change; complaints also that authorities’ views were not always carefully portrayed in staff reports.
  - Candor: authorities welcomed candid advice in restricted policy discussions when grounded in sound theory and understanding of local realities; many worried about market sensitivity and political fallout from public criticism of policies, though a few large-country interviewees did not share that concern.
  - Timing: several interviewees stressed appropriate timing of missions, arguing that public criticism of recently announced policy decisions was unhelpful and that staff could gain more traction by offering advice in advance of government decisions (not all authorities agreed).

*This document reflects interviews conducted mostly during the 2011 Spring Meetings to ascertain senior country officials’ views on IMF surveillance.*

### Section 2

### Section 2

### Perceptions of Fund surveillance and bilateral interactions
- Some authorities saw staff missions prior to the preparation of the budget as excessive interference.
- Several authorities noted that acceptance of candid advice would be enhanced by a perception of greater evenhandedness in Fund surveillance; they viewed the Fund as too uncritical of the policies of its major shareholders.
- Perceptions of unevenness in surveillance and lack of traction on major shareholders' policies are pervasive among emerging and low income country authorities interviewed and were said to negatively impact those countries' reactions to Fund advice.
- Many authorities raised issues of the Fund’s cooperation with other institutions (IBRD, OECD, EC, ECB, BIS and FSB):
  - Perception that Article IV mission teams are sometimes not well acquainted with analytical work and advice provided to the country by these institutions.
  - This can lead to duplication of efforts and occasionally to conflicting advice.
  - Authorities called for improved communication, exchange of relevant information, and analytical cooperation leveraging comparative advantages in expertise.

### II. Multilateral surveillance issues — overall perspectives
- Authorities generally supported the increased focus by the Fund on multilateral surveillance and the strengthening of analytical tools in recent years.
- Perspectives varied significantly with country size:
  - Representatives of smaller countries viewed WEO, GFSR, Fiscal Monitor and REOs primarily as valuable sources of information on global and regional trends and risks for national macro projections and scenarios.
  - Representatives of larger, more systemic countries were more interested in the Fund’s analysis of cross-border spillover effects, related policy recommendations, and the effectiveness of such recommendations.

### II.a Focus and quality
- Most authorities complimented the quality and relevance of the traditional products (WEO and GFSR) and welcomed the more recent introduction of the Fiscal Monitor.
- Observations and suggestions:
  - GFSR thought to have substantially improved in recent years.
  - Consistency of messages across outputs has improved; a few wanted further progress, including joint preparation of the first chapters of WEO and GFSR and joint discussion in a single board meeting.
  - Need for further integration of financial sector analysis with macro-analysis, including:
    - Better integration of the WEO and GFSR.
    - Modeling transmission channels of financial disturbances domestically and across borders.
    - Tracing impact of real sector disturbances through the financial sector.
  - Calls for greater focus on the role and impact of large complex financial institutions (LCFI).
  - Continued close cooperation with other institutions (FSB, BIS, regional supervisory networks) emphasized.
- Systemic risk analysis:
  - Increased focus on analysis of systemic risks welcomed, especially risks stemming from the financial sector.
  - Further progress needed in identifying risks, especially tail risks, and in tracing effects of their realization (“connecting the dots”).
  - Concern that risk scenarios could become self-fulfilling if viewed as predictions by economic agents.
- Familiarity and transparency of newer tools:
  - Most interviewees had limited familiarity with newer tools: Vulnerability Exercise for Advanced Countries (VEA) and the Early Warning Exercise (EWE), reflecting restricted access to such documents.
  - Some felt the trade-off between confidentiality and traction was too skewed toward confidentiality.
  - Suggested experimenting with publishing a “sanitized” version of the EWE presented to Ministers at the IMFC breakfast (e.g., not referring to individual country risks) to provide stronger analytical basis for public policy recommendations.
  - Noted that the breakfast presentations had aroused significant interest among senior policy makers but produced little feedback to others in government or to other member governments.
- Exchange rate focus:
  - Most welcomed reduced focus on exchange rate issues, viewing exchange rates as one source of global imbalances and one policy tool among others.
  - Some authorities remained strongly concerned with spillovers from other countries’ exchange rate policies and wanted continued or increased Fund pressure and public comment on those policies.

### II.b Effectiveness
- Spillover reports:
  - Most welcomed preparation of spillover reports for five systemic countries and the Euro Area in principle.
  - Some thought a sharper focus and more comprehensive analysis of spillovers in WEO and GFSR would make separate spillover reports redundant.
  - Concerns expressed:
    - Unable to assess quality or prospective traction of these reports at present.
    - Fund staff would need significant experience for reports to become effective surveillance tools.
    - Important to integrate spillover reports fully into bilateral Article IV discussions to ensure consistency of policy recommendations.
    - Work would require greater internal coordination between bilateral and multilateral surveillance, increased cooperation among Fund departments, and stronger management direction.
    - Closer coordination with other relevant institutions, especially the FSB, seen as needed.
- Importance of perceptions of evenhandedness:
  - Especially among EMEs and LICs, perceptions of unevenness significantly affect effectiveness and traction of surveillance.
  - Negative perceptions persist among both large and small EMEs.
  - Example concern: Fund attempting to stipulate “rules of good conduct” for capital controls affecting recipients of capital inflows (mainly EMEs) without setting rules for originators of such flows (especially advanced countries).
  - Some advanced country respondents perceived Fund surveillance as favoring economic management models influenced by US policies, institutions, and traditions and by dominance of U.S. academic thought.
  - Those critical felt significant increases in traction would hinge on governance changes fostering greater involvement and commitment of all members.

### III. Governance issues related to surveillance — overall
- A broad range of views expressed on governance issues, including relation of IMF surveillance with the G20 MAP process, the EWE and the forthcoming Spillover Exercise.
- G20 members’ perspective:
  - Greater effectiveness of mutual surveillance in G20 attributed to:
    - Personal involvement of highest level leadership.
    - Leaders speaking on behalf of their own country, not of a constituency.
    - Voluntary nature of participation fostering ownership.
    - Absence of weighted voting, reliance on consensus building, and feeling of "collective responsibility".
  - Progress toward quantitative indicators of imbalances and G20 mandate for the Fund to analyze systemic economies seen as an opportunity to increase traction by focusing on cross-border effects.
  - Praised quality and usefulness of Fund staff inputs to the G20 (surveillance notes, MAP contributions, work on indicators and norms).
- Non-G20 members’ perspective:
  - Underscored legitimacy deficit of the G20 given its limited and somewhat arbitrary country coverage compared with near-universal Fund and IMFC coverage.
  - Attitudes varied:
    - Some smaller countries: if G20 is currently the most effective forum for international policy cooperation, the Fund should support it fully and the Executive Board should voice views more effectively on G20 agenda items and staff analyses; regional and global forums (e.g., G24) seen as vehicles to influence agenda.
    - Some larger non-G20 members: critical of G20 undermining Fund’s efforts to gain traction; saw peer-pressure-based surveillance without legal standing as effective mainly under crisis conditions and likely to lose focus as environment normalizes.
    - These authorities favored transformation of the IMFC into a Council (as foreseen in the Articles of Agreement), potentially formed through merger of G20 Ministers and Governors functions (related to economic and financial issues) and IMFC functions, an idea recently advocated in the Palais Royal Report.

### III.b Strengthening the Fund’s internal governance systems to increase surveillance effectiveness
- Recent governance changes (doubling of quotas, shift towards dynamic EMEs and under-represented countries, an all-elected Executive Board, greater EME representation) seen as promising for increasing institutional effectiveness.
- Concerns and recommendations:
  - Little change might occur without increased member commitment to involve themselves more actively in the institution’s work, especially surveillance.
  - Some view surveillance as primarily a staff and management function rather than a "collective responsibility" of the membership.
  - Questions raised about involvement and accountability of IMFC members and concern that active G20 decision-making on IMF matters has weakened the IMFC by presenting decisions effectively already made elsewhere.
  - Greater use of restricted sessions has strengthened the IMFC, but exclusion of non-IMFC members from important parts of meetings raises issues.
  - Suggested increased role for the Board in involving the rest of the membership through detailed Board discussion of the EWE, prospective spillover reports, and staff contributions to the MAP.
  - Others argued little would change without merging functions of the IMFC and the G20 Ministers and Governors.

### Appendix 1 — Countries Interviewed
- Australia
- Brazil
- France
- Germany
- India
- Israel
- Jamaica
- Japan
- Lithuania
- Mexico
- Morocco
- Peru
- PNG
- Netherlands
- Russia
- Slovenia
- Tanzania
- UAE
- UK
- US

* _051511 - Section 2*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2011/_051511.pdf_