## 1. Allocation of IMF Financial and Human Resources Across Program Countries

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---

### Introduction
- Legitimacy is essential for an international organization to achieve its goals (Woods, 2000; Van Houtven, 2002, p. 66).
- Legitimacy-enhancing constraints (rules, checks and balances, transparency) can conflict with operational efficiency (the ability to achieve goals without wasting resources).
- Stronger legitimacy-enhancing constraints may be required for international institutions than for domestic ones, potentially reducing operational efficiency more deeply.
- Limited operational efficiency can be offset by additional resources, but political controversy over releasing resources often means limited efficiency translates into limited effectiveness.
- Paper examines legitimacy-efficiency trade-offs across three dimensions:
  - Control of political power over operational decisions of international “technocrats” (Section II).
  - Transparency in IMF decision making (Section III).
  - Uniformity of treatment across countries (Section IV).
- Resource constraint issue and IMF work processes discussed in Section V; Section VI concludes.
- Emphasis on probing efficiency while recognizing trade-offs are not necessarily inevitable; some reforms may be Pareto-improving in legitimacy and efficiency.
- Paper does not provide a full reform program; highlights trade-offs and calls for more delegation-theory expertise.

### Appropriate Degree and Form of Political Control
- IMF governance entities:
  - The capitals: Board of Governors and International Monetary and Financial Committee (IMFC), meeting infrequently (typically twice a year), with IMFC meetings routinely preceded by preparatory Deputies’ meetings.
  - The Board of Executive Directors (“the Board”): 24 EDs in Washington, D.C., representing the IMF’s 184 member countries; exercises most powers for conducting IMF business except those reserved for the Board of Governors.
  - The Managing Director and Deputies (Management): appointed by the Board; Managing Director is CEO, head of staff, and Chairman of the Board.
  - The staff: currently some 2,700 international civil servants, representing the IMF’s “technical” voice.
- Other forums (G-7, G-20, G-24) also discuss IMF business.
- Historical evolution and recent trends:
  - Early U.S. preference for close political oversight prevailed, resulting in a Board in continuous session.
  - From the early 1950s management and staff roles increased; the Board retained significant policy-setting role and involvement in politically high-value cases.
  - Since the mid-1990s increased information and ex ante vetting capacity of the political pole: disclosure of side letters (since September 1999), formalization of prior actions and exceptional access provisions, ex post assessment reports for prolonged-use countries before presenting a new program (as of mid-2003).
  - Trend toward shifting control within the political pole away from the Board toward capitals of the largest countries (Group of Seven acting as a self-appointed steering group).

- Key features and implications for efficiency:
  - Formal political control is pervasive; most IMF actions require Board approval; formal control has increased recently.
  - Practical influence of the political pole is constrained by information-processing limitations; ratio between professional staff working for the Board and regular professional staff has remained roughly constant over the last 10 years (about 9½ percent).
  - Power appears tilted toward the political pole and within it toward capitals of larger shareholders (advanced countries can devote more resources to monitoring).
- Potential efficiency costs identified:
  - Risk that decisions in politically important cases reflect political pressures rather than technical considerations; survey evidence: 7 percent of mission chiefs reporting technical judgment was overridden “frequently” or “always,” and 48 percent reporting political pressures “occasionally” or “sometimes” (IMF, 2002, p. 64).
  - Alleged “clientelism” of staff toward country authorities driven by culture and career incentives.
  - Shift of decision power from the Board to capitals may reduce efficiency because capitals’ officials have less IMF knowledge and contact with staff.
  - Board’s role in daily management is atypical from corporate governance perspective: a body of 24 is “extremely large for useful exchanges of views” and spends about two-thirds of its time on country matters rather than setting policy guidelines/monitoring implementation.
- Trade-offs and proposed directions:
  - Need for political oversight acknowledged for legitimacy, but some oversight forms can hamper operational efficiency; degree of delegation (slack) requires more study.
  - Reform proposals discussed include:
    - More operational independence for the IMF coupled with stronger ex post accountability.
    - Enhancing protection of staff from explicit and implicit political pressure; change incentives so management backs staff who give frank advice (IMF, 1999, p. 67).
    - Reassessing the Board’s role to reduce formal-control activities and increase its role vis-à-vis the capitals; reducing Board responsibilities for country decisions to allow more time for setting policy guidelines.

### Appropriate Degree of Transparency
- Transparency is key to legitimacy; secrecy weakens IMF legitimacy.
- Transparency can also enhance efficiency by:
  - Allowing closer monitoring and accountability of IMF staff (improving principal-agent outcomes).
  - Magnifying the IMF voice when IMF advice is published—if markets listen, inappropriate policies are more directly penalized, enhancing “peer pressure.”
- Shift toward greater transparency partly reflects attempts to enhance effectiveness after the Asian crisis.
- Transparency involves trade-offs with efficiency; design of transparency policies must acknowledge potential costs.
- Definitions and scope:
  - “Transparency policies” refer to dissemination of documents to an audience that would not otherwise receive them; dissemination itself can affect document content.
  - IMF documents typically contain: (a) information on a country or country group; (b) staff or governance views on policy issues; and (c) assessments of IMF performance. Paper focuses primarily on (a) and (b).
  - Focus on broadening dissemination from the technocratic pole (and country authorities) to the political pole or the general public.

- Transparency: direct drawbacks (findings)
  - Publication of IMF views (for example, on sustainability of an exchange rate regime) can cause a negative market reaction (speculative attack) that could have been avoided through a change in policies; negative market reaction could have been avoided had country authorities been given sufficient time to react to IMF views.
  - Vulnerability assessments are probabilistic, but most readers focus on the modal projection or outlook, which could precipitate a crisis.
  - In countries with an IMF-supported program, publication of letters of intent may disrupt the conditionality process:
    - Programs and conditionality are modified as developments unfold (Mussa and Savastano, 1999).
    - Markets fully aware of letters of intent make negotiation/renegotiation more difficult.
    - Failure to take actions covered by conditionality may trigger a crisis even when the IMF would have been willing to waive them.
    - Waiving conditions may be inappropriately seen as watering down a program.
    - Conditionality can act as a coordinating device for speculative attacks (reverse catalytic effect) because transparency, in a world of high capital mobility, dramatically cuts time available for negotiation.
  - Transparency about government intentions can prevent implementation if public knowledge causes vested interests to coalesce against the measure.

- Effects of publication requirements on information and candor (findings)
  - Country authorities may withhold information if dissemination imposes costs, preventing IMF staff from providing adequate advice (IMF, 1999, p. 75).
  - Staff, given limited protection vis-à-vis political pressures or risk of causing a crisis, may be less candid in documents to be published, producing pro-forma transparency where key information is omitted.
  - Transparency vis-à-vis the Board raises additional issues:
    - Whether information provided to the Board would leak to the public is controversial (IMF, 1999, p. 78).
    - Delicate issues arise when disclosure to Executive Directors is hard to reconcile with confidentiality (Van Houtven, 2002, p. 19).
    - Occasional embarrassing leaks from the Executive Board have occurred (Martin, 2002, p. 40), though leaks of sensitive material have been infrequent.
    - Borrowing countries may be reluctant to reveal sensitive information to the Board because some states represented may be political adversaries.

- Transparency in IMF history (findings)
  - For many decades after establishment, transparency vis-à-vis the public was not regarded as critical; main concern was information to be provided to the Board.
  - Shift to staff responsibility for dealing with country authorities (early 1948) created a barrier between the Board and member countries (Martin, 2002, p. 37).
  - Technocratic views emphasized confidentiality as fundamental to Fund operations (de Vries, 1985, p. 994).
  - In the 1990s, public demand for transparency mounted; IMF began publishing previously unpublished documents, including staff reports and letters of intent (IMF, 2003).
  - Pressure for more transparency to the Board increased (disclosure of side letters, more frequent and informal Board discussions).

- Unresolved issues and practical limits to mitigating costs of transparency (findings & questions)
  - Deletion policy allows removal of “highly market-sensitive material” from published staff reports, but practical limitations remain:
    - Requests for deletion require IMF management approval; uncertainty on what qualifies as “highly market-sensitive.”
    - Modifications for highly market-sensitive information are limited (must keep text intelligible/grammatically correct; cannot eliminate entire sections or several paragraphs).
    - Deletion policy covers only highly market-sensitive information and does not address other concerns (e.g., publication of policy intentions that impede implementation).
  - Majority of the Board focuses on transparency benefits; some Directors note trade-offs between transparency and candor (IMF, 2003).
  - Key questions highlighted for further scrutiny:
    - How to ensure countries continue to provide necessary information despite publication requirements.
    - How to prevent pro-forma transparency where important information is not disclosed.
    - To what extent delaying publication of some documents would be appropriate (contrasting current virtually immediate publication) to allow ex post accountability while reducing ex ante censorship.
    - Appropriate degree of transparency vis-à-vis the political pole (Board and capitals) and which technocratic-pole information/views should be shared.

### Appropriate Degree of Uniformity of Treatment Across Countries
- Evenhandedness is critical to IMF legitimacy; efficiency requires selectivity because economic conditions differ across countries.
- In theory no contradiction between evenhandedness and selectivity if countries are assessed on objective grounds (uniformity in substance).
- In practice, formalistic uniformity is easier to establish than substantive evenhandedness, creating bias toward applying same formal procedures to all countries and loss of resources/efficiency.
- Trends in recent years show less selectivity:
  - Article IV consultations occur annually for most countries; fewer than one-tenth are on a 24-month cycle.
  - Many standard surveillance tools and mandates (for example, assessment of standards and codes) cover all countries.
  - Vulnerability assessment exercise (introduced 2001) is a selective practice; some Directors saw merit applying it to advanced economies, others noted advanced economies are examined through other mechanisms (IMF, 2003).
- Two avenues proposed to reconcile selectivity and evenhandedness:
  - Micro level: broaden use of screening processes to avoid same formal procedures for all countries.
  - Macro level: consider revising responsibilities across international economic organizations; identify a “leading institution” for each country as a milder alternative to strict reallocation.

### Resource Constraints and Human Resources Adequacy
- Adequacy of human resources is critical but little addressed by IMF-watchers; some critics argue IMF is understaffed relative to program caseload; IMF (1999, p. 73) notes many staff are chronically overworked.
- Growth of IMF staff from 1970 to 2002 increased relative to number of member countries but less so relative to number of IMF-supported programs.
- Typical IMF mission team composition:
  - Mission chief plus four (rarely five) economists who often have other HQ assignments; resident representative assists in program and key surveillance cases.
  - Reviewers often work part-time across tens of countries.
- Comparisons and observations:
  - Central bank and finance ministry teams in industrial countries often include hundreds of economists (examples: Bank of England ~220; U.K. Treasury ~200; ECB Research & Economics ~180; Federal Reserve System Monetary Affairs & Research and Statistics ~160; U.S. Treasury Domestic Finance & Economic Policy ~140).
  - Each of four mission economists typically handles one sector (real, monetary, fiscal, balance of payments); balance of payments responsibilities often rest with a single economist covering multiple complex tasks.
- Human resources allocation findings and quantitative results:
  - Implicit elasticity of human resources vs. lending:
    - 0.11 for whole IMF
    - 0.08 for area departments
    - 0.16 for other departments
  - Econometric estimate: existence of a program increases human-resource allocation by less than a third relative to surveillance-only relationship (Tables/Figures referenced).
  - Turnover and team stability:
    - Some 60 percent of teams of nonprogram countries change with each mission.
    - Median time desk economists/mission chiefs had worked on main assignments: 12 months and 13 months, respectively (sample collected May 2004).
  - Ivanova and others (2003) found team size has little effect on program outcomes; possible explanations include staffing below a minimum effectiveness threshold or inadequate organization of staff teams to absorb additional resources.

- Key quantitative tables and regression outputs (as presented)
  - Table 1. Number of Fund Staff Relative to IMF Member Countries and Fund-Supported Programs — Staff Year Columns (as presented):
    - All staff — Per country 8.7 10.1 11.9 14.7
    - All staff — Per program 43.3 48.8 34.8 51.6
    - Professional staff and managers — Per country ... 5.9 7.6 10.5
    - Professional staff and managers — Per program ... 28.9 22.2 36.6
  - Table 2. Factors Affecting the Allocation of IMF Human Resources Across Countries: Regression Results Based on FY 2003/2004 (dependent variable: number of staff-years)
    - Constant: Coefficient 0.10; t-statistics 2.50
    - Log (per capita GDP) 1/: Coefficient 0.21; t-statistics 8.85
    - Log (SDR) 2/: Coefficient -0.05; t-statistics -1.03
    - Program dummy 3/: Coefficient 0.43; t-statistics 4.33
    - Industrial country dummy 4/: Coefficient -0.30; t-statistics -5.00
    - Notes: R2 = 0.50; standard error = 0.24; number of observations = 177.
    - Footnotes:
      - 1 At purchasing-power-parity exchange rates.
      - 2 Amount of approved lending per program, in millions of SDRs.
      - 3 Equal to 1 for program countries.
      - 4 Equal to 1 for industrial countries.
  - Figure 1 regression equations and R2 values (as presented):
    - All IMF departments: y = -0.8894x + 0.5062; R2 = 0.9593
    - IMF area departments: y = -0.9167x + 0.3138; R2 = 0.9781
    - Other IMF departments: y = -0.8436x + 0.0084; R2 = 0.847

### Conclusions and Areas for Further Work (Recommendations and Research Topics)
- Trade-offs exist between enhancing IMF legitimacy (through governance reforms and transparency) and maintaining operational efficiency; some reforms can yield synergies or Pareto improvements.
- Examples of potentially efficiency-enhancing legitimacy reforms:
  - Redistributing political oversight among countries may enhance legitimacy without increasing political control over day-to-day operations.
  - Strengthening staff protection against political influences can increase candor in published documents, reducing pro-forma transparency.
  - Ex post accountability could substitute for close ex ante political monitoring, reducing direct political pressure and supporting uniformity of treatment.
- Topics identified for further work:
  - How the political pole could monitor the technocratic pole without undue efficiency costs, including:
    - (a) the role explicit political considerations should play in IMF decisions;
    - (b) the role of the Board in day-to-day IMF management; and
    - (c) steps to avoid staff “clientelism.”
  - How to reconcile transparency and confidentiality needs and avoid pro-forma transparency that harms both efficiency and accountability.
  - The scope for improved efficiency through more selectivity in the country dimension: increased prescreening to identify countries requiring more resource-intensive procedures; ways to reduce overlapping country responsibilities across international organizations.
  - The adequacy of the amount and use of the IMF’s human resources; comprehensive assessment needed, taking turnover into account and evaluating whether tasks should be streamlined or resource use reorganized.

*IMF Working Paper — chapter “1. Allocation of IMF Financial and Human Resources Across Program Countries”*

### References .............................................................................................................

### _wp05107 - References .............................................................................................................

### Tables
- 1.     Number of Fund Staff Relative to IMF Member Countries and  
             Fund-Supported Programs ..............................................................................................26
- 2.     Factors Affecting the Allocation of IMF Human Resources Across Countries: 
              Regression Results Based on FY 2003-2004.................................................................27

### Figure
- Figure (title/description not provided in the supplied content)

*https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2005/_wp05107.pdf*

### 1.     Allocation of IMF Financial and Human Resources Across Program Countries ................28

### 1.     Allocation of IMF Financial and Human Resources Across Program Countries

### Introduction
- Legitimacy is essential for an international organization to achieve its goals (Woods, 2000; Van Houtven, 2002, p. 66).  
- Legitimacy often requires constraints—rules, checks and balances, transparency—that can conflict with operational efficiency (the ability to achieve goals without wasting resources).  
- For international institutions, stronger legitimacy-enhancing constraints may be necessary than for domestic institutions, potentially reducing operational efficiency more deeply.  
- Limited operational efficiency can be offset by additional resources, but releasing resources to international institutions is politically controversial; consequently, limited efficiency often translates into limited effectiveness.  
- The paper examines legitimacy-efficiency trade-offs across three dimensions:  
  - Control of political power over operational decisions of international “technocrats” (Section II).  
  - Transparency in IMF decision making (Section III).  
  - Uniformity of treatment across countries (Section IV).  
- The resource constraint issue and IMF work processes are discussed in Section V; Section VI concludes.  
- The paper emphasizes the need to probe efficiency (often disregarded) while recognizing that trade-offs are not necessarily inevitable and that some reforms may be Pareto-improving in legitimacy and efficiency.  
- The paper does not provide a full reform program; it highlights trade-offs and suggests that more work and delegation-theory expertise are needed.

### Appropriate Degree and Form of Political Control
- IMF governance involves four entities:  
  - The capitals (direct representatives of countries' interests): Board of Governors and International Monetary and Financial Committee (IMFC), meeting infrequently (typically twice a year), with IMFC meetings routinely preceded by preparatory Deputies’ meetings.  
  - The Board of Executive Directors (“the Board”): 24 EDs in Washington, D.C., representing the IMF’s 184 member countries. The Board “exercises all the powers for conducting the IMF’s business, except those that the Articles of Agreement ... have reserved for the Board of Governors” (Van Houtven, 2002, p. 14). The Board meets at IMF headquarters for at least three days a week. EDs generally operate, for key decisions, in concert with “the capitals.”  
  - The Managing Director and Deputies (Management): appointed by the Board; the Managing Director is the IMF’s Chief Executive Officer, head of the staff, and Chairman of the Board.  
  - The staff: currently some 2,700 international civil servants, representing the IMF’s “technical” voice.  
- Other forums (G-7, G-20, G-24) also discuss IMF business.  
- Historical evolution:  
  - Early debates at IMF establishment pitted U.S. preference for close political oversight against British preference for technical independence (Keynes). U.S. views prevailed, resulting in a Board in continuous session.  
  - In early IMF years EDs played direct operational roles, including negotiating and heading field missions; growing membership and turnover made this impracticable due to informational constraints.  
  - From the early 1950s management and staff roles increased; the Board retained a significant role in setting general policies and guidelines, less so in specific country decisions, except for high political-value cases.  
- Since the mid-1990s there has been a trend to increase information and ex ante vetting capacity of the political pole:  
  - Side letters required to be disclosed to the Board since September 1999; as of early 2003 all “comfort letters” and similar statements by staff to IFIs, donors, and creditors must be transmitted to the Board.  
  - Conditionality streamlined; prior actions formalized; detailed provisions for exceptional access cases (early Board involvement).  
  - As of mid-2003, for countries with prolonged use of IMF resources (some 80 percent of program countries outstanding in mid-2004), an ex post assessment report must be discussed by the Board before presenting a new program; negotiations cannot be completed before such discussion.  
- Trend toward shifting control within the political pole away from the Board toward the capitals of the largest countries (Group of Seven acting as a self-appointed steering group).

Key features and implications for efficiency
- Formal political control is pervasive: most IMF actions require Board approval; formal control has increased recently.  
- Practical ability of the political pole to exert influence is constrained by information-processing limitations; the ratio between professional staff working for the Board and regular professional staff has remained roughly constant over the last 10 years (at about 9½ percent).  
- Power appears tilted toward the political pole in most relevant cases, and within that pole toward capitals of larger shareholders (advanced countries can devote more resources to monitoring).  
- Potential efficiency costs identified:  
  - Risk that decisions in politically important cases reflect direct political pressures rather than technical considerations. Empirical evidence is mixed, but surveys report political pressures: 7 percent of mission chiefs reporting technical judgment was overridden “frequently” or “always,” and 48 percent reporting political pressures “occasionally” or “sometimes” (IMF, 2002, p. 64). Perceptions of political interference damage IMF credibility.  
  - Alleged “clientelism” of staff toward country authorities: culture and career incentives (managers assessed partly on ability to keep good relations) may encourage less incisive reporting, especially in surveillance (“calm waters”).  
  - Shift of decision power from the Board to capitals may reduce efficiency because capitals’ officials have more limited IMF knowledge than EDs and less contact with staff; problem acute where political pole retains high control (policy guidelines).  
  - Board’s atypical role in daily management is unusual from corporate governance perspective; a large body of 24 is “extremely large for useful exchanges of views” and consumes substantial time on country matters (about two-thirds of the Board’s time is spent on country matters rather than setting policy guidelines/monitoring implementation). This yields time-consuming formal control and pro forma activities for staff.  
- Trade-offs and proposed directions:  
  - The need for political oversight is acknowledged—especially for legitimacy—but some forms of oversight can hamper operational efficiency. The appropriate degree of delegation (slack) from political to technocratic pole is under-studied.  
  - Proposals and reforms discussed include:  
    - More operational independence for the IMF coupled with stronger ex post accountability (De Gregorio and others, 1999; Bordo and James, 2000; Allegret and Dulbecco, 2004). Note: making the Board independent does not address the challenge of a large body managing daily financial-institution tasks; a nonresident board focused on broad oversight was suggested.  
    - Enhancing protection of staff from explicit and implicit political pressure; change incentives so management backs staff who give frank advice (IMF, 1999, p. 67).  
    - Reassessing the Board’s role to reduce formal-control activities and increase its role vis-à-vis the capitals (Van Houtven, 2002); Woods (2000) recommended reducing Board responsibilities for country decisions to allow more time for setting policy guidelines.

### Appropriate Degree of Transparency
- Transparency is key to legitimacy; secrecy weakens IMF legitimacy. Transparency can also enhance efficiency by:  
  - Allowing closer monitoring and accountability of IMF staff (improving principal-agent outcomes).  
  - Magnifying the IMF voice when IMF advice is published—if markets listen, inappropriate policies are more directly penalized, enhancing “peer pressure.”  
- The shift toward greater transparency partly reflects attempts to enhance effectiveness after the Asian crisis.  
- However, transparency can involve trade-offs with efficiency; acknowledging potential costs is necessary to design appropriate transparency policies.  
- Definitions and scope:  
  - “Transparency policies” refer to dissemination of documents to an audience that would not otherwise receive them; dissemination itself can affect document content.  
  - IMF documents typically contain: (a) information on a country or country group (data on reserves, government decisions, etc.); (b) staff or governance views on policy issues (exchange rate appropriateness, banking supervision, political risks); and (c) assessments of IMF performance. The paper focuses primarily on (a) and (b).  
  - Discussions should identify original and new recipients; focus here is on broadening dissemination from the technocratic pole (and country authorities) to the political pole or the general public.

- (Text continues into “B. Potential Drawbacks of Transparency,” which begins to explore channels through which transparency may involve costs; only the introduction to that subsection is included in this content unit.)

*Italicized source attribution: IMF Working Paper — chapter “1. Allocation of IMF Financial and Human Resources Across Program Countries”*

### 1.      I will first consider the specific mechanisms through which transparency vis-à-vis the

### I will first consider the specific mechanisms through which transparency vis-à-vis the public at large can affect IMF efficiency

### Transparency: direct drawbacks (findings)
- Publication of IMF views (for example, on sustainability of an exchange rate regime) can cause a negative market reaction (speculative attack) that could have been avoided through a change in policies; negative market reaction could have been avoided had country authorities been given sufficient time to react to IMF views.
- Vulnerability assessments are probabilistic, but most readers focus on the modal projection or outlook, which could precipitate a crisis.
- In countries with an IMF-supported program, publication of letters of intent may disrupt the conditionality process:
  - Programs and conditionality are modified as developments unfold (Mussa and Savastano, 1999).
  - Markets fully aware of letters of intent make negotiation/renegotiation more difficult.
  - Failure to take actions covered by conditionality may trigger a crisis even when the IMF would have been willing to waive them.
  - Waiving conditions may be inappropriately seen as watering down a program.
  - Conditionality can act as a coordinating device for speculative attacks (reverse catalytic effect) because transparency, in a world of high capital mobility, dramatically cuts time available for negotiation.
- Transparency about government intentions can prevent implementation if public knowledge causes vested interests to coalesce against the measure.

### Effects of publication requirements on information and candor (findings)
- Publication requirements can alter the information provided to IMF staff:
  - Country authorities may withhold information if dissemination imposes costs, preventing IMF staff from providing adequate advice (IMF, 1999, p. 75).
  - Staff, given limited protection vis-à-vis political pressures or risk of causing a crisis, may be less candid in documents to be published, producing pro-forma transparency where key information is omitted.
- Transparency vis-à-vis the Board raises additional issues:
  - Whether information provided to the Board would leak to the public is controversial (IMF, 1999, p. 78).
  - Delicate issues arise when disclosure to Executive Directors is hard to reconcile with confidentiality (Van Houtven, 2002, p. 19).
  - Occasional embarrassing leaks from the Executive Board have occurred (Martin, 2002, p. 40), though leaks of sensitive material have been infrequent.
  - Even without leaks, borrowing countries may be reluctant to reveal sensitive information to the Board because some states represented may be political adversaries.

### Transparency in IMF history (findings)
- For many decades after establishment, transparency vis-à-vis the public was not regarded as critical; main concern was information to be provided to the Board.
- Shift to staff responsibility for dealing with country authorities (early 1948) created a barrier between the Board and member countries (Martin, 2002, p. 37).
- Technocratic views emphasized confidentiality as fundamental to Fund operations (de Vries, 1985, p. 994).
- In the 1990s, public demand for transparency mounted; IMF began publishing previously unpublished documents, including staff reports and letters of intent (IMF, 2003).
- Pressure for more transparency to the Board increased (disclosure of side letters, more frequent and informal Board discussions).

### Unresolved issues and practical limits to mitigating costs of transparency (findings & questions)
- Deletion policy allows removal of “highly market-sensitive material” from published staff reports, but practical limitations remain:
  - Requests for deletion require IMF management approval; uncertainty on what qualifies as “highly market-sensitive.”
  - Modifications for highly market-sensitive information are limited (must keep text intelligible/grammatically correct; cannot eliminate entire sections or several paragraphs).
  - Deletion policy covers only highly market-sensitive information and does not address other concerns (e.g., publication of policy intentions that impede implementation).
- Majority of the Board focuses on transparency benefits; some Directors note trade-offs between transparency and candor (IMF, 2003).
- The author argues trade-offs deserve more extensive exploration.
- Key questions highlighted for further scrutiny:
  - How to ensure countries continue to provide necessary information despite publication requirements.
  - How to prevent pro-forma transparency where important information is not disclosed.
  - To what extent delaying publication of some documents would be appropriate (contrasting current virtually immediate publication) to allow ex post accountability while reducing ex ante censorship.
  - Appropriate degree of transparency vis-à-vis the political pole (Board and capitals) and which technocratic-pole information/views should be shared.

### Appropriate degree of uniformity of treatment across countries (findings & proposals)
- Evenhandedness is critical to IMF legitimacy; efficiency requires selectivity because economic conditions differ across countries.
- In theory no contradiction between evenhandedness and selectivity if countries are assessed on objective grounds (uniformity in substance).
- In practice, formalistic uniformity is easier to establish than substantive evenhandedness, creating bias toward applying same formal procedures to all countries and loss of resources/efficiency.
- Trends in recent years show less selectivity; Article IV consultations occur annually for most countries, fewer than one-tenth on a 24-month cycle.
- Many standard surveillance tools and mandates (for example, assessment of standards and codes) cover all countries.
- Vulnerability assessment exercise (introduced 2001) is a selective practice; some Directors saw merit applying it to advanced economies, others noted advanced economies are examined through other mechanisms (IMF, 2003).
- Two avenues proposed to reconcile selectivity and evenhandedness:
  - Micro level: broaden use of screening processes to avoid same formal procedures for all countries.
  - Macro level: consider revising responsibilities across international economic organizations (overlap OECD/IMF for industrial countries; World Bank/IMF for nonindustrial countries); identify a “leading institution” for each country as milder alternative.

### Resource constraints, human resources adequacy (findings, statistics, regression results)
- Adequacy of human resources is critical but little addressed by IMF-watchers.
- Some critics argue IMF is understaffed relative to program caseload; IMF (1999, p. 73) notes many staff are chronically overworked.
- Growth of IMF staff from 1970 to 2002 increased in relation to number of member countries but less so relative to number of IMF-supported programs.
- Typical IMF mission team composition:
  - Mission chief plus four (rarely five) economists who often have other HQ assignments; resident representative assists in program and key surveillance cases.
  - Reviewers often work part-time across tens of countries.
- Comparisons and observations:
  - Central bank and finance ministry teams in industrial countries often include hundreds of economists (examples: Bank of England ~220; U.K. Treasury ~200; ECB Research & Economics ~180; Federal Reserve System Monetary Affairs & Research and Statistics ~160; U.S. Treasury Domestic Finance & Economic Policy ~140).
  - Each of four mission economists typically handles one sector (real, monetary, fiscal, balance of payments); balance of payments responsibilities often rest with a single economist covering trade flows, service account, capital account, external debt stocks, competitiveness, trade restrictions, external debt negotiations, etc.
  - Human resources assigned to program countries rise only modestly with size of financial resources committed: implicit elasticity of human resources vs. lending is 0.11 for whole IMF; 0.08 for area departments; 0.16 for other departments.
  - Econometric estimate: existence of a program increases human-resource allocation by less than a third relative to surveillance-only relationship (Tables/Figures referenced).
- Turnover and team stability:
  - Some 60 percent of teams of nonprogram countries change with each mission.
  - Median time desk economists/mission chiefs had worked on main assignments: 12 months and 13 months, respectively (sample collected May 2004).
  - High turnover may allow cross-fertilization and reduce clientelism, but may also cause lack of country familiarity, shortsightedness in planning, reduced accountability, and insufficient long-term initiatives.
- Study on team size and program success:
  - Ivanova and others (2003) found team size has little effect on program outcomes; possible explanations:
    - Staff teams currently fall so short of a minimum effectiveness threshold that marginal additional resources do not help.
    - Organization of staff teams is not adequately modified to accommodate increased resources.
- Key quantitative tables and regression outputs (preserved exactly as provided):
  - Table 1. Number of Fund Staff Relative to IMF Member Countries and Fund-Supported Programs — Staff Year Columns (as presented):
    - All staff — Per country 8.7 10.1 11.9 14.7
    - All staff — Per program 43.3 48.8 34.8 51.6
    - Professional staff and managers — Per country ... 5.9 7.6 10.5
    - Professional staff and managers — Per program ... 28.9 22.2 36.6
  - Table 2. Factors Affecting the Allocation of IMF Human Resources Across Countries: Regression Results Based on FY 2003/2004 (dependent variable: number of staff-years)
    - Regressors and results:
      - Constant: Coefficient 0.10; t-statistics 2.50
      - Log (per capita GDP) 1/: Coefficient 0.21; t-statistics 8.85
      - Log (SDR) 2/: Coefficient -0.05; t-statistics -1.03
      - Program dummy 3/: Coefficient 0.43; t-statistics 4.33
      - Industrial country dummy 4/: Coefficient -0.30; t-statistics -5.00
    - Notes: R2 = 0.50; standard error = 0.24; and number of observations = 177.
    - Footnotes:
      - 1 At purchasing-power-parity exchange rates.
      - 2 Amount of approved lending per program, in millions of SDRs.
      - 3 Equal to 1 for program countries.
      - 4 Equal to 1 for industrial countries.
  - Figure 1 regression equations and R2 values (as presented):
    - All IMF departments: y = -0.8894x + 0.5062; R2 = 0.9593
    - IMF area departments: y = -0.9167x + 0.3138; R2 = 0.9781
    - Other IMF departments: y = -0.8436x + 0.0084; R2 = 0.847

### Conclusions and areas for further work (recommendations / topics for additional research)
- Trade-offs exist between enhancing IMF legitimacy (through governance reforms and transparency) and maintaining operational efficiency; some reforms can yield synergies or Pareto improvements.
- Examples of potentially efficiency-enhancing legitimacy reforms:
  - Redistributing political oversight among countries may enhance legitimacy without increasing political control over day-to-day operations.
  - Strengthening staff protection against political influences can increase candor in published documents, reducing pro-forma transparency.
  - Ex post accountability could substitute for close ex ante political monitoring, reducing direct political pressure and supporting uniformity of treatment.
- Topics identified for further work:
  - How the political pole could monitor the technocratic pole without undue efficiency costs, including:
    - (a) the role explicit political considerations should play in IMF decisions;
    - (b) the role of the Board in day-to-day IMF management; and
    - (c) steps to avoid staff “clientelism.”
  - How to reconcile transparency and confidentiality needs and avoid pro-forma transparency that harms both efficiency and accountability.
  - The scope for improved efficiency through more selectivity in the country dimension: increased prescreening to identify countries requiring more resource-intensive procedures; ways to reduce overlapping country responsibilities across international organizations.
  - The adequacy of the amount and use of the IMF’s human resources; comprehensive assessment needed, taking turnover into account and evaluating whether tasks should be streamlined or resource use reorganized.

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### References

### References

### Governance and Reform
- Akyüz, Yilmaz, 2002, “Towards Reform of the International Financial Architecture: Which Way Forward?” in Reforming the Global Financial Architecture, Issues and Proposals, ed. by Yilmaz Akyüz (Penang: United Nations).
- Allegret, J.P.A., and P. Dulbecco, 2004, Why International Institutions Need Governance? The Case of the IMF, 21st Symposium on Banking and Monetary Economics, Nice, June 10–11.
- Buira, Ariel, 2003, “The Governance of the IMF in a Global Economy,” in Challenges to the World Bank and IMF, Developing Country Perspectives, ed. by Ariel Buira (London: Wimbledon Publishing Company).
- Caliari, Aldo, and Frank Schroeder, 2004, “Reform Proposals for the Governance Structures of the International Financial Institutions,” New Rules for Global Finance, Mimeo (May)
- De Gregorio, José, Barry Eichengreen, Takatoshi Ito, Charles Wyplosz, 1999, “An Independent and Accountable IMF, Geneva Reports on the World Economy 1” (London: Center for Economic Policy Research).
- Kafka, Alexandre, 1996, “Governance of the Fund,” in The International Monetary and Financial System: Developing-Country Perspectives, ed. by G.K. Helleiner (New York: St. Martin’s Press).
- Kenen, Peter B., Jeffrey R. Shafer, Nigel L. Wicks, and Charles Wyplosz, 2004, The International Economic and Financial Cooperation: New Issues, New Actors, New Responses (London: Center for Economic Policy Research).
- Van Houtven, Leo, 2002, Governance of the IMF, Decision Making, Institutional Oversight, Transparency, and Accountability, IMF Pamphlet No. 53 (Washington: International Monetary Fund).
- Woods, Ngaire, 2000, “The Challenge of Good Governance for the IMF and the World Bank Themselves,” World Development, Vol. 28, No. 5, pp. 823–41.

### IMF Evaluations, Transparency, and Institutional History
- International Monetary Fund (IMF), 1999, External Evaluation of IMF Surveillance, Report by a Group of Independent Experts (Washington).
- International Monetary Fund (IMF), 2002, Evaluation of Prolonged Use of IMF Resources, Independent Evaluation Office (Washington).
- International Monetary Fund (IMF), 2003, The Fund’s Transparency Policy: Progress Report on Publication of Country Documents (Washington).
- International Monetary Fund (IMF), 2004, Evaluation of the Role of the Fund in Argentina, 1991–2001, Independent Evaluation Office (Washington).
- Boughton, James M., 2001, Silent Revolution: The International Monetary Fund, 1979–89 (Washington: International Monetary Fund).
- de Vries, Margaret Garritsen, 1985, The International Monetary Fund 1972–1978, Cooperation on Trial, Vols. I and II: Narrative and Analysis (Washington: International Monetary Fund).
- de Vries, Margaret Garritsen, and J. Keith Horsefield, The International Monetary Fund, 1945–1965: Twenty Years of International Monetary Cooperation (Washington: International Monetary Fund).
- Horsefield, J. Keith, 1969, The International Monetary Fund 1945–1965, Twenty Years of International Monetary Cooperation, Vol. I: Chronicle (Washington: International Monetary Fund).
- Southard, Frank A., 1979, The Evolution of the International Monetary Fund (Princeton, New Jersey: International Finance Section, Department of Economics, Princeton University).
- Gold, Joseph, 1972, Voting and Decisions in the International Monetary Fund (Washington: International Monetary Fund).

### IMF Lending, Conditionality, and Political Economy
- Barro, Robert, and Jong-Wha Lee, 2002, “IMF Programs: Who Is Chosen and What Are the Effects? NBER Working Paper No. 8951 (Cambridge, Massachusetts: National Bureau of Economic Research).
- Bird, Graham, 2003, “Political Economy Influences Within the Life Cycle of IMF Programmes,” in The IMF and the Future, Issues and Options Facing the Fund (New York: Routledge).
- Bird, Graham, and D. Rowlands, 2001, “IMF Lending: How Is It Affected by Economic, Political and Institutional Factors,” Journal of Policy Reform, No. 4.
- Ivanova, Anna, Wolfgang Mayer, Alex Mourmouras, and George Anayiotos, 2003, “What Determines the Implementation of IMF-Supported Programs?” IMF Working Paper 03/08 (Washington: International Monetary Fund).
- Mussa, Michael, and Miguel Savastano, 1999, “The IMF Approach to Economic Stabilization,” IMF Working Paper 99/104 (Washington, International Monetary Fund).
- Stiles, Kendall W., 1990, “IMF Conditionality: Coercion or Compromise?” in World Development, Vol. 18, No. 7, pp. 959–74.
- Stiles, Kendall W., 1991, Negotiating Debt: The IMF Lending Process (Boulder, Colorado: Westview Press).
- Thacker, S., 1999, “The High Politics of IMF Lending,” World Politics, No. 52, pp. 38-75.
- Williamson, John, 2000, “A Mixed Record for IMF Advice,” in Reforming the International Monetary and Financial System, ed. by Peter B. Kenen and Alexander K. Swoboda (Washington: International Monetary Fund).

### Theoretical, Institutional, and Political Analyses
- Alesina, Alberto, and Guido Tabellini, 2004, “Bureaucrats or Politicians?” NBER Working Paper No. 10241 (Cambridge, Massachusetts: National Bureau of Economic Research).
- Bendor, J., A. Glazer, and T. Hammond, 2001, “Theories of Delegation,” in Annual Review Political Science, Vol. 4, pp. 235–69.
- Bordo, Michael D., and Harold James, 2000, The International Monetary Fund: Its Present Role in Historical Perspective, Working Paper 7724, NBER Working Paper Series (Cambridge, Massachusetts: National Bureau of Economic Research).
- Calomiris, Charles W., 2000, “When Will Economics Guide IMF and World Bank Reforms?” in Cato Journal, Vol. 20, No. 1 (Spring/Summer), pp. 85-103
- Feinberg, Richard E., and Catherine Gwin, 1989, “Reforming the Fund,” in The International Monetary Fund in a Multipolar World: Pulling Together (Washington: Overseas Development Council).
- Feldstein, Martin, 1998, “Refocusing the IMF,” Foreign Affairs, Vol. 77 (March/April), pp. 20-33.
- Harper, Richard H.R., 1998, Inside the IMF, An Ethnography of Documents, Technology and Organisational Action (London: Academic Press).
- Kenen, Peter B., Jeffrey R. Shafer, Nigel L. Wicks, and Charles Wyplosz, 2004, The International Economic and Financial Cooperation: New Issues, New Actors, New Responses (London: Center for Economic Policy Research).
- Krueger, Anne O., 1997, Whither the World Bank and the IMF?, NBER Working Paper No. 6327 (Cambridge, Massachusetts: National Bureau of Economic Research).
- Lister, Frederick K., 1984, Decision-Making Strategies for International Organizations: The IMF Model, Monograph Series in World Affairs, Vol. 20, Book 4 (Denver, Colorado: University of Denver, Graduate School of International Studies).
- Martin, Lisa L., 2002, “Distribution, Information, and Delegation to International Organizations: The Case of IMF Conditionality” (unpublished; Cambridge, Massachusetts: Harvard University).
- Polak, J.J., 2004, “If the Bretton Woods Conference Were to Be Held Now, It Would Not Succeed,” interview, in IMF Survey, Vol. 33 (August 23).
- Sachs, Jeffrey D., 2000, “Cutting the IMF and World Bank Down to Size,” in Project Syndicate. Available on the Web at http://www.project-syndicate.org/commentaries/commentary_text.php4?id=296&lang=1.
- Skidelsky, Robert, 2003, John Maynard Keynes 1883–1946, Economist, Philosopher, Statesman (London; Macmillan).
- Strange, Susan, 1973, “IMF: Monetary Managers” in The Anatomy of Influence: Decisionmaking in International Organizations, ed. by R.W. Cox and H.K. Jacobson (New Haven, Connecticut: Yale University Press).
- Vaubel, Roland, 1994, “The Political Economy of the IMF: A Public Choice Analysis,” in Perpetuating Poverty, The World Bank, the IMF, and the Developing World, ed. by Doug Bandow and Ian Vásquez (Washington: Cato Institute).

### Developing-Country Perspectives and Critiques
- Mohammed, Aziz Ali, 2000, “The Future Role of the IMF: A Developing Country Point of View,” in Reforming the International Financial System, Crisis Prevention and Response, ed. by Jan Joost Teunissen (The Hague: FONDAD).
- Passacantando, Franco, 2004, Democrazia e Governance internazionale: il caso delle istituzioni di Bretton Woods (upublished; Rome: Banca d’Italia).
- Buira, Ariel, 2003, “The Governance of the IMF in a Global Economy,” in Challenges to the World Bank and IMF, Developing Country Perspectives, ed. by Ariel Buira (London: Wimbledon Publishing Company).
- Willett, Thomas D., 2004, “IMF: Governments Need to Be Persuaded to Mend Their Ways,” letter to the Financial Times (April 27).

- International Monetary and Financial Committee (IMFC) of the Board of Governors of the International Monetary Fund, 2004, communiqué, October 2.

*References list from _wp05107 - References*

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