## _073014c

## Source details

**Canonical URL:** [_073014c](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2014/_073014c.pdf)

## Other formats

- [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2014/_073014c.pdf.md)
- [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2014/_073014c.pdf.json)

---

### Executive summary — objectives and overall findings
- Purpose: assess implementation of reforms from the 2011 Triennial Surveillance Review (TSR) to increase focus on (i) interconnectedness; (ii) risk assessments; (iii) financial stability; (iv) external stability and sustainability; and (v) traction.
- Steps taken:
  - Adoption by the IMF’s Executive Board in 2012 of the Integrated Surveillance Decision (ISD).
  - Generalized use in surveillance of risk assessments for individual countries and the global economy.
  - Adoption of a Financial Surveillance Strategy.
  - Strengthening tools to assess balance of payments stability and sustainability (pilot ESRs, improved DSA).
  - Steps aimed at increasing traction of surveillance.
- Overall interview finding: broad endorsement of reform thrust; recognition of significant progress; further progress needed in:
  - strengthening tools for analysis of policy spillovers, macro-financial linkages, risk assessment, and external sector assessments;
  - more closely integrating and strengthening synergies between bilateral surveillance (BS) and multilateral surveillance (MS);
  - increasing the value added—and the traction—of bilateral surveillance for a broader range of member countries.
- Resource constraint warning: without additional staff resources, objectives must be addressed under significantly constrained budgets, likely requiring difficult managerial decisions on priorities, procedures, resource allocation, and incentives.
- Expansion of MS since 2008–09 crisis manifested in strengthening flagship reports (WEO, GFSR) and creation/refinement of new products and tools (Fiscal Monitor, Spillover Report, pilot External Sector Report, Global Risk Assessment Matrix) and expanded vulnerability exercises (VEE, VEA, VE-LIC, EWE).

### Multilateral surveillance (MS): flagship reports and newer products
- Flagship reports—WEO and GFSR:
  - WEO: widely regarded as IMF’s premier MS product; praised for broad forward-looking overview, systemic risks, and policy responses; improved in sharpening analysis of spillovers and risks.
  - GFSR: seen as significantly improved; first chapter widely read for focus on downside risks; analytical chapters sometimes viewed as too technical; occasional differences in tone/messages versus WEO noted.
- Newer MS products—views and issues:
  - Fiscal Monitor (FM):
    - Strong support from financial market participants for consistent fiscal indicators across member countries.
    - Mixed views among country authorities; some request more focus on structural fiscal issues, comparative analyses, lessons from tax/expenditure policies and institutional reforms, and more focus on EMs and LICs.
    - Some area department staff question need for semi-annual FMs given resource costs; FAD notes FM staff resources are a fraction of WEO and GFSR.
  - Spillover Report (SR):
    - Diverse and on balance less positive opinions; concerns about execution, methodology opacity, and unwieldiness for larger-country authorities; smaller countries and market participants generally unfamiliar with SRs.
    - Functional departments stress SR importance for interconnectedness and support continuation as stand-alone; area departments worry about resource diversion from BS.
  - Pilot External Sector Report (ESR) and EBA methodology:
    - Authorities welcome broader methodology versus prior CGER focus; note experimental nature and significant judgment involved; caution against strong policy conclusions.
    - Functional departments value ESRs for multilaterally consistent discipline on country assessments; market participants show little familiarity.
  - G-RAM and expanded vulnerability exercises:
    - G-RAM prepared as internal input; not published or shared with authorities; staff view it as useful standardized background.
    - Vulnerability/exposure assessments (VEA, VEE, VE-LIC, EWE) expanded; staff find them useful for collective reflection though time-consuming.

### Multilateral risk assessment tools — G-RAM and vulnerabilities
- G-RAM purpose and features:
  - Prepared by an interdepartmental group led by SPR.
  - Provided to staff as input into country and MS risk assessments to ensure multilateral consistency.
  - Lists types of short- and medium-term systemic risks from country policies, financial market developments, commodity price developments, with relative probability assessments reflecting staff judgment.
- Risk probability classifications (exact wording preserved):
  - low if the probability of the triggering event is assessed at less than 10 percent;
  - medium if it is assessed at between 10 and 30 percent;
  - high if it is more than 30 percent.
- Feedback:
  - Most country authorities interviewed were not familiar with specifics of G-RAMs.
  - Staff view G-RAM as essential input but believe better analytical tools are needed to assess probabilities and transmission mechanisms.
- Vulnerability and exposure assessments:
  - Significant effort devoted to expanding methodologies; except VE-LIC, assessments are internal staff exercises not shared with Executive Board and authorities.
  - Staff concern about time absorbed but find exercises useful for peer comparison.

### Bilateral surveillance (BS) and Article IV consultations — coverage, value-added, and traction
- Expanded Article IV coverage expectations: deeper treatment of financial sector developments, macro-financial linkages, risk assessments, external stability prospects, macro-critical social issues (job creation and inequality), and inward/outward spillovers when relevant.
- Country authorities:
  - Universal welcome for increased focus on financial sector developments and implications.
  - Many noted modeling and empirical assessment of macro-financial linkages remain work in progress and called for more granular data.
  - Most welcomed streamlined and risk-focused FSAPs; follow-up in Article IV missions varied with MCM staff presence.
  - Several, especially smaller countries, want more frequent FSAP updates even at cost of reduced coverage.
  - Some authorities find IMF analysis too general and insufficiently grounded in country-specific institutional and political realities; value IMF’s broad international perspective and want more cross-country experience and case comparisons in Article IV reports and Selected Issues Papers.
- Staff perspectives:
  - Mixed views on expanded BS coverage.
  - Area staff support increased financial focus and systematic focus on risks; claim RAM preparation often becomes box-ticking lacking analytical basis.
  - Divergent views on structural issues: some staff lack expertise and fear credibility loss; some mission chiefs urge IMF to address macro-relevant structural issues and build in-house expertise.
  - Requests for clarity from Management and the Executive Board on expected IMF involvement in structural issues, priorities, and resource needs.
- Market participants:
  - Value Article IV and FSAPs for independent, deeper analysis of macro trends and financial risks; note quarterly/annual frequency limits utility for very short-term developments.
- Integration and consistency of BS and MS:
  - Need stronger interdepartmental cooperation and synergies; country authorities sometimes find MS analysis of other countries more candid than Article IV reports and privilege Article IV when messages on their country differ.
  - Area staff report a “cacophony of messages” between MS and BS documents and spend large time reviewing MS outputs for consistency.
  - Functional departments argue Article IV missions should draw more on MS work; call for lower burden on area staff in preparing MS products.

### Evenhandedness and perceived resource allocation biases
- Perceptions vary:
  - Some advanced-country authorities view surveillance as reasonably evenhanded but occasionally restrained with powerful countries.
  - Some emerging market authorities feel IMF emphasizes their vulnerabilities more than those of advanced economies and is more accommodating of large Asian countries (especially China).
  - Smaller and low-income countries seem less concerned or more resigned to unevenness.
- Resource allocation concerns:
  - Complaints that excessive staff resources are devoted to supporting G-20 countries that account for less than 15 percent of the membership (in number) albeit for more than three quarters in economic weight, constraining analysis depth for other members.
  - Noted difficulty for IMF governance to be critical of major shareholders; some see improving trend with forceful recent Management remarks on European banking weaknesses and U.S. debt ceiling politics.

### Access, candor, transparency, and traction in Article IV missions
- Access and candor:
  - Missions generally have access to top economic policymakers; authorities willing to listen privately but sensitive to public airing of criticism.
  - Sensitivity varies by region and history with IMF; Asian and Latin American authorities noted as more sensitive.
- Transparency and deletions:
  - IMF transparency policy intensifies tension between private candor and public criticism; staff spend considerable time handling deletion requests; strict rules seen as defense against inappropriate pressures.
- Engagement with non-government stakeholders:
  - Degree of mission exposure to banks, business associations, labor, CSOs, opposition varies by country; some governments restrict contacts citing political misuse risk.
- Traction determinants:
  - Sound economic analysis necessary but not sufficient; socio-political factors and quality/openess of dialogue are critical.
  - Rapid turnover of mission teams and decline in seniority/experience following downsizing could weaken traction.
  - Some authorities dislike summary assessment box on compliance with past IMF recommendations as “backward-looking” and demeaning.

### Knowledge and data management — identified weaknesses and remedies
- Long-standing complaints about storage and retrieval of economic and policy information gathered by IMF staff; staff knowledge often rests with individuals and is lost on move.
- Five specific issues highlighted:
  1. No readily accessible, well-organized source of information on countries’ experiences in macroeconomic and financial policy and institutional reforms; inadequate incentives to build and maintain knowledge bases beyond basic spreadsheets.
  2. Many desk databases are poorly documented, differ from IFS data, and are retrievable only by direct request to each desk.
  3. Even data stored within IFS are not easily accessible to staff; some desks use outside vendors to access other countries’ data.
  4. Proprietary data purchase contracts restrict sharing across departments, affecting country desk work on financial sector developments; may be primarily a budgetary issue.
  5. Important gaps in domestic and international statistics: currency mismatches (including rapidly growing corporate sectors in emerging economies); currency composition of official reserves; measures of global exposures of banking groups; and many others.
- Consequences: hinder staff’s ability to provide best analysis and policy advice; mission chiefs often cannot quickly provide relevant cross-country experiences.
- Remedies discussed: improve search engine for Selected Issues Papers and TA Reports, more open access to TA reports, and regional units (REOs) developing comparable databases shared across staff. IEO evaluation of data issues underway; Knowledge Exchange (KE) initiative aims to improve storage and retrieval of core IMF documents.

### Organizational and staffing issues — resource trends and review function
- Staffing and resourcing trends:
  - Area departments (except EUR) report increased surveillance requirements met with an envelope of resources slightly reduced from pre-downsizing levels.
  - Exact staff numbers cited: total number of professional regular and contractual staff in area departments other than EUR declined from 530 in FY08 to 521 in FY2014.
  - Functional departments (FAD, MCM, RES, SPR) saw resources increase since downsizing, but a large share devoted to externally funded TA and MS activities, squeezing support to bilateral surveillance via mission participation and review.
- Impacts:
  - Reported adverse effects on the quality of BS due to reduced functional department participation in Article IV missions (notably MCM and FAD).
  - Review function erosion concerns despite MCM creating a Surveillance Review division in 2012 and designating senior staff as contacts for area departments.
  - SPR concentration of document clearance may weaken incentives for other functional departments to allocate time to reviews; some area staff criticize SPR review approach as “too legalistic.”
  - Functional departments (except SPR) keep lists of countries they review; number of reviews reportedly falls short of area departments’ wishes.
- Managerial implications:
  - Expanded MS product set and expanded BS coverage absorb staff time; trade-offs between producing MS products and supporting BS exist.
  - Calls for clearer managerial prioritization and incentives to allocate staff time between MS products and BS.
  - Need for managerial decisions on priorities, procedures, resource allocation, and incentives to address TSR objectives under constrained budgets.

### Key figures and interview sample (exact figures preserved)
- Interview sample: 23 interviews with country authorities, 11 with market participants, 23 mission chiefs and 7 IMF staff from various functional departments.
- Area department professional staff counts (other than EUR): 530 in FY08; 521 in FY2014.
- Membership representation note: G-20 countries account for less than 15 percent of the membership (in number) albeit for more than three quarters in economic weight.

*Source: 2014 TSR—REPORT ON INTERVIEWS (text provided in the content unit).*

### EXECUTIVE SUMMARY _______________________________________________________________ 2

### EXECUTIVE SUMMARY

### A. Multilateral Surveillance
- Purpose of interviews: assess implementation of reforms from the 2011 Triennial Surveillance Review (TSR) to increase focus on (i) interconnectedness; (ii) risk assessments; (iii) financial stability; (iv) external stability and sustainability; and (v) traction.
- Steps taken to implement reforms:
  - Adoption by the IMF’s Executive Board in 2012 of the Integrated Surveillance Decision (ISD).
  - Generalized use in surveillance of risk assessments for individual countries and the global economy.
  - Adoption of a Financial Surveillance Strategy.
  - Strengthening tools to assess balance of payments stability and sustainability.
  - Steps aimed at increasing the traction of surveillance.
- Overall interview finding: broad endorsement of the thrust of reforms by country authorities, market participants, and most IMF staff; recognition of significant progress; further progress needed in:
  - Strengthening tools for analysis of policy spillovers, macro-financial linkages, risk assessment, and external sector assessments.
  - More closely integrating and strengthening synergies between bilateral surveillance (BS) and multilateral surveillance (MS).
  - Increasing the value added—and the traction—of bilateral surveillance for a broader range of member countries.
- Resource constraint warning: without additional staff resources, objectives must be addressed under significantly constrained budgets, likely requiring difficult managerial decisions on priorities, procedures, resource allocation, and incentives.
- Expansion of MS since 2008–09 crisis manifested in:
  - Strengthening flagship reports: World Economic Outlook (WEO) and Global Financial Stability Report (GFSR).
  - Creation/refinement of new products and tools: Fiscal Monitor (FM), Spillover Report (SR), Pilot External Sector Report (ESR), Global Risk Assessment Matrix (G-RAM).
  - New tools to broaden vulnerability assessments to advanced markets and low-income countries (LICs).
- Views on flagship reports:
  - WEO: praised for broad, forward-looking overview of global economy, systemic risks, and policy responses; widely used by country authorities and IMF staff; improved in sharpening analysis of spillovers and risks.
  - GFSR: seen as significantly improved; first chapter widely read, especially by market participants for focus on downside risks; analytical chapters viewed by many as too technical; occasional differences in tone/messages versus WEO noted.
- Views on newer MS products:
  - Mixed knowledge and use; many staff feel number, size and frequency may have gone too far given staff resource costs and distraction from BS.
  - Fiscal Monitor (FM):
    - Strong support from financial market participants for consistent fiscal indicators across member countries.
    - Mixed views among country authorities: some value benchmarking; others worry about universal fiscal rules/benchmarks.
    - Requests for greater FM focus on structural fiscal issues, comparative analyses, lessons from tax/expenditure policies and institutional reforms; interest in more focus on EMs and LICs.
    - Some area department staff questioned need for semi-annual FMs given resource costs; FAD notes FM staff resources are a fraction of WEO and GFSR.
  - Spillover Report (SR):
    - Diverse and on balance less positive opinions.
    - No challenge to focus on spillovers, but discomfort with execution, methodology opacity, and unwieldiness for larger-country authorities familiar with SRs.
    - Smaller countries and market participants generally unfamiliar with SRs.
    - Area department staff concerned about resources and analytical tools; some argue SRs distract from country-specific work or should be absorbed into WEO or reduced in frequency.
    - Functional department staff stress SR importance for focusing on interconnectedness and support continuation as stand-alone.
  - Pilot External Sector Report (ESR):
    - Authorities welcome broader methodology of external balance assessment (EBA) versus prior CGER focus on exchange rates, but note experimental nature and judgment involved; caution against strong policy conclusions.
    - Functional department staff value ESRs for multilaterally consistent discipline on country assessments.
    - Market participants interviewed showed little or no familiarity with ESR.
  - G-RAM and expanded vulnerability exercises:
    - Not published or shared with authorities; no external views available.
    - Staff find vulnerability exercises useful for collective reflection and peer comparisons, though time-consuming.
    - G-RAM viewed as useful standardized background for discussing global factors in country risk assessments; caveat to not lose regional/country-specific factors.

### B. Surveillance Under Article IV Consultations and FSAPs
- Interview focus: coverage, focus and value-added of evolving BS; integration/consistency between BS and MS; evenhandedness and traction; knowledge and data needs; internal issues including review process and staffing.
- Financial sector and macro-financial linkages:
  - Country authorities unanimously welcomed increased focus in Article IV consultations.
  - Appreciation for streamlining and increased risk focus in FSAPs, though some want further emphasis.
- Risk assessment quality: most authorities welcome increased focus on risks but request strengthened analytical quality of risk assessments.
- Spillovers in Article IV: increased focus welcomed; most authorities more interested in inward than outward spillovers.
- Coverage of social and structural issues:
  - Mixed views: some authorities strongly endorse IMF focus on macro-relevant structural issues; others prefer IMF stick to traditional comparative advantage and leave other institutions to advise on structural issues outside Fund’s mandate.
- Value-added of bilateral surveillance:
  - Several authorities (including small developing countries) find IMF analysis too general and insufficiently grounded in country-specific institutional and political realities.
  - Authorities value IMF’s broad international perspective and want more use of cross-country experiences and country case comparisons in Article IV reports and Selected Issues Papers (SIPs).
- Staff perspectives on expanded BS:
  - Mixed; many area department staff feel they lack expertise to credibly advise on non-core structural issues and worry about undermining credibility in core areas.
  - Some staff, notably mission chiefs for LICs, argue Fund cannot be silent on macro-relevant structural issues; advocate investing in in-house expertise and collaborating with other institutions.
  - Staff request clarity from Management and Executive Board on desired extent of IMF involvement in structural issues, priority work areas, and resource requirements.
- Market participants value Article IV staff reports and FSAPs for independent, deeper analysis of macro trends, policies, prospects and financial risks—not for up-to-date short-term developments.
- Integration and consistency of BS and MS:
  - Need for stronger interdepartmental cooperation and synergies.
  - Country authorities often find MS analysis of other countries more candid and useful than in Article IV reports; when messages about their own country differ, they privilege Article IV reports as more attuned to “realities on the ground.”
  - Area department staff report instances of “a cacophony of messages” between MS documents and Article IV reports and large time spent reviewing MS documents for consistency.
  - Functional department staff view MS products as providing broader perspective required by global interconnectedness and as useful checks on BS advice; stress Article IV missions should draw more from MS work on spillovers, financial and external stability.
  - Call for greater synergy between MS and BS and a lower burden on area department staff in preparing MS products.
- Evenhandedness perceptions:
  - Varied across authorities.
  - Some large emerging market (EM) authorities criticize IMF for emphasizing vulnerabilities in their countries more than in advanced economies.
  - Some advanced-country authorities cite increased focus on spillovers, growth, jobs, inequality, and IMF flexibility on capital controls as evidence of growing evenhandedness.
  - Several non G-20 countries and their mission chiefs express concern about disproportionate focus of surveillance resources on the G-20.
- Traction of surveillance:
  - Most authorities take Article IV consultations seriously, provide mission access to top economic policymakers and a broad range of stakeholders, and are willing to listen to constructive criticism; sensitivity to public criticism varies.
  - Sound economic analysis is necessary but not sufficient for implementation; socio-political factors can limit implementation and may not be fully accounted for in IMF advice.
  - Traction depends on quality and openness of dialogue with IMF staff.
  - Concerns that rapid turnover of mission teams and decline in seniority and experience following downsizing could weaken traction.

### C. Organizational and Staffing Issues
- Interviews highlighted internal issues affecting effective implementation of surveillance reforms:
  - Role of the review process in surveillance.
  - Staffing constraints and downsizing impacts on mission seniority, experience, and continuity.
- Resource implications:
  - Expanded MS product set and expanded BS coverage absorb staff time; trade-offs exist between producing MS products and supporting BS.
  - Area and functional departments differ on appropriate allocation of staff time between MS products and BS, with calls for clearer managerial prioritization and incentives.
- Need for managerial decisions:
  - Address objectives of TSR under constrained budgets via decisions on priorities, procedures, resource allocation, and incentives.
  - Authors hope report provides background for such decision-making.

*Source: 2014 TSR—REPORT ON INTERVIEWS (Executive Summary).*

### 25.      Many comments from those interviewed—especially from staff, but also from some

### 25.      Many comments from those interviewed—especially from staff, but also from some

### Organizational and staffing issues
- Many interviewees—especially staff, but also some authorities and financial market participants—expressed long-standing complaints about the state of knowledge and data management in the IMF, particularly the capacity for storage and retrieval of economic and policy information gathered by IMF staff in interactions with member countries. 5
- Several country authorities and most market participants indicated they would like the IMF to play a greater role as a collector and aggregator of economic and financial data in different areas.
- Area and functional department staff identified organizational and staffing issues that could hinder implementation of the IMF’s reformed surveillance agenda if not addressed timely:
  - Area departments: increased requirements of both multilateral and bilateral surveillance have been met with an envelope of resources that has been slightly reduced from pre-downsizing levels.
  - Functional departments: most of the significant additional resources received since downsizing have been devoted to externally funded TA, policy development, and MS activities, resulting in squeezed support to bilateral surveillance (BS) through both mission participation and review, with perceived adverse effects on the quality of BS.
  - Some country authorities raised concerns about decreased participation of functional department staff, especially from MCM and FAD, in Article IV consultation missions.

### Introduction and scope of the interview exercise
- This paper reports main findings from structured interviews conducted by the authors with a representative range of country authorities, financial market participants, and IMF staff, on implementation to date of reforms to IMF surveillance initiated by the 2011 TSR. 6
- Interview sample:
  - 23 interviews with country authorities, 11 with market participants, 23 mission chiefs and 7 IMF staff from various functional departments. 6
- The 2014 TSR concept note (Board discussion, September 2013) called the review to focus on:
  - (a) effectiveness of implementation of the integrated surveillance framework from the 2011 TSR; and
  - (b) consistency, focus, traction and evenhandedness of IMF policy advice in surveillance.
- Many interviewees spoke candidly about other related issues beyond the two main questions.

### 2011 TSR objectives and progress to date
- The 2011 TSR emphasized making IMF surveillance as interconnected as the global economy and endorsed an action plan to increase focus on:
  - (i) interconnectedness;
  - (ii) risk assessments;
  - (iii) financial stability;
  - (iv) external stability and sustainability; and
  - (v) traction.
- The 2011 TSR also recommended better integration of multilateral surveillance (MS) and bilateral surveillance (BS), including consideration of legal framework changes.
- Progress to date has included:
  - i. Adoption in 2012 of the Integrated Surveillance Decision (ISD), mandating that Article IV consultations identify and discuss outward spillovers from members’ policies that may significantly affect the effective operation of the international monetary system.
  - ii. More systematic use of risk assessments in surveillance activities, and development of an improved debt sustainability assessment (DSA) framework for market access countries.
  - iii. Adoption in 2012 of a three-pronged Financial Surveillance Strategy (FSS) aiming to: (a) strengthen analytical underpinnings of macro-financial risk assessment and policy advice; (b) update instruments and products of financial surveillance, to foster an integrated policy response to risks, including through more focused and frequent FSAPs; and (c) strengthen IMF engagement with stakeholders, including the Financial Stability Board (FSB) and other regulatory bodies, to influence the global financial regulatory agenda.
  - iv. Strengthening tools to assess balance of payments stability and sustainability, including two pilot External Sector Reports (ESRs) using a new External Balance Assessment (EBA) methodology.
  - v. Steps to increase traction of surveillance, including expansion of coverage to macro-critical social issues; clearer statement of authorities’ views in Article IV reports; and intensified outreach to increase visibility of IMF policy advice.

### Multilateral surveillance (MS): expansion and instruments
- MS scope and instruments have substantially expanded, reflected in:
  - Evolution of flagship reports: World Economic Outlook (WEO) and Global Financial Stability Report (GFSR).
  - Creation/refinement of new products and analytical tools: Fiscal Monitor (FM), Spillover Report (SR), pilot External Sector Report (ESR), and Global Risk Assessment Matrix (G-RAM).
  - Expansion of vulnerability assessment exercises: VEE (emerging markets), VEA (advanced countries), VE-LIC (low-income countries) and the Early Warning Exercise (EWE).
- Interview focus: stakeholder views on effectiveness of these MS tools.

### Traditional flagship reports: WEO and GFSR
- General findings:
  - Both WEO and GFSR drew broad praise; many said no other institution—public or private—has the capacity, access, and knowledge to produce anything like these reports.
  - Market participants described them as "bridging the divide between academics and Wall Street." (quote preserved)
- WEO:
  - Nearly all interviewees regarded WEO as the IMF's premier and most widely recognized MS product.
  - Seen as providing a broad, forward-looking overview of the global economy, systemic risks, and needed policy responses.
  - Widely used by country authorities as an input to forecasting; used in markets for IMF views on prospects and risks for the global economy, especially larger countries.
  - Some market participants view WEO as more candid and less influenced by country authorities and the Executive Board than Article IV reports.
  - Analytical chapters vary in quality but are generally theoretically sound and cover globally relevant issues (example cited: recent work on fiscal multipliers).
  - Virtually all interviewees thought WEO had improved in recent years, especially in sharpening analysis of spillovers and risks since the 2008 global crisis.
- GFSR:
  - Viewed as having improved significantly over the past decade.
  - First chapter widely read and appreciated, especially by market participants, for greater focus on downside risks than WEO.
  - Market participants appreciate increased analytical depth (example: analysis of bank losses and recapitalization needs in Europe).
  - Analytical chapters sometimes seen as too technical and difficult to read.
  - Producers’ knowledge and expertise are widely respected and relied upon internally and externally.
  - Some private sector interviewees would welcome more frequent dialogue with GFSR staff.
- Consistency and relations between WEO and GFSR:
  - A few authorities suggested combining WEO and GFSR; most disagreed.
  - Some suggested ensuring greater consistency of messages between the two, e.g., via a common introduction.
  - Staff opinions divided: some see differing messages as confusing and harmful to dialogue with authorities; others believe multiple views reflect genuine uncertainty and controversy on issues like fiscal policy roles or risks from exit from unconventional monetary policies.
  - Market participants also divided on need for consistent messages.
- GFSR traction and data sensitivity:
  - Country authorities seem more sensitive to GFSR analysis and messages due to its presumed traction with market participants.
  - Reported reluctance of some countries to provide detailed financial sector data for GFSR and pushback on "market sensitive" issues has increased GFSR reliance on multilateral sources (e.g., BIS) rather than national sources.
  - Some area department staff also pushed back citing market sensitivity (example: corporate debt reporting).

### Newer MS products and tools: mixed reactions
- Opinions on newer MS additions were more mixed and knowledge/use varied significantly across interviewees.
- Many staff familiar with the instruments felt their number, size and frequency may have become excessive and should be scaled back, given resources required for their preparation.

### The Fiscal Monitor (FM)
- Background:
  - FM began in 2009, initially focusing on fiscal implications of the global financial crisis.
- Market participants:
  - Enthusiastic supporters; view FM as providing a unique overview of public finances across IMF members based on a consistent fiscal indicators dataset—described by some as a valuable public good.
- Country authorities:
  - Views mixed: some value scope for comparisons and benchmarking; others concerned about attempts to find universally applicable rules or benchmarks for fiscal sustainability, arguing sustainability depends on country-specific factors.
  - Most authorities would like the FM to focus more on structural fiscal issues and comparative analysis of country responses to structural fiscal challenges (lessons from tax and expenditure policies and institutional reforms).
  - October 2013 issue “Taxing Times” cited as a good direction for FM evolution.
  - Several authorities thought FM should focus more on issues relevant to emerging market and low-income countries.
- IMF staff perspectives:
  - Area department staff were less positive, viewing FM as absorbing scarce FAD resources better used for bilateral surveillance and demanding staff time for data and review; several preferred reducing FM frequency to once a year.
  - FAD staff noted FM staff resources are only a fraction of those absorbed by WEO and GFSR.

### The Spillover Report (SR)
- Purpose and scope:
  - Developed in 2011 to assess economic and financial spillovers among four countries (China, Japan, UK and US), the Euro area, and spillovers from the S5 to major emerging markets. 8
  - SR findings are discussed with S5 authorities in Article IV consultations and with the IMF Executive Board in clustered consultations.
- Interview findings:
  - Opinions on SR effectiveness were more diverse and significantly less positive than for other MS products.
  - Some S5 authorities viewed SR as useful for integrating multilateral with bilateral surveillance, but suggested improvements to examine spillovers in both directions and better linkages to financial sector developments in the models used.
  - Some S5 authorities criticized emphasis on immediate market reactions to shocks in assessing spillovers and policy impacts.
  - Authorities in the G20 tended to be more familiar with and supportive of SR and its analytical strengthening; non-G20 authorities generally showed little familiarity.
  - Several non-S5 authorities requested more analysis of spillovers from other countries (including non-G20 regional “heavyweights”) on their economies. 9
  - Most market participants interviewed had little familiarity with SR.
- Staff views:
  - Divided sharply:
    - Supporters (mostly functional departments) saw SR as experimental but valuable in spotlighting externalities from systemic countries’ policies and argued for stand-alone continuation with refined analytics and stronger area/functional department involvement.
    - Critics highlighted model issues: G35 model viewed by some as relatively opaque, with non-replicable results and lacking external review; GIMF considered weak in modeling financial shocks and better suited for structural/long-term policy impacts than short- to medium-term financial effects—characterized by some as part of an ongoing "models war." 10
    - Management’s decision to give RES responsibility for managing and coordinating future SRs, while keeping them interdepartmental, was seen by some as likely to help develop an integrated analytical framework capturing both short- and longer-term spillover effects.
  - Area department staff complained about heavy time demands the SR exercise placed on them.

### The Pilot External Sector Report (ESR) and EBA methodology
- Aim and coverage:
  - Two pilot ESRs aimed to strengthen external sector surveillance by assessing exchange rates, current accounts, capital flows, and sustainability of external balance sheets.
  - The 2013 ESR presented a multilateral consistent assessment of external positions of the 28 largest economies and the Euro Area and discussed corrective policy responses to significant external imbalances. 11
- Methodology:
  - ESRs use a common methodology, the EBA, to assess current account balances and real exchange rates that would prevail in a cyclically neutral state and absent policy distortions.
  - Policy distortions are measured against normative benchmarks appropriate for each country based on econometric analysis or staff judgment.
  - For countries with large net foreign indebtedness, EBA includes an evaluation of external sustainability.
  - The pilot EBA, developed by RES, builds and improves on previous methods to assess external imbalances, including IMF's Consultative Group on Exchange Rates (CGER). 12
- Interviewee reactions:
  - Country authorities generally welcomed broader coverage of external sector assessments in EBA compared with CGER’s narrower exchange rate focus.
  - Several emphasized the experimental nature of the methodology and cautioned against drawing strong policy conclusions.
  - Some noted that the methodology relies significantly on judgment, especially regarding characterization of policy distortions.
  - A few authorities expressed significant discontent with exercise results.

*Italic: Source content excerpt from the IMF 2014 TSR—Report on Interviews (text provided in the content unit).*

### 47.      Views from area department staff largely echoed those of country authorities. In general,

### _073014c - 47.      Views from area department staff largely echoed those of country authorities. In general,

### Multilateral Risk Assessment Tools
- A G-RAM is prepared by staff to highlight systemic risks capable of producing significant adverse deviations from the WEO baseline scenario.
- The G-RAM:
  - Is prepared by an interdepartmental group led by SPR.
  - Is provided to staff as an input into preparation of risk assessments for individual countries and MS products to ensure multilateral consistency.
  - Lists and briefly discusses different types of short and medium-term systemic risks potentially originating from:
    - policies of individual countries or groups of countries,
    - financial market developments,
    - commodity price developments.
  - Includes, for each type of risk, a relative probability assessment reflecting staff judgment.
- Risk probability classifications:
  - low if the probability of the triggering event is assessed at less than 10 percent;
  - medium if it is assessed at between 10 and 30 percent;
  - high if it is more than 30 percent.
- G-RAM is an internal exercise; content is reflected in a range of surveillance documents and outlined in a Management presentation to the (restricted) IMFC.
- Feedback and perceptions:
  - Most country authorities interviewed were not familiar with specifics of G-RAMs.
  - Many authorities appreciated discussion of the EWE in the restricted IMFC session as candid and informative.
  - Staff view G-RAM as an essential input to country risk assessments but believe better analytical tools are needed to assess:
    - the probability of systemic risks,
    - mechanisms of transmission of their effects.

### Vulnerability and Exposure Assessments
- Significant effort has been devoted to expanding coverage and refining methodologies of macro-economic and financial vulnerability assessments (VEA, VEE, and VE-LIC).
- With the exception of the VE-LIC, vulnerability assessments are internal staff exercises, not shared with the Executive Board and country authorities.
- Staff views:
  - Concern about the amount of time absorbed by the exercises.
  - Generally find them useful for collective reflection on country risks and comparing risks with relevant peers.

### Bilateral Surveillance (BS) — Coverage and Value-Added
- Article IV consultations are now expected to cover in greater depth:
  - financial sector developments,
  - macro-financial linkages,
  - risk assessments,
  - external stability prospects,
  - macro-critical social issues (job creation and inequality),
  - outward and inward spillovers, when relevant.
- Integration objective: Better integrate bilateral with multilateral surveillance as enshrined in the 2012 ISD.
- Country authorities’ views:
  - Universal welcome for increased focus on financial sector developments and implications for the real economy, public finances, and balance of payments.
  - Many noted that theoretical modeling and empirical assessment of macro-financial linkages remain work in progress and called for further efforts, including gathering granular data.
  - Most welcomed streamlining and increased focus on risks in FSAPs; some thought IMF should go further.
  - Follow-up of FSAP findings in Article IV missions varied with presence of experienced MCM staff.
  - Several authorities (especially smaller countries) want more frequent FSAP updates even at cost of reduced coverage.
  - Caution about potential adverse repercussions from publishing staff judgments on probability and impact of risks under heightened market sensitivities.
  - Emphasis on recognizing idiosyncratic risks (e.g., conflict, natural disasters) in policy recommendations.
  - Diverse views on coverage of social and structural issues:
    - Some endorse broader context and holistic approach, urging cooperation with OECD, MDBs, ILO and deeper staff knowledge.
    - Most agree IMF should focus on structural issues only when macro-relevant.
    - Others prefer IMF to stick to traditional comparative advantages unless strict macro-criticality test is met.
  - Increasing sense that countries developing in-house forecasting capacity reduce IMF’s edge in short-term macro analysis; advice sometimes seen as too general and insufficiently grounded in country-specific institutional and socio-political realities.
  - Appreciation for IMF’s broad international perspective and desire for more cross-country experience analyses in background papers and Selected Issues Papers.
- Staff views:
  - Mixed on expanded BS coverage.
  - Most area department staff support increased focus on financial sector and systematic focus on risks; requirement to discuss risks with authorities through RAMs welcomed.
  - Complaints that RAM preparation is often a box-ticking exercise lacking strong analytical basis; difficulty engaging authorities on tail risks and policy responses.
  - Divergent views on structural issues:
    - Some staff lack necessary expertise and worry advising beyond core mandate could undermine IMF credibility.
    - Some mission chiefs, especially for developing countries, believe IMF should not be silent on macro-relevant structural issues and should build in-house expertise while leveraging external work.
  - Request for more clarity from Management and the Executive Board on desired IMF involvement in structural issues and related resource requirements.
  - Area department staff call for strengthened cross-country analysis in Article IV documents and greater support from functional departments to make policy advice more specific and practically oriented.
- Market participants:
  - Note annual frequency of Article IV reports makes them inferior for current developments compared with investment bank newsletters or central bank/ministry reports.
  - Value Article IV reports for independent, deeper analysis of macroeconomic trends, policies, and prospects.
  - Find them useful as a compact comprehensive source for countries not followed closely day-to-day.

### Integration and Consistency of BS and MS
- Operational guidance post-2011 TSR and ISD emphasizes inclusion in Article IV consultations of:
  - inward spillovers,
  - outward spillovers when relevant,
  - risk assessments,
  - financial and external stability.
- Country authorities:
  - Welcome efforts to integrate bilateral and multilateral surveillance.
  - Several view MS documents’ analysis of other countries as more candid than Article IV reports; when messages differ about their own country they privilege Article IV reports as more attuned to “realities on the ground.”
  - Some EM countries complain of excessive pessimism about their vulnerabilities in the GFSR.
  - Similar complaints about spillover reports and pilot external reports in some cases.
- Staff:
  - Area department staff report a “cacophony of messages” between MS and BS documents in some instances and call for Management to better arbitrate differences.
  - Many complain about time spent reviewing MS documents to avoid inconsistent messages.
  - Spillover reports criticized by some mission chiefs for opaque methodology (“black-box”) and difficulty explaining it to authorities.
  - Functional department staff view MS products as providing a broader perspective necessary for global interconnectedness and a useful check on BS advice; they argue Article IV missions should draw more on MS work.
- Summary: Progress has been made in integrating bilateral and multilateral perspectives, but further interdepartmental cooperation and synergies are needed.

### Evenhandedness
- Perceptions vary widely across country authorities:
  - Most advanced country authorities view surveillance as reasonably evenhanded but sometimes not forceful enough regarding other countries; note complex politics in powerful countries limits IMF impact.
  - Recent developments cited as evidence of increased evenhandedness include:
    - increased focus on spillovers,
    - adoption of the ISD,
    - requirement for systemic countries to undergo FSAPs,
    - calls for global rebalancing,
    - more flexible attitudes on capital controls and countercyclical fiscal policies.
  - Some emerging market countries feel IMF emphasizes their vulnerabilities more than those of advanced countries and “still pulls its punches with its advanced members.”
  - Complaints include perceived underestimation of spillover risks from unconventional monetary policies of advanced countries and a more accommodating attitude toward large Asian countries (especially China).
  - Smaller and low-income countries seem less concerned or more resigned to unevenness.
- Monetary union members:
  - Some want IMF to be more sensitive to policy constraints imposed by membership; others welcome IMF perspectives as balancing union debates.
- Resource allocation concerns:
  - Some mission chiefs to non-G20 countries complain excessive staff resources are devoted to supporting G-20 countries that account for less than 15 percent of the membership (in number) albeit for more than three quarters in economic weight, constraining analysis depth and impacting quality of advice to other members.
  - Noted difficulty for IMF governance to be critical of major shareholders, though some see improving trend with forceful recent Management remarks on European banking weaknesses and U.S. debt ceiling politics.

*Source: 2014 TSR—REPORT ON INTERVIEWS (excerpt as provided)*

### 72.      Most country authorities emphasized that they attach significant importance to Article

### 72.      Most country authorities emphasized that they attach significant importance to Article IV consultations

### Access, candor, and sensitivity
- Missions generally have access to top economic policy makers, at least to present their concluding remarks.
- Authorities are willing to listen to criticisms in private, but are more sensitive to their public airing.
- Sensitivity to criticisms and degree of candor depend on personalities, history of relations with the IMF, and the IMF's image with the public.
- Authorities involved in negotiations for Fund-supported programs find it more difficult to “agree to disagree” when moving to surveillance mode.
- Regional patterns noted: Asian and Latin American authorities tend to be more sensitive to criticism than those from Eastern Europe and Africa, reflecting legacies of the IMF’s role in past crises.

### Transparency, deletions, and market sensitivity
- Some authorities noted IMF transparency policy has intensified tensions between private candor and public criticism; there were no calls to reverse that policy.
- Staff need to be sensitive to damage certain statements (e.g., about the degree of exchange rate misalignment) can cause in periods of heightened market concerns.
- Mission chiefs report considerable time spent fending off unjustifiable requests for deletions from Article IV documents; they welcomed strict rules as a defense against inappropriate country pressures.
- Footnote noted: Fund staff have been accommodating of requests for deletions in published staff reports of quantifications of the degree of an exchange rate misalignment under the market sensitivity criteria.

### Engagement with stakeholders outside government
- Degree of mission exposure to non-government stakeholders varies by country.
- Most countries allow contacts with banks, business associations, and labor representatives.
- Some countries also allow background or on-the-record press contacts, CSOs, and opposition members; others restrict such contacts citing risk of misuse of IMF staff views for political purposes.

### Traction of IMF advice and dialogue quality
- Sound economic analysis is necessary but not sufficient for traction; government policies must reflect socio-political factors that IMF staff may not fully account for.
- IMF should recognize it is “a voice in the choir,” not the sole or main influence on policy-making.
- Several interviewees disliked the summary assessment box on compliance with past IMF recommendations in Article IV reports as “backward-looking” and demeaning.
- Traction depends on quality and openness of dialogue:
  - Prior consultation on issues of particular interest to the country is important.
  - Preparing in-depth, practical analyses focused on country concerns enhances effectiveness.
  - Receptive attitude by staff to country views is crucial; some teams were perceived as arriving with firmly held views, undermining open dialogue.
- Rapid turnover of mission teams weakens traction; traction must be earned through in-depth knowledge of country-specific macroeconomic, institutional, and socio-political characteristics and by building mutual trust.
- Note in footnote: Some authorities did not seem aware of recent initiatives by IMF Management and SPR to limit short term-mobility and to strengthen requirements for more effective handover of desk assignments.

### Knowledge and data management — main weaknesses identified
- Many interviewees—especially staff, some authorities, and market participants—reported long-standing complaints about data management, storage, and retrieval of economic and policy information gathered by IMF staff.
- Several authorities and most market participants would like the IMF to play a greater role as a collector and aggregator of economic and financial data.
- The IEO has begun an evaluation of data issues in the IMF.
- The Knowledge Exchange (KE) initiative aims to improve storage and retrieval of core IMF documents.
- Five specific issues highlighted:
  1. No readily accessible, well-organized source of information on countries’ experiences in macroeconomic and financial policy and institutional reforms; staff knowledge often rests with individuals and is lost when they move on; inadequate incentives to build and maintain knowledge bases beyond basic spreadsheets.
  2. Many databases compiled and used by country desks are poorly documented, use data differing from those in IFS, and are generally not retrievable except by direct request to each desk.
  3. Even data stored within IFS are not easily accessible to staff; some country desks use an outside vendor to access other countries’ data, including data sourced by the vendor in the IFS database itself.
  4. Proprietary data purchased by some departments cannot, under purchase contracts, be made available to others; legally justifiable but results in lack of access affecting country desk work, especially on financial sector developments; may be primarily a budgetary issue.
  5. Important gaps in domestic and international statistics: currency mismatches (including in rapidly growing corporate sectors in emerging economies); currency composition of official reserves; measures of global exposures of banking groups; and many others. IMF cannot gather all such statistics but needs to press other agencies to do more.
- Consequences: these factors hinder staff from bringing best analysis and policy advice; mission chiefs often cannot quickly provide relevant cross-country experiences; suggested remedies include a better search engine for Selected Issues Papers and TA Reports and more open access to TA reports; possibility of regional units (REOs) developing comparable databases and sharing them across staff.

### Organizational and staffing issues affecting surveillance
- Area departments (except EUR) report increased surveillance requirements handled with a resource envelope slightly reduced from pre-downsizing levels; this has led to inadequate staffing of missions, especially for smaller non-program countries, while surveillance coverage expanded and authorities’ expectations rose.
- The total number of professional regular and contractual staff in area departments other than EUR declined from 530 in FY08 to 521 in FY2014.
- Functional departments (FAD, MCM, RES, SPR) saw resources increase from pre-downsizing levels, but a large share of that increase relates to externally funded TA whose priorities may not align with surveillance; remaining resources mostly devoted to MS and policy development activities.
- Functional departments’ support to bilateral surveillance (BS), through mission participation and review, has been squeezed, with reported adverse impacts on surveillance quality.
- Review function erosion noted despite MCM creating a Surveillance Review division in 2012 to better coordinate surveillance activities and align GFSR and Article IV messages; MCM also designated five senior staff as initial contacts for area departments.
- Functional departments (except SPR, which reviews all countries) keep lists of countries they review; number of reviews reportedly falls short of area departments’ wishes.
- Concentration of document clearance in SPR may weaken incentives for other functional departments to allocate adequate time to reviews amid budget constraints.
- Some area department staff criticized SPR for a “too legalistic” approach to review, focusing on meeting guidance note requirements rather than on substantive policy advice; they suggested SPR review officers should provide more country-specific policy advice and solicit other functional departments when needed.
- Calls for SPR review officers to be better positioned to provide peer country comparator advice—this would require experience and time, both thought to have suffered from downsizing and SPR’s increased focus on policy development and MS activities.
- SPR acknowledged cross-country perspective in surveillance and review remains a work-in-progress; SPR questioned whether integrating risks, vulnerabilities, and spillovers into bilateral surveillance (per 2011 TSR recommendations) had diluted focus on other country-specific policy issues and noted positive feedback from area departments on the more interactive review process.

*Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2014/_073014c.pdf*

---


_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2014/_073014c.pdf_