## _090115a

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---

### Executive Summary
- Scope and purpose:
  - The Seventh PMR includes: (i) a discussion of progress made over the last year on the actions corresponding to four Management Implementation Plans (MIPs) that were classified as still “in progress” in the previous PMR; and (ii) an assessment of the progress made in achieving the high-level objectives in three areas directly related to those MIPs.
  - An update on substantive issues related to five older MIPs agreed since 2007 is provided at the end of the report.
  - Three new evaluations completed by the IEO since March 2014 yielded MIPs issued in July and August 2015; progress on those MIPs will be discussed in the next PMR.
- Key developments since the Sixth PMR:
  - Sixth PMR: 42 out of 46 actions across four MIPs were either implemented or “in progress”.
  - Seventh PMR finds further progress; most actions remain “in progress” due to continuous, long-term implementation needs.
  - 2014 TSR completed September 2014; Managing Director’s Action Plan for Strengthening Surveillance and an updated Guidance Note for Surveillance under Article IV Consultations circulated March 2015; Board briefed May 2015.
- Overall assessment:
  - Assessing implementation requires judgment, especially for institutional culture/process changes with long horizons.
  - Three overall conclusions:
    - Issues of attention to risks and uncertainty, organizational silos, and evenhandedness are intrinsic and likely to remain work in progress.
    - The Fund has made substantial efforts to address these issues, with varying degrees of success.
    - Approaches have been adapted over time and will continue to evolve.
  - Most actions in the four MIPs have either been implemented or remain in progress.
  - Recommendation: next PMR should focus on monitoring implementation of new MIPs and those in-progress actions most critical for the Fund.

### Implementation status and follow-up (structure of the PMR)
- Report divided into:
  - Section 1: status of actions still “in progress” from the four MIPs reviewed in the Sixth PMR.
  - Section 2: assessment of progress in three recurrent areas: (i) attention to risks and uncertainty; (ii) organizational silos; (iii) evenhandedness.
- Sixth PMR follow-up: 22 actions corresponding to the four MIPs required further follow-up. Table 5 (in source) updates implementation status for all four MIPs.
- FY 2016–FY 2018 Medium Term Budget implications summarized in Appendix 2 (in source) and will affect some in-progress actions.

### Implementation snapshot (summary counts and rates)
- Role of the Fund as Trusted Advisor MIP:
  - Number of Board-Endorsed Recommendations: 6
  - Number of Follow-Up Steps in the MIP: 16
  - Implemented: 6
  - Partially Implemented: 3
  - In Progress: 7
- IMF Performance in the Run-Up to the Financial and Economic Crises:
  - Number of Board-Endorsed Recommendations: 8
  - Number of Follow-Up Steps in the MIP: 17
  - Implemented: 8
  - In Progress: 9
- Research at the IMF–Relevance and Utilization:
  - Number of Board-Endorsed Recommendations: 5
  - Number of Follow-Up Steps in the MIP: 8
  - Implemented: 4
  - Partially Implemented: 2
  - In Progress: 2
- International Reserves–IMF Concerns and Country Perspectives:
  - Number of Board-Endorsed Recommendations: 2
  - Number of Follow-Up Steps in the MIP: 5
  - Implemented: 3
  - In Progress: 2
- Aggregate totals (all listed MIPs):
  - Number of Board-Endorsed Recommendations: 21
  - Number of Follow-Up Steps in the MIP: 46
  - Implemented: 21
  - Partially Implemented: 5
  - In Progress: 20
  - Percentage Implemented: 100
  - Percentage Partially Implemented: 45.7
  - Percentage In Progress: 43.5

---

### Run-Up to the Crisis MIP — overview and main pending issues
- MIP structure:
  - Eight general recommendations followed by 17 specific steps.
  - Nine actions were “in progress” in the Sixth PMR.
- Key outstanding needs (Run-Up to the Crisis MIP):
  - Further integration of global risk analysis into Article IV reports.
  - Strengthened analysis of macro-financial linkages and financial spillovers, including inward spillovers and spillbacks.
  - Improved information sharing and coverage of cross-country experiences.
  - Address weaknesses identified in the 2013 Staff Survey; increase staff training.
  - Address perceptions about lack of evenhandedness across countries.
  - Strengthen support for vulnerable (non-systemic, non-advanced) countries on issues requiring specialized expertise.
- Budget and staffing constraints:
  - Some in-progress actions will be affected by FY 2016–FY 2018 Medium Term Budget changes, including multilateral surveillance activities and reform of employment categories.

### Risk assessment unit and risk management developments
- Major changes to strengthen risk analysis:
  - 2012 ISD clarified scope of risk coverage and spillover analysis in Article IV consultations; systemic economies covered by Spillover Report.
  - Interdepartmental Risk Group (RG) produces Global Risks Assessment Matrix (G-RAM); G-RAM issued to the Board and summarized in WEO/GFSR/FM/REOs.
  - Independent Tail Risk Group of A-level economists established to explore tail risks and report to RG and management.
  - Semi-annual Early Warning Exercise (EWE) with FSB; Vulnerability Exercises (VEs) for advanced, emerging market, and low income countries; VE findings incorporated in flagship products.
  - External sector surveillance strengthened via External Balance Assessment (EBA) methodology and External Sector Report (ESR); EBA-lite provided to non-ESR desks.
- Risk Management Unit (RMU):
  - Established on June 9, 2014; reports to the First Deputy Managing Director.
  - Initial responsibilities:
    - (i) developing main elements for a strengthened RM framework;
    - (ii) fostering development of additional tools to analyze and monitor risks to the Fund;
    - (iii) producing reports on the Fund’s risk profile at regular intervals.
  - March 2015: Board informal session discussed RMU conceptual framework paper.
  - RMU responsibilities are broader than the originally proposed risk assessment unit in the IEO recommendation.

### Managing Director’s Action Plan on risks and surveillance integration (selected actions)
- To strengthen clarity/coherence of multilateral surveillance messages:
  - Incorporate key messages from ESR and Spillover Report into WEO and GFSR.
  - Summarize main views in the GPA; abolish WEO regional trends chapter; streamline GFSR; Fiscal Monitor to include conjunctural chapter once a year.
- Facilitate two-way flow between multilateral and bilateral surveillance:
  - Flagship analytical chapters to reflect other departments’ views; tailored presentations by flagship authors on implications for country groupings.
  - Regional analysis and cluster reports to support integration.
- Article IV enhancements:
  - For economies with likely systemic spillovers: greater quantification of outward spillovers and spillbacks; discuss with authorities.
  - For countries where risks could impact outlook: include alternative scenario in Article IV reports; first wave to experiment with 20 countries.
  - Use balance sheet approach for in-depth shock transmission analysis; STA preparing prototype balance sheet matrices for macro-financial pilots.
- Data and analytics:
  - SPR to expand external debt sustainability analysis (DSA) to assess shocks to external flows.
  - G-20 Data Gaps Initiative second phase planning starting in 2016; medium-term effort to develop a global flow of funds for largest economies.

---

### Staffing, recruitment, training, and diversity (financial sector expertise)
- Recruitment and employment framework:
  - 109 mid-career economists (staff and contractuals; Grades A11-A15) recruited into economics departments in 2014; 69 percent fungible macroeconomists and 31 percent specialists (mostly fiscal and financial sector experts).
  - Mid-career economists represented 80 percent of total economist appointments (staff and contractuals) in 2014.
  - Categories of Employment paper broadly endorsed by the Board in October 2014; became effective May 1, 2015.
  - Department-by-department review indicated about 120 of 630 contractual appointments met criteria for staff appointments.
- Centralized recruitment programs:
  - Externally Financed Appointee program reaching near full capacity in 2015 with 15 appointees.
  - Special Appointee Program: 10 officials currently participating.
- Training and curriculum:
  - ICD-developed macro-financial training curriculum for FY 2015 and FY 2016, jointly with MCM and other departments.
  - ICD launched a 5-module course on key macro-financial topics in February 2015; to be repeated due to demand.
- HRD findings and concerns:
  - Base salary is a key hiring issue at the mid-career level; reliance on total compensation package to facilitate recruitment.
  - Policy of limiting grade offers to A12 and A13 for fungible economist positions could discourage candidates.
  - Diversity challenges in mid-career hiring; increased specialist hiring in 2014 limited candidate pool from underrepresented regions.
  - Average training uptake: On average, 31.1 percent of Fund staff took four or more days of training in FY 2014.
  - Management measures: charge-backs for no-shows to training and recording training enrollments in calendar of absences.

### Internal Economics Training Events in Finance (FY 2010–2015) — key statistics
- FY 2011: Total No. of Events — 24; Participant Weeks — 170.6; Percentage of IET Total (Participant Weeks) — 18.5
- FY 2012: Total No. of Events — 19; Participant Weeks — 203.6; Percentage of IET Total (Participant Weeks) — 21.2
- FY 2013: Total No. of Events — 19; Participant Weeks — 181.0; Percentage of IET Total (Participant Weeks) — 19.2
- FY 2014: Total No. of Events — 26; Participant Weeks — 237.9; Percentage of IET Total (Participant Weeks) — 31.7
- FY 2015: Total No. of Events — 25; Participant Weeks — 221.3; Percentage of IET Total (Participant Weeks) — 37.5
- Total (FY 2011–2015): Total No. of Events — 140; Participant Weeks — 1292.5; Percentage of IET Total (Participant Weeks) — 25.4

---

### Role of the Fund as Trusted Advisor — engagement, continuity, confidentiality
- Early consultations and mission preparation:
  - Early consultations expected of all teams; mission teams to share major policy questions and global assumptions at least one week ahead of mission.
  - Pilot clustered Article IV consultations implemented.
  - Mission chiefs to better explain rationale for Fund policy advice; these items largely “in progress”.
- Continuity and tenure:
  - Target of three years average tenure for country assignments to be monitored by HRD: indicator shows average tenure of 2.3 years in mid-FY 2015 versus target of three years.
  - Box 2 mission chief tenure (by area department) — values measured as last completed assignment:
    - Total: FY 2013 = 2.4; Mid-FY 2014 = 2.3; FY 2014 = 2.3; Mid-FY 2015 = 2.3
    - AFR: FY 2013 = 2.4; Mid-FY 2014 = 2.2; FY 2014 = 2.2; Mid-FY 2015 = 2.3
    - APD: FY 2013 = 2.4; Mid-FY 2014 = 2.0; FY 2014 = 1.9; Mid-FY 2015 = 1.8
    - EUR: FY 2013 = 2.8; Mid-FY 2014 = 2.6; FY 2014 = 2.3; Mid-FY 2015 = 2.3
    - MCD: FY 2013 = 2.5; Mid-FY 2014 = 2.5; FY 2014 = 2.9; Mid-FY 2015 = 2.9
    - WHD: FY 2013 = 2.1; Mid-FY 2014 = 2.3; FY 2014 = 2.1; Mid-FY 2015 = 2.1
- Confidentiality and informal engagement:
  - SPR updated Guidance Note on the Fund’s Transparency Policy; includes Transparency Policy Information Sheet for missions.
  - Staff to inform authorities on confidentiality policy and to encourage informal/brainstorming discussions.
  - TSR surveys show variation in authorities’ willingness to disclose confidential information; around a quarter of members provide no information beyond Article IV requirements; in the Middle East this is around 40 percent.
- Communication and outreach:
  - 2015 Guidance Note encourages routine meetings with political leaders, trade unions, business representatives and CSOs; COM prepared outreach guidance and an IMF Communications toolkit.
  - Social media pilot (Twitter) tested with resident representatives in four countries.

---

### International Reserves and Reserve Adequacy (ARA work)
- EM metric:
  - Introduced 2011 as complement to traditional metrics; conservative tool for assessing reserve needs for emerging market economies.
  - Data for EM metric and traditional metrics available on SPR website.
- January 2015 ARA paper proposals (selected):
  - Article IV reports should, when warranted, include: fuller discussion of authorities’ objectives for holding reserves; assessment of precautionary reserve needs; discussion of costs of reserves.
  - Classification by financial/economic flexibility and market access: mature markets, deepening financial markets, constrained market access; methodologies developed per group.
  - Mature economies without a reserve currency: scenario analysis recommended; Article IV reports to discuss reserve adequacy framework, risks, possible reserve needs, and costs.
  - Deepening financial markets: discuss traditional metrics and ARA EM metric; adjust for capital controls, commodity volatility, dollarized economies; currency unions start from consolidated union-level needs.
  - Low-income and credit constrained economies: weigh benefits vs opportunity cost; complement traditional approaches like the three-month import rule.
  - Board view: depth/emphasis depends on country circumstances and external/global stability relevance; Directors emphasized judgment over mechanical metric application.
- Pending:
  - Guidance Note on Reserve Adequacy planned for end-October 2015.
  - More outreach and public data availability on reserve adequacy metrics expected after Board discussion.

---

### Attention to risks and uncertainty; organizational silos; evenhandedness — high-level progress
- Attention to risks and uncertainty:
  - Risk assessments standard in surveillance and program reports; creation of interdepartmental risk groups and dedicated RMU; VE, G-RAM, ISD, and Guidance Note improved analysis of risks and spillovers.
  - WEO, GFSR, Fiscal Monitor and DSA increased focus on risks and fiscal risks.
  - TSR surveys: Fund’s work on risks highly rated by country authorities and EDs; EDs gave highest rating for value added to risk assessments.
  - Stakeholders seek more focus on transmission channels, quantification of risks, and balance sheet analysis.
- Organizational silos:
  - Substantial efforts to integrate multilateral and bilateral surveillance; interdepartmental groups and task forces; new integrated reports and mobility measures.
  - Limited progress on integrating cross-country policy experience in surveillance; only about one-third of recent Article IV reports included in-depth cross-country policy experience.
  - Suggested remedies: expand cross-country analytical studies, better cross-country data, a cross-country policy experience database, incentives for sharing cross-country lessons, stronger Regional Unit role.
- Evenhandedness:
  - Perceptions of lack of evenhandedness persist, notably toward large advanced economies.
  - External study: little evidence of systematic bias but instances of unjustified differences; significant perceptions persist.
  - TSR recommendation: define evenhandedness using equal risk-adjusted “inputs” to bilateral surveillance.
  - Actions: developing principles and an assessment mechanism for concerns; paper on “Evenhandedness at the Fund – Principles and Reporting Mechanism” expected for Board information by November 2015.
  - 2015 Guidance Note: staff encouraged to articulate approaches when they differ from those for countries in “seemingly” similar circumstances; advice for systemic economies should be candid and actionable.

### Box 3 — Evenhandedness data highlights
- Country authorities:
  - Majority agree Fund treats them evenhandedly relative to other countries in their region or similar circumstances.
  - Around 20 percent feel they are not treated evenhandedly relative to advanced economies; views strongly held in the Americas and to a lesser extent in Asia Pacific.
- Executive Directors:
  - Some 40 percent of EDs (mainly representing Africa, Asia Pacific, and the Americas) do not believe Fund is evenhanded with respect to G-20 advanced economies.
- Mission chiefs:
  - Around 70 percent see overall assessments as evenhanded to some or a great extent.
  - 40 percent concerned about degree of intrusiveness; 50 percent concerned about objectivity/candor.

---

### Structural issues, small states, LICs, and other thematic work
- Small states and fragile situations:
  - March 2015 paper on Macroeconomic Developments and Selected Issues in Small Developing States; addresses fiscal management, exchange rate devaluation issues, and financial inclusion; May 2015 informal Board session on Fund engagement with fragile situations.
  - Formation of “Small Islands Club” interdepartmental working group; Small States Forum collaboration with World Bank.
- Conditionality reforms:
  - July 2014 Operational Guidance Note on Conditionality revised December 2009 guidance; emphasizes macro-social conditionality, leveraging surveillance and TA, partnerships, parsimonious conditionality, and review-based approach. Revised policy effective June 30, 2015; staff guidance note issued May 2015.
- Public debt policy and program design:
  - December 2014 staff paper on Reform of the Policy and Public Debt Limits in Fund-Supported Programs proposed unified treatment of public external debt and debt limits as component of fiscal framework.
- LICs and SSA:
  - October 2014 Macroeconomic Developments in Low-Income Developing Countries: 2014 Report — findings: most LIDCs had strong growth driven by factor accumulation; about one-half of LIDCs at medium-high vulnerability to a growth shock; fiscal institutions should be strengthened.
  - February 4, 2015: Executive Board approved establishment of Catastrophe Containment and Relief Trust (CCRT); CCRT replaced PCDR and provided close to $100 million debt relief for Ebola-affected Liberia, Sierra Leone, and Guinea; in addition to close to $305 million assistance since September 2014.
  - Continued collaboration with World Bank on Global Monitoring Report and engagement in international fora (FfD, SDGs, Climate Change Conference).

### Trade review and structural conditionality findings
- Trade Review (Board discussed February 27, 2015): found slowdown in global trade growth; shift from multilateral to preferential/plurilateral negotiations and from tariffs to non-tariff measures.
- Coverage of trade policy in bilateral surveillance limited; scope exists to better integrate trade in macro assessment.
- Structural conditionality:
  - Trend toward increased structural conditionality observed; Guidance Note (July 2014) sets selectivity and macro-criticality criteria; APR processes and surveillance guidance to determine structural issue coverage.

---

### Proposed Board conclusion (as presented)
- Most actions envisaged in the MIPs for:
  - IMF Performance in the Run-Up to the Financial and Economic Crisis,
  - Research at the IMF—Relevance and Utilization,
  - International Reserves—IMF Concerns and Country Perspectives, and
  - Role of the Fund as a Trusted Advisor
  - have either been implemented or remain in progress, given their long-term nature.
- A few actions have been partially implemented, with no further action foreseen.
- Work in areas in progress appears largely on track.

*Source: SEVENTH PERIODIC MONITORING REPORT — EXECUTIVE SUMMARY (September 1, 2015)*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Scope and purpose
- The Seventh PMR includes:
  - (i) a discussion of progress made over the last year on the actions corresponding to four Management Implementation Plans (MIPs) that were classified as still “in progress” in the previous PMR; and
  - (ii) an assessment of the progress made in achieving the high-level objectives in three areas directly related to those MIPs.
- An update on substantive issues related to five older MIPs agreed since 2007 is provided at the end of the report.
- Three new evaluations have been completed by the IEO since March 2014. In July and August 2015, Management issued the MIPs in response to these evaluations; progress on those MIPs will be discussed in the next PMR because only a short time has passed since their completion.

### Key developments since the Sixth PMR
- The previous PMR concluded that the majority of the actions envisaged in the four MIPs had either been implemented or were “in progress” (42 out of 46 actions).
- The Seventh PMR finds further progress over the last year on actions previously classified as pending, though most remain “in progress” because their implementation involves continuous, long-term effort.
- Since the Sixth PMR the IEO has concluded two new evaluations: Recurrent Issues from a Decade of Evaluation – Lessons from the IMF (April 30, 2014); and the IMF Response to the Financial and Economic Crisis (October 27, 2014). Management issued the corresponding MIPs in July and August 2015.
- The 2014 Triennial Surveillance Review (TSR) was completed in September 2014; following the Board discussion, management issued the Managing Director’s Action Plan for Strengthening Surveillance and circulated an updated Guidance Note for Surveillance under Article IV Consultations in March 2015. The Board was briefed on initial steps in May 2015.

### Assessment of implementation status (major findings)
- The PMR emphasizes that assessing implementation requires judgment, especially for recommendations involving changes in institutional culture and processes that require a long time horizon to evaluate sustainability.
- Overall conclusions:
  - First, the issues of attention to risks and uncertainty, organizational silos, and evenhandedness are intrinsic to the nature of the Fund and are likely to remain work in progress for a prolonged period.
  - Second, notwithstanding their “perennial” nature, the Fund has made substantial efforts to address these issues, with varying degrees of success.
  - Third, the approaches to address these high-level objectives have been adapted over time and will continue to evolve.
- The PMR concludes most actions in the four MIPs have either been implemented or remain in progress given their long-term nature.
- As work in the key areas appears largely on track, the report proposes that the next PMR focuses on monitoring the implementation of new MIPs and those actions still in progress that are more critical for the Fund.

### Implementation status detail and follow-up
- The Seventh PMR is divided into two sections:
  - Section 1: status of actions still “in progress” from the four MIPs reviewed in the Sixth PMR.
  - Section 2: assessment of progress in achieving high-level objectives in three areas identified as “recurrent” in the IEO Evaluation of Recurrent Issues: (i) attention to risks and uncertainty; (ii) organizational silos; and (iii) evenhandedness.
- The Sixth PMR identified 22 actions corresponding to the four MIPs that required further follow-up. Table 5 in the report presents an updated summary of implementation status for all four MIPs.
- For the Run-Up to the Crisis MIP:
  - Key outstanding needs included further integration of global risk analysis into Article IV reports; strengthening analysis of macro-financial linkages and financial spillovers; improving information sharing and coverage of cross-country experiences; addressing related weaknesses identified in the 2013 Staff Survey; devoting more time to staff training; addressing perceptions about lack of evenhandedness across countries; and strengthening support for vulnerable (non-systemic, non-advanced) countries on issues requiring specialized expertise.
  - Some actions still “in progress” will be affected by changes envisaged in the FY 2016-FY 2018 Medium Term Budget, including those related to multilateral surveillance activities and the recent reform of the Fund’s categories of employment. Appendix 2 summarizes main implications of the FY 2016 Budget for issues related to this MIP and the PMR in general.

### Process and consultations
- OIA prepared the report after meetings with the Chairman of the EVC and senior staff from ICD, HRD, MCM, RES, SEC, SPR, some area departments, and the IEO, and drawing on Fund documents issued since the Sixth PMR, including the 2014 TSR and recent IEO evaluations.
- Departments were in broad agreement with the PMR’s substance; specific comments and suggestions received from Departments were incorporated.

*Source: SEVENTH PERIODIC MONITORING REPORT — EXECUTIVE SUMMARY (September 1, 2015)*

### 12.      Overall, the Run-Up to the Crisis MIP listed eight general recommendations followed by

### 12.      Overall, the Run-Up to the Crisis MIP listed eight general recommendations followed by

### Overview
- The Run-Up to the Crisis MIP listed eight general recommendations followed by 17 specific steps to address them.
- Out of these, nine actions were classified as still “in progress” in the Sixth PMR.
- Recent progress and other steps to address pending issues at the time of the Sixth PMR are discussed below.
- Table 1 provides a summary of the status of the MIP.

### A.1 Create an environment that encourages candor and diverse/dissenting views — IEO Recommendation
- IEO Recommendation: “Create a risk assessment unit that reports directly to management with the purpose of developing risk scenarios for the systemically important countries and analyzing tail risks for the global economy.”

### MIP Implementation — risk analysis and institutional changes
- Major changes introduced to strengthen the analysis of risks:
  - (i) The 2012 Integrated Surveillance Decision (ISD) clarified the scope of risk coverage and spillover analysis (including outward spillovers) in Article IV consultations, supported by coverage of systemic economies in the Spillover Report.
  - (ii) An interdepartmental Risk Group (RG) identifies and analyzes key global risks that are summarized in the Global Risks Assessment Matrix (G-RAM). Risk assessments in Article IV reports are guided by this matrix, and also leverage the analysis of risks conducted at the multilateral and regional levels (WEO/GFSR/FM/REOs). Country teams are expected to identify and discuss domestic risks, in addition to global risks, in Article IV reports.
  - (iii) The G-RAM is now being issued to the Board, and the WEO/GFSR summarizes the key global risks highlighted in the G-RAM.
  - (iv) An independent interdepartmental Tail Risk Group comprising A-level economists has been established to explore tail risks. This group reports its findings to both the main RG and management.
  - (v) In partnership with the Financial Stability Board (FSB), the Fund has continued to conduct a semi-annual Early Warning Exercise (EWE) to identify and assess low probability, but possible high impact risks to the global economy. In addition, Vulnerability Exercises (VEs) are conducted to assess vulnerabilities and emerging risks in advanced, emerging market, and low income countries. The VE’s findings are incorporated in the flagship products.
  - (vi) Efforts have been made to strengthen external sector surveillance through the External Balance Assessment (EBA) methodology and the External Sector Report (ESR), which provides a multilateral consistent analysis of the external positions and policies of 29 systemic economies. An EBA-lite methodology has been provided to non-ESR desks.
- A Risk Management Unit (RMU) was established on June 9, 2014 as part of a set of measures undertaken by the Fund to strengthen its risk management framework. The RMU reports to the First Deputy Managing Director (FDMD), on behalf of management.
  - RMU responsibilities (initial):
    - (i) developing the main elements for a strengthened RM framework;
    - (ii) fostering the development of additional tools to analyze and monitor risks to the Fund;
    - (iii) producing reports on the Fund’s risk profile at regular intervals, highlighting areas where additional risk analysis or mitigation efforts need to be undertaken.
  - In March 2015, the Board held an informal session to discuss a paper prepared by RMU staff on the main elements of a conceptual framework for risk management.
- The new RMU responsibilities are somewhat different and more comprehensive than those envisaged in the IEO recommendation and aim to lay the basis for a more systemic, measurable, and integrated culture of risk management at the Fund.

### Pending Issues under the MIP
- Despite substantial progress since the financial crisis, the 2014 TSR recognizes continued needs to:
  - deepen risk analysis;
  - better integrate outward spillovers and spillbacks into policy discussions;
  - strengthen the analysis of inward spillovers.
- Stakeholder feedback:
  - Authorities interviewed for the IEO Evaluation on the IMF Response to the Financial and Economic Crisis indicated they would have appreciated earlier and clearer warnings regarding recent critical risks, including on the euro crisis and the volatility from quantitative easing and its tapering.
  - Stakeholders find it difficult to absorb key messages from multilateral surveillance given the proliferation of multilateral products; calls for consolidation and simplification of Fund initiatives aimed at identifying risks and vulnerabilities.
- Managing Director’s Action Plan for Strengthening Surveillance envisages actions to enhance work on risks and spillovers:
  - (i) To strengthen the clarity and coherence of multilateral surveillance messages, the key messages from the ESR and the Spillover Report will be incorporated in the WEO and the GFSR. The main views on the global outlook, risks and vulnerabilities, and policy messages from all the multilateral products will be summarized in the GPA. The regional trends chapter of the WEO will be abolished to avoid duplication; the GFSR will be streamlined; and the Fiscal Monitor will include a conjunctural chapter only once a year.
  - (ii) To facilitate further integration of multilateral surveillance into bilateral surveillance, efforts are being made to promote an effective two-way flow of ideas between multilateral surveillance and country/regional analysis. Topics for analytical chapters of the flagships will reflect other departments’ views. Departments authoring flagships will give tailored presentations highlighting implications of global risks for different country groupings, while area departments will determine implications for their countries.
  - (iii) Regional analysis and cluster reports will be used more systematically to help integrate multilateral surveillance products with Article IV consultations.
  - (iv) Article IV consultations for economies whose policies are likely to have systemic spillovers will include greater quantification of the impact of outward spillovers and spillbacks, which will be discussed with country authorities.
  - (v) For countries where risks could have an impact on the economic outlook, Article IV reports will include an alternative scenario that will support the policy discussions. Departments are already considering a first wave of 20 countries to experiment with the design and implementation of these scenarios.
  - (vi) The balance sheet approach will be used to facilitate a more in-depth analysis of the impact of shocks and their transmission across sectors. In June 2015 the Board was briefed on the Fund’s experience with balance sheet analysis and how to use it more effectively in surveillance. STA is preparing prototype balance sheet matrices for a number of macro-financial pilots to allow country teams to assess distribution of risks within and across sectors and run stress scenarios that will illustrate transmission of shocks.
  - (vii) SPR will expand the external debt sustainability analysis (DSA) to assess shocks to external flows.
  - (viii) The staff will work with G-20 members to develop plans for a second phase of the G-20 Data Gaps Initiative, starting in 2016, including strengthening implementation of data on sectoral accounts, government finance statistics, and external exposures in foreign currency. Over the medium term, efforts will be intensified to develop a global flow of funds, at least for the largest global economies.
- Follow-up work on streamlining in support of the FY16–18 Medium-Term Budget envisages finding ways to exploit synergies and achieve efficiency gains in the work of the risk and early-warning exercise groups. Work on tail risks will also be better coordinated with these efforts.
- The work by the RMU on building a framework for risk management will provide a basis for risk reporting.

### IEO Recommendation — broaden professional diversity and strengthen financial sector expertise
- IEO Recommendation: Change the insular culture of the IMF through broadening the professional diversity of the staff, in particular by hiring more financial sector experts, analysts with financial markets experience, and economists with policy making backgrounds. Strengthen financial sector expertise in the IMF by updating the staff’s knowledge through training and by hiring market participants in both the Monetary and Capital Markets Department (MCM) and area departments.

### MIP Implementation — staffing, recruitment, and training
- Recruitment and employment framework:
  - Within the limits imposed by a tight budget, efforts have continued to enhance professional diversity of staff by hiring financial sector experts and mid-career economists with policy experience.
  - The recent report on Staff Recruitment and Retention indicates that recruitment of mid-career economists (including specialists) in 2014 was more or less at the same level as in 2013.
  - A total of 109 mid-career economists (staff and contractuals; Grades A11-A15) were recruited into economics departments, of which 69 percent were fungible macroeconomists and 31 percent specialists (mostly fiscal and financial sector experts).
  - Overall, mid-career economists represented 80 percent of total economist appointments (staff and contractuals) in 2014.
  - In October 2014 the Board broadly endorsed the new employment framework proposed in the Categories of Employment paper, which became effective on May 1, 2015.
  - A department-by-department review indicated that about 120 of the existing 630 contractual appointments met the criteria for staff appointments. Many of these appointments are related to capacity development and include headquarters-based technical assistance experts with substantial professional experience. The new staff appointments are expected to improve morale and provide a better balance between continuity and turnover.
- Centralized recruitment programs:
  - Externally Financed Appointee program: program participation would reach near full capacity in 2015, with 15 appointees.
  - Special Appointee Program: targeted at country officials from LICs on a one year contractual appointment financed by the Fund (10 officials are currently participating).
- Training on financial sector issues:
  - Data on finance courses offered through ICD show a marked increase in FY 14–15, both in terms of the number of courses and the number of weeks attended by staff (Box 1).
  - For FY 2015 and FY 2016, ICD, jointly with MCM and other departments, developed the macro-financial training curriculum.

*SEVENTH PERIODIC MONITORING REPORT*

### Box 1. Internal Economics Training Events in Finance (FY 2010–2015)

### Box 1. Internal Economics Training Events in Finance (FY 2010–2015)

### Key statistics: Internal Economics Training (IET) activity by fiscal year
- FY 2011: Total No. of Events — 24; Participant Weeks — 170.6; Percentage of IET Total (Participant Weeks) — 18.5
- FY 2012: Total No. of Events — 19; Participant Weeks — 203.6; Percentage of IET Total (Participant Weeks) — 21.2
- FY 2013: Total No. of Events — 19; Participant Weeks — 181.0; Percentage of IET Total (Participant Weeks) — 19.2
- FY 2014: Total No. of Events — 26; Participant Weeks — 237.9; Percentage of IET Total (Participant Weeks) — 31.7
- FY 2015: Total No. of Events — 25; Participant Weeks — 221.3; Percentage of IET Total (Participant Weeks) — 37.5
- Total (FY 2011–2015): Total No. of Events — 140; Participant Weeks — 1292.5; Percentage of IET Total (Participant Weeks) — 25.4

*Source: ICD*

### Pending issues under the MIP: support to vulnerable countries and HRD findings
- Concern: Support available to vulnerable countries not directly affected by the crisis remains insufficient, especially in AFR and MCD, due to resource constraints.
- Area department view: Mission chiefs working on EMs and LICs (particularly from AFR and MCD) call for reallocation of resources and greater support from functional departments on Article IV missions or on a continuous basis.
- HRD reporting highlights:
  - The report on Staff Recruitment and Retention Experience in CY 2014 notes base salary has become a key issue for hiring at the mid-career level, especially for more experienced economists; increasing reliance on the total compensation package (monetary value of expatriate benefits) to facilitate acceptance of Fund employment.
  - Current policy of limiting grade offers to A12 and A13 for fungible economist positions could discourage candidates or lead to early dissatisfaction.
  - Diversity remains a challenge for mid-career economist hiring; an increase in the share of hired specialist economists in 2014 limited the candidate pool, making hiring from underrepresented regions more challenging.
- Training participation: On average, only 31.1 percent of Fund staff took four or more days of training in FY 2014.
- Management measures to improve training attendance:
  - Charge-backs for no-shows to training sessions instituted.
  - Training enrollments reflected in the calendar of absences to assist planning and incentivize attendance.

### A.2 Strengthen incentives to “speak truth to power” — implementation and pending issues
- Implementation highlights:
  - Senior staff report cultural improvement since the crisis; interdepartmental groups promoted candor and reduced “group think”.
  - Management holds periodic informal “brown bag” lunches with diverse staff groups; creation of the Tail Risk Group to promote new thinking.
  - 2015 Guidance Note for Surveillance under Article IV Consultations advises staff to “engage with members well ahead of Article IVs and maintain a continuous dialogue, including through staff visits, seminars, and workshops”.
  - A short survey recently sent to OED seeks feedback about staff engagement with country authorities and EDs.
  - November 2014 paper on Key Trends in Implementing the Fund’s Transparency Policy included detailed information on requests for corrections and deletions received in 2013.
- Pending issues:
  - 2013 Staff Survey showed poor results in the evaluation of the Fund’s climate for innovation, risk taking and empowerment among A-level staff — needs follow-up in future surveys.
  - Surveys of country authorities suggest staff needs to pay greater attention to authorities’ views and requests for specific analysis and advice; TSR External Advisory Group recommended a shift to more “client-focused” surveillance with “communication at the start and not at the end of the surveillance process”.
  - Managing Director’s Action Plan envisages more continuous engagement with member countries; follow-up of past policy advice in Article IV consultations to be expanded to include changes in staff advice and, where relevant, implementation of different policies by authorities.
  - Surveys for the 2014 TSR indicate a significant minority of stakeholders has concerns about evenhandedness; Board endorsed a new “input-based” concept of evenhandedness and a mechanism to help member countries report concerns about evenhandedness will be established.
  - OIA Report (Review of the Application of the Rules for Corrections to Article IV Consultation Staff Papers, January 2015) found process improvements needed in: (i) completeness of data on rejected correction requests; (ii) documentation trail supporting confirmation of authorities’ views; (iii) validation and compliance monitoring tools for country desk data; (iv) certain quality aspects of the review process; and (v) outreach to country authorities on the transparency policy.

### A.3 Better integrate financial sector issues into macroeconomic assessments — actions, guidance, and remaining challenges
- Strategic and institutional steps taken:
  - 2010 decision: FSSA component of FSAPs mandatory in Article IV surveillance for most systemic jurisdictions; frequency is every five years.
  - September 2012: Executive Board adopted the IMF’s Financial Surveillance Strategy (FSS).
  - September 2013 Progress Report on the FSS: progress across three pillars but acknowledged limited coverage of macro-financial linkages in Article IVs and deficiencies in cross-border linkages, spillover analysis, sovereign-bank feedback loops, and financial deepening in shallow financial systems.
  - Further actions since Progress Report:
    - Continued hiring of financial sector experts and provision of training.
    - Systemic importance remains important criterion for MCM participation in Article IV missions.
    - Analytical work: June 2014 staff briefing on cross-border bank resolution; January 2015 briefing on how banking sector developments influence propagation of risks to sovereign debt.
    - March 2014: inter-departmental working group produced “Strengthening Surveillance of Financial Sector Issues in Article IV Consultations” (Marston-Demekas Report), input to 2014 TSR and FSAP review.
    - September 2014: Executive Board completed the 2014 Review of the FSAP; review found strengthened focus, effectiveness, and traction of the FSAP; country authorities reported high satisfaction and many FSAP recommendations implemented.
- TSR findings and recommendations:
  - 2014 TSR: FSAPs better integrated into Article IVs but financial and macroeconomic analysis remained fragmented; macro-financial discussion varied markedly across country groups (more extensive for AMs than EMs, much less for LICs).
  - TSR recommendations: (i) mainstream macro-financial surveillance through better tools and new practices; (ii) strengthen surveillance of macro-prudential policies as a complement to other macroeconomic policies.
- Mainstreaming macro-financial surveillance — implemented steps:
  - Country cases: Work under way on 23 pilot country cases with focused support from functional departments; common topics include financial cycle and macroeconomic implications; macroeconomic shocks and financial stress; balance sheet analysis; cross-border issues and spillovers; financial supervision and regulation; financial development, deepening, and inclusion.
  - Better tools, training, and review:
    - MCM revamped its Financial Toolbox website (tools to assess macro-financial environment and measure resilience).
    - RES developed a desktop toolkit to check consistency between real sector forecasts and credit conditions.
    - STA working with teams using balance sheet analysis to generate data sets for upcoming missions.
    - February 2015: ICD launched a 5-module course on key macro-financial topics; cycle to be repeated due to high demand.
    - SPR and MCM providing intensified backstopping through the review process and disseminated common questions for country teams.
  - Hiring and mobility: HRD placing more emphasis on macro-financial skills in recruitment; a voluntary mobility scheme for staff with financial sector expertise developed.
  - October 2015: Executive Board to be briefed on Fund-wide ongoing efforts to mainstream macro-financial surveillance and strengthen its coverage in bilateral surveillance.
- Macro-prudential policies — guidance and activity:
  - November 2014: Guidance Note on Macro-prudential Policy issued; two accompanying notes provided guidance on instruments to address specific vulnerabilities and on how LIC characteristics may shape Fund advice.
  - January 2013: staff issued policy paper on The Interaction of Monetary and Macro-prudential Policies (with background paper).
  - 2013 SDN discusses interaction between macro-prudential and micro-prudential policies.
  - November 2014: conference with Sveriges Riksbank on implementation and interaction of macro-prudential policies with other policies.
  - Acknowledgement that macro-prudential thinking and practice remain work in progress; further work needed on links with other policies and wider macroeconomic implications.
- Pending issues and constraints:
  - Mainstreaming macro-financial surveillance will take significant time and require changing the institution’s skills profile through training, hiring, mobility, and incentives; could take several years given resource constraints and multiple work pressures; requires intensive collaboration from functional departments.
  - Need to continue developing expertise in macro-prudential policies; more research needed on costs and benefits and interactions with other policies; Guidance Note to be updated periodically and review process to place more emphasis on macro-prudential policies.
  - Resources remain insufficient in the financial sector area despite recent hires; FSAP coverage in EUR, APD, and WHD increased at the expense of coverage of Sub-Saharan and Middle Eastern countries (especially LICs and fragile states); low frequency of FSAPs in non-systemic jurisdictions results from resource constraints.
  - FSAP review highlighted challenges in analysis of financial interconnectedness and spillovers (partly data-dependent) and that evaluations of oversight and supervisory effectiveness are often driven by gaps in formal compliance with international standards rather than impact on systemic risk. Review stressed shifting FSAP components toward systemic risk focus; upgrading analytical underpinnings, transparency, and evenhandedness; exploring macro-financial approach to supervisory standards assessments; ensuring systematic treatment of macro-prudential issues.
  - Review of Standards and Codes planned for April 2016 will pay attention to a newly developed macro-financial approach to supervisory standards assessments.
  - Both the IEO and staff consider FSSAs every five years too infrequent for continuous surveillance; staff view assessments under three years as largely redundant; Board has been against shortening FSAP frequency given resource costs and slow evolution of structural/institutional factors.

### A.4 Overcome silo behavior and mentality — measures, evidence, and remaining gaps
- Implementation measures:
  - Surveillance Committee revamped; interdepartmental collaboration strengthened via standing interdepartmental groups and task forces.
  - Spillover and External Sector Reports to integrate bilateral and multilateral perspectives.
  - Policy paper preparation: concept notes circulated for comments, interdepartmental meetings convened, and mid-point meetings held to incorporate perspectives.
  - Continued production of cluster reports (examples completed or in progress):
    - German-Central European Supply Chain (GCESC), Nordic Regional Report (NRR), Baltic Cluster Report (BCR).
    - Housing Recoveries: Cluster Report on Denmark, Ireland, Kingdom of the Netherlands – the Netherlands, and Spain.
    - Central and Eastern Europe – New Member States Policy Forum, 2014 – Staff Report on Cluster Consultations – Common Policy Frameworks and Challenges.
    - Cluster report on Financial Integration in Central America, Panama, the Dominican Republic, and Colombia recently completed.
  - Mobility measures: staff encouraged to seek assignments outside their department after five years; centralized mobility support after seven years when necessary.
  - Indicator tracked through AFs: share of fungible economists (A11 to B5) with seven or more years in a department declined from 12.6 percent in FY 2012 to 9.7 percent in FY 2014.
- Pending issues:
  - Cross-country analysis remains limited: only about one-third of recent Article IV reports included an in-depth analysis of policy experiences in other countries (background work for the 2014 TSR).
  - Country authorities called for more expert policy advice backed by cross-country work; staff highlighted poor accessibility of cross-country policy experience information as a constraint.
  - Managing Director’s Action Plan launched initiative to better document and use cross-country knowledge, with steps underway:
    - Knowledge Management Working Group (KMWG) established March 2014 presented a KM strategy and program.
    - Departments implementing initiatives to improve cross-country learning (e.g., a paper on small states prepared jointly by AFR, APD, MCD and WHD; AFR’s work on small middle income countries drawing cross-country lessons).
    - SPR conducting internal senior staff meetings to ensure cross-country policy review consistency and encouraging Article IV teams to include cross-country lessons in policy notes.
    - Intensified efforts to draw cross-country lessons from FSAPs and incorporate regional perspectives for country counterparts and area teams.
    - Plan to make Fund’s cross-country knowledge more directly available to member countries through better dissemination.
    - Continued work on cluster reports: an ASEAN report and a report on CEMAC are being prepared.

*Source: ICD*

### 1.  Create a risk assessment unit that

### 1.  Create a risk assessment unit that 

### Purpose and core recommendation
- Create a risk assessment unit that reports directly to management, with the purpose of developing risk scenarios for the systemically important countries and analyzing tail risks for the global economy.

### Related implementation actions and statuses (numbered from source)
- 1. WEOs to pay greater attention to risks around the baseline.
  - Implemented (as reported in the Sixth PMR)
- 2. Analyses and findings from multilateral products to be taken up in policy discussions with country authorities. The tools underlying multilateral surveillance would be disseminated to area departments to support this effort.
  - Implemented (as reported in the Sixth PMR)
- 3. More explicit discussion of risks and matrices in Article IVs.
  - In progress.

### Complementary governance and cultural reforms referenced in the same section
- 2. Change the insular culture of the IMF through broadening the professional diversity of the staff, in particular by hiring more financial sector experts, analysts with financial markets experience, and economists with policy making backgrounds. Strengthen financial sector expertise in the IMF by updating the staff’s knowledge through training and by hiring market participants in both the Monetary and Capital Markets department (MCM) and area departments.
  - 4. Efforts will continue to broaden the professional diversity of staff, including their educational background and skill mix. HRD will provide regular reports to the Board on progress.
    - In progress.
- 3. Ensure that Summing Up of Board discussions better reflect areas of significant disagreement and minority views.
  - 5. A Working Group of Executive Directors, supported by staff and perhaps an external consultant, will clarify the purposes of Summing Up, including the appropriate presentation of minority views.
    - Implemented (as reported in the Sixth PMR)
- 4. Management should encourage staff to ask probing questions and challenge management’s views and those of country authorities.
  - 6. Staff will exchange views with the authorities on key issues for discussion prior to Article IV missions, but without compromising the IMF’s capacity—and obligation—to raise relevant, and at times difficult, issues.
    - In progress
  - 7. Staff will report on the traction of past advice.
    - In progress
- 5. Conduct regular IMF-wide self-assessments to look at the health and functioning of the organization.
  - 8. The 2010 staff survey, which was hosted by an external survey consultant, identified key themes and areas of concern among staff. Based on the findings, departments have worked with management to develop action plans. Regular self-assessments, with input from both authorities and external stakeholders, will continue also in the context of strategic and policy reviews.
    - In progress.
- 6. Continue to strengthen the FSAP and address the problems ... which limited its effectiveness in the run-up to the crisis. Strengthen financial expertise in the IMF by updating the staff’s knowledge through training and by hiring experienced market participants .... Missions to G20 economies and other financial centers should include experienced financial experts.
  - 9. Financial sector experts will be assigned to the Article IV teams involving systemically important financial sectors.
    - Implemented (as reported in the Sixth PMR).
  - 10. Coverage of financial issues in Article IVs will be strengthened by stepped-up training and dissemination of vetted tools and good practices, as well as cross-country thematic studies.
    - In progress.
  - 11. Intensified efforts to draw cross-country lessons from FSAPS.
    - In progress.
  - 12. Efforts will continue to broaden the professional diversity of staff, including their educational background and skill mix, and to hire more staff with financial sector experience.
    - In progress.
  - 13. A strategic plan for financial sector surveillance would be prepared.
    - Implemented (as reported in the Sixth PMR).
- 7. Management should clarify the rules and responsibilities for the internal review process, in particular for “connecting the dots... bringing cross-country experience to bear, and having policy consistency across countries/regions on cross-cutting issues...establish interdepartmental collaboration at an earlier stage of the Article IV process.
  - 14. The TSR made a number of recommendations to better analyze linkages and spillovers across sectors and countries, as well as to bring more cross-country experience to bear.
    - In progress.
  - 15. Specific measures will be taken to make progress on cross-departmental collaboration, promote diversity of staff and views, and address mobility issues.
    - Implemented (as reported in the Sixth PMR).
- 8. Ensure that the assessment of the global economy is consistent and comprehensive, taking a stance on a central scenario with clear specifications of risks and vulnerabilities around this scenario. This assessment should be transmitted to the membership in a clear fashion.
  - 16. The Global Policy Agenda (which replaced the Consolidated Multilateral Surveillance Report) continues to distill the key messages from the WEO, GFSR, Fiscal Monitor, and other surveillance products.
    - Implemented (as reported in the Sixth PMR).
  - 17. Starting with the next issue, WEOs will pay greater attention to risks around the baseline.
    - Implemented (as reported in the Sixth PMR).

---

### Connections with Research, Relevance, and Utilization (section excerpt)
- The IEO Evaluation of Research at the IMF found Fund Research was widely read and included a large number of high quality products, but identified shortcomings: insufficient consultation with national authorities on research topics; uneven quality of Working Papers (WPs) and Selected Issues Papers (SIPs); proliferation of research products; and, in some cases, excessive reliance on inappropriate or overly sophisticated techniques.
- 2014 Strategic Review of Research (SRR) completed by an interdepartmental working group led by the Research Department; an external consultant prepared a background report covering 2010-2012 and identified the main shortcomings above.
- Sixth PMR classifications:
  - Periodic Strategic Review: classified as “implemented”.
  - Designation of a Research Coordinator: classified as “partially implemented”.
- Ongoing and pending actions referenced:
  - Departments to step up consultations with country authorities on research topics; mission chief tenure target of three years monitored through AFs; average tenure for area department mission chiefs in FY 2014 was 2.3 years.
  - Research support coverage monitored through AFs, with a target of one research assistant/officer for every four economists; most departments at or above this target.
  - Budgetary constraints limit periodic regional research conferences with local institutions.
  - Need for a targeted survey to assess whether consultations on research topics have improved.
  - New procedures for Working Papers (end-2012) require originating department authorization, checklist compliance, cross-department review where relevant, and notifying concerned Executive Director(s); datasets used may be posted when legally permissible.
  - FY 2016 – FY 2018 Medium Term Budget paper proposals: list planned SDNs in departmental AFs; require ex ante approval for new WP proposals by a dedicated senior staff and listing on a Fund-wide ongoing project website; line managers held accountable for quality and relevance.
  - Assessment of the impact of new WP procedures on quality would require resources beyond this PMR; implementation of MT Budget procedures remains pending.

### Table 2 Implementation Plan highlights (selected entries)
- IEO Recommendation 1: Management should designate a senior staff member as Research Coordinator who reports annually.
  - Follow-up: Coordination stepped-up; Economic Counselor to convene interdepartmental meetings about twice a year and update the Board.
  - Status: Partially implemented (as reported in the Sixth PMR).
- IEO Recommendation 2: Conduct a periodic strategic review and prepare an indicative medium-term research agenda in consultation with member countries and the Executive Board.
  - Follow-up: Next review expected in about 18 months; will build on the IEO framework and inform an indicative medium-term research agenda.
  - Status: Implemented (as reported in the Sixth PMR).
- IEO Recommendation 3: Staff should consult country authorities on topics for SIPs and other research; longer country assignments and collaboration with authorities encouraged.
  - Follow-up: Departments will step up efforts to consult more with country authorities while preserving staff flexibility.
  - Status: Partially implemented.
- IEO Recommendation 4: Researchers should be allowed to explore issues without preconceived conclusions; Board and management should foster innovative research.
  - Follow-up: Reforms announced on leadership, management training, mobility, and accountability; forthcoming statement of workplace values to emphasize staff contribution of ideas.
  - Status: In progress / Implemented (as reported in the Sixth PMR) for specific items.
- IEO Recommendation 5: Allocate adequate time and resources to research projects; establish clear standards for technical quality and incentives to improve research quality.
  - Follow-up: New WP procedures and MT Budget proposals aim to strengthen review and accountability; impact assessment pending.
  - Status: Ongoing implementation and pending assessment.

*Source: Excerpt from SEVENTH PERIODIC MONITORING REPORT, Implementation Plan and Research sections as provided in the supplied content.*

### 7. New procedures have been adopted to ensure

### 7. New procedures have been adopted to ensure 

### C. International Reserves – IMF Concerns and Country Perspectives
- Objective: Focus on IEO recommendations with broad Executive Director support, concentrating on reserve adequacy assessments in bilateral surveillance.
- IEO recommendation: Ensure robust coverage of reserve adequacy in Fund surveillance, and specific guidance tailored to certain types of economies.

MIP Implementation — key actions and outputs
- EM metric:
  - Introduced in 2011 as a complement to traditional metrics based on imports, short-term liabilities, and broad money.
  - Provides a conservative tool for assessing reserve needs for emerging market economies.
  - Data for the EM metric and traditional metrics are available on the SPR website and accessible to country teams.
- Follow-up papers and Board discussions:
  - November 2013: staff issued "Assessing Reserve Adequacy – Further Considerations" focusing on reserves held for precautionary purposes.
  - July 2014: informal Board meeting on additional operational considerations.
  - January 2015: Board discussion of "Assessing Reserve Adequacy – Specific Proposals" which outlined a framework addressing reserve adequacy across different economy types.
- Proposals from the January 2015 ARA paper:
  (i) Article IV reports, when warranted, should include:
    - fuller discussion of authorities’ stated objectives (precautionary and non-precautionary) for holding reserves;
    - assessment of reserve needs for precautionary purposes; and
    - discussion of costs of reserves.
    - Aim: evenhandedness across similar circumstances while reflecting country-specific conditions.
  (ii) Classification of countries by financial/economic flexibility and market access:
    - Groups: mature markets, deepening financial markets, and constrained market access categories.
    - For each group, methodologies developed to help assess reserve adequacy for precautionary purposes.
    - No single indicator/model suffices; use all relevant indicators as a starting point plus country-specific analysis.
  (iii) Mature economies without a reserve currency:
    - Rationale for reserves centers on limiting foreign exchange market dysfunction, including bank funding stress.
    - Data gaps prevent standardized approach; scenario analysis recommended for precautionary reserve assessment.
    - Article IV reports should discuss reserve adequacy framework, risks, possible reserve needs, and costs.
  (iv) Deepening financial markets:
    - Discuss traditional metrics (import cover, ratio of reserves to short-term debt, ratio of reserves to broad money, etc.) and the ARA EM metric.
    - Adjust Fund metric to reflect capital controls and volatility of capital flows; discuss risks in intensive commodity economies; consider dollarized economies.
    - For currency unions: start from consolidated, union-level reserve needs.
  (v) Low-income and credit constrained economies:
    - Balance benefits of holding reserves for crisis prevention/mitigation against opportunity cost.
    - Complement traditional approaches like the three-month import rule.
    - Capture cross-country differences in exchange rate regimes, resource dependence, and fiscal position.
    - As market access improves, countries may increasingly use emerging market tools.
  (vi) Board response:
    - Depth and emphasis of reserve adequacy discussions should depend on country circumstances and reflect external/global stability relevance.
    - Discussion should reflect precautionary adequacy, authorities’ stated objectives, and cost of reserves.
    - Directors emphasized judgment over mechanical metric application.
    - For mature economies, scenario analysis is helpful; for deepening and credit-constrained economies, use all relevant metrics plus country-specific analysis.
    - Most Directors agreed with ARA-EM methodology; some concerns on components and weights.
    - Support for preparation of a staff guidance note.

Pending issues under the MIP
- A Guidance Note on Reserve Adequacy is planned for end-October 2015.
- More outreach activities to country authorities, think-tanks, and the private sector expected after the Board discussion on the Guidance Note.
- Staff working to make the Fund’s data on various reserve adequacy metrics publicly available to allow wider use and discussion.

### Communication and outreach on reserve adequacy
- IEO recommendation: Improve communication of the Fund’s views, and guidance, on reserve adequacy.

MIP Implementation — engagement and dissemination
- November 2013 follow-up ARA paper informed by a survey of member country views and visits to emerging markets in Latin America.
- 2014 preparatory work for the 2015 ARA paper included meetings with officials in several Asian countries.
- Internal presentations in some area departments on the ARA metric and key findings.
- Where relevant, country teams discussed the Fund’s reserve adequacy work with authorities in Article IV missions and reflected views in staff reports.

Pending issues
- More outreach expected following Guidance Note Board discussion.
- Staff working to make Fund data on reserve adequacy metrics publicly available.

### D. The Role of the Fund as Trusted Advisor
- IEO Evaluation finding: Majority of country authorities hold positive views; Fund image improved post-crisis (more open, flexible, responsive). Additional efforts needed; several recommendations to enhance trusted advisor role.

MIP and prior steps
- 2012 Guidance Note for Surveillance provided additional guidance to staff.
- Management issued specific instructions; some actions adopted before the MIP (including responses from the Run-Up to the Crisis Evaluation).
- Sixth PMR: several actions related to three of five Board-endorsed recommendations were “in progress”.

IEO recommendation: Enhance the value-added of Article IV consultations for country authorities.

MIP Implementation — engagement practices
- 2011 TSR enshrined early consultation with authorities on key areas of interest; reflected in 2012 Surveillance Guidance Note.
- 2013 management instructions: mission teams expected to contact authorities at least two months in advance to exchange views on policy issues; policy notes should indicate outcomes of these exchanges.
- Mission teams expected to share major policy questions and global assumptions with authorities and relevant Executive Director at least one week ahead of missions.
- Emphasis on fostering dialogue and explaining rationale/relevance of policy advice.
- Increased senior staff participation in concluding stages of Article IV missions for some systemic economies.
- Senior staff frequently visit countries between Article IV consultations for enhanced engagement and informal discussions.

Pending issues under the MIP
- Surveys for the 2014 TSR confirm staff is more willing to engage and responsive, but country authorities see room for improvement:
  - Staff should better listen and understand authorities’ views and account for political constraints, particularly in EMs and LICs.
  - Enhance traction of Fund advice via earlier engagement on mission scope, more fact-checking from headquarters, and missions with deeper specialist knowledge.
- Limited progress on enhanced use of cross-country examples by functional department economists; Managing Director’s Action Plan aims to strengthen KM and cross-country information exchange.
- A survey recently sent to OED seeks to assess progress in implementing actions to strengthen dialogue with member countries.

IEO recommendation: Strengthen continuity of the relationship between the Fund and member countries.

MIP Implementation — tenure, handovers, and diversity
- Steps to lengthen mission chief and staff tenure on country assignments; progress monitored through the AFs.
- Indicator for mission chief tenure for all area departments shows average tenure of 2.3 years in mid-FY 2015, compared with 2.4 years in FY 2013; represents an increase since the financial crisis but below the target of three years average tenure.
- Data coverage for mission chiefs improved: 184 country assignments captured for FY 2014, compared with 153 assignments for FY 2013.
- Area departments monitor desk economist tenure; comprehensive data not available.
- Guidelines issued (June 2013 memo by FDMD) by all area and functional departments establishing minimum requirements and recommending best practices for handovers of country assignments, including data management.
  - Assessment of handover quality expected to be reflected in the APR process.
- MIP envisaged measures to raise share of nationals from under-represented regions among senior staff and set targets for representation of women at senior levels.
  - 2014 Diversity and Inclusion Report: progress mixed; only 3 out of the 11 quantitative benchmarks for underrepresented groups met by end FY 2014.
  - Diversity among senior managers has improved.
  - Appendix 3 provides updates on geographical, educational and gender diversity trends (not reproduced here).

Pending issues under the MIP
- Enhance the role of OED in the liaison process; mission teams instructed to engage closely with OED prior to, during, and after policy discussions. Progress to be monitored through annual surveys; OED survey to obtain feedback on staff engagement with OED.
- Practices concerning APR assessments of desk transitions vary significantly across departments; SPR planning a survey on handover procedures.
- Continued efforts required to increase diversity, including at the senior level.

IEO recommendation: Reduce unnecessary disclosure concerns inhibiting authorities from using the Fund as a sounding board.

MIP Implementation — confidentiality and informal engagement
- Staff should make authorities aware of the Fund’s policy on treatment of confidential information and encourage informal/brainstorming discussions.
- Following the Transparency Review, SPR issued an updated Guidance Note on the Fund’s Transparency Policy.
  - Guidance note indicates staff should ensure authorities are aware of key elements of the Transparency Policy.
  - Includes an appendix with a Transparency Policy Information Sheet for missions.

Pending issues
- 2014 TSR surveys indicate willingness of country authorities to disclose confidential information to IMF staff varies across income groups and regions:
  - Around a quarter of country members provide no information beyond Article IV requirements and publicly available information; in the Middle East this is around 40 percent.
  - LICs, countries in AFR, or those with Fund arrangements show greatest trust (proxied by early disclosure of policy intentions or full disclosure).
  - AMs and G-20 countries are less prepared to trust Fund staff with confidential information.
  - Country authorities with Fund-supported programs emphasize early engagement on mission scope and more room for “off-the-record” discussions.

Box 2 — Staff Tenure in Country Assignments (mission chief tenure)
- Indicator measured based on last completed assignment; three-year target.
- Area departments overall indicator:
  - Total: FY 2013 = 2.4; Mid-FY 2014 = 2.3; FY 2014 = 2.3; Mid-FY 2015 = 2.3
  - AFR: FY 2013 = 2.4; Mid-FY 2014 = 2.2; FY 2014 = 2.2; Mid-FY 2015 = 2.3
  - APD: FY 2013 = 2.4; Mid-FY 2014 = 2.0; FY 2014 = 1.9; Mid-FY 2015 = 1.8
  - EUR: FY 2013 = 2.8; Mid-FY 2014 = 2.6; FY 2014 = 2.3; Mid-FY 2015 = 2.3
  - MCD: FY 2013 = 2.5; Mid-FY 2014 = 2.5; FY 2014 = 2.9; Mid-FY 2015 = 2.9
  - WHD: FY 2013 = 2.1; Mid-FY 2014 = 2.3; FY 2014 = 2.1; Mid-FY 2015 = 2.1

- Source data: HRD and Departmental AFs.

*SEVENTH PERIODIC MONITORING REPORT — INTERNATIONAL MONETARY FUND*

### 1. Enhance the value-added of

### 1. Enhance the value-added of Article IV consultations for country authorities.

### Early consultations, mission preparation, and cross-country analysis
- 1. Early consultations with country authorities will now be expected of all teams.
  - Status: In progress.
- 2. Mission teams will be expected to share major policy questions and global assumptions underlying projections at least one week ahead of the mission.
  - Status: In progress.
- 3. Enhanced use of cross-country examples by functional department economists.
  - Status: In progress.
- 4. Pilot reports on clustered Article IV consultations, which can augment cross-country analysis, will be initiated.
  - Status: Implemented.
- 5. Mission chiefs to be tasked to better explain rationale for Fund policy advice.
  - Status: In progress.

### Strengthen continuity of Fund–country relationships
- 6. Target of three years average tenure for country assignments to be monitored by HRD.
  - Status: Implemented (Sixth PMR).
- 7. Measures to raise the share of nationals from under-represented regions among senior staff and set targets for representation of women at senior levels will continue.
  - Status: In progress.
- 8. Transition rules to be introduced by July 2013 to support orderly handovers.
  - Status: Implemented (Sixth PMR).
- 9. SPMs will work to prevent simultaneous turnover of the mission chief, senior desk, and/or Resident Representative.
  - Status: Implemented (Sixth PMR).
- 10. Role of OED in liaison process to be emphasized and monitored through an annual survey, which will begin by April 2014.
  - Status: In progress.
- 11. Surveys of country authorities for forthcoming TSRs will be enhanced to help determine progress in improving the Fund’s role as trusted advisor.
  - Status: Partially implemented.

### Incorporating authorities’ views in major policy papers
- 12. Staff will continue the best practice of extensively consulting authorities and other stakeholders ahead of major policy papers. However, consistent with views of most Directors, it is not proposed that all policy papers will have to present the views of every country.
  - Status: Implemented (Sixth PMR).

### Confidentiality and informal advice
- 13. Staff will be expected to inform authorities of the Fund’s policy on the treatment of confidential information. At the same time, staff will be encouraged to have informal/brainstorming discussions with country authorities in the course of policy discussions.
  - Status: In progress.

### Outreach strategy for mission chiefs and Resident Representatives
- 14. Mission chiefs should discuss outreach plans/strategy with authorities in the context of mission planning, with support from COM. SPR will monitor during PCMs.
  - Status: Partially implemented (as reported in the Sixth PMR).
- 15. Resident Representatives’ terms of reference will be clarified to underscore the importance of formulating an outreach strategy in collaboration with the country authorities, to be updated on an annual basis. This will be monitored by HRD, with support from COM.
  - Status: Partially implemented (as reported in the Sixth PMR).

### Transparency policy implementation
- 16. The next Review of Transparency, expected to be issued to the Board in the second quarter of 2013, will provide updated analysis on the implementation of the policy, including whether it has been applied in an even-handed manner across the membership. To the extent that shortfalls are found, it will provide concrete recommendations on how these may be addressed.
  - Status: Implemented (as reported in the Sixth PMR).

### Summary table: Implementation status for recent Management Implementation Plans (MIPs)
- Role of the Fund as Trusted Advisor MIP:
  - Number of Board-Endorsed Recommendations: 6
  - Number of Follow-Up Steps in the MIP: 16
  - Implemented: 6
  - Partially Implemented: 3
  - In Progress: 7
- Other MIPs (aggregated in Table 5):
  - IMF Performance in the Run-Up to the Financial and Economic Crises:
    - Number of Board-Endorsed Recommendations: 8
    - Number of Follow-Up Steps in the MIP: 17
    - Implemented: 8
    - In Progress: 9
  - Research at the IMF–Relevance and Utilization:
    - Number of Board-Endorsed Recommendations: 5
    - Number of Follow-Up Steps in the MIP: 8
    - Implemented: 4
    - Partially Implemented: 2
    - In Progress: 2
  - International Reserves–IMF Concerns and Country Perspectives:
    - Number of Board-Endorsed Recommendations: 2
    - Number of Follow-Up Steps in the MIP: 5
    - Implemented: 3
    - In Progress: 2
  - Total (all listed MIPs):
    - Number of Board-Endorsed Recommendations: 21
    - Number of Follow-Up Steps in the MIP: 46
    - Implemented: 21
    - Partially Implemented: 5
    - In Progress: 20
    - Percentage Implemented: 100
    - Percentage Partially Implemented: 45.7
    - Percentage In Progress: 43.5

### Progress in achieving high-level objectives of Board-endorsed IEO recommendations
- Three recurrent areas assessed: (i) attention to risks and uncertainty; (ii) organizational silos; and (iii) evenhandedness.
- High-level conclusions:
  - These objectives are intrinsic to the Fund and likely to be work in progress.
  - The Fund has made substantial efforts with different degrees of success: greatest progress on attention to risks and uncertainty; next on addressing organizational silos; progress on evenhandedness remains difficult to quantify.
  - Strategies will continue to evolve reflecting member views, issue criticality, progress, and budgetary considerations.

A. Attention to Risks and Uncertainty
- 24–27. Progress and developments:
  - Assessments of risks and uncertainty are now a standard feature of surveillance and program reports.
  - Interdepartmental risk groups have been created; risk tools have been developed; a dedicated risk management unit has been established.
  - The VE, the G-RAM, the ISD, and the related Guidance Note on Surveillance have improved analysis of risks and spillovers.
  - The WEO has increased attention to risks and alternative scenarios; the GFSR has enhanced focus on risks and financial stability; the Fiscal Monitor has developed indicators and focused on fiscal risks; the DSA is now a standard element in Article IV documents.
  - Surveys for the 2014 TSR: Fund’s work on risks was highly rated by both country authorities and EDs; EDs gave their highest rating in terms of value added to the Fund’s risk assessments.
  - Country authorities in AMs (EUR) valued external risk assessments; those in EMs and LICs (AFR and MCD) emphasized domestic risks.
  - Stakeholders want more focus on transmission channels of shocks, quantification of risks and their likely impacts, and balance sheet analysis to tailor risk and spillover analysis.

- 27. Spillover analysis:
  - Perception of spillover analysis improved significantly relative to the 2011 TSR.
  - WEO and GFSR ranked best for spillover analysis.
  - Newer reports (Spillover Report, Pilot External Sector Report, Cluster Reports) rated higher by authorities from AMs than EMs and LICs.
  - EDs gave high priority to analysis of inward spillovers for the broader membership.

- 28. Macro-financial linkages:
  - Stakeholders divided: country authorities fairly positive; some 70 percent of EDs indicated Fund work on macro-financial linkages had contributed only to some extent to their understanding.
  - Most progress reported in cross-border linkages, capital flows, and policies to contain sovereign-bank feedback loops.
  - Less improvement in assessing implications of exit from extraordinary macro-financial policies, global regulatory reforms, and financial deepening.
  - Broad support to strengthen work on financial and macro-financial issues, including structural financial issues.
  - Staff work mentioned: Emerging Market Volatility: Lessons from the Taper Tantrum, and Rethinking Financial Deepening: Stability and Growth in Emerging Markets.

B. Organizational Silos
- 29–31. Mixed progress:
  - Substantial efforts and visible progress in integrating multilateral and bilateral surveillance, approval of the ISD, increased collaboration in review processes, creation of interdepartmental groups and task forces, new integrated reports, and stimulated mobility.
  - Limited progress on integrating cross-country policy experiences in surveillance.
  - 2014 TSR surveys: stakeholders acknowledge start of integration but see room for improvement.
    - More than 25 percent of EDs viewed bilateral and multilateral surveillance as still fragmented; negligible share of country authorities and less than 10 percent of mission chiefs shared this view.
    - A further 25 percent of EDs noted need for more progress to incorporate global and regional issues into bilateral surveillance.
  - Concerns that strengthening multilateral surveillance within existing resources may have weakened bilateral surveillance, especially for less systemically important countries.
  - Mission chiefs, particularly on EMs and LICs, reported near half experiencing a marginal or substantial decline in support from functional departments.
  - Suggested remedies: expand cross-country analytical studies, greater availability of cross-country data, establish a database with cross-country policy experiences, incentives for staff to share cross-country experiences, and active role for Regional Units.
  - Closer coordination with Fund technical assistance perceived to improve traction; most authorities who used Fund TA reported subsequent Article IV advice was more persuasive.

C. Evenhandedness
- 33–35. Challenges and measures:
  - Evenhandedness is hard to define and measure; objective criteria remain elusive.
  - External background study for the 2014 TSR did not find evidence of pervasive lack of evenhandedness but documented significant perceptions of lack of evenhandedness, notably in treatment of large AMs.
  - Past IEO evaluations found asymmetries in:
    - (i) analysis: differences between advanced and emerging countries and between high-income and low-income countries (including resource allocation to research);
    - (ii) influence: perceptions of non-transparent political influence on focus of surveillance or conditionality;
    - (iii) candor: staff reluctance or pressure not to deliver candid messages about risks and vulnerabilities to larger/advanced economies.
  - Background studies found candor for larger economies sometimes buried deep in reports; follow-up of past policy advice discussed less frequently for advanced countries.
  - 2014 TSR recommended defining evenhandedness using equal risk-adjusted “inputs” to bilateral surveillance, calibrated to country circumstances based on domestic and cross-country risks.
  - Board discussion stressed attention to both inputs and outputs; differences in Fund advice for countries with similar characteristics drive perceptions of uneven treatment.
  - 2015 Guidance Note for Surveillance under Article IV Consultations:
    - The new approach should reflect “not just the outcomes (i.e., policy advice) but the underlying inputs to surveillance”.
    - “Surveillance inputs and outputs should both be well-founded and free from bias, consistent with the Fund’s principle of uniformity of treatment”.
    - Staff are encouraged to articulate their approach when it differs from that taken for countries in “seemingly” similar circumstances.

*SEVENTH PERIODIC MONITORING REPORT — Implementation plan and progress as presented in the source content.*

### Box 3. Evenhandedness

### Box 3. Evenhandedness

### Survey Results on Evenhandedness
- A significant minority of country authorities and EDs perceive the Fund not to be evenhanded in its policy advice, particularly with respect to the treatment of large advanced economies.
- Country authorities:
  - A majority agrees that the Fund treats them evenhandedly relative to other countries in their region or in similar circumstances.
  - Around 20 percent feel that they are not being treated evenhandedly by the Fund in comparison to advanced economies.
  - These views are strongly held in the Americas, and to a lesser extent in Asia Pacific.
- Executive Directors (EDs):
  - Some 40 percent of EDs – mainly representing Africa, Asia Pacific, and the Americas – do not believe that the Fund is evenhanded with respect to G-20 advanced economies.
- EDs with concerns about evenhandedness flag:
  - the tone and substance of policy recommendations,
  - the treatment of the authorities’ views,
  - the degree of intrusiveness of Fund surveillance.
- Mission chiefs:
  - Around 70 percent of mission chiefs see overall assessments as evenhanded to some or a great extent.
  - 40 percent are concerned about lack of evenhandedness in the degree of intrusiveness.
  - 50 percent are concerned about the objectivity/candor of Fund surveillance.
  - Mission chiefs generally believe that the Fund is evenhanded in terms of the substance of its surveillance, but are more concerned about the intrusiveness and tone of reports.

### External Study — Evenhandedness of Fund Surveillance
- The external study reviewed the Article IV reports of 25 countries, and conducted interviews with EDs and mission chiefs.
- Main conclusions:
  - Little evidence that surveillance was systematically biased, although there were instances of differences that were not well-justified.
  - Significant perceptions persisted (even held by some staff) that the Fund was not evenhanded, and the study stressed the need for the Fund to respond to this situation.
  - The study made several recommendations that served as a basis for the 2014 TSR recommendations.
- Methodological argument:
  - Actual evenhandedness should be assessed on the basis of risk-adjusted “inputs” to surveillance (resources deployed, issues to be covered, etc.) or the way surveillance is conducted, rather than by the outcomes from surveillance, which depend on country circumstances.

### Follow-up Actions and Guidance
- In line with the TSR recommendations, further work is planned to deepen understanding of the new approach to evenhandedness and develop a set of criteria to evaluate it.
- Cross-departmental work is underway to develop principles to form a shared understanding and to guide assessments of evenhandedness concerns.
- Staff has begun to discuss the broad outlines of an assessment mechanism through which country authorities would raise concerns via their EDs.
  - Based on this new mechanism, management will inform the Board about the concerns raised, along with proposals to address them, when warranted.
  - A paper on “Evenhandedness at the Fund – Principles and Reporting Mechanism” is expected to be circulated for information to the Board by November 2015.
- To address asymmetries in candor:
  - The 2015 Guidance Note on Surveillance emphasizes that “policy advice for all members, and especially for systemic economies, should be clear, concrete and actionable”, and “for systemic economies, messages should be candid, properly reflecting their systemic implications”.
- Broader governance and communication measures:
  - Evenhandedness issues relate to the governance of the institution.
  - Further efforts to enhance transparency and governance reforms can be helpful.
  - Strengthening communications and outreach, especially in the context of Fund programs, would also contribute to avoiding misperceptions.

### Implications and Recommendations (as reflected in the 2014 TSR)
- Develop a clearer understanding of how to gauge “evenhandedness of surveillance” by using equal risk-adjusted “inputs” to bilateral surveillance.
- Establish a mechanism for the authorities to report concerns, and deal with the issues transparently.
- Ensure policy advice remains independent and candid while addressing stakeholder perceptions about evenhandedness.

*Source: 2014 TSR–Stakeholders’ Perspectives on IMF Surveillance and 2014 TSR – External Study–Evenhandedness of Fund Surveillance*

### 2.      As noted in the previous PMR, most of the actions envisaged in the Interactions with

### _090115a - 2.      As noted in the previous PMR, most of the actions envisaged in the Interactions with

### Recent IMF work on small states and fragile situations
- March 2015: staff issued a paper on Macroeconomic Developments and Selected Issues in Small Developing States; it built on a 2013 Board paper on Fund Engagement with Small States, 2013 background papers on Asia-Pacific and Caribbean small states, and the March 2014 Guidance Note on the Fund’s Engagement with Small Developing States.
- The March 2015 paper provides deeper analysis and policy recommendations on three challenges identified earlier:
  - (i) fiscal management;
  - (ii) exchange rate devaluation issues;
  - (iii) financial inclusion.
- The paper also analyses the impact and possible policy responses to two global economic trends: lower oil prices and diverse movements in major currencies.
- May 2015: Board considered in an informal session a paper on the Review of the Fund’s Operational Engagement with States in Fragile Situations.
- Institutional and capacity developments:
  - Formation of an interdepartmental working group, the “Small Islands Club,” to support staff working on small states.
  - Collaboration through the Small States Forum, led by the World Bank.
  - Participation and organization of high-level conferences (example: UN-sponsored International Conference of Small Island Developing States, September 2014, Samoa).
  - Early April 2015: APD partnered with HRD for a two-day training session on leveraging the Fund’s collective know-how on small states, including engagement with development partners and communications strategy in mission work.

### Communications strategy, outreach, and social media
- July 2014: Executive Board discussed the Review of the IMF’s Communication Strategy, supported by surveys of Fund employees and external opinion research.
- Key review findings and actions:
  - Most departments have tailored communication strategies integrated into work programs and increasingly into AFs.
  - Communications training increased for mission chiefs and resident representatives.
  - Better coordination of external communications through closer consultation between area departments, COM, and country authorities.
  - An institution-wide outreach database introduced in 2013.
  - EDs concurred the communications framework remained broadly appropriate; emphasized clarity and consistency; supported plans for impact assessments via regular opinion research and surveys.
- Social media pilot and guidance:
  - 2013 pilot: Twitter accounts established for resident representatives in four countries (South Africa, Peru, India and Pakistan); pilot found active engagement and HQ coordination required.
  - Review concluded social media expansion should be gradual, strategic, and supported by training and guidelines being prepared by COM in consultation with area departments.
- Area department communications adjustments:
  - APD, EUR, MCD, and WHD, in consultation with COM, are revisiting their communication strategies in light of the TSR.
  - MCD plans to roll out a targeted annual survey in FY 2016 to monitor quality of engagement and policy dialogue (following AFR’s example).
  - Article IV consultation policy notes expected to include key communication messages for outreach.
- Regional conferences and forums:
  - May 2014: “Building the Future” conference (Amman) and “Africa Rising” conference.
  - December 2014: major conference for Latin America in Santiago, Chile.
  - WHD and COM began work on the Road to Lima series (analytical agenda, management visits, regional conferences).
  - Newly established Fiscal Forum organized annually at spring Meetings.
- Implementation and guidance tools:
  - 2015 Guidance Note on Surveillance under Article IV Consultations encourages routine meetings with political leaders, trade unions, business representatives and CSOs, and recording their views in staff reports.
  - COM prepared guidance on outreach with civil society, legislators, the media, and the general public; IMF Communications toolkit provides up-to-date policy information.
  - New templates standardize mission press releases and concluding statements for publication.
  - Executive Board to be briefed on implementation of the Fund’s Communication Strategy in November 2015.
- TSR interviews (2014) broadly confirmed the Review’s findings: Fund initiatives to strengthen and widen engagement have helped build trust and a broader understanding of the institution.

### Conditionality reforms and guidance
- July 2014: staff issued a revised guidance note on conditionality (“Operational Guidance Note on Conditionality – July 2014 Revisions”) introducing several revisions to the December 2009 operational guidance note, in line with recommendations from the Review of Conditionality discussed by the Board in September 2012.
- Focus and additions in the 2014 Guidance Note:
  - Incorporates guidance on conditionality related to macro-social (jobs and growth) issues.
  - Emphasizes better leveraging surveillance and technical assistance in program design.
  - Encourages improving partnerships with other institutions, particularly regional financing arrangements.
  - Adds guidance on the review-based approach to monetary policy conditionality in countries with inflation-targeting frameworks or evolving monetary policy regimes.
- Key principles and operational points reiterated in the Guidance Note:
  - Staff should seek authorities’ views and accommodate preferences and policy choices where possible, consistent with resolving balance of payments problems, macroeconomic stability and program goals.
  - Program preparation and review processes should facilitate reflection on links between program goals, strategies, and conditionality; reform strategies and critical structural measures should be identified early, including timing and sequencing.
  - Conditionality should be parsimonious and well matched to tightly specified program goals, with regard to program effects on growth, employment and, where relevant, income distribution.
  - Program-related conditions generally must be critical for achievement of program goals or necessary to implement specific Articles of Agreement provisions.
  - The criticality criterion applies to all measures; focus should be primarily on core Fund competencies; for non-core but critical measures, the Fund should draw on other multilateral/bilateral expertise where possible.
  - Cross-conditionality is prohibited.
  - Reviews are the primary tool for monitoring structural elements; the discontinuation of structural performance criteria aims to avoid excessively narrow or rigid focus; under the review-based approach, programs should include a specified agenda for critical structural reforms if relevant.
  - Structural benchmarks remain critical but failure to meet them does not automatically interrupt disbursement; deviations indicate potential off-track status and require Board judgment at review completion.

### Public debt policy and program design developments
- December 2014: Executive Board discussed a staff paper on “Reform of the Policy and Public Debt Limits in Fund-Supported Programs,” building on the March 2013 Board discussion and subsequent consultations.
- Key reforms proposed:
  - (i) better linkage of the use of debt conditionality with the presence of significant debt vulnerabilities, as identified by debt sustainability assessments;
  - (ii) unified treatment of public external debt, encompassing both concessional and non-concessional borrowing;
  - (iii) determination of debt limits as one component of the fiscal framework, appropriately adjusted to country conditions.
- Outcomes and implementation:
  - Unified treatment of debt provides LICs more flexibility to manage financing needs.
  - A new set of “Guidelines on the Use of Public Debt Conditionality in Fund Arrangements” replaced the former “Guidelines on Performance Criteria with respect to External Debt in Fund Arrangements.”
  - The revised policy became effective on June 30, 2015.
  - A staff guidance note for implementing the new policy was issued in May 2015.

### Revenue mobilization, sovereign debt, and crisis program review
- February 2015: Board considered in an informal session a staff paper on “Current Challenges in Revenue Mobilization: Improving Tax compliance,” discussing tax policy and administration challenges and initiatives to help developing countries build revenue systems.
- June 2015: Board discussed “The Fund’s Lending Framework and Sovereign Debt – Further Considerations,” supporting proposals to modify the Fund’s lending framework in the context of sovereign debt vulnerabilities and addressing design and implementation issues; work on more efficient approaches to resolving sovereign debt distress expected to be completed during the remainder of the year.
- November 2015: Board will consider a “Crisis Program Review” to take stock of recent crisis program cases to distill lessons.

### Review of the Role of Trade in the Work of the Fund (Trade Review)
- February 27, 2015: Executive Board discussed the five-yearly Review of the Role of Trade in the Work of the Fund, responding to the MIP from the 2009 IEO Evaluation of IMF Involvement on Trade Policy Issues.
- Review methodology:
  - (i) textual analysis of staff reports over the last five years;
  - (ii) structured review by Fund staff of a representative sample of staff reports using a common template;
  - (iii) review of multilateral and research work with external experts and other areas (technical assistance, institutional collaboration).
  - Interviews conducted with stakeholders including WTO, World Bank, OECD, and International Trade Center.
- Main findings:
  - Growth in global trade has slowed over the last few years as benefits of past reforms and integration trends matured and new reforms languished.
  - Two important shifts in trade policy:
    - (i) trade liberalization efforts have migrated in part from multilateral to preferential and plurilateral negotiations;
    - (ii) the focus has moved from tariffs to non-tariff measures.
  - The Fund has done significant and high quality analytical work covering issues like the great trade collapse, Global Value Chains (GVCs), and trade spillovers.
  - Coverage of trade and trade policy issues in bilateral surveillance has been limited (trade policy receiving less attention than trade developments); scope exists for better integration with multilateral products.
  - Integration of trade issues in the overall macro assessment has been limited, particularly in EMs and LICs.
- Forward-looking surveillance focus by country group:
  - Advanced economies: implications of pioneering new trade policy frontiers, including opening services markets and making regulatory systems more coherent.
  - Emerging market economies: benefits from integration via traditional liberalization and anchoring to GVCs.
  - Low-income countries: benefits from reducing trade costs, upgrading trade infrastructures, and improving economic institutions at national and regional levels, supported by technical assistance.
- Collaboration and products:
  - Continued collaboration among IMF, WTO and World Bank, including joint Annual IMF/World Bank/WTO trade workshops.
  - IMF and World Bank produce a Trade Watch internal report regularly (replaced the Trade Monitor) to provide up-to-date data and analysis.
  - SPR continues internal monthly seminars on trade topics.
  - The 2010 reference note on trade policy will be updated to provide guidance on macro-relevant trade and trade policy issues.

### Structural conditionality in IMF-supported programs and surveillance
- Context and historical trend:
  - Sixth PMR noted a trend toward increased structural conditionality in recent years.
  - IEO Evaluation of the IMF Response to the Financial and Economic Crisis found the number of structural conditions increased from an average of 8.8 per year in SBAs approved in 2008 to more than 10 in those approved in 2010 (compared with 15.3 per year in programs approved in 1997).
  - 2013 Ex-Post Evaluation of Exceptional Access under the 2010 Stand-By Arrangement for Greece indicated structural conditionality became very detailed, with a proliferation of fiscal conditions; Romania’s Ex-Post Evaluation of Exceptional Access under the 2011 Stand-By Arrangement reached a similar conclusion.
  - Given the expected increased role of structural policies to restore sustainable growth, developments in structural conditionality merit close follow-up.
- 2014 Guidance Note on Conditionality (July 2014) summary (see “Conditionality reforms and guidance” subsection above for operational points).
- Surveillance guidance and selectivity:
  - 2014 TSR discussed the Fund’s role on structural issues in surveillance and stressed the need for selectivity in advising on structural policies.
  - 2015 Guidance Note for Surveillance under Article IV Consultations established criteria for coverage of structural issues in Fund surveillance.
  - Guidance Note instructs staff to determine whether an issue is macro-critical and whether the Fund has expertise to analyze or advise.
  - The Guidance Note provides a list of structural topics (beyond fiscal and financial issues) that staff may consider in Article IV consultations, including: jobs and growth, infrastructure, labor markets, social safety nets, public sector enterprises, gender (female labor participation), and the macroeconomic challenges of climate change.

*Source: SEVENTH PERIODIC MONITORING REPORT — excerpts as provided in the content unit*

### 7.      Area departments are seeking to improve the coverage of structural issues by

### _090115a - 7.      Area departments are seeking to improve the coverage of structural issues by

### Structural-issues coordination and research priorities
- AFR and MCD have established departmental groups to coordinate work on inclusive growth issues.
- AFR, EUR, and MCD are working closely with the World Bank, OECD and regional agencies to coordinate and develop relevant structural policy advice without duplication.
- Staff is developing an analytical framework for identifying structural reforms with the largest productivity payoffs across different country groups.
- Interdepartmental work is ongoing to explore macroeconomic aspects of inequality, energy and gender issues in selected countries.
- Looking ahead, labor and product market reforms figure prominently in the research agenda of both functional and area departments.

### IMF exchange rate policy advice — stakeholder views and integration into surveillance
- Surveys conducted for the 2014 TSR indicate stakeholders (country authorities and EDs) believe external assessments should be embedded more fully in surveillance.
- Prevailing view: Article IV reports often express external assessments narrowly in terms of the exchange rate rather than undertaking a more comprehensive assessment of the external position based on a broader set of indicators.

### Developments since the IEO evaluation of IMF Exchange Rate Policy Advice
- Prepared the 2014 External Sector Report (ESR) and the 2014 Spillover Report.
- Worked to broaden and improve the External Balance Assessment (EBA) approach.
- Issued updated guidelines on external sector assessments in the context of the 2015 Guidance Note for Surveillance under Article IV Consultations.
- Conducted recent work on foreign exchange intervention.

### External Sector Report (ESR) and Spillover Report developments
- The 2014 ESR provided an overview of developments in key external sector variables and an assessment of the external positions of individual economies, including policy options to reduce external gaps.
- A companion paper discussed in greater detail the external position of each of the 29 economies covered in the ESR.
- Assessments used a wide range of variables to estimate desirable current account balances and real exchange rates under the EBA methodology.
- The 2014 Spillover Report focused on global spillovers from recovery and normalization of monetary policies in advanced economies, and from slower growth in emerging markets.
- The 2015 ESR and Spillover Report will analyze global imbalances, spillovers, and the policy implications from exchange rate movements among major currencies, which will then be integrated in relevant Article IV consultations.
- Looking ahead: both the ESR and the Spillover Report will be more focused and targeted to policymakers, with the analysis from the latter to be folded into the WEO from 2016.

### EBA and EBA-lite methodology and coverage
- The EBA approach developed by the Research Department provides a multilaterally consistent estimate of current account and real effective exchange rate gaps for around 50 countries.
- Norms and gaps can be decomposed into contributions from “fundamental” characteristics and policies.
- SPR developed EBA-lite to replace CGER-based methodologies and extend EBA to a broader group of countries where adequate data are available (147 countries including EBA cases).
- Differences between EBA and EBA-lite: EBA-lite includes aid and remittances as explanatory variables but drops public health spending due to lack of information.
- The Managing Director’s Action Plan envisages a paper describing the EBA-lite methodology and the dataset and programs underpinning EBA-lite results will be made publicly available by end-2015.
- Efforts underway to assess scope for developing an EBA-lite type external sector assessment methodology for LICs.
- An internal External Sector Assessment website provides operational guidance, tools, and resources for current account and exchange rate assessments.

### 2015 Guidance Note for Surveillance (external sector assessment guidance)
- Staff should provide a clear bottom line assessment of the member’s balance of payments based on a broad perspective.
- Assessment should go beyond surveillance of exchange rate and exchange rate policies, with staff encouraged to cover five key areas: current account, capital flows and policy measures, exchange rates, reserves and foreign exchange intervention, and external balance sheets.
- BOP assessments should be fully integrated into the staff’s advice on the overall policy mix.
- EBA and EBA-lite methodologies can help identify the contribution of domestic (and foreign) policies to external imbalances, but staff should discuss policy contributions to external imbalances regardless of the methodologies used.
- Guidance on use of EBA/EBA-lite:
  - Countries in the ESR should use and report EBA results (except those that are non-EBA countries).
  - Countries in EBA but not the ESR should normally use and report EBA results.
  - If other methods (such as EBA-lite) are considered more suitable for a particular non-ESR EBA country, country teams can base their assessments on these results in consultation with RES and SPR.
  - For non-EBA countries, the use of EBA-lite is encouraged.
  - Countries with serious data limitations and/or special circumstances (financial centers, and countries dependent on large aid-remittance inflows, commodity exports or tourism) can use other methods, including qualitative information.

### Foreign exchange intervention
- An informal Board discussion on Foreign Exchange Intervention – Issues and Experiences was held in February 2015.
- The discussion focused on key considerations for foreign exchange intervention under disorderly market conditions and for applying the Fund’s framework to quantitative easing/quantitative external easing.

### The IMF’s work on LICs and Aid to Sub-Saharan Africa — main developments since Sixth PMR
- October 2014: staff issued a policy paper on Macroeconomic Developments in Low-Income Developing Countries: 2014 Report, discussed in an informal Board session.
  - The report examined macroeconomic developments and related vulnerabilities in low-income developing countries (LIDCs) — a group of 60 countries mostly eligible for concessional financing from both the Fund and the World Bank.
  - Key findings included:
    - (i) most LIDCs have recorded a strong economic growth for an extended period, but based primarily on factor accumulation rather than productivity growth;
    - (ii) about one-half of LIDCs are classified as being at medium-high vulnerability to a growth shock, with weakened fiscal positions being a key source of vulnerability;
    - (iii) fiscal institutions, including debt management, should be strengthened to preempt the build-up of potential new imbalances.
  - Future: these reports will be prepared on an annual basis, concentrating on different thematic topics. The 2015 report is expected to focus on the current conjuncture; risks faced by LIDCs; and policy issues arising from their deeper integration with international financial markets. The vulnerability exercise for LIDCs will be included as a chapter of these annual reports.
- February 4, 2015: Executive Board approved establishment of the Catastrophe Containment and Relief Trust (CCRT).
  - CCRT allows the Fund to provide debt relief to LICs hit by public health disasters with international spillover potential, as well as to members experiencing other types of catastrophic events.
  - CCRT replaced the Post-Catastrophe Debt Relief (PCDR) Trust (established in June 2010).
  - The CCRT has already provided debt relief of close to $100 million for the three countries affected by Ebola in West Africa – Liberia, Sierra Leone, and Guinea.
  - This is in addition to close to $305 million of assistance provided to these countries since September 2014.
- Fund participation in international development fora:
  - Active participation in the July 2015 Financing for Development (FfD) Conference in Addis Ababa.
  - Providing support to the September UN General Assembly meeting in New York (expected to adopt a post-2015 development agenda and new Sustainable Development Goals).
  - Engaged for the Climate Change Conference in Paris in December.
  - Preparing a paper elaborating policy positions on key areas in the FfD debate relevant to the Fund’s mandate and proposing new initiatives to enhance the Fund’s support for developing countries.
  - Actively involved in drafting the outcome document for the FfD Conference and collaborating with other multilateral organizations on post-2015 work streams.
- Collaboration with other international agencies:
  - Continued joint preparation with the World Bank of the Global Monitoring Report (GMR).
  - The 2014/2015 GMR confirmed that cutting extreme poverty in half by 2015 was met ahead of time in 2010 in the context of a generally adequate stance of supporting policies.
  - With expected adoption of the SDGs in late September 2015, the 2015/2016 GMR will take a longer than usual perspective both looking back at the MDGs and forward to the SDGs.
- Late June 2015: Executive Board supported reforms to the Fund’s Poverty Reduction Strategy (PRS) policy.
  - Reforms seek to maintain a clear link between a member’s PRS and its policies under a Fund-supported program, with streamlined PRS documentation and flexibility in PRS procedures to reflect country circumstances.
  - For ECF arrangements and PSIs, Board supported transmittal to the Fund of an Economic Development Document (EDD) that could comprise an existing national development plan or strategy document, or a newly-prepared document on a member’s PRS elaborated for Fund-supported program purposes.
- Partnership with UK DFID continues to fund LIC research in areas including: monetary and exchange rate policies; public investment, growth, and debt sustainability; macroeconomic management and natural resources; macroeconomic policies and income distribution; financial deepening for macroeconomic stability and sustained growth; growth through diversification; capital flows; and gender and macroeconomics.
  - DFID resources used to hire researchers, organize conferences, and work with country authorities on applying frameworks and tools.
- Ongoing Fund staff work on LICs includes analyses of: how to best use natural resources for development, macro-financial linkages and credit booms, and preparation of an SDN on sovereign bond issues.
- One of the Staff Background Studies prepared for the 2014 TSR includes a Chapter on “Scope of Surveillance in LICs”.
- A biennial review of eligibility for concessional financing was conducted in July 2015.
- Late 2015: Board will be briefed on “Evolving Monetary Policy Frameworks in LICs and Other Developing Countries”, examining how monetary frameworks can be made more credible, countercyclical and forward-looking in the presence of less developed financial systems and high vulnerability to shocks.

### Proposed Executive Board decision and conclusion
- Proposed draft decision available for adoption by a majority of the votes cast.
- Executive Board supports the following conclusion:
  - Most of the actions envisaged in the Management Implementation Plans for IMF Performance in the Run-Up to the Financial and Economic Crisis, Research at the IMF—Relevance and Utilization, International Reserves—IMF Concerns and Country Perspectives, and Role of the Fund as a Trusted Advisor have either been implemented or remain in progress, given their long-term nature.
  - In addition, a few actions have been partially implemented, with no further action foreseen.
  - Work in the areas that are in progress appears to be largely on track.

*Seventh Periodic Monitoring Report — excerpt*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2015/_090115a.pdf_