## _012716 - EXECUTIVE SUMMARY

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---

### Introduction
- 2014 Triennial Surveillance Review (TSR) examined perceptions that the Fund is not evenhanded in its surveillance.
- TSR findings and responses:
  - TSR did not find evidence of a systematic lack of evenhandedness but confirmed significant and long‑standing perceptions that the Fund is not evenhanded.
  - TSR recommended establishing a clearer understanding of evenhandedness of surveillance and a mechanism for country authorities to report concerns.
- Purpose of this paper:
  - Outline a framework to operationalize TSR recommendations consistent with the Managing Director’s Action Plan for Strengthening Surveillance.
  - Key goal: address perceptions while safeguarding the independence and candor of the Fund’s advice, learn from shortcomings, and promote better practices.
  - The framework will evolve with experience; the next Comprehensive Surveillance Review in 2019 will take stock of progress.
- Date and approvals:
  - *January 27, 2016*
  - Prepared by SPR, in consultation with other departments. Approved By Siddharth Tiwari.

### Background and key findings
- Importance:
  - Evenhandedness is central to the Fund’s legitimacy and credibility; both actual and perceived lack of evenhandedness can be detrimental.
  - Surveillance is a universal Fund activity and an important contributor to perceptions of evenhandedness.
- Key TSR and external study findings:
  - A significant minority of member countries believe the Fund is not evenhanded in its policy advice, particularly with respect to larger economies.
  - Around 20 percent of country authorities feel that they are not being treated evenhandedly in comparison to advanced market economies.
  - External study: little evidence of pervasive bias, but small instances of perceived lack of evenhandedness can matter given entrenched perceptions.
  - Differences in surveillance across countries are not necessarily evidence of lack of evenhandedness if surveillance is appropriately tailored to country circumstances.
  - TSR recommended focusing on both surveillance “outputs” (policy advice and presentation) and “inputs” (resources deployed, depth of analysis, quality of engagement) to assess evenhandedness.

### Managing Director’s Action Plan items related to evenhandedness
- Update Article IV guidance to clarify a new approach to evenhandedness based on “inputs”.
- Develop clear principles/benchmarks for an evenhanded approach to surveillance via an interdepartmental working group.
- Enable Executive Directors to submit concerns about evenhandedness in writing to the Secretary via a dedicated email inbox.
- Report to the Executive Board by Management on concerns raised and, where necessary, plans to address them.
- The updated Guidance Note for Surveillance under Article IV Consultations reflecting the outcomes of the 2014 TSR was issued in March 2015.

### Principles for evenhanded surveillance
- Conceptual basis:
  - Guided by the Fund’s long‑standing principle of “uniformity of treatment”: members in similar circumstances should be treated similarly; it does not require identical treatment.
  - Assessment should begin with surveillance “outputs”: substantive content, extent of coverage, and strength/tone of policy message.
- Risk‑adjusted inputs:
  - Surveillance should be “risk‑adjusted,” taking into account risks to domestic/external stability and global economic and financial stability.
  - Assessment of relative risk requires judgment and should not be overly rigid or mechanistic.
  - Tools/indicators informing judgments include: a country’s most recent Risk Assessment Matrix, Vulnerability Exercise ratings, staff report on a Fund‑supported program, and indicators of whether a country is globally or regionally systemic (e.g., G‑20, large and interconnected financial sector and thus subject to mandatory Financial Stability Assessments, relatively large quota and/or GDP).

- Illustrative principles for surveillance “inputs” (summarized):
  - Principle 1 — Resources: allocate resources reflecting individual and/or systemic risk factors. Possible factors include: (i) size, experience and expertise of a country team; (ii) staff turnover; (iii) frequency and duration of missions or other engagement; (iv) coverage of relevant issue during interdepartmental review.
  - Principle 2 — Analysis: policy advice should reflect sound, objective analysis tailored to country circumstances, including choice of issues, depth of analysis, and analytical approaches/tools.
  - Principle 3 — Engagement: engagement with authorities and stakeholders, and presentation of analysis/advice, should reflect the Fund’s role, responsiveness to authorities’ needs, and fair representation of their views; early and regular engagement is important.

### Reporting and assessment mechanism — overview and objectives
- Purpose:
  - Provide country authorities an opportunity to report specific concerns about evenhandedness and for the Fund to assess them transparently while preserving staff independence and candor.
  - Address perceptions, enable learning from shortcomings, and promote better practices.
- Key elements:
  - Clarify principles.
  - Enable reporting by Executive Directors to the Secretary with specific details to allow a thorough assessment.
  - Report to the Executive Board on concerns and remedial plans where appropriate.
- Pilot and review:
  - Framework and mechanism will be piloted and refined; the next Comprehensive Surveillance Review in 2019 will assess progress and consider refinements.

### Resource implications
- Staff estimate that each case could require between 0.1 and 0.2 FTEs depending on its complexity.

### Scope and ineligible items
- Applies to concerns relating to both bilateral and multilateral surveillance (e.g., Article IV consultations, mandatory Financial Stability Assessments, and the Fund’s flagship products).
- Ineligible:
  - Decisions or policies of the IMF Board or shareholders.
  - Financing operations / TA, or complaints about individual staff members.
  - Article IVs not yet considered by the Board (mechanism covers completed surveillance cycles).
- Concerns must be sufficiently concrete and well‑substantiated to enable a thorough assessment.

### Reporting and assessment process (broad steps)
- Submission:
  - An Executive Director will submit the concern in writing to the Secretary on behalf of his/her country authorities; concerns will be shared with the rest of the Board and Management for information.
  - A dedicated email inbox will be established by the start of FY2017 to facilitate submissions.
- Committee assessment:
  - An interdepartmental committee (the “Committee”) will undertake an objective and thorough assessment covering both surveillance inputs and outputs.
  - Committee composition and safeguards:
    - Representatives from LEG, SEC, SPR and, on a rotating basis, three area departments and one functional department.
    - Committee members would recuse themselves from cases concerning their own department, country or review assignment, or home country.
    - Where relevant, an external expert (e.g., a former ED not serving a government or a retired Fund official) may be included to provide an independent viewpoint on specific policy issues; external experts would not be involved on personnel‑ or resource‑related issues.
  - Assessment focus and limits:
    - Focus on Fund policies and procedures and their application; not a review or appraisal of individual staff members.
    - Distinction between “tailored” and “unevenhanded” surveillance outputs will be a matter of judgment, guided by the principles and benchmarks in the paper.
  - Reporting line:
    - Committee reports findings to Management, which will communicate findings to the relevant Executive Director.
    - Management will report annually to the Board on the number of concerns raised and the assessment of those concerns, emphasizing lessons learned and, where necessary, forward‑looking actions to prevent recurrence.
    - Actions will be forward‑looking rather than retrospective; surveillance products will not be changed retrospectively.

### Key elements in assessing evenhandedness (decision tree and principles)
- Steps to assessment:
  - Establish facts of treatment for countries cited and identified comparators; select additional comparators if necessary to ensure a representative sample.
  - Identify nature of concern (typically policy advice but could relate to analysis, engagement, or resources).
  - Establish country circumstances using key metrics relevant to each concern. Example metrics for fiscal advice: (i) debt & deficit levels; (ii) GDP growth; (iii) contingent liabilities; (iv) exchange rate regime and other elements of policy mix.
- Broad principles to guide assessment:
  - Principle 1 — Resources: calibration of resources (e.g., team size, tenure, experience, use of external expertise).
  - Principle 2 — Analysis: case for macrocriticality; choice of analytical tools to support policy advice (e.g., growth diagnostic tools, cross‑country analysis); use of external evidence, if applicable.
  - Principle 3 — Engagement: timing and continuity of dialogue with authorities (e.g., staff visits, conference calls); coverage of authorities’ priorities; articulation of staff and authorities’ positions, including explanation of differences or similarities with other countries.
- If treatment judged not evenhanded:
  - Determine whether problem is systemic; if systemic, Management will consider forward‑looking measures.

### Publication approach and confidentiality
- General stance:
  - The Fund will strive to disclose documents and information on a timely basis unless strong and specific reasons argue against disclosure (Decision No. 15420-(13/61), June 24, 2013).
- Sensitivities:
  - Management’s report and Directors’ concerns may contain confidential or sensitive information (e.g., policy notes, unpublished reports, summings up, confidential information from authorities, internal administrative or personnel issues).
  - A general presumption of publication may undermine the mechanism by discouraging Directors from raising concerns or affecting candor.
- Proposed cautious publication approach (initial phase):
  - Management’s reports to the Board would not be published to preserve consistency and candor of engagement; if Directors agree, this understanding will be reflected in the summing up.
  - The Fund would publish general progress updates on tackling evenhandedness concerns through existing Fund products (e.g., the Fund’s Annual Report or the new Risk Report), including an overview of the number of concerns reported and their outcomes.
  - Forward‑looking actions with policy implications will be taken up in policy papers subject to the Fund’s Transparency Policy; if changes to Fund policy are required, staff will prepare separate policy papers for Board consideration.
  - Publication arrangements will be reviewed later once the Board and Management have more experience with the reports.

### Implementation timeline and review
- Operational from the beginning of FY2017:
  - Process for Executive Directors to submit concerns to the Secretary and the interdepartmental Committee will be operational from the beginning of FY2017.
  - Management will report to the Board on an annual cycle; the initial report is expected to be a short, stand‑alone document.
- Review and evolution:
  - Early experience will be considered in the context of the next Comprehensive Surveillance Review (CSR).
  - The 2019 CSR will provide an important opportunity to take stock of progress, understand resource implications, and consider whether the principles or mechanism need refinement based on lessons learned.

### Illustrative examples (Annex III) — selected scenarios and responses
- Fiscal policy advice example (stylized outcomes):
  - SCENARIO 1: Different advice justified by country circumstances — CONCLUSION: Evenhanded. Response: Surveillance for all countries is well calibrated. No problem, systemic or otherwise.
  - SCENARIO 2: Different advice not justified by country circumstances (one country) — CONCLUSION: Not evenhanded. Response: Country A is an outlier; merit in exploring scope to clarify staff guidance.
  - SCENARIO 3: Different advice not justified by country circumstances (multiple countries) — CONCLUSION: Not evenhanded. Response: Urgent need to address (e.g., clarify position in a policy paper and/or revise staff guidance).
- Coverage of corruption issues example (stylized outcomes):
  - SCENARIO 1: Different treatment justified by country circumstances — CONCLUSION: Evenhanded. RESPONSE: Surveillance well calibrated for all countries.
  - SCENARIO 2: Different treatment not justified by country circumstances (one country) — CONCLUSION: Not evenhanded. RESPONSE: Country B is an outlier; staff to examine issue further and clarify staff guidance, where necessary.
  - SCENARIO 3: Different treatment not justified by country circumstances (multiple countries) — CONCLUSION: Not evenhanded. RESPONSE: Surveillance not well calibrated in about half the cases; urgent need to address issue (e.g., clarify position in a policy paper and/or revise staff guidance).

### Questions for Board discussion
- Do Directors consider that the principles set out provide a useful approach to assess the evenhandedness of surveillance, including by clarifying how “risk‑adjusted” inputs can inform an understanding of how “outputs” have been tailored to country circumstances?
- Q23: Do Directors think that the proposed reporting and assessment mechanism strikes the right balance between responding effectively to well‑founded evenhandedness concerns and protecting staff independence and candor?
- Q24: Do Directors agree with the proposed approach to publication?

*Source: EVENHANDEDNESS OF FUND SURVEILLANCE — EXECUTIVE SUMMARY (January 27, 2016), _012716.*

### EXECUTIVE SUMMARY

### _012716 - EXECUTIVE SUMMARY

### Introduction
- The 2014 Triennial Surveillance Review (TSR) examined perceptions that the Fund is not evenhanded in its surveillance.
- The TSR did not find evidence of a systematic lack of evenhandedness, but confirmed significant and long-standing perceptions that the Fund is not evenhanded.
- The TSR recommended: establishing a clearer understanding of evenhandedness of surveillance and a mechanism for country authorities to report concerns.
- This paper outlines a framework to operationalize the TSR recommendations, consistent with the Managing Director’s Action Plan for Strengthening Surveillance.
- Key goal: address perceptions while safeguarding the independence and candor of the Fund’s advice, learn from shortcomings, and promote better practices.
- The framework will evolve with experience; the next Comprehensive Surveillance Review in 2019 will take stock of progress.

*January 27, 2016*

### Background and Context
- Evenhandedness is central to the Fund’s legitimacy and credibility; both actual and perceived lack of evenhandedness can be detrimental.
- Surveillance is a universal Fund activity and an important contributor to perceptions of evenhandedness.
- In an interconnected global economy, consistency of surveillance will be scrutinized more closely.

Key findings from TSR and external study:
- The TSR confirmed persistent perceptions that the Fund is not evenhanded; a significant minority of member countries believe the Fund is not evenhanded in its policy advice, particularly with respect to larger economies.
- Around 20 percent of country authorities feel that they are not being treated evenhandedly in comparison to advanced market economies.
- The external study found little evidence of pervasive bias but noted that even small instances of perceived lack of evenhandedness can matter given entrenched perceptions.
- Differences in surveillance across countries are not necessarily evidence of lack of evenhandedness if surveillance is appropriately tailored to country circumstances.
- The TSR recommended focusing on both surveillance “outputs” (policy advice and presentation) and “inputs” (resources deployed, depth of analysis, quality of engagement) to assess evenhandedness.

Managing Director’s Action Plan actions related to evenhandedness:
- Update Article IV guidance to clarify a new approach to evenhandedness based on “inputs”.
- Develop clear principles/benchmarks for an evenhanded approach to surveillance via an interdepartmental working group.
- Enable Executive Directors to submit concerns about evenhandedness in writing to the Secretary via a dedicated email inbox.
- Report to the Executive Board by Management on concerns raised and, where necessary, plans to address them.
- The updated Guidance Note for Surveillance under Article IV Consultations reflecting the outcomes of the 2014 TSR was issued in March 2015.

### Principles for Evenhanded Surveillance
- The conceptual approach is guided by the Fund’s long-standing principle of “uniformity of treatment”: members in similar circumstances should be treated similarly; it does not require identical treatment.
- Evenhandedness assessment should begin with the Fund’s surveillance “outputs” (policy advice and its presentation), considering:
  - the substantive content or nature of the policy advice offered;
  - the extent of coverage and emphasis placed on a particular issue, including the space dedicated to it in a staff report or any accompanying selected issues papers;
  - the strength or tone of the policy message, degree of criticism and choice of language.
- The TSR’s concept of “risk-adjusted inputs” is central to understanding how surveillance is calibrated to country circumstances.

Risk-adjustment and inputs:
- Risk-adjustment: surveillance should be “risk-adjusted,” taking into account risks to a country’s domestic and external stability, and global economic and financial stability. Assessment of relative risk requires judgment and should not be overly rigid or mechanistic.
- Tools/indicators that can inform judgments about risk include: a country’s most recent Risk Assessment Matrix, Vulnerability Exercise ratings, staff report on a Fund-supported program, and indicators of whether a country is globally or regionally systemic (e.g., G-20, large and interconnected financial sector and thus subject to mandatory Financial Stability Assessments, relatively large quota and/or GDP).

Illustrative principles for surveillance “inputs” (summarized; detailed principles in Annex II):
- Principle 1: Resources allocated for surveillance should be adjusted to reflect countries’ individual and/or systemic risk factors. Factors could include: (i) the size, experience and expertise of a country team; (ii) staff turnover; (iii) the frequency and duration of missions or other engagement; and (iv) the coverage of the relevant issue during the interdepartmental review process.
- Principle 2: Policy advice should reflect sound, objective analysis tailored to country circumstances, including the choice of issues analyzed, depth of analysis, and analytical approaches and tools. Choices about priorities, analytical approaches and presentation (main text, box/annex, selected issues paper) are matters of judgment informed by issue nature, availability of expertise, domestic/systemic risks, and data availability.
- Principle 3: Engagement with authorities and other stakeholders, and presentation of analysis and advice, should reflect the Fund’s role in supporting the membership, responsiveness to authorities’ needs, and a fair and balanced representation of their views. Early and regular engagement can help guide priorities, build trust, and secure access to information. Consistent application of the Fund’s Transparency Policy and liaising with authorities about planned outreach can help ensure candid and balanced messaging.

### Reporting and Assessment Mechanism (overview)
- The paper sketches a possible mechanism for country authorities to report specific concerns about evenhandedness and for the Fund to assess them transparently while preserving staff independence and candor.
- The mechanism aims to address perceptions, enable learning from shortcomings, and promote better practices going forward.
- Key steps include: clarifying principles, enabling reporting by Executive Directors to the Secretary with specific details to allow a thorough assessment, and reporting to the Executive Board on concerns and remedial plans (see Managing Director’s Action Plan steps above).
- The framework and mechanism will be piloted and refined; the next Comprehensive Surveillance Review in 2019 will assess progress and consider refinements.

### Key takeaways and next steps
- Evenhandedness is essential to the Fund’s legitimacy and effectiveness; perceptions matter as much as actual practice.
- A risk-adjusted, input-based approach provides a structured way to assess whether surveillance outputs are appropriately calibrated to country circumstances.
- Implementing principles, updating guidance (Article IV), establishing a reporting channel, and management reporting to the Board are concrete steps underway.
- The framework will continue to evolve with experience and be reviewed in the Comprehensive Surveillance Review in 2019.

*Prepared by SPR, in consultation with other departments. Approved By Siddharth Tiwari.*

*Source: EVENHANDEDNESS OF FUND SURVEILLANCE — EXECUTIVE SUMMARY (January 27, 2016).*

### 13.      Better understanding the relationship between surveillance “outputs” and “inputs”

### 13.      Better understanding the relationship between surveillance “outputs” and “inputs”

### Purpose and rationale
- Examining both “inputs” (resources, analysis, engagement) and “outputs” (staff reports, policy advice) provides the insights needed to assess relative treatment across countries and whether surveillance outputs pay due regard to country circumstances.
- Tailoring of surveillance to specific country circumstances can explain apparent inconsistencies in policy advice, but “tailoring” should not be an automatic explanation for all differences; the key question is whether factors/inputs demonstrate appropriate calibration.

### Reporting and assessment mechanism — objectives and principles
- Main rationale for the mechanism:
  - Give members an opportunity to raise concerns and have them dealt with transparently.
  - Reassure members that specific—and well-founded—concerns will be considered thoroughly and distinguish these from perception-driven concerns.
  - Reinforce an environment of a learning institution focused on generating forward-looking actions to prevent recurrence.
- Balance aims:
  - Respond effectively to well-founded and specific concerns while protecting staff independence and candor.
  - Maintain a consistent and robust process that transparently engages the Board without imposing excessive resource costs on Executive Directors or staff.
- Resource implication estimate:
  - Staff estimates that each case could require between 0.1 and 0.2 FTEs depending on its complexity.

### Scope and application
- The mechanism will apply to concerns relating to both bilateral and multilateral surveillance (e.g., Article IV consultations, mandatory Financial Stability Assessments, and the Fund’s flagship products).
- Ineligible items:
  - Decisions or policies of the IMF Board or shareholders.
  - Financing operations / TA, or complaints about individual staff members.
  - Article IVs not yet considered by the Board (mechanism covers completed surveillance cycles).
- Concerns must be sufficiently concrete and well-substantiated to enable a thorough assessment.

### Reporting and assessment process (broad steps)
- Submission:
  - An Executive Director will submit the concern in writing to the Secretary on behalf of his/her country authorities; concerns will be shared with the rest of the Board and Management for information.
  - A dedicated email inbox will be established by the start of FY2017 to facilitate submissions.
- Committee assessment:
  - An interdepartmental committee (the “Committee”) will undertake an objective and thorough assessment covering both surveillance inputs and outputs.
  - Committee composition and safeguards:
    - Representatives from LEG, SEC, SPR and, on a rotating basis, three area departments and one functional department.
    - Committee members would recuse themselves from cases concerning their own department, country or review assignment, or home country.
    - Where relevant, an external expert (e.g., a former ED not serving a government or a retired Fund official) may be included to provide an independent viewpoint on specific policy issues; external experts would not be involved on personnel- or resource-related issues.
  - Assessment focus and limits:
    - The assessment will focus on Fund policies and procedures, and their application; it will not be a review or appraisal of individual staff members.
    - The distinction between “tailored” and “unevenhanded” surveillance outputs will be a matter of judgment, guided by the principles and benchmarks in the paper.
  - Reporting line:
    - The Committee will report its findings to Management, which will communicate findings to the relevant Executive Director.
    - Management will report annually to the Board on the number of concerns raised and the assessment of those concerns, emphasizing lessons learned and, where necessary, forward-looking actions to prevent recurrence.
    - Actions will be forward-looking rather than retrospective; surveillance products will not be changed retrospectively.

### Key elements in assessing evenhandedness (decision tree and principles)
- Establish facts of treatment for countries cited in concern and identified comparators; select additional comparators if necessary to ensure a representative sample.
- Identify nature of concern (typically policy advice but could relate to analysis, engagement, or resources).
- Establish country circumstances using key metrics relevant to each concern. Example metrics for fiscal advice:
  - (i) debt & deficit levels; (ii) GDP growth; (iii) contingent liabilities; (iv) exchange rate regime and other elements of policy mix.
- Broad principles to guide assessment:
  - Principle 1 — Resources: calibration of resources (e.g., team size, tenure, experience, use of external expertise).
  - Principle 2 — Analysis: case for macrocriticality; choice of analytical tools to support policy advice (e.g., growth diagnostic tools, cross-country analysis); use of external evidence, if applicable.
  - Principle 3 — Engagement: timing and continuity of dialogue with authorities (e.g., staff visits, conference calls); coverage of authorities’ priorities; articulation of staff and authorities’ positions, including explanation of differences or similarities with other countries.
- If treatment is judged not to be evenhanded, determine whether the problem is systemic; if systemic, Management will consider forward-looking measures.

### Publication approach and confidentiality
- The Fund will strive to disclose documents and information on a timely basis unless strong and specific reasons argue against disclosure (Decision No. 15420-(13/61), June 24, 2013).
- Sensitivities:
  - Management’s report and details of Directors’ concerns may contain confidential or sensitive information (e.g., policy notes, unpublished reports, summings up, confidential information from authorities, internal administrative or personnel issues).
  - A general presumption of publication may undermine the mechanism by discouraging Directors from raising concerns or affecting candor.
- Proposed cautious publication approach (initial phase):
  - Management’s reports to the Board would not be published to preserve consistency and candor of engagement; if Directors agree, this understanding will be reflected in the summing up.
  - The Fund would publish general progress updates on tackling evenhandedness concerns through existing Fund products (e.g., the Fund’s Annual Report or the new Risk Report), including an overview of the number of concerns reported and their outcomes.
  - Forward-looking actions with policy implications will be taken up in policy papers subject to the Fund’s Transparency Policy; if changes to Fund policy are required, staff will prepare separate policy papers for Board consideration.
  - Publication arrangements will be reviewed later once the Board and Management have more experience with the reports.

### Implementation timeline and review
- Operational from the beginning of FY2017:
  - Process for Executive Directors to submit concerns to the Secretary and the interdepartmental Committee will be operational from the beginning of FY2017.
  - Management will report to the Board on an annual cycle; the initial report is expected to be a short, stand-alone document.
- Review and evolution:
  - Early experience will be considered in the context of the next Comprehensive Surveillance Review (CSR).
  - The 2019 CSR will provide an important opportunity to take stock of progress, understand resource implications, and consider whether the principles or mechanism need refinement based on lessons learned.

### Issues for Board discussion
- Do Directors consider that the principles set out provide a useful approach to assess the evenhandedness of surveillance, including by clarifying how “risk-adjusted” inputs can inform an understanding of how “outputs” have been tailored to country circumstances?

*Source: _012716 - 13.      Better understanding the relationship between surveillance “outputs” and “inputs”*

### 23.      Do Directors think that the proposed reporting and assessment mechanism strikes the right

### _012716 - 23.      Do Directors think that the proposed reporting and assessment mechanism strikes the right

### Core questions posed
- Q23: Do Directors think that the proposed reporting and assessment mechanism strikes the right balance between responding effectively to well‑founded evenhandedness concerns and protecting staff independence and candor?
- Q24: Do Directors agree with the proposed approach to publication?

### 2014 TSR Recommendations and Executive Board / Management responses
- 2014 TSR Recommendations
  - Establish a clearer understanding of how to gauge “evenhandedness of surveillance” by using equal risk‑adjusted ‘inputs’ to bilateral surveillance (in keeping with the Fund’s principle of uniformity of treatment), where ‘inputs’ are calibrated to country circumstances based on domestic and cross‑country risks.
  - Establish a mechanism for country authorities to report concerns, and deal with identified issues transparently.
- Executive Board’s Views
  - Directors stressed the importance of tackling perceptions of a lack of evenhandedness.
  - Many Directors were open to assessing evenhandedness in terms of inputs to surveillance, particularly resources and depth of analysis based on judgments about domestic and systemic risks, while also being mindful of surveillance outputs.
  - A number of Directors saw need to pay even greater attention to outputs of surveillance, noting differences in Fund advice for countries with similar characteristics as a main source of concerns.
  - Directors saw merit in establishing a mechanism for authorities to report concerns about evenhandedness, allowing the Fund to better identify and understand issues and act transparently.
- Managing Director’s Action Plan for Strengthening Surveillance
  - The Article IV guidance note will clarify the Fund’s approach to evenhandedness based on inputs. An interdepartmental working group [will] set clear principles/benchmarks for an evenhanded approach to surveillance.
  - Executive Directors will be responsible for raising evenhandedness concerns. A dedicated mailbox for concerns in writing will include specific details to allow a thorough assessment. Management will report to the Board on concerns raised, and, where necessary, plans to address specific concerns.

### Annex II — Principles Related to Surveillance “Inputs”
- Purpose: illustrative, not exhaustive, set of examples to help characterize principles related to surveillance inputs.

- Principle 1 — Resources
  - Staff resources are allocated adjusting for risk across the range of Fund activities, including bilateral and multilateral surveillance.
  - Resources allocated to surveillance reflect countries’ individual and/or systemic risk factors.
  - Possible allocation factors:
    - (i) the size, experience and expertise of a country team;1
    - (ii) team, and particularly mission chief, turnover (including both the duration of assignment and avoiding to the extent possible simultaneous turnover of all or most team members);
    - (iii) the frequency and duration of missions or other engagement; and
    - (iv) coverage in the interdepartmental review process.
  - The review process—including review by the authoring and other departments, and Management—as well as consideration by the Executive Board should support and reinforce evenhandedness.
  - Interdepartmental review helps ensure consistency by drawing on wider exposure to developments and Fund policy advice across countries, institutional policy positions and technical advice, and by bringing to bear a multilateral perspective at the individual country level. Resources devoted to review are tailored to countries’ needs and prioritized based on risk.

- Principle 2 — Analysis
  - Staff’s policy advice reflects sound, objective analysis tailored to country circumstances, including choice of issues covered, depth of analysis, and analytical approaches and tools.2
  - Evenhandedness does not require all issues be covered in equal depth for all countries at all times; priorities vary over time and between members.
  - Priority issues in a staff report would normally be supported by deeper analysis; selected issues papers (SIP) should focus on priority issues and integrate results into the Article IV staff report.
  - Potentially controversial issues or policy advice benefit from deeper analysis (e.g., SIP or cross‑country policy lessons).
  - Multilateral analysis and policy advice should be adjusted to reflect systemic importance (global or regional), depending on product (e.g., flagship reports, External Sector Report).
  - Choice of analytical approaches/tools is judgmental and reflects priority issues, domestic/systemic risks, and other country circumstances (e.g., data availability).
  - A “tailored” approach can be aided by explicit or implicit justification and use of cross‑country experiences to explain differences.
  - Example: referencing third party analysis/data sets should consider approach for similar countries and whether additional justification is needed.

- Principle 3 — Engagement
  - Staff’s approach to engaging authorities and stakeholders and presenting analysis/advice (including publicly) reflects the Fund’s role, responsiveness to authorities’ needs, and fair representation of their views.3
  - Early engagement with authorities can guide and demonstrate choice of topics in line with Fund mandate and member needs.
  - Regular/continuous dialogue with authorities, including via Executive Directors’ offices, provides basis for feedback and access to information for future analysis.
  - Staff teams are encouraged to acknowledge and explain differences in approach or policy advice compared to other countries in ostensibly similar circumstances; cross‑country analysis and interdepartmental review can justify differences.
  - Assessments of past Fund policy advice in Article IV reports can be honest reporting and contribute to ongoing dialogue.
  - Staff reports should balance candor and awareness of country circumstances, and assess spillovers/interconnections candidly where significant.
  - Staff should ensure major issues covered have been discussed with authorities to avoid surprises and avoid unfounded judgmental or subjective material.
  - Staff reports should fairly present authorities’ views, aiding trust and relationship building.
  - Staff implements the Fund’s Transparency Policy4 in a uniform and fair manner (e.g., proportion of requests accepted/rejected could provide objective basis for comparisons).
  - Outreach (end of mission press conferences, dialogue with non‑governmental stakeholders) is standard practice; liaising with authorities about outreach helps garner support.

### Annex III — Illustrative Examples of Possible Evenhandedness Concerns

- Example 1: Fiscal Policy Advice
  - Nature of Concern: Inconsistency of treatment on fiscal advice in two countries’ Article IV consultations, for countries in similar circumstances.
  - Within scope: Yes - recent bilateral surveillance (not related to individual staff member(s)).
  - Facts of treatment for Countries A & B:
    - Both: in medium term, fiscal consolidation recommended for both.
    - Country A: IMF recommends near‑term consolidation.
    - Country B: IMF recommends near‑term stimulus.
  - Preliminary analysis: Countries A & B broadly similar in growth outlook, deficit and debt profiles, income levels; both have floating exchange rate regimes; but different regions.
  - Comparator identification: include “peer” countries from both regions, possibly a third region.
  - Assessment checklist under Principles:
    - Principle 1 — Resources: Do teams for A, B, and others have similar resources (fiscal expertise, FAD involvement)?
    - Principle 2 — Analysis: Are fiscal recommendations outliers among peers? Are they supported by deeper analysis or cross‑country spillovers? Is advice consistent with multilateral advice (e.g., Fiscal Monitor)?
    - Principle 3 — Engagement: Have teams sufficiently engaged authorities on sustainability and growth implications?
  - Illustrative results (Annex III. Table A)
    - SCENARIO 1: Different Advice Justified by Country Circumstances
      - POLICY ADVICE: Country A: Recommends near‑term consolidation; Country B: Recommends near‑term stimulus; Peer countries: Diverse advice.
      - PRINCIPLE 1: Country A, B and all peers: teams of same size and experience. Involvement of FAD fiscal expert and intensive FAD review for all countries.
      - PRINCIPLE 2: Advice supported by multiplier analysis, a DSA and cross‑country analysis. Country B: additional analysis of spillover risks from country C; stimulus reflects insurance against potential shock.
      - PRINCIPLE 3: Country A: early and regular engagement, but tense dialogue; Country B: early and regular engagement; peers: diverse practices.
      - CONCLUSION: Evenhanded. Response: Surveillance for all countries is well calibrated. No problem, systemic or otherwise.
    - SCENARIO 2: Different Advice Not Justified by Country Circumstances (one country)
      - POLICY ADVICE: Country A: Recommends near‑term consolidation; Country B and peer countries: Recommends near‑term stimulus.
      - PRINCIPLE 1: Country A, B and all peers: teams of same size and experience. Involvement of FAD fiscal expert and intensive FAD review for all countries, except country A.
      - PRINCIPLE 2: Country A: refers to DSA, but without further analysis/justification. Country B and peers: advice supported by multiplier analysis, DSA and cross‑country analysis.
      - PRINCIPLE 3: Country A: tense policy dialogue; staff not responsive to outreach. Country B and peers: early and regular engagement.
      - CONCLUSION: Not evenhanded. Response: Surveillance for most countries (B and comparators) well calibrated. Country A is an outlier; merit in exploring scope to clarify staff guidance.
    - SCENARIO 3: Different Advice Not Justified by Country Circumstances (multiple countries)
      - POLICY ADVICE: Country A: Recommends near‑term consolidation; Country B: Recommends near‑term stimulus; Peer countries: Diverse advice.
      - PRINCIPLE 1: Country A, B and all peers: teams of same size and experience. Involvement of FAD fiscal expert and intensive FAD review for country B and some peers, but not for country A and other peers.
      - PRINCIPLE 2: Country B: advice supported by multiplier analysis, a DSA and cross‑country analysis. Peer countries: limited additional background justification. Country A: refers to DSA without further justification.
      - PRINCIPLE 3: Country A: tense dialogue; staff not responsive. Country B: early and regular engagement. Peer countries: staff policy advice explained only in some countries.
      - CONCLUSION: Not evenhanded. Response: Surveillance not well calibrated in significant number of cases; urgent need to address (e.g., clarify position in a policy paper and/or revise staff guidance).
    - Note: 1/ The range of factors considered in this stylized example is illustrative and not exhaustive.

- Example 2: Coverage of Corruption Issues
  - Nature of Concern: Inconsistent treatment of corruption in two countries’ latest Article IV consultation reports; ED concerned Fund’s treatment of Country A was much tougher than Country B despite similar problem.
  - Within scope: Yes - recent AIV surveillance (not related to individual staff member(s)).
  - Facts of treatment:
    - Country A: issue features prominently in latest staff report (e.g., box/annex, dedicated paragraph, and staff appraisal) and strong critical tone.
    - Country B: No mention in staff report.
  - Preliminary analysis: Third party corruption/governance indices show both countries have very similar rankings (e.g., within ±10).
  - Comparator identification: select 4 countries with similar governance/corruption indices and similar income levels (countries C, D, E, F).
  - Assessment checklist under Principles:
    - Principle 1 — Resources: If corruption is an identified source of risk (e.g., in RAM), are team size and experience commensurate with that risk?
    - Principle 2 — Analysis: Does report make strong case for macrocriticality? What analytical tools used (growth diagnostics, cross‑country analysis)? To what extent did staff draw on external expertise (World Bank, Transparency International)? Has corruption been prioritized in past surveillance (past 3‑5 years)?
    - Principle 3 — Engagement: Does prioritization reflect early and regular dialogue (staff visits, calls)? Does it reflect authorities’ priorities? Are positions of staff and authorities articulated clearly, including explanation of differences with other countries?
  - Results: Several illustrative scenarios and outcomes are set out in Table III‑B.

*EVENHANDEDNESS OF FUND SURVEILLANCE, INTERNATIONAL MONETARY FUND*

### Annex III. Table B. Illustrative Example of Evenhandedness Concern Regarding the Coverage of Corruption Issues

### Annex III. Table B. Illustrative Example of Evenhandedness Concern Regarding the Coverage of Corruption Issues

### Scenario summaries
- SCENARIO 1: Different Treatment Justified by Country Circumstances
  - POLICY ADVICE: Country A and comparators: prominent coverage; detailed advice; direct and critical tone. Country B: not mentioned in current report, but prominent coverage in recent reports.
  - CONCLUSION: Evenhanded
  - RESPONSE: Surveillance well calibrated for all countries. No problem, systemic or otherwise.
- SCENARIO 2: Different Treatment Not Justified by Country Circumstances (one country)
  - POLICY ADVICE: Country A and comparators: prominent coverage; detailed advice; direct and critical tone. Country B: not mentioned.
  - CONCLUSION: Not evenhanded
  - RESPONSE: Surveillance well calibrated for most countries. Country B is an outlier. While problem does not appear systemic, staff to examine issue further and clarify staff guidance, where necessary.
- SCENARIO 3: Different Treatment Not Justified by Country Circumstances (multiple countries)
  - POLICY ADVICE: Country A and comparators: prominent coverage; detailed advice; direct and critical tone. Country B: not mentioned.
  - CONCLUSION: Not evenhanded
  - RESPONSE: Surveillance not well calibrated in about half the cases, indicating widespread inconsistencies. Urgent need to address issue (e.g., clarify position in a policy paper and/or revise staff guidance).

### Assessing the calibration of surveillance to country circumstances — Principles and observations
- PRINCIPLE 1: RESOURCES
  - SCENARIO 1:
    - Country A and all comparators: teams of same size and experience. Lack corruption expertise but consult World Bank experts.
    - Country B: team of similar size and experience. Lack corruption expertise and does not consult World Bank experts during consultation.
  - SCENARIO 2:
    - Country A and all comparators: teams of same size and experience. Lack corruption expertise but consult World Bank experts.
    - Country B: team of similar size and experience. Lack corruption expertise and does not consult World Bank experts during consultation.
  - SCENARIO 3:
    - Country A and some comparators: teams of same size and experience. Lack corruption expertise but consult World Bank experts.
    - Country B and other comparators: team of similar size and experience. Lack corruption expertise and does not consult World Bank experts during consultation.

- PRINCIPLE 2: ANALYSIS
  - SCENARIO 1:
    - Country A and all comparators: detailed analysis makes a strong case for macrocriticality. 2/ SIP draws on relevant evidence, including reports/data from other agencies (e.g., World Bank), growth diagnostic tool and cross-country policy lessons.
    - Country B: no analysis or reference to readily available evidence demonstrating macrocriticality 2/ (e.g., World Bank report).
  - SCENARIO 2:
    - Country A and all comparators: detailed analysis makes a strong case for macrocriticality. 2/ SIP draws on relevant evidence, including reports/data from other agencies (e.g., World Bank), growth diagnostic tool and cross-country policy lessons.
    - Country B: no analysis or reference to readily available evidence demonstrating macrocriticality 2/ (e.g., World Bank report).
  - SCENARIO 3:
    - Country A and some comparators: detailed analysis makes a strong case for macrocriticality. 2/ SIP draws on relevant evidence, including reports from other agencies (e.g., World Bank), growth diagnostic tool and cross-country policy lessons.
    - Country B and other comparators: no analysis or reference to readily available sources (e.g., previous IMF and World Bank reports) that reveal differences in macrocriticality 2/ between country B and other comparators. For some, issue is pervasive with major macro-impact; for others, issue is sector specific with limited implications.

- PRINCIPLE 3: ENGAGEMENT
  - SCENARIO 1:
    - Country A and all comparators: strong policy dialogue with authorities (e.g., early and regular engagement during staff visit and conference calls). Discussed macrocriticality 2/ and similarities/differences with other countries. Authorities fully aware of staff position.
    - Country B: issue not discussed with authorities.
  - SCENARIO 2:
    - Country A and all comparators: strong policy dialogue with authorities (e.g., early and regular engagement during staff visit and conference calls). Discussed macrocriticality 2/ and similarities/differences with other countries. Authorities fully aware of staff position.
    - Country B: issue not discussed with authorities.
  - SCENARIO 3:
    - Country A and some comparators: strong policy dialogue with authorities (e.g., early and regular engagement during staff visit and conference calls). Discussed macrocriticality 2/ and similarities/differences with other countries. Authorities fully aware of staff position.
    - Country B and other comparators: issue not discussed with authorities. For other comparators, authorities not aware of staff position, surprised by issue’s inclusion in staff report and concerned it does not properly capture their views.

### Footnotes and definitional test
- 1/ The range of factors considered in this stylized example, particularly in assessing the calibration of surveillance to country circumstances, is only illustrative. This should not be viewed as a rigid or exhaustive list to be followed in an actual assessment of an evenhandedness concern.
- 2/ The test for including an issue in bilateral surveillance is whether it has a significant influence on a member’s present or prospective domestic or balance of payments stability (see ISD).

*Annex III. Table B. Illustrative Example of Evenhandedness Concern Regarding the Coverage of Corruption Issues — source PDF content*

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