November 21, 2001
Dr. Montek Ahluwalia
Director, Independent Evaluation Office
International Monetary Fund
700 19th Street NW
Washington, DC 20431
Dear Dr. Ahluwalia:
We are pleased to submit our comments regarding the proposed work plan of the Independent Evaluation Office (IEO). We note that some of our recommendations have found their way into the work program and communication framework of the IEO. We do have additional comments, however, both on the operating framework of IEO and on the work program.
We are basing our comments not only on the October 19, 2001 draft work plan posted on the IEO‘s web site, but also on IEO‘s document, “Second Stage of Development of the Work Program.” We must note that are concerned that this second stage document is not posted on the web site. It is unclear why the large menu of topics is the basis for public consultation when the IEO has already made firm decisions about FY2002/2003 reviews. This sends a signal to outside parties that they are commenting on outdated information that is no longer the basis for discussion or decision making. It creates an impression that the IEO has two standards for consultation and disclosure.
Comments on the Procedural Work of the IEO
Firstly, there are some procedural steps that we have raised before and would like to reaffirm. The IEO should provide a formal mechanism for outside stakeholders to raise concerns with IMF programs and procedures. To make this operational the IEO‘s procedures should include the following features:
- A right for outsiders to submit suggestions for evaluation topics to the office and to receive a written response. These should be posted on the IEO‘s website;
- An obligation for the IEO to discuss the suggestions it receives and its responses thereto in its annual report.
The draft work program proposes a summary of suggestions for evaluation topics. To fully ensure that stakeholders’ reasonable inputs are taken seriously, it is important that IEO respond to all serious requests for review and details these requests and its response in the annual report.
To adequately consider civil society’s views during evaluation, it will be necessary for the IEO to draw up clear guidelines for an evaluation as to when and how outside stakeholders will participate in the evaluations. For example, how much notice stakeholders (including parliamentarians, government departments and the private sector) should be given in advance of an evaluation team arriving in the country, which IMF documents will be made available; what feedback participants can expect etc. This is particularly necessary given that the IMF does not have guidelines on participation.
We also want to raise a procedural concern with the plan to circulate draft evaluations to IMF staff and management, with the possibility that the final evaluation is then changed. A more preferable route is to publish management’s comments alongside the evaluation report and submit both to the Board. It should be the Board’s responsibility to judge between the differing points of view. Bringing these into light would be a very useful learning exercise in its own right. Alternatively, if the intention of circulating draft evaluations is to correct inaccuracies or errors, we recommend that the body of the report be circulated without the recommendations.
All participants in a review should receive notice that the evaluation report is publicly available and from where they can obtain copies. Where evaluations have focussed on a specific country, reports should be made available in the national language.
Comments on Proposed Items in the Work Program
Overall, we are pleased that the IEO has selected a comprehensive work plan that addresses some important and controversial aspects of the IMF‘s operations. Understanding that the IEO will need to narrow its focus even more from the fourteen proposed reviews, and in our view, should leave flexibility in the work plan to respond to changing circumstances and propose alternative reviews, we question the fiscal adjustment study proposed in the first year. Since the external review of the Enhanced Structural Adjustment Facility (ESAF) and since the Asian financial crisis, the IMF has shown greater willingness to be flexible in the area of fiscal adjustment relative to other areas. The appropriateness of fiscal adjustment is also likely to be a topic in the staff review of the progress to date in the Poverty Reduction and Growth Facility (PRGF). Therefore, we believe IEO‘s limited resources are best spent on other review topics.
Regarding case studies of capital account crisis, we question why Russia is not one of the countries proposed. One of the more controversial cases, a focus on Russia could also highlight whether countries are treated differently and how these decisions are made. Furthermore, we also suggest that in addition to the IMF‘s assessment of the policies, the review address whether the warning system functioned appropriately. Would greater transparency of staff assessments have made a difference in alerting investors earlier in the process? To what extent would it have precipitated a crisis or would earlier warning have lessened the crisis that finally resulted? Furthermore, we believe the review should examine whether policy advice, such as exchange rate policy advice, contained in any preceding programs was a causal factor in the capital account crisis.
We agree that a review of the PRGF and Poverty Reduction Strategy Papers (PRSP) is appropriate after the programs have some time to acquire a track record. We also agree that it is an appropriate review topic since they do apply to a large number of the Fund’s members and consume a large amount of staff time and resources. We have additional items to be raised in the questions. These include:
- The approach to program negotiations should consider who participates in negotiations, and the timing of negotiations and mission visits so as to allow greater ownership and coherence with the PRSP process;
- Measures to protect the vulnerable must go beyond safety nets, and should assess the extent to which PRGFs have incorporated ex ante poverty assessments;
- In addition to selectivity, whether conditionality has become more appropriate given the IMF‘s mandate and expertise.
With regard to the various reviews proposed dealing with capital account and financial sector issues, we feel that there is some redundancy that could allow some reviews to be combined to allow space for other reviews. For example, the IMF‘s advice on financial sector crisis resolution seems to have significant overlaps with the capital account crisis cases proposed in year one. Concerns regarding the IMF‘s advice on exchange rate policy also surface most prominently in crisis countries. Could this proposed topic not also be integrated with one of the other reviews?
Combining elements of some reviews would also provide greater flexibility in picking up new topics as they arise or are suggested by outside stakeholders, or dealing with some review topics earlier in the IEO‘s timeline. For example, we believe that a review of private sector involvement would be beneficial in the near term. IMF staff has already developed papers on this topic, and policy is hotly debated. An IEO evaluation could make a useful contribution, including on the subject of what body is the appropriate one to involve the private sector in crisis resolution.
Finally, we note that the IEO‘s work program has taken up some topics that were proposed by several NGOs in an August letter to you. We consider the review of structural conditionality, with a focus on privatization, financial liberalization, and trade conditions, a crucial one. We hope that the terms of reference for this study will propose a detailed look at poverty reduction deliverables and measurable steps toward sustainable development.
Again, we appreciate the opportunity to comment on this comprehensive work program proposal. We eagerly await the launch of this work.
Bretton Woods Project
Friends of the Earth
Jo Marie Griesgraber