The IMF is changing and needs an independent ombudsman

21 July 2022 | Guest comment

Portuguese students protest against IMF austerity in Lisbon in 2011. Credit: StockPhotoArt/ Shutterstock

The fact that the IMF has recognised that issues like pandemics, climate change, gender discrimination and inequality influence macro-economic stability is to be welcomed. So is the fact that the Fund has begun to incorporate these issues into its research and its regular consultations with its Member States, and is proposing to include them in the scope of financing facilities such as the Resilience and Sustainability Trust (see Observer Spring 2022).

However, it is concerning that the IMF has not yet fully recognised how these issues challenge its usual way of doing business.

They require the IMF to interact directly and systematically with non-state actors in its Member States so that it can understand how these issues affect communities, organisations and individuals, and how they may respond to particular IMF policy proposals. This increases the risk that the IMF’s own activities may directly and adversely affect these non-state actors. The principles of good governance require that the IMF be accountable for these impacts.

The IMF board of executive directors should appoint an Ombudsman ...[with] the authority to receive and investigate complaints from external stakeholders who claim they have been harmed by the failure of IMF staff and management to comply with the IMF’s own operational policies and procedures.Danny Bradlow, University of Pretoria

This article argues that the IMF should appoint an ombudsman who can receive and investigate complaints about the way in which it has exercised its power. This will help the IMF address the operational challenges posed by these new issues.

Three challenges facing the IMF

First, these issues blur the boundaries between the macro- and micro-impacts of economic, social and environmental policies. For example, a full understanding of the impacts of climate policies includes assessing both their macro-level financial and fiscal implications, and their differential impacts on sub-national governments, businesses, communities, regions, and social groups. These impacts – and the response of these groups to them – can both affect the success of climate policies and have implications for inequality and discrimination in the Member State. The IMF, therefore, can only fully assess the likely success of the proposed policies if it consults with all these groups about the policy.

Second, policies addressing these new issues operate over longer time periods than the usual IMF operations. Thus, the IMF staff, in developing them, must take more variables into account. They must also directly consult with a broad range of state and non-state actors, who will now have time to adjust their conduct to the policies, thereby influencing their success or failure.

Third, the IMF staff and the Member State cannot address all of these issues in any particular country mission or financing arrangement. They will have to decide which ones to prioritise. The staff, therefore, will need to decide whom to consult about these choices and what information they should make available in these consultations.

These new issues, therefore, necessarily require IMF officials to take decisions that can have a substantial impact on the lives and wellbeing of the residents of its Member States.

The IMF has only partially responded to these challenges. For example, its current Guidance Notes envisage that staff can undertake consultations but do not establish formal procedures that staff should follow in deciding whom to consult or about which issues. They also do not provide staff with clear guidance on the scope of the impact assessments they should undertake (see Observer Summer 2021).

IMF needs mandatory staff guidance and an ombudsman

First, management should formulate a set of publicly available mandatory policies that explain how staff should manage the environmental and social aspects of macroeconomic policy. Staff should make decisions based on reliable data, appropriate consultations with all stakeholders and without fear or favour of any particular stakeholder. The policies should clarify the IMF’s approach to information disclosure. They should stipulate the criteria for assessing the adequacy of consultations with all relevant stakeholders and the environmental and social impacts of current and proposed macroeconomic policy.

Second, the IMF board of executive directors should appoint an ombudsman who is independent of IMF management, reports to the board and can hold the IMF staff and management accountable for their compliance with these policies.

This official should have the authority to receive and investigate complaints from external stakeholders who claim they have been harmed by the failure of IMF staff and management to comply with the IMF’s own operational policies and procedures. After completing the investigation, the ombudsman should submit to the Board a publicly-available report documenting its findings and making recommendations about how to address any harm caused by the IMF staff’s non-compliance with the applicable policies and procedures. The ombudsman should also issue an annual report that, when appropriate, discusses the lessons it has learned about IMF operations from its investigations.

Currently, the IMF is the only international financial institution without an independent accountability mechanism. It is time it corrects this deficiency and appoints an independent ombudsman.