IMF Executive Board Concludes Review of the Implementation of the Framework for Enhanced Engagement on Governance

IMF News, April 11, 2023

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IMF Executive Board Concludes Review of the Implementation of the Framework for Enhanced Engagement on Governance

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Bibliographic details

• Published: April 11, 2023

Scope and purpose of the Review

• Review provides an in-depth stocktaking of the Fund’s engagement on governance and corruption since the adoption of the Fund’s “Framework for Enhanced Engagement on Governance” adopted by the Executive Board in April 2018 (“the 2018 Framework”).
• Review covers implementation of the policies on governance detailed in the “2018 Framework” and in “The Role of the IMF in Governance Issues: Guidance Note,” adopted by the Executive Board in 1997 (1997 Governance Policy).
• The Executive Board discussed the staff papers on the “Review of the Implementation of the 2018 Framework for Enhanced Fund Engagement on Governance” on April 4, 2023.

Core findings

• Fund engagement with member countries on governance and corruption has been “broadly systematic, candid, effective, and evenhanded,” in line with the objectives of the 2018 Framework.
• The Review papers:
  • find that Fund engagement on governance and corruption issues has been broadly systematic, candid, effective, and evenhanded;
  • provide concrete proposals to strengthen engagement in these areas, guided by macro-criticality and core expertise of the Fund.
• Interim Update conducted in July 2020 found that implementation of the 2018 Framework was “well underway.”
• Updates on implementation status of governance measures committed under COVID-19 Emergency Financing were published in May 2021 and May 2022.

The 2018 Framework: four elements (as stated in the Review)

• (i) a systematic assessment of the nature and severity of governance vulnerabilities and of corruption with respect to all members;
• (ii) an assessment of the economic impact of the governance weaknesses that have been identified;
• (iii) the provision of policy advice in circumstances where IMF’s engagement is justified; and
• (iv) an assessment of governmental measures to prevent private actors from offering bribes to foreign officials or providing services that enable such officials to conceal proceeds of their corrupt acts.

Executive Board Assessment — Directors’ views

• Directors “welcomed the opportunity to review the implementation” and “broadly agreed with the staff’s proposals.”
• General agreement that the 2018 Framework has made the Fund’s engagement more candid, systematic, and effective, with remaining areas for improvement.
• Mixed views on evenhandedness:
  • many Directors considered the Framework has made engagement more evenhanded;
  • many other Directors expressed “lingering concerns about evenhandedness.”
  • staff’s analysis “found no evidence of systematic biases,” but many Directors found results insufficient to draw conclusions.
• Coverage and content:
  • Directors welcomed the systematic assessment of the full membership under a robust, centralized, interdepartmental process focused on six state functions most relevant to economic activity;
  • Directors called for further analysis on the effectiveness of the Fund’s engagement in these areas.
  • Noted increased candid discussions in Article IV staff reports and specific policy advice over the three-year surveillance cycle, but limited coverage in some areas such as market regulation.
• Conditionality and implementation:
  • Proportion of governance-related conditions in Fund-supported programs has increased, with conditionality aligned with program goals.
  • Compliance rates for governance-related benchmarks considered “somewhat disappointing”—albeit similar to those for other structural benchmarks in areas outside of governance.
  • Directors supported a final stocktaking of implementation of governance safeguards during the COVID-19 emergency financing; a few Directors noted “uneven implementation” of these commitments.
  • Supported updating guidance on the use of governance commitments in emergency financing.

Participation and transnational aspects

• Only 13 countries have volunteered for the Fund to assess their frameworks for combatting transnational aspects of corruption—a number “still below expectations,” which may contribute to perceptions that the Fund’s engagement is not sufficiently evenhanded.
• Directors encouraged other jurisdictions to volunteer for the assessment of transnational aspects of corruption and agreed efforts should continue to sustain and deepen coverage.

Capacity development (CD) and integration with other priorities

• Directors welcomed expanded Fund work on governance in CD, including leveraging existing CD and establishing new forms of delivery, particularly governance diagnostics.
• Encouraged speeding up strategic integration and alignment of CD to country-specific policy advice.
• Supported further integration of governance and anti-corruption with other Fund priorities such as Fragile and Conflict affected States (FCS), climate change, and digitalization/GovTech.
• Supported deepening work on rule of law and anti-corruption issues and building upon the increasing role of supreme audit institutions (SAIs).

Challenges, constraints, and implementation realities

• Achieving lasting reduction in corruption is a challenge; implementation is constrained by limited capacity and vested interests.
• Directors emphasized that mitigation requires a tailored and sequenced approach mindful of implementation capacity constraints and political economy realities.
• Need for prioritization and phasing of proposals given competing demands under a tight budgetary environment.

Staff proposals and supported measures to strengthen implementation

• Directors supported staff proposals to strengthen implementation in line with objectives of the 2018 Framework, guided by macro-criticality and core expertise of the Fund, while stressing the need for prioritization and phasing.
• Specific endorsed actions:
  • update more regularly the centralized assessment of the membership to refresh qualitative information and track improvements or backsliding;
  • improve consistency of coverage across the six state functions, exploiting synergies with other work streams;
  • strengthen external interactions and internal processes to enhance effectiveness and address key obstacles (including enhancing ownership and support for reforms);
  • particularly encouraged strengthening political economy analysis;
  • further develop targeted CD in response to increasing demand from authorities, leveraging governance diagnostics to inform engagements;
  • implement practical measures to enhance interactions and collaboration with other international organizations and civil society;
  • fine-tune staff guidance on governance safeguards in emergency financing;
  • establish mechanisms to improve monitoring of the implementation of governance-related Article IV recommendations.

Follow-up and timelines

• Directors looked forward to an update from the staff on the implementation of the Framework in two to three years.
• Directors looked forward to a review by the Executive Board within five years.

Press Release No. 23/115, April 11, 2023 — IMF Executive Board Concludes Review of the Implementation of the Framework for Enhanced Engagement on Governance

References

• https://www.imf.org/-/media/images/imf/bios/imfboard.jpg
• The Executive Board
• The IMF and Good Governance -- A Factsheet
• Press Releases
• PRESS CENTER
• Review of the Implementation ofthe 2018 Framework for Enhanced Fund Engagement on Governance
• Framework for Enhanced Engagement on Governance
• The Role of the IMF in Governance Issues: Guidance Note
• http://www.IMF.org/external/np/sec/misc/qualifiers.htm
• https://www.imf.org/en/home