Public Information Notice No. 08/52

Public Information Notice: IMF Executive Board Discusses Implementation Plan Following IEO Evaluation of Structural Conditionality in IMF-Supported Programs

May 14, 2008

On May 2, 2008, the Executive Board of the International Monetary Fund (IMF) discussed the implementation plan in response to board-endorsed recommendations arising from the Independent Evaluation Office (IEO) evaluation of structural conditionality in IMF-supported programs.

Background

On December 12, 2007, the Executive Board discussed the Independent Evaluation Office's Evaluation of Structural Conditionality in IMF-Supported Programs. In that report, the IEO put forward a set of recommendations aimed at improving the IMF's work in setting structural conditionality in IMF-supported programs.

Based on those IEO recommendations that were endorsed by the Board, staff and management have prepared an implementation plan. The implementation plan is part of a new framework established following an External Evaluation of the IEO that seeks to ensure a more systematic follow-up and monitoring of the implementation of Board-endorsed IEO recommendations and envisages: i) the presentation to the Board of a forward-looking implementation plan for Board-endorsed recommendations soon after Board discussion of each IEO report and ii) periodic monitoring of the state of implementation of actions set out in such plans.

Executive Board Assessment

Executive Directors welcomed the opportunity to provide feedback on management's implementation plan for the Board-endorsed recommendations arising from the IEO report on the Evaluation of Structural Conditionality in IMF-Supported Programs. Directors generally considered that the plan lays out an appropriate strategy, and that its specificity and compactness will facilitate the monitoring of its implementation. Directors welcomed the three elements of this implementation plan that are aimed at ensuring parsimony and criticality in setting structural conditionality—namely, (i) the mechanisms being proposed to strengthen program design; (ii) the proposed description of the rationale for conditionality in program documents; and (iii) the dissemination of information with a view to strengthening accountability in the application of conditionality. They saw better Board scrutiny of programs also as important.

Program Design

The 2002 Conditionality Guidelines—which remain in effect—call for program-related conditionality to be established on all measures that are critical for achieving the program goals, for monitoring the implementation of reform measures, and for implementing specific provisions under the Articles of Agreement or policies adopted under them. Directors stressed that structural conditionality should focus on core Fund competencies, and that conditionality in non-core areas requires strong justification, and the Fund should draw, to the fullest extent possible, on the advice of other multilateral institutions, particularly the World Bank. Within this framework, Directors reiterated that strengthened efforts are needed to achieve parsimony and a focus on criticality in setting structural conditionality, including structural benchmarks, and the proposed implementation plan will further cement the move to parsimony. This approach would be consistent with the current refocusing of the Fund on the basis of its comparative advantage.

Against this background, most Directors welcomed the proposal in Table 1 of the implementation plan to discuss the goals, strategies, and program conditionality at the pre-brief stage, and to elaborate in the briefing paper the rationale for prospective conditionality, with a view to strengthening the design of Fund-supported programs.

Program Documentation

Directors agreed that all program Board documents should contain a full and clear justification that the envisaged structural conditionality is critical for achieving program goals (or, as the case may be, for program monitoring or implementing specific provisions of the Articles or policies adopted thereunder). They accordingly supported the proposal in Table 1 that Board documents should provide a clear description of the links between structural conditionality and the underlying program goals and supporting reform strategies. Directors also agreed that any conditions introduced during subsequent reviews will be anchored on the rationale provided in the original program documents, and noted that structural conditionality added during program reviews should be adequately justified. Directors welcomed the staff work on best practice examples for text boxes that could serve to highlight the criticality of proposed conditionality. Some Directors also called for stocktaking at the time of the final program review, to compare stated program goals with their achievements.

Dissemination of Information

Directors welcomed the planned enhancement of the Monitoring of Fund Arrangements (MONA) database in order to improve the monitoring of program documentation, particularly with regard to the links between goals and strategies. They also welcomed the initiative to make the MONA database available to the general public for documents in the public domain. Directors looked forward to receiving annually, for information, summary statistics on conditionality and their documentation. They noted that progress on the implementation plan would be assessed in the context of the periodic monitoring reports on Board-endorsed IEO recommendations and future conditionality reviews. Going beyond these budgeted plans, many Directors considered that it would be useful if the annual report to be provided by the staff could provide a basis for a Board discussion, with some Directors suggesting an initial discussion in the Evaluation Committee. The question of the frequency of Board discussions will require careful consideration in the context of the Fund's constrained budgetary environment.

Operational Guidance Note

Based on the proposals in Table 1, Directors welcomed staff plans to review and propose changes to the 2006 Operational Guidance Note on Structural Conditionality (OGN) so as to highlight the objectives of parsimony and criticality as well as the need to enhance program documentation. Directors noted that the revised OGN should also include criteria for dealing with donor-driven conditionality and conditionality requested by the authorities, as well as guidance on how to address critical areas of reform in which the Fund may not have the expertise and reliance on other multilateral institutions may not be sufficient. Directors stressed that any changes to the OGN should be made in line with the 2002 Conditionality Guidelines and in accordance with Executive Directors' views expressed during the discussion of the IEO's evaluation of structural conditionality. They looked forward to being informed about these revisions.