## 1. Implementation Status for IEO Report on IMF Interactions with Member Countries

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---

### Overview
- Fifth Periodic Monitoring Report (PMR) updating Management Implementation Plans (MIPs) in response to Executive Board-endorsed IEO recommendations.
- Last PMR discussed by the Board Evaluation Committee (EVC) and agreed by the Board in August 2011.
- Fourth PMR concluded that all key performance benchmarks had either been met or were on track; no new remedial actions proposed and no outstanding performance benchmarks to be reviewed in the next PMR.
- EVC noted further work needed on three issues: staff mobility, enhanced coverage of previous implementation plans, and the process for following up on IEO recommendations.
- This PMR updates work on those three issues and presents consolidated recent progress on all Board-endorsed recommendations since the first PMR in 2007 and on the Implementation Plan responding to the IEO Interactions Evaluation.

### Summary of Implementation Status
- Implementation status of performance benchmarks reported in three parts:
  - Section A: progress on key benchmarks for the Interactions Evaluation Implementation Plan.
  - Section B: EVC-requested progress update on staff mobility and the follow-up process for IEO recommendations.
  - Section C: update on previous implementation plans agreed since the first PMR in 2007.
- Overall conclusion: performance benchmarks related to the Interactions Evaluation have either been met or are on track for timely completion.

### A. IMF Interactions with Member Countries — Key Implementation Progress
Findings, new products, and procedural changes:
- Improve quality and relevance of international dimensions / spillovers and cross-country analysis:
  - continuing spillover reports (discussed by the Board in July 2012);
  - External Sector Report (pilot discussed by the Board in July 2012);
  - more coverage of spillovers and cross country work in Article IV reports;
  - Board discussion of Article IV reports in clusters (plan to extend beyond clustered discussion of the five systemic economies);
  - Risk Assessment Matrices (RAMs).
  - Integrated Surveillance Decision approved by the Board in July 2012.
  - Given insufficient Board support for increasing frequency of mandatory FSAPs for systemic economies, alternative modalities described in the 2011 Triennial Surveillance Report (TSR):
    - a financial expert will be assigned to each Article IV team involving systemically important financial sectors;
    - additional resources will be mobilized for these countries and others as needed (e.g., in case of mounting financial vulnerabilities).

- Engage more deeply with emerging and advanced economies through menus of products and services:
  - Reforms to lending products include creation of the Precautionary and Liquidity Line (PLL) and amendments to the Flexible Credit Line (FCL) in November 2011.
  - 2011 review of fragile states implemented new policies and practices, including fuller use of the Rapid Credit Facility (RCF).

- Strategic agendas and traction:
  - Little Board support for strategic agendas; 2011 TSR proposed actions to improve traction of IMF advice, including urging country teams to exchange views with authorities on key issues prior to Article IV missions.

- Broaden professional diversity and bring more experts on country visits:
  - Shifted focus from the IEO’s specific proposal to broadening staff diversity via:
    - recruit a higher proportion of midcareer economists with substantial policy experience;
    - hire more staff with financial sector experience and experts with fiscal and debt policy skills;
    - increased support for training and secondments.
  - Working Group recommended strengthening training and preparation of resident representatives, better advance planning in selection, and clarifying mandates and departmental management for resident representatives.
  - Regional advisory groups continue to play an important role in some area departments.

- Outreach and reputational legacy:
  - Outreach approach evolving: regularly held communications meetings chaired by the Managing Director/Acting Managing Director and an updated toolkit supporting outreach.
  - Reforms to conditionality and lending frameworks continue to help address legacy issues.
  - 2011 Review of Conditionality (discussed by the Board in September 2012) finds broadly positive results for a substantial majority of Fund-supported programs, while highlighting challenges in recent arrangements for countries with high debt.

- Professional conduct, leadership, and HR measures:
  - Reforms covering professional conduct, leadership, management training, mobility, and accountability announced.
  - Statement of workplace values for employees agreed and launched in July 2012.
  - New measures to balance cross-country experience with mission team stability:
    - assignments will be expected to last three years on average going forward;
    - for staff members with seven or more years in a department, there will be a centralized mobility support program.
  - HRD, with TGS, implemented a system to monitor mission chief and team tenure; results to be shared with the Board in briefings on strategic human resources issues.
  - Clarified mandate of resident representatives; tailored job standards and substantive, country-specific terms of reference are being established.

- Technical assistance and capacity development:
  - Institute for Capacity Development (ICD) launched on May 1, 2012, consolidating INS and OTM.
  - ICD focuses on strategic approach to technical assistance and training, with a new Strategy and Evaluation Division and regional divisional structure aligned with area departments and RTACs.

Key statistics and scheduling:
- Next update on strategic HR issues scheduled in the fourth quarter of 2012.
- MIP for the Crisis Evaluation discussed by the Board in May 2012; summary of initial implementation provided.

### B. Progress on Specific Issues Highlighted by the EVC from the Fourth PMR
- EVC had identified three issues requiring further work; the PMR reports progress on each.

I. Staff tenure
- A system exists to monitor mission chief and team tenure; results to be shared with the Board in briefings on corporate workforce planning scheduled for the fourth quarter of 2012.
- Reforms announced:
  - assignments expected to last three years on average;
  - at five years staff members will be encouraged to look for assignments outside their department;
  - if unable to do so by seven years there will be centralized support.
- Training: new course on ‘conducting country relations’; communication and outreach refresher courses for resident representatives and mission chiefs.

II. A better process for endorsing and following up on IEO recommendations
- Current MIP/PMR process is useful but seen as overly bureaucratic and can result in recommendations being forgotten after declared “implemented.”
- Upcoming external review of the IEO provides an opportunity to consider changes; any new system should avoid being bureaucratic, cumbersome, and costly.
- From staff perspective, IEO recommendations continue to have major impact long after initial evaluation, evidenced by the 2011 TSR and 2011 Review of Conditionality.

III. Enhanced coverage of previous implementation plans
- PMR produces a table highlighting status of past implementation plans to facilitate overall assessment of pursuit of Board-endorsed IEO recommendations.
- This PMR updates implementation status of all Board-endorsed recommendations made since the first PMR in 2007.
- Reports covered include:
  - The IMF and Aid to Sub-Saharan Africa (2007);
  - IMF Exchange Rate Policy Advice 1999-2005 (2007);
  - Structural Conditionality in IMF-Supported Programs (2007);
  - IMF Involvement in International Trade Policy Issues (2009).
- Summary of initial implementation of the MIP for the Crisis Evaluation (discussed May 2012) also provided.

### C. Implementation of IEO Reports — Summary of Recent Developments
- Consolidated updates on implementation status of Board-endorsed recommendations since 2007 and recent progress across the listed IEO reports and the Crisis Evaluation MIP.
- Conclusion reiterated: “All performance benchmarks from the Interactions MIP have either been met or are on track for completion, and no new remedial actions are proposed. There are no outstanding performance benchmarks to be reviewed in the next PMR, although the next PMR will provide further updates on any broader issues raised in the context of this report.”
- Proposed Decision: Executive Board supports the conclusions in Paragraph 8 of the Fifth Periodic Monitoring Report on the Implementation of Board-Endorsed IEO Recommendations.

*Source: 1. Implementation Status for IEO Report on IMF Interactions with Member Countries*

---

### 5. A summary of developments on issues related to recent IEO reports

### IMF and Aid to Sub-Saharan Africa — Key actions and status
- 2009 reform of LIC facilities increased flexibility and tailored support; new architecture created:
  - (i) the Extended Credit Facility (ECF);
  - (ii) the Standby Credit Facility (SCF);
  - (iii) the Rapid Credit Facility; and
  - (iv) the (pre-existing) Policy Support Instrument (PSI).
- Access was doubled and access policies revised; blending rules strengthened; concessionality increased, including through temporary interest relief; Poverty Reduction Strategy documentation requirements made more flexible; medium-term financing package put in place, supported in part from resources linked to gold sales.
- Adopted a new policy on debt limits in Fund-supported programs and discontinued structural performance criteria.
- Current LIC demand: “there are currently around 50 PRGT-eligible countries in program or near-program status, of which around 30 in sub-Saharan Africa.”
- LIC facilities scheduled for review in 2012.
- Handbook of IMF Facilities for Low-Income Countries issued to the Board in March 2012.
- Guidelines for Ex Post Assessments (EPAs) updated in 2010; recent EPAs prepared for Benin, Burundi, The Gambia, Ghana, Kenya, Kyrgyz Republic, Mali, Niger, Sierra Leone, and Zambia.
- Comprehensive review of Resident Representative program took place in June 2011; no expansion of resident representative program in the medium-term budget.

### IMF Exchange Rate Policy Advice — Implementation highlights
- 2007 Surveillance Decision and related guidance clarified expectations for surveillance of exchange rates and external stability.
- 2008 and 2011 TSRs contained recommendations clarifying exchange rate surveillance; revised Surveillance Guidance notes followed each TSR.
- Integrated Surveillance Decision approved by the Board in July 2012.
- Research and methodology developments:
  - Research Department produced practical guidance to desks on implementing CGER assessments.
  - Staff developing External Balance Assessment (EBA), building on CGER.
  - SPR and Area Departments promoting best practice and adapting exchange rate analysis to specific country circumstances.
- Multilateral surveillance: pilot External Sector Report prepared analyzing external sector imbalances on a multilaterally consistent basis covering “28 major economies plus the Euro Area.”
- Interdepartmental coordination: joint training sessions by ICD and SPR; External Sector Report Coordinating Group introduced new interdepartmental process.
- Engagement with authorities: 2011 TSR recommended exchanging views with authorities prior to Article IV missions; new spillover reports for five major economies produced in 2011 and 2012.

### Structural Conditionality in IMF-Supported Programs — Findings and reforms
- 2011 Review of Conditionality findings:
  - Program conditionality has generally been appropriately streamlined, even-handed, and tailored to country needs.
  - In a few recent programs requiring deep labor and product market reforms, structural conditionality was more extensive.
  - In most programs, conditionality guidelines were followed and programs succeeded in meeting objectives.
  - Program design adapted flexibly to global financial crisis challenges.
  - Macroeconomic impact of most programs appears generally positive; social spending usually protected and in some cases increased.
  - Where large policy adjustment was needed for medium-term fiscal and external sustainability, it was associated with output losses, with efforts made to protect the most vulnerable.
- MONA developments:
  - MONA database expanded in July 2008 to link goals, reforms, and structural conditionality.
  - First Annual Report on Structural Conditionality provided to the Executive Board in July 2008 (period 2005-07).
  - 2011 Review recommended replacing descriptive Annual Report with short periodic analytical reports and making conditionality review data publicly available; published MONA database significantly enhanced.

### IMF Involvement in International Trade Policy Issues — Progress and tools
- Staff developed guidance on financial services and preferential trade agreements (PTAs); Reference Note on Trade in Financial Services (September 2010) and Reference Note on Trade Policy, PTAs and WTO Consistency (October 2010) issued to the Board for information.
- Trade and Policy Review division in SPR reviews consistency of Fund lending and surveillance with updated trade guidance; performance to be examined in the 2014 review.
- Trade-related multilateral surveillance material produced standalone (example: 2011 paper Changing Patterns of Global Trade); follow-up planned on global supply chains.
- Staff access to trade data improved: Fund-wide availability of the Global Trade Atlas and preparation of a quarterly internal trade monitor publication.
- Continued cooperation and data sharing with World Bank, WTO, and others; regular senior staff meetings and semi-annual meetings with the WTO experts group on trade finance.
- 2011 saw the first IMF/WB/WTO joint trade workshop; IMF staff presented analysis to WTO ambassadors.

### IMF performance in run-up to crisis; Crisis Evaluation MIP
- Board discussed the MIP in response to Crisis Evaluation recommendations in May 2012; Directors broadly supported proposals and welcomed management’s statement on breaking down silos and promoting diverse views and candor.
- Directors encouraged continued engagement with the Board where appropriate.
- Next PMR will assess progress on Crisis Evaluation MIP measures; Board will return in one year to assess more intangible goals from the Managing Director’s statement.

---

### Annex summaries — Selected recommendations and implementation actions

### Annex 1 — Key recommendations 1–4 (selected highlights)
- Recommendation 1 (international dimensions / spillovers):
  - Follow-up: new bilateral and multilateral surveillance procedures and products (thematic multi-country reports, spillover reports, multilateral consultations); Multilateral surveillance decision; strengthen financial sector analysis and macro-financial linkages; improve access to data for spillover analysis.
  - Implementation: continuing spillover reports (2011 and 2012); Integrated Surveillance Decision adopted July 2012; alternative modalities to mandatory FSAPs described.

- Recommendation 2 (menus of products/services for emerging and advanced economies):
  - Follow-up: new knowledge products; multi-country swap/credit lines; support to RFAs; Precautionary Credit Line (PCL); refinements to FCL; Post-Catastrophe Debt Relief (PCDR) Trust Fund; Vulnerability Exercise for LICs.
  - Implementation: Creation of PLL and amendments to FCL; new concessional facilities for LICs effective January 2010 under the PRGT; fuller use of RCF.

- Recommendation 3 (strategic agendas to replace surveillance agendas):
  - Follow-up: initiatives under Recommendation 1; 2011 TSR proposed improving traction including exchange of views with authorities prior to Article IV missions.
  - Implementation: teams exchanging views with authorities prior to missions while preserving capacity to raise difficult issues.

- Recommendation 4 (more experts on country visits; recruit practitioners):
  - Follow-up: emphasis on mid-career and specialized skills recruitment; regional advisory groups; Working Group on Fund Presence in the Field.
  - Implementation: recruitment and training emphasis; Working Group report delivered June 2011 with recommendations being acted upon.

### Annex 3 — Exchange rate policy advice (selected operational and analytical progress)
- Rules, guidance, and methodology:
  - Operational guidance on 2007 Surveillance Decision issued July 2008 and published August 2008.
  - Revised Surveillance Guidance Note following 2011 TSR; intranet dissemination site established.
  - Staff developing External Balance Assessment (EBA) building on CGER; preliminary methodological versions expected Spring 2009 (per earlier timeline in the record).
- Regime classification and analytic underpinning:
  - 2008 TSR found 96 percent of sampled reports had a clear description of the de facto exchange rate classification.
  - MCM compiles de facto classifications in the Annual Report on Exchange Arrangements and Exchange Restrictions using quantitative behavior.
- Spillovers and multilateral perspective:
  - Spillover Reports for five major economies produced in 2011 and 2012.
  - ESR pilot covers “28 major economies plus the Euro Area.”
  - ESR Coordinating Group piloted interdepartmental integration for external balances and exchange rates.

### Annex 4 — Structural conditionality (selected policy and monitoring reforms)
- Operational Guidance Note (OGN) revised July 2008 to emphasize linking structural conditionality to program goals, parsimony, and criticality.
- MONA database enhancements to link goals, reforms, and structural conditionality and to provide public access and analytical outputs.
- 2011 Review of Conditionality found generally positive results but noted uneven presentation and justification of critical structural measures in program documents—efforts needed to improve implementation of guidance.

### Annex 5 — Trade policy (selected follow-up)
- Reference Notes issued:
  - Reference Note on Trade in Financial Services, September 2010.
  - Reference Note on Trade Policy, Preferential Trade Agreements, and WTO Consistency, October 2010.
- Improved data access (Global Trade Atlas), quarterly internal trade monitor, and continued institutional cooperation with WTO and World Bank.
- First IMF/WB/WTO joint trade workshop in 2011; regular senior staff meetings and semi-annual WTO experts group meetings on trade finance.

*Source: Fifth Periodic Monitoring Report on the Implementation of Board-Endorsed IEO Recommendations (sections and annex excerpts provided in the document).*

### 1. Implementation Status for IEO Report on IMF Interactions with Member Countries ........12

### 1. Implementation Status for IEO Report on IMF Interactions with Member Countries

### Overview
- This is the fifth Periodic Monitoring Report (PMR) updating Management Implementation Plans (MIPs) in response to Executive Board-endorsed IEO recommendations.
- The last PMR was discussed by the Board Evaluation Committee (EVC) and agreed by the Board in August 2011.
- The fourth PMR concluded that all key performance benchmarks in that report had either been met or were on track, with no new remedial actions proposed and no outstanding performance benchmarks to be reviewed in the next PMR.
- The EVC noted further work was needed on three issues: staff mobility, enhanced coverage of previous implementation plans, and the process for following up on IEO recommendations.
- This PMR (the fifth) updates work on those three issues and presents a consolidated picture of recent progress on all Board-endorsed recommendations made since the first PMR in 2007, and on the Implementation Plan in response to the IEO Evaluation of IMF Interactions with Member Countries (Interactions Evaluation).

### Summary of Implementation Status
- The implementation status of performance benchmarks is reported in three parts:
  - Section A: progress on key benchmarks for the Interactions Evaluation Implementation Plan.
  - Section B: EVC-requested progress update on staff mobility and the follow-up process for IEO recommendations.
  - Section C: update on previous implementation plans agreed since the first PMR in 2007.

### A. IMF Interactions with Member Countries — Key Implementation Progress
- Overall: performance benchmarks related to the Interactions Evaluation have either been met or are on track for timely completion.

- Improve the quality and relevance of the international dimensions of the Fund’s work:
  - New products and procedures include:
    - continuing spillover reports (discussed by the Board in July 2012);
    - the External Sector Report (a pilot report was discussed by the Board in July 2012);
    - more coverage of spillovers and cross country work in Article IV reports;
    - Board discussion of Article IV reports in clusters (plan to extend beyond the clustered discussion of the five systemic economies);
    - Risk Assessment Matrices (RAMs).
  - The Integrated Surveillance Decision was approved by the Board in July 2012.
  - Given insufficient Board support for increasing frequency of mandatory FSAPs for systemic economies, the 2011 Triennial Surveillance Report (TSR) described alternative modalities:
    - a financial expert will be assigned to each Article IV team involving systemically important financial sectors;
    - additional resources will be mobilized for these countries and others as needed (e.g., in case of mounting financial vulnerabilities).

- Engage more deeply with emerging and advanced economies through menus of products and services:
  - Reforms to lending products include creation of the Precautionary and Liquidity Line (PLL) and amendments to the Flexible Credit Line (FCL) in November 2011.
  - The 2011 review of fragile states implemented new policies and practices, including fuller use of the Rapid Credit Facility (RCF).

- Replace defunct country surveillance agendas with strategic agendas:
  - Little Board support for strategic agendas, but the 2011 TSR proposed actions to improve traction of IMF advice, including urging country teams to exchange views with authorities on key issues prior to Article IV missions.

- Bring more experts on country visits / broaden professional diversity of staff:
  - Due to insufficient Board support for the IEO’s specific proposal, focus shifted to broadening staff diversity:
    - recruit a higher proportion of midcareer economists with substantial policy experience;
    - hire more staff with financial sector experience and experts with fiscal and debt policy skills;
    - increased support for training and secondments.
  - The MIP for the Crisis Evaluation detailed progress; next update on strategic HR issues scheduled in the fourth quarter of 2012.
  - A Working Group recommended strengthening training and preparation of resident representatives, better advance planning in selection, and clarifying mandates and departmental management for resident representatives.
  - Regional advisory groups continue to play an important role in some area departments.

- Clarify the rules of the game on outreach:
  - The Fund’s outreach approach continues to evolve with new initiatives, including regularly held communications meetings chaired by the Managing Director/Acting Managing Director and an updated toolkit supporting outreach.

- Address the Fund’s negative reputational legacy:
  - Reforms to conditionality and lending frameworks continue to help address legacy issues.
  - The 2011 Review of Conditionality (discussed by the Board in September 2012) finds broadly positive results for a substantial majority of Fund-supported programs, while highlighting challenges in recent arrangements for countries with high debt.

- Provide guidance and training on professional conduct and leadership:
  - Reforms announced covering professional conduct, leadership, management training, mobility, and accountability.
  - A statement of workplace values for employees was agreed and launched in July 2012, emphasizing people management, diversity, and encouraging diverse contributions to departmental work programs.
  - Working group recommendations addressing staff presence in the field are being taken forward.

- Increase mission chief and staff tenure on country assignments, and provide training and incentives:
  - New measures aim to balance cross-country experience with mission team stability:
    - assignments will be expected to last three years on average going forward;
    - for staff members with seven or more years in a department, there will be a centralized mobility support program.
  - Human Resources Department (HRD), with Technology and General Services Department (TGS), has put in place a system to monitor mission chief and team tenure; results will be shared with the Board as part of briefings on strategic human resources issues.

- Clarify relationship management arrangements and emphasize teamwork:
  - The mandate of resident representatives has been clarified and departmental management strengthened.
  - Tailored job standards for resident representatives are being established and substantive, country-specific terms of reference are being drawn up in consultation with key stakeholders.

- Strengthen implementation of country-specific technical assistance strategies:
  - The Institute for Capacity Development (ICD) was launched on May 1, 2012, bringing together the former IMF Institute (INS) and Office of Technical Assistance Management (OTM).
  - ICD focuses on developing a strategic approach to technical assistance and training, with a new Strategy and Evaluation Division and a regional divisional structure aligned with area departments and regional technical assistance centers (RTACs).

### B. Progress on Specific Issues Highlighted by the EVC from the Fourth PMR
- The EVC identified three issues requiring further work; this PMR reports progress on each.

I. Staff tenure
- A system now exists to monitor mission chief and team tenure; results will be shared with the Board in briefings on corporate workforce planning scheduled for the fourth quarter of 2012.

II. A better process for endorsing and following up on IEO recommendations
- The current MIP/PMR process is useful but seen as overly bureaucratic and can result in recommendations being forgotten after declared “implemented.”
- An upcoming external review of the IEO provides an opportunity to consider changes; any new system should avoid being bureaucratic, cumbersome, and costly.
- From staff perspective, IEO recommendations continue to have a major impact long after initial evaluation, as evidenced by the 2011 TSR and the 2011 Review of Conditionality.

III. Enhanced coverage of previous implementation plans
- This PMR produces a table highlighting status of past implementation plans to facilitate overall assessment of pursuit of Board-endorsed IEO recommendations.
- The first PMR provided a comprehensive assessment of IEO recommendations up to the 2006 IEO report on the IMF’s Multilateral Surveillance.
- Subsequent PMRs reported on reports with outstanding implementation; this PMR updates implementation status of all Board-endorsed recommendations made since the first PMR in 2007.
- Reports covered in Section C include:
  - The IMF and Aid to Sub-Saharan Africa (2007);
  - IMF Exchange Rate Policy Advice 1999-2005 (2007);
  - Structural Conditionality in IMF-Supported Programs (2007);
  - IMF Involvement in International Trade Policy Issues (2009).
- A summary of initial implementation of the MIP for the Crisis Evaluation (discussed by the Board in May 2012) is also provided.

### C. Implementation of IEO Reports — Summary of Recent Developments
- This PMR updates on implementation status of Board-endorsed recommendations made since the first PMR in 2007 and provides consolidated recent progress across the listed IEO reports and the Crisis Evaluation MIP.

*Source: 1. Implementation Status for IEO Report on IMF Interactions with Member Countries*

### 5.      A summary of developments on issues related to recent IEO reports is provided

### 5.      A summary of developments on issues related to recent IEO reports is provided

### IMF and Aid to Sub-Saharan Africa
- Reform of LIC facilities in 2009 to increase flexibility and tailor support to diverse LIC needs, seen as part of the Fund’s response during the global crisis.
- New architecture of facilities created: (i) the Extended Credit Facility (ECF); (ii) the Standby Credit Facility (SCF); (iii) the Rapid Credit Facility; and (iv) the (pre-existing) Policy Support Instrument (PSI).
- Access was doubled and access policies revised; blending rules strengthened; concessionality increased, including through temporary interest relief; Poverty Reduction Strategy documentation requirements made more flexible; and a medium-term financing package put in place, supported in part from resources linked to gold sales.
- Adopted a new policy on debt limits in Fund-supported programs and discontinued structural performance criteria.
- Current LIC demand: “there are currently around 50 PRGT-eligible countries in program or near-program status, of which around 30 in sub-Saharan Africa.”
- LIC facilities scheduled for review in 2012.

### IMF Exchange Rate Policy Advice
- 2007 Surveillance Decision and related guidance notes clarified expectations for Fund surveillance of exchange rates and external stability.
- 2008 and 2011 TSRs contained recommendations clarifying exchange rate surveillance; Surveillance Guidance notes following each TSR provided guidance to staff.
- Staff prepared proposals for an Integrated Surveillance Decision, which was approved by the Board in July 2012.
- Research Department produced practical guidance to desks on implementing CGER assessments; staff developing improved exchange rate methodologies, notably the External Balance Assessment (EBA), building on CGER.
- SPR and Area Departments promoting best practice and adapting exchange rate analysis to countries in specific circumstances.
- 2011 TSR and related guidance note emphasized Article IV reports should take a broad view of external stability (current accounts, reserves, capital flows, balance sheets) and discuss exchange rate policies in context of overall policy mix; these recommendations are being implemented in staff reports.
- Multilateral exchange rate surveillance: pilot External Sector Report prepared analyzing external sector imbalances on a multilaterally consistent basis covering “28 major economies plus the Euro Area.”
- External Sector Report presents assessments of current accounts, exchange rates, capital flows, reserves (including intervention), and net foreign asset positions; aims to enhance transparency and consistency of Fund policy advice on exchange rates.
- Steps taken on interdepartmental coordination on exchange rate analysis: joint training sessions on external stability assessments by ICD and SPR; External Sector Report Coordinating Group introduced a new interdepartmental process for integrating departments’ views.
- Engagement with country authorities: 2011 TSR recommended exchanging views with authorities prior to Article IV missions and following up in Article IV reports. New reports introduced including spillover reports for five major economies in 2011, and again in 2012.

### Structural Conditionality in IMF-Supported Programs
- 2011 Review of Conditionality found broadly positive results for a substantial majority of Fund-supported programs, while highlighting challenges in some recent Fund financial arrangements.
- Review findings:
  - Program conditionality has generally been appropriately streamlined, even-handed, and tailored to country needs.
  - In a few recent programs requiring deep labor and product market reforms to restore external competitiveness, structural conditionality was more extensive.
  - In most programs, conditionality guidelines were followed appropriately and programs succeeded in meeting their objectives.
  - Program design adapted flexibly and appropriately to the challenges of the global financial crisis and its aftermath.
  - Macroeconomic impact of most programs appears generally positive; social spending has usually been largely protected and, in some cases, has increased.
  - In some cases where large policy adjustment was needed for medium-term fiscal and external sustainability, it was associated with output losses, with efforts made to protect the most vulnerable.

### IMF Involvement in International Trade Policy Issues
- Guidance on financial services and preferential trade agreements (PTAs) developed by staff, issued to the Board for information, and published, are now being utilized.
- Trade and Policy Review division in SPR reviews consistency of Fund lending and surveillance with updated trade guidance notes; performance to be examined in the next review of trade policy, expected in 2014.
- Cross-cutting trade policy issues regularly included in Fund surveillance vehicles; more trade-related multilateral surveillance material prepared standalone (example: 2011 paper Changing Patterns of Global Trade).
- Follow-up paper planned to examine dynamic aspects of global supply chains and implications for surveillance (impact of value added trade on REERs and linkages with financial flows).
- November 2011 paper The WTO Doha Trade Round—Unlocking the Negotiations and Beyond provided status update on Doha negotiations and outlook on significant non-Doha trade issues.
- Trade policy work carried out by staff economists able to work on both trade policy and broader macroeconomic issues to integrate trade policy into the Fund’s broader work.
- Progress to ensure staff access to timely trade policy information: Fund-wide availability of the Global Trade Atlas and preparation of a quarterly internal trade monitor publication.
- Continued close cooperation and data sharing with the World Bank, WTO, and others.
- Regular meetings between senior staff of WTO and World Bank and other relevant multilateral organizations, including semi-annual meetings with the WTO experts group on trade finance.
- 2011 saw the first IMF/WB/WTO joint trade workshop; IMF staff presented analysis of protectionism to WTO ambassadors in a session chaired by the Director General of the WTO.

### IMF Performance in the Run-Up to the Financial and Economic Crisis; Board Response and Monitoring
- The Board discussed the MIP in response to Board-endorsed recommendations for the Crisis Evaluation in May 2012; Directors broadly supported specific proposals in the implementation plan and welcomed management’s statement on an ambitious agenda to break down silos and promote diverse views and candor.
- Directors encouraged management and staff to continue to build on proposals and engage the Board where appropriate.
- The next PMR will assess progress on measures set out in the MIP for the Crisis Evaluation; the Board will also return in a year’s time to issues raised in the Managing Director’s statement to assess more intangible goals.
- Conclusion: “All performance benchmarks from the Interactions MIP have either been met or are on track for completion, and no new remedial actions are proposed. There are no outstanding performance benchmarks to be reviewed in the next PMR, although the next PMR will provide further updates on any broader issues raised in the context of this report.”
- Proposed Decision: The Executive Board supports the conclusions in Paragraph 8 of the Fifth Periodic Monitoring Report on the Implementation of Board-Endorsed IEO Recommendations.

### Annex 1 — Implementation Status excerpts: Key recommendations and implementation actions (Recommendations 1–4)
- Recommendation 1: Improve the quality and relevance of the international dimensions of the Fund’s work (cross-country analysis and spillovers).
  - Executive Directors: stressed importance of enhancing international dimension and cross-country analysis and spillovers.
  - Follow-up initiatives: new bilateral and multilateral surveillance procedures and products (thematic multi-country reports, spillover reports, multilateral consultations); Multilateral surveillance decision; strengthen financial sector analysis and macro-financial linkages; improve access to data for spillover analysis; make FSAP stability module mandatory for countries with systemically important financial systems.
  - Implementation status highlights:
    - 2011 TSR outlined initiatives: continuing spillover reports (done in 2011 and 2012); more coverage of spillovers and cross-country work in Article IV reports (expanded in 2012); Board discussion of Article IV reports in clusters for systemic 5 economies.
    - Integrated Surveillance Decision adopted by Executive Board in July 2012.
    - With insufficient Board support for increasing mandatory FSAP frequency for systemic economies, alternative modalities described (assign financial expert to each Article IV team for systemically important financial sectors; mobilize additional resources as needed).
    - Review of data provision to the Fund brought forward to 2012.

- Recommendation 2: Develop menus of products and services for engagement with emerging and advanced economies, and consider similar strategic menus for sub-groups like small states.
  - Executive Directors: open to considering menus of products within resource limits while preserving evenhandedness.
  - Follow-up initiatives: new knowledge products; multi-country swap/credit lines; support to RFAs; Precautionary Credit Line (PCL); refinements to FCL; Post-Catastrophe Debt Relief (PCDR) Trust Fund; Vulnerability Exercise for LICs.
  - Implementation status highlights:
    - Creation of Precautionary and Liquidity Line (PLL) and amendments to the Flexible Credit Line (FCL).
    - New concessional facilities for LICs effective January 2010 under the PRGT.
    - 2011 review of fragile states led to fuller use of the Rapid Credit Facility (RCF).
    - Vulnerability exercise central to Fund toolkit; new knowledge products continued; new debt limits policy agreed.

- Recommendation 3: Replace country surveillance agendas with strategic agendas that include effectiveness of interactions, linkages across surveillance/programs/technical assistance, outreach plan, consultation with authorities, budget/staff alignment, accountability and learning.
  - Executive Directors: mixed views; some supported further consideration, others concerned about additional burden.
  - Follow-up: see initiatives under Recommendation 1; 2011 TSR addressed improving traction, including exchange of views with authorities prior to Article IV missions.
  - Implementation status highlights:
    - 2011 TSR proposed actions to improve traction of IMF surveillance and reiterated need for teams to exchange views with authorities on key issues prior to Article IV missions while preserving obligation to raise difficult issues.

- Recommendation 4: Bring more experts on country visits; recruit highly skilled technical experts and mid-career practitioners; use panels of world-class experts for key visits.
  - Executive Directors: some saw merit; others concerned about team continuity.
  - Follow-up initiatives: continue emphasis on mid-career and specialized skills recruitment; regional advisory groups; Working Group on Fund Presence in the Field.
  - Implementation status highlights:
    - Efforts to broaden professional diversity of staff: recruit higher proportion of midcareer economists with policy experience; hire more staff with financial sector, fiscal, and debt policy skills; increase support for training and secondments.
    - Regional advisory groups continued and composition adapted as needed.
    - Working Group report on increasing effectiveness of staff in the field delivered in June 2011 with recommendations being acted upon (longer lead times for Resident Representative selection; focus on outreach/interpersonal/diplomatic skills; comprehensive training for newly appointed Resident Representatives).

*Source: Fifth Periodic Monitoring Report on the Implementation of Board-Endorsed IEO Recommendations (sections and annex excerpts provided in the document).*

### 5. Clarify the rules of

### 5. Clarify the rules of the game on outreach

### Outreach policy intent and governance
- Clarification of the policy intent is essential, mindful that such outreach is potentially one of the main foundations of traction in large emerging and advanced economies.
- “Directors generally considered that it would be useful to provide greater guidance on outreach efforts, while ensuring sufficient flexibility.”
- “Several Directors stressed the need for care in engaging in policy debates outside the official dialogue, and a few asked for further discussion on this issue.”
- Interdepartmental Communications Group, now chaired by First Deputy Managing Director, meets regularly to provide guidance to staff on strategic communications and outreach priorities.
- The communications group meeting has been replaced by a weekly communications meeting that is now chaired by the Managing Director.

### Communications toolkit: updates and dissemination
- Continue updating communications toolkit with changing Fund policies and facilitate staff use of toolkit.
- The toolkit is regularly updated and disseminated to staff.
- Update communications toolkit.
- Increased targeted outreach activities.
- Media training available to staff.

### Managing the Fund’s negative reputational legacy
- “Directors] agreed that it is important for the Fund to deal forthrightly with current and past controversies, and that outreach efforts should be regularly updated to reflect ongoing reforms in Fund policies.”
- “While outreach efforts were seen to have a critical role in overcoming a negative reputational legacy in many countries, Directors generally did not support the proposal to develop specific guidance in this particular area.”
- Recent reforms cited:
  - Adoption of review-based monitoring of structural conditionality.
  - Establishment of FCL (ex-ante conditionality).
- The experience with many of these recent reforms is considered in detail in the forthcoming Review of Conditionality.
- Guidance Note.
- Revised Conditionality Guidance Note.

### Guidance and training on professional conduct and country relations
- Recommendation: The Managing Director should commission a task force of staff at all levels, with participation by the ethics officer, to consider guidance for staff on how to be both appropriately forthright, and respectful; the task force should report back by summer 2010, and the actionable points to be reported to the Executive Board for its endorsement and oversight.
- “Directors strongly supported efforts to enhance the candor and effectiveness of Fund engagement with country authorities. They acknowledged the critical role of management and the Executive Board in supporting staff analysis involving politically difficult messages. Directors supported continued deepening of guidance and training for staff in conducting country relations.”
- “A few Directors supported the establishment of a task force to develop professional standards for staff interactions with the authorities on country assessments.”
- Actions taken:
  - Continue updating training framework for staff and mission chiefs: new course on ‘conducting country relations.’
  - Communication and outreach refresher courses for resident representatives and mission chiefs.
  - Systematic training needs analysis.
  - Working Group on Standards for Staff Conduct.
- Outcomes:
  - The Fund now offers a range of management development training courses to help managers understand and develop the skills needed to conduct effective country relations.
  - The training and preparation of resident representatives for their assignments has been strengthened, focusing on preparing staff in the field to conduct effective outreach through a revised training program, including a deeper media and outreach course better tailored to the Fund’s needs.
  - In March 2012, The IMF revised its standards of conduct for staff, bringing to fruition more than two years of work on strengthening the institution's ethical framework.

### Mission chief and staff tenure, training, and incentives
- “Directors generally supported the proposal to increase mission chief and staff tenure on country assignments. They welcomed the steps being taken in this regard and noted that this objective should be balanced against the desire for fresh and cross-country perspectives.”
- Increase staff tenure from the current low base, while remaining mindful of Directors calls for fresh perspectives on country teams as well as the importance of departmental flexibility and staff career development needs.
- Training framework: new course on ‘conducting country relations.’
- The recent MIP for the IEO Crisis Evaluation provides an update on staff tenure, noting that new measures will ensure the demand for cross-country experience among staff is met, while being cognizant of the demand for mission team stability.
- Reforms announced to ensure an appropriate balance:
  - Going forward, assignments will be expected to last three years on average,
  - at five years staff members will be encouraged to look for assignments outside their department,
  - and if they are unable to do this by seven years there will be centralized support.

### Clarify relationship management arrangements and accountability
- Recommendation: Clarify relationship management arrangements, emphasizing teamwork—setting out clearly who is responsible and accountable for what, along with appropriate performance measures. The links between the mission chief and the resident representative need to be clarified and systematized.
- “A few Directors supported the IEO recommendation that the responsibilities and accountabilities of management in interactions with members need to be better established.”
- Continue efforts to improve clarity about relations and management responsibilities between mission chief and resident representative.
- Continue strengthening the framework for provision of technical assistance. Medium-term technical assistance (TA) programs on a pilot basis.
- No action; proposal not broadly supported (in specific instances).
- Outcomes and institutional changes:
  - Tailored job standards are being established for resident representatives (RRs), and Terms of Reference are being drawn up that are substantive and country specific, in consultation with key stakeholders.
  - The new Institute for Capacity Development, launched in May 2012, marked a step change in the provision of the Fund’s TA.
  - A new Strategy and Evaluation Division is tasked with continually developing and enhancing the Fund’s capacity building strategy.
  - The Department’s new regional divisional structure is more closely aligned with area departments and regional technical assistance centers (RTACs) allowing a more cohesive approach.

### Annex A–C: Follow-up on IEO Report on the IMF and Aid to Sub-Saharan Africa (summary of related actions)
- A. Policy clarification on aid and program design:
  - A chapeau paper on “The Role of the Fund in LICs” was discussed by the Board in July 2008.
  - Policy has been clarified by the Board in July 2007 discussions of program design and aid and in October 2007 discussion of the IMF’s role in the PRS process and collaboration with donors.
  - Scaling Up Aid Scenarios have recently been prepared by the Fund for 15 countries in Sub-Saharan Africa as a result of the Fund’s participation in the MDG Africa Steering and Working Group.
- B. Monitoring, evaluation, and ex post assessments:
  - Directors welcomed recommendations to establish transparent mechanisms for monitoring and evaluating the implementation of clarified policy guidance.
  - A Handbook of IMF Facilities for Low-Income Countries was issued to the Board in March 2012 and posted on the IMF’s website.
  - Guidelines for Ex Post Assessments (EPAs) were updated in 2010 (see Ex Post Assessments of Members with a Longer-Term Program Engagement—Revised Guidance Note).
  - Recent EPAs were prepared for Benin, Burundi, The Gambia, Ghana, Kenya, Kyrgyz Republic, Mali, Niger, Sierra Leone, and Zambia.
  - Facilities for low-income members were overhauled in 2009. A Review of Facilities for Low-Income Countries is scheduled for 2012.
- C. Resident representatives, donor coordination, and outreach:
  - Directors welcomed clarifying expectations—and resource availabilities—for resident representatives’ and mission chiefs’ interactions with local donors and civil society groups.
  - No expansion of resident representative program in the medium-term budget.
  - A comprehensive review of the Fund’s Resident Representative program, including the role of resident representatives in outreach activities, took place in June 2011.
  - The Role of the Fund in the PRSP and Donor Coordination Processes and the IMF’s Communication Strategy have addressed changing aid modalities, decentralization of donor operations, and the need for improved coordination and communication.
  - A JMAP to improve Bank-Fund collaboration—presented to the Board in October 2007—is being implemented.

*Source: _092412 - 5. Clarify the rules of (PDF).*

### Annex 3. Recent Progress on the IEO Report on IMF Exchange Rate Policy Advice, 1999-2005

### Annex 3. Recent Progress on the IEO Report on IMF Exchange Rate Policy Advice, 1999-2005

### I. Rules of the Game and Guidance to Staff
- IEO recommendation I.1: Clarify the rules of the game for the IMF and its member countries.
  - Board discussion: “Most Directors agreed ... that a revalidation of the fundamental purpose of surveillance is an important goal, although views differed on the best vehicle through which this revalidation could occur.”
  - Follow up / MIP Status, October 2008: Adoption of the 2007 Decision on Bilateral Surveillance. Decision adopted and being implemented.
  - More recent progress:
    - The 2008 and 2011 TSRs contained recommendations clarifying the content of exchange rate surveillance.
    - Guidance to staff provided in revised Surveillance Guidance notes following each TSR.
    - Consideration being given to adoption of an Integrated Surveillance Decision.

- IEO recommendation I.2: Develop practical policy guidance on key analytical issues (stability of the system; use and limits of intervention).
  - Board discussion: Directors “had diverse views regarding the need for such guidance and on the feasibility of developing it.” Some saw merit in a Board discussion on stability (similar to 1999); others noted WEO already provides a platform.
  - Follow up / MIP Status, October 2008:
    - Revised Surveillance Guidance Note (by end 2007; guidance related to the 2007 Decision may be issued by October 2007).
    - Tentative review of the stability of the system of exchange rates in 2009.
    - Expand and improve CGER work (refining methodologies and expanding to key low income countries and producers of exhaustible resources).
    - Knowledge dissemination: coordinated training plan by INS and PDR in 2008; best practice examples to be posted on PDR website in late 2007.
  - More recent progress:
    - Guidance on operational aspects of the 2007 Surveillance Decision issued in July 2008 and published in August 2008.
    - Updated Surveillance Guidance Note revised following the 2011 TSR; new intranet site set up for dissemination.
    - Following Board endorsement of the MD’s 2011 Statement on Strengthening Surveillance, staff preparing an External Sector Report (ESR) to analyze external sector imbalances on a multilaterally consistent basis.
    - Staff developing improved exchange rate methodologies, the External Balance Assessment (EBA), building on CGER; greater country coverage and addressing identified shortcomings of CGER approaches.
    - Priority given to assessing past CGER predictions and improving methodology; work underway on expanding CGER to LICs and producers of exhaustible resources. Preliminary methodological versions expected Spring 2009 (knowledge dissemination mostly completed summer 2008).

- IEO recommendation I.3: Management should give much greater attention to ensuring effective dialogue with authorities.
  - Board discussion: “Directors agreed that there remains scope to explore further ways to improve the dialogue with member countries, and to address any perception of lack of evenhandedness.”
  - Follow up / MIP Status, October 2008: Surveillance agendas; ongoing initiatives to increase MCM participation in Article IV missions.
  - More recent progress:
    - 2011 TSR recommended greater transparency and explanation of exchange rate assessment methodologies for country authorities and the public.
    - Staff examining best practice enhancements to CGER; Research Department produced practical guidance to desks on implementing CGER.
    - ESR will transparently present assessments of current accounts, exchange rates, capital flows, reserves (including intervention), and net foreign asset positions for 28 major economies plus the Euro Area.
    - a. Strategic approach to improve dialogue:
      - Surveillance agendas discontinued as overly bureaucratic; country teams will exchange views with authorities on key issues prior to Article IV missions without compromising capacity to raise difficult issues.
      - Staff produced Consolidated Multilateral Surveillance Report (CMSR) in 2011 and April 2012 to promote ministerial engagement.
      - 2011 TSR recommended exchanging views with authorities prior to Article IV missions and following up on past policy advice in Article IV reports; included in updated guidance note and being implemented.
    - b. Adjusting incentives to raise controversial issues:
      - Managing Director’s Strategic Directions paper envisions an IMF more critical in assessments and more assertive in communicating concerns.
      - 2011 TSR emphasized greater candor and traction via steps in the MD’s statement on Strengthening Surveillance.
    - MCM participation: increased to about 60 consultations in FY08; decline planned in FY09 (40-50 missions) but ongoing targeted training to ensure right mix of skills/expertise.

### II. Implementing Existing Policy Guidance
- II.1 Regime classification clarity
  - IEO recommendation: Resolve inconsistencies and ambiguity over regime classification.
  - Board discussion: Directors reaffirmed importance of clear description of de facto exchange rate regime; need to understand differences between de facto and de jure classifications.
  - Follow up / MIP Status, October 2008:
    - Revised Surveillance Guidance Note.
    - Review of Exchange Arrangements, Restrictions, and Markets in September 2007.
    - Focus on issue in internal review process.
  - More recent progress:
    - Guidance on operational aspects of 2007 Decision issued July 2008 and published August 2008; updated Surveillance Guidance Note to follow TSR discussion.
    - Review split in two; Review of Exchange Arrangements, Restrictions, and Controls completed in 2007.
    - Informal Board seminar on Classification of Exchange Rate Arrangements held April 2008; further Board discussion may occur.
    - Review process strengthened with guidance to staff on reporting exchange rate regime classification; training by MCM on foreign exchange regime classification and market operations prepared.
    - The 2008 TSR found 96 percent of sampled reports had a clear description of the de facto exchange rate classification.
    - MCM compiles de facto classifications in the Annual Report on Exchange Arrangements and Exchange Restrictions; classifications based on quantitative behavior of the exchange rate rather than desk judgment.

- II.2 Backing advice on regimes with analytic work
  - IEO recommendation: IMF advice on exchange rate regimes should be explicitly underpinned by analytic work.
  - Board discussion: Directors saw scope for more candid staff assessments while avoiding mechanistic approaches; staff’s views should be underpinned by comprehensive analytical discussion considering country circumstances and authorities’ views.
  - Follow up / MIP Status, October 2008:
    - Knowledge dissemination and focus in internal review process; tentative 2009 review of exchange rate stability.
  - More recent progress:
    - Guidance on operational aspects of 2007 Decision included expectations for exchange rate assessments in Article IV consultations.
    - Review process strengthened in context of 2007 Decision implementation.
    - Country teams provide advice on exchange rate regimes taking into account macroeconomic conditions and country-specific circumstances.

- II.3 Improve assessments of exchange rate level
  - IEO recommendation: IMF should lead development of analytical frameworks and translate methodologies into country-relevant advice.
  - Board discussion: Directors welcomed improved analysis but noted scope for quality improvement; cautioned against overreliance on model-based estimates.
  - Follow up / MIP Status, October 2008:
    - Expand and improve CGER work; progress on knowledge dissemination; additional research in area departments; work on oil producers in MCD; Table A.2 lists recent Selected Issues papers on exchange rate topics.
  - More recent progress:
    - SPR and Area Departments promoting best practice and adapting exchange rate analysis to specific country circumstances (e.g., oil exporters, financial centers).
    - Research undertaking major project to improve CGER approaches via External Balance Assessment (EBA).

- II.4 Data provision for surveillance
  - IEO recommendation: Consider what lies behind problems of data provision and how incentive structures can be improved.
  - Board discussion: Directors welcomed recommendation to consider scope of problem and remedies; looked forward to review of data provision to the Fund.
  - Follow up / MIP Status, October 2008:
    - Review of data provision to the Fund in late 2007; review completed May 2008.
    - Directors noted approach effective in resolving concerns about data sharing but highlighted variance in staff handling of such cases; endorsed clarifying guidance to staff when concerns arise about Article VIII, Section 5 compliance.
  - More recent progress:
    - In September 2012, a review of Data Provision to the Fund for Surveillance Purposes will assess usage of data and future data needs to strengthen surveillance.

- II.5 Integrating spillovers into surveillance
  - IEO recommendation: Incentives should be given to develop and implement guidance for integration of spillovers into bilateral and regional surveillance.
  - Board discussion: Directors underscored importance of incorporating policy spillovers into surveillance and welcomed initiatives under the MTS.
  - Follow up / MIP Status, October 2008: Continued implementation of existing initiatives under the MTS.
  - More recent progress:
    - Theme received renewed emphasis in refocusing process and in the TSR; MD’s Strategic Directions paper outlines initiatives to integrate multilateral perspective in bilateral surveillance.
    - Spillover Reports produced in 2011 and 2012 for five major economies examined cross-border impacts.
    - External Sector Report being prepared to examine external balances in a multilateral consistent way, accounting for cross-country effects.
    - Staff revised the Surveillance Guidance note; 2011 TSR recommendations encourage greater coverage of inward and outward spillovers in Article IV reports.
    - Recently adopted Integrated Surveillance Decision is designed to better account for spillovers.

### III. Management of Work on Exchange Rates
- IEO recommendation III.1: Bring better focus to analytical work on exchange rates and integrate financial sector issues into surveillance.
  - Board discussion: Directors agreed management should ensure work is organized and managed effectively in tandem with integration of financial sector issues.
  - Follow up / MIP Status, October 2008: No changes in departmental organization and responsibilities.
  - More recent progress:
    - The ESR Coordinating Group was a pilot for a new interdepartmental process to integrate views on members’ external balances and exchange rates and ensure information sharing across departments.
    - a. Clarify responsibility and accountability; actively use forum like Surveillance Committee:
      - Surveillance Committee being strengthened and expected to oversee efforts to integrate global perspectives into Article IV consultations, especially for systemically important cases.
      - ESR Coordinating Group piloted interdepartmental integration.
    - b. Structure of staff teams:
      - No new initiatives; ongoing initiatives to increase MCM participation in Article IV missions.
      - Existing team structures deemed appropriate; focus on developing analytical techniques and diffusion via joint training sessions (e.g., ICD/SPR joint training on external stability assessments).

### IV. Confidentiality and Executive Board Oversight
- IEO recommendations: Clarify expectations for what is included in Article IV staff reports, what may be mentioned orally at Board meetings, and what may be discussed confidentially between staff and authorities but not reported to the Board.
  - Board discussion: “Many Directors had concerns with the IEO suggestion to have an independent party periodically review Fund staff activities that are not reported to the Board.” “Most Directors emphasized that management is responsible for providing the Executive Board with all the information that it needs to conduct surveillance, and is accountable to the Executive Board for how it combines this duty with the need for the staff and management to serve as a confidential advisor to members.”
  - Follow up / MIP Status, October 2008: No new initiatives planned at that time, pending discussion by the Board’s Ad Hoc Committee on Confidential Information on related issues in use of Fund resources.
  - More recent progress:
    - The 2011 TSR and the revised guidance emphasize Article IV reports should go beyond exchange rates to take a broad view of external stability, including current accounts, reserves, capital flows, and balance sheets, and emphasize discussing exchange rate policies in overall policy mix.
    - No additional guidelines issued regarding what information may be shared with the Board.

### V. Facilitating Multilateral Policy Coordination
- IEO recommendation: Make opportunities for potential multilateral concerted action a key strategic management focus.
  - Board discussion: “Most Directors considered multilateral consultations to be a useful addition to the surveillance toolkit because they helped to improve policymakers’ understanding of each other’s objectives.”
  - Follow up / MIP Status, October 2008: Continued use of the multilateral consultation vehicle.
  - More recent progress:
    - Continued monitoring of Multilateral Consultation conclusions in relevant Article IV reports.
    - Fund plays a role in facilitating dialogue requiring multilateral concerted action; IMFC underscored collaboration with the Financial Stability Forum, Bank for International Settlements, standard setting bodies, and national authorities to share lessons from the crisis and implement agreed policy actions.
    - IMF initiative to work as facilitator and coordinator with Sovereign Wealth Funds to develop best practices.
    - No additional steps taken beyond these activities.

*Source: Annex 3. Recent Progress on the IEO Report on IMF Exchange Rate Policy Advice, 1999-2005*

### Annex 4. Recent Progress on the IEO Report on Structural Conditionality in IMF-Supported Programs

### Annex 4. Recent Progress on the IEO Report on Structural Conditionality in IMF-Supported Programs

### A. Policy Review — Clarify expectations on numbers and focus of structural conditions
- IEO recommendation: strengthen parsimony by focusing on criticality and require rigorous justification for conditions.
- Board supported the recommendation: “The preferred way forward appears to be to strengthen efforts to achieve parsimony by focusing on criticality, and requiring rigorous justification for conditions.”
- Follow-up plan: Propose changes to the Operational Guidance Note (OGN) to highlight clear and thorough justification of criticality of structural conditionality (SC) in initial staff reports; assess additional OGN changes to highlight parsimony and criticality while minimizing subjectivity; include guidance on donor-driven conditionality and conditions introduced at the request of country authorities.
- Implementation status, October 2008: The Operational Guidance Note (OGN) was revised in July 2008 to emphasize linking structural conditionality to program goals, emphasize parsimony and criticality, and provide further specific guidance. The revised OGN was made available on the Fund’s external web site (Revisions to the Operational Guidance Note on Conditionality; July 10, 2008).
- More recent progress: The 2011 Review of Conditionality found that program conditionality has generally been appropriately streamlined, even-handed, and tailored to country needs. In a few recent programs requiring deep labor and product market reforms, structural conditionality was more extensive.

### B. Program and Conditionality Design — Link goals, strategies, and conditions
- IEO recommendation: Identify main program goals and set structural conditions that contribute to these goals; better explain links between goals, strategies, and conditions in Board papers.
- Board comment: “Directors agreed ... that the link between program goals, strategies, and conditions should be better explained in Board papers.”
- Follow-up plan: At pre-brief, staff should propose program strategy necessary to achieve goals; anticipate structural conditionality (SC) where possible; strengthen justification of SC in briefing papers; at approval, Board documents should present clear description of links between goals, strategies, and proposed reform framework; anchor all future SC within originating reform framework or justify expansion during reviews.
- Implementation status, October 2008: Revisions to the OGN call specifically for program documentation to present links between program goals, reform strategies, and underlying structural conditionality, and require that conditionality added during reviews be in line with the reform strategy in the original program document or justified in the new staff report. Program documents, particularly for longer-duration arrangements, are to provide a roadmap of reform, and documentation for the last program review will take stock of implementation experience.
- More recent progress: The 2011 Review of Conditionality found uneven presentation of conditionality in program documents—program implementation risks were mostly analyzed, but presentation of critical structural measures, justification of criticality, and discussion of policy options were often limited. Efforts are needed to ensure better implementation of existing guidelines, including enhanced clarity on macro-criticality and alternative structural measures considered.

### C. Monitoring and Evaluation Framework — Link conditions to reforms and goals; MONA enhancements
- IEO recommendation: Develop monitoring and evaluation framework linking conditions to reforms and specified goals; improve MONA to track conditions and disclose data.
- Board support: “Directors agreed...that the link between program goals, strategies, and conditions should be better explained...and that this should be monitored.”
- Follow-up plan: Establish framework within MONA to monitor links between goals, reforms, and SC; issue annual updates (Board information) on application of SC; make MONA data available on external website for staff reports in public domain.
- Implementation status, July 2008: A system to link goals, reforms, and structural conditionality was established within the MONA database in July 2008. The first Annual Report on Structural Conditionality was provided to the Executive Board for information in July 2008 and made available on the Fund’s external website. It provides new data for the period 2005-07. The second annual report was to be issued to the Board for information with recommendation to make it available externally (Application of Structural Conditionality 2009 Annual Report).
- More recent progress: The 2011 Review of Conditionality recommended replacing the descriptive Annual Report with a short, periodic analytical report and making conditionality review data publicly available. The published MONA database has been significantly enhanced; users can now retrieve a count of conditions per review by selected country or group and compare to another country or group.

### D. Information in Board Documents — Explicitly link IMF objectives to proposed measures
- IEO recommendation: Program documentation should be more explicit about IMF objectives and how proposed measures help achieve them; PRGF requests should include an operational roadmap covering program length, modalities, sequencing, and expected impact.
- Board remarks: “Directors agreed...that the link between program goals, strategies, and conditions should be better explained...” and some Directors supported inclusion of text boxes in program documents laying out rationale for conditions; proposals included initial program roadmaps and final program reviews with stock-taking against stated goals.
- Follow-up plan: Staff reports should include descriptions of links between goals, strategies, and conditionality; judgment of a condition’s critical importance for achieving program goals should be central; staff may quantify the impact of SC on the macroeconomic framework where possible; contact group to assess need for additional guidance on structural benchmarks; use of appendix table to establish links (not subject to word limits).
- Implementation status and recent progress: See sections A–C above regarding OGN revisions, program documentation requirements, and MONA developments. The 2011 Review noted that presentation of critical structural measures and justification in program documents often remained limited, indicating need for better implementation of guidance.

### Annex 5 (contextual cross-reference): Recent Progress on IEO Report on IMF Involvement in International Trade Policy Issues
(Note: summary entries in Annex 5 are reported here only to preserve continuity of the source material provided.)

- A. Reviews and guidance
  - IEO recommended five-yearly reviews of Fund trade guidance and Board guidance on PTAs and trade in financial services.
  - Follow-up included plans for five-yearly reviews with first expected in 2014, and staff guidance on trade in financial services and PTAs to be developed by July 2010.
  - Implementation: Reference Note on Trade in Financial Services, September 2010, and Reference Note on Trade Policy, Preferential Trade Agreements, and WTO Consistency, October 2010 were developed and issued to the Board for information.
  - More recent progress: Guidance on financial services and PTAs are being utilized.

- B. Trade policy in Fund-supported programs
  - Board noted scaled-back conditionality on trade policy; trade-related conditionality should be macro-critical and country-specific.
  - Follow-up: Update guidance notes, including the 1999 Guidelines on Implementing Trade Policy Reforms, by July 2010.
  - Implementation: The Reference Note on Trade Policy, Preferential Trade Agreements, and WTO Consistency updates the 1999 Guidelines. The Trade and Policy Review division in SPR reviews consistency of Fund lending and surveillance with updated trade guidance; performance to be examined in the 2014 review.

- C. Multilateral, regional, and bilateral surveillance
  - Recommendation: Address trade policy periodically in multilateral and regional surveillance (WEO, REOs, GFSR).
  - Follow-up: Cover relevant trade topics in standalone papers and collaboration across departments; incorporate Executive Board guidance on macro-critical trade policy and evenhandedness.
  - Implementation and progress: Increased coverage in surveillance vehicles (e.g., Chapter 4 of September 2010 WEO); standalone staff papers in April and September 2010; 2011 paper Changing Patterns of Global Trade and follow-up on global supply chains; November 2011 paper The WTO Doha Trade Round—Unlocking the Negotiations and Beyond provided updates and outlook.

- D. Staffing-related issues
  - Recommendation: Build a critical mass of trade policy expertise; some Directors did not favor reintroducing a separate Trade Policy Division.
  - Follow-up: Attract and develop trade policy expertise while balancing macroeconomic and country-team integration; maintain expertise in a division with broader responsibilities.
  - Implementation: Trade policy work carried out by staff economists working on both trade policy and broader macroeconomic issues to integrate trade into Fund work.

- E. Trade policy information
  - Recommendation: Improve data and measures of trade protection; collaborate with WTO and World Bank on data and tools for PTAs and financial services.
  - Follow-up: Prepare guidance note on availability and use of tariff and trade policy information from existing databases by July 2010; explore enhanced information sharing with WTO, World Bank.
  - Implementation and progress: Reference Note provides account of information sources; Fund-wide availability of the Global Trade Atlas; quarterly internal trade monitor publication; continued close cooperation and active engagement with WTO and World Bank on monitoring and policy discussions.

- F. Institutional cooperation
  - Recommendation: Management and senior staff to commit to regular formal meetings with counterparts in other IOs; report to Committee on Liaison and/or Executive Board/IMFC on proceedings and coordination plans.
  - Follow-up: Occasional senior staff meetings among IMF, World Bank, WTO to focus on Fund-relevant issues; organize on margins of other international meetings when possible.
  - Implementation and progress: Regular meetings have taken place with WTO and World Bank senior staff and other multilateral organizations, including semi-annually with the WTO experts group on trade finance; 2011 saw the first IMF/WB/WTO joint trade workshop; IMF staff presented analyses to WTO ambassadors and in WTO workshops.

*Source: Annex 4 and Annex 5, “Recent Progress on the IEO Report on Structural Conditionality in IMF-Supported Programs” (implementation status and more recent progress as presented in the supplied content).*

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