## Transcript of Press Briefing on IMF Advice on Exchange Rate Policies

_IMF News, May 17, 2007_

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## Bibliographic details
- Published: May 17, 2007

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### 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.*

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## References

- [People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)
- [Japan and the IMF](http://www.imf.org/external/country/JPN/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Transcripts](https://www.imf.org/en/news/searchnews)
- [Press Release No. 07/101](https://www.imf.org/external/np/sec/pr/2007/pr07101.htm)
- [PRESS CENTER](http://presscenter.imf.org/)
- [Webcast](https://www.imf.org/external/mmedia/view.asp?eventID=791)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/54/tr070517_