Selected Decisions and Selected Documents of the IMF, Thirty- Eighth Issue -- The Chairman’s Summing Up—Selected Streamlining Proposals Under the FY16-18 Medium-Term Budget—Implementation Issues, Executive Board Meeting 15/39, April 23, 2015

Prepared by the Legal Department of the IMF
As updated as of February 29, 2016

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ARTICLE V, SECTION 3(a), (b), AND (c)
Use of Fund Resources

The Chairman’s Summing Up— Selected Streamlining Proposals Under the FY16-18 Medium-Term Budget—Implementation Issues

Executive Board Meeting 15/39, April 23, 2015

In approving the FY16 budget, Executive Directors welcomed the opportunity to discuss a set of cross-cutting streamlining proposals to support the FY16-18 medium-term budget strategy. They recognized that maintaining an unchanged budget envelope in real terms requires difficult trade-offs, a particularly challenging process in an evolving and uncertain environment. Directors noted that a flat budget should not undermine the Fund’s capacity to deliver core activities and fulfill its mandate. They appreciated staff’s ongoing efforts to achieve efficiencies and reallocate resources to higher priority activities. While Directors supported many of the proposals, they expressed a wide range of views on other proposals.

Directors generally saw merit in the streamlining proposals regarding the use of Fund resources. There was broad support for a more systematic application of the presumption of semi-annual reviews for Fund arrangements and instruments, while stressing the need to preserve quarterly reviews in countries that are particularly vulnerable or where program risks are acute. A few Directors, however, preferred applying a presumption of quarterly reviews to ensure that emerging risks are not missed. Most Directors agreed with aligning post-program monitoring (PPM) more closely with financial risks to the Fund by raising the thresholds for PPM engagement, as proposed. However, a significant minority of Directors cautioned that such a change could weaken countries’ incentives to press ahead with essential reforms and undermine the exercise of the Board’s fiduciary responsibility. In light of today’s discussion, management has withdrawn the proposal dealing with post-program monitoring and will reflect further on this issue.

Directors broadly supported the more systematic use of lapse-of-time (LOT) procedures, where possible, for completing standard program reviews and reviews where program deviations are minor. However, there was insufficient support for the proposal to allow for the possibility of concluding program reviews of exceptional access cases on an LOT basis, and management has withdrawn this proposal. Most Directors agreed to discontinue ex post assessments, as lessons will continue to be drawn from past programs in a more cost-effective way through post-program peer-reviewed assessments to help design successor programs.

Directors broadly welcomed the more strategic approach to policy reviews, where the standard periodicity would be lengthened to five years, with a few exceptions as proposed. Directors generally supported flexibility in conducting policy reviews on an as-needed basis, with assessments on the timing of specific reviews taken in the Executive Board Work Program discussions. They also generally agreed to merge related reviews to ensure a holistic and consistent approach in reviewing major Fund policies. Directors concurred with the proposal to lengthen the periodicity of certain reports and operational reviews and to streamline them where possible. In this regard, they noted the review of the debt sustainability framework for low-income countries expected to be completed in 2016.

Directors broadly endorsed other streamlining initiatives, including in multilateral surveillance, capacity development, and administrative and other internal processes, that management intends to implement.

Directors expressed a wide variety of views on the proposals to streamline Article IV consultations and make greater use of the 24-month consultation cycle for stable, non-systemic countries, while underlining that the proposals should not weaken bilateral surveillance activities. Noting the merit of the risk-based approach, many Directors supported or could go along with the proposals, including the modifications streamlining the formal requirements for Article IV staff reports as set forth in Annex I of the streamlining paper. Many other Directors, however, expressed serious reservations or some concerns with specific aspects of the proposals. In particular, these Directors stressed that streamlining should not unduly target countries where the Fund is the only source of high-quality analysis, given the public good nature of Fund surveillance. Other concerns included the risk of missing emerging vulnerabilities and creating an unintended stigma when moving countries back to the regular 12-month cycle, with some Directors calling for further discussion and reflection on these issues.

BUFF/15/38

April 30, 2015

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