Transcript of Press Briefing on IMF Advice on Exchange Rate Policies
IMF News, May 17, 2007
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- Published: May 17, 2007
IEO evaluation: main findings and judgment
- The Independent Evaluation Office (IEO) released an evaluation of the IMF's exchange rate policy advice during the period 1999 to 2005.
- The report takes a "frank and critical look" at IMF performance and identifies an "effectiveness gap" in the Fund's performance during the sample period.
- Key emphases from the IEO:
- Exchange rate surveillance is "part of the safety inspection of the international financial system."
- There is "no professional consensus on many of the analytical issues involved," yet the IMF's performance bar "must be set very high."
- Despite signs of improvement, "the performance gap at the end of the sample period remains significant and needs to be addressed."
- The IEO's main message: the Fund needs to "reenergize its contribution to policy discussions with member countries."
Evidence and methodology cited by the IEO
- The IEO based its conclusions on three sources of evidence:
- Desk reviews, including review of all Article IVs for the last two years of the sample period.
- In-depth reviews of 30 countries.
- A survey of officials and interviews with Fund staff and country officials (confidential interviews).
- The IEO states it "triangulate[d] and test[ed] conclusions" across these sources to form robust findings.
IMF management and staff response (Lipsky)
- Management welcomed the report's candid, constructive assessment but noted disagreement with some conclusions and that the report could not address initiatives launched since 2005.
- Management argued the report "contains a lot more positive evidence of the IMF's performance than the report's conclusions would suggest."
- Management accepts the IEO's call to strengthen exchange rate surveillance and highlighted recent and ongoing actions:
- Sharpened analytical tools for surveillance of exchange rates, including in emerging markets.
- Improved integration of financial sector analysis in bilateral, regional, and global surveillance.
- Creation of a new vehicle for multilateral consultations on issues of global importance, including exchange rate issues.
- Revision of the 1977 Decision on Surveillance over Exchange Rate Policies (a proposal to revise the decision will be discussed in the Executive Board, "probably in June").
Specific data points and survey results cited
- The staff response noted: "the IEO questionnaire had 79 percent of countries found Fund assessment instrumental or helpful at the margin."
- The staff response further noted: that percentage "rises to 90 percent when the few countries that had little or no discussions with the Fund were excluded."
- The evaluation sample period: "1999 to 2005."
- The governing framework being revised: the "1977 Decision."
Discussion of leverage, credibility, and Fund role
- The IEO and management converged on the idea that the Fund's leverage where there is no program comes from the quality of its analysis and advice rather than conditionality:
- The Fund must "earn a seat at the table" by the quality and relevance of its contributions.
- Country authorities increasingly seek different types of advice: "more specific, more examples... more attention to practical issues and implementation."
- The IEO noted "a significant minority of cases" where authorities felt they were not getting the dialogue they wanted and therefore sought other sources of advice.
- Management emphasized that changes since 2005 are intended to address these concerns, while acknowledging "more work to do."
The 1977 Decision revision: intent and framing
- Management described the revision in plain terms:
- The 1977 Decision is narrow relative to current surveillance practice; much of what is expected of surveillance is currently "implicit."
- The proposal aims to "make explicit what is currently implicit" by setting out principles guiding surveillance and clarifying expectations to staff and members.
- The Board is the ultimate decision-maker; a proposed draft decision was being prepared "at the request of the Board and the endorsement of the IMFC" and would be discussed in the Board "in the next few weeks."
Internal incentives, Board discussion, and outstanding issues
- The IEO highlighted unresolved issues it felt had not yet been fully addressed:
- The Board had not had a formal policy discussion since 1999 on developments in the global monetary system and their implications for stability.
- Questions remain regarding incentives for staff to be frank with authorities and to bring "sharp analysis and advice" to the Board.
- Combining broad policy advice with implementation guidance remains a challenge.
- IEO indicated it could revisit the topic in the future to assess the impact of changes since 2005.
Follow-up, scope, and staff engagement
- IEO remarks on possible follow-up: the evaluation office could "come back at some point in the future" to assess the impact of changes and reforms.
- On survey and staff engagement:
- The staff survey targeted "senior economists and above" who worked on exchange rate matters over the period under review, yielding "several hundred staff responding."
- Interviews with staff who worked on individual country cases were used as an in-depth, confidential information source.
- The staff response to the evaluation was coordinated through the Policy Development and Review Department and collated broadly across staff.
Transcript of Press Briefing on IMF Advice on Exchange Rate Policies, Washington, D.C., May 17, 2007 — IMF management and IEO remarks as recorded in the press briefing transcript.