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IMF Executive Board Discusses “2018 Review of Program Design and Conditionality”

May 20, 2019

On May 3, 2019, the Executive Board of the International Monetary Fund
(IMF) discussed staff papers reviewing the design, conditionality, and
performance of IMF-supported programs ongoing during the period September
2011 to end-2017.

The review documents consist of a main paper that presents the key
findings and recommendations, a background supplement that provides
additional information on the survey results, additional areas of analysis
and methodological material, and a paper with in-depth case studies
in the key analytical areas.


The 2018 Review of Program Design and Conditionality (hereinafter the
“RoC”) is the latest periodic assessment of IMF-supported programs
undertaken by the Executive Board and Fund staff. The RoC examines the
performance of Fund-supported programs ongoing between September 2011 and
end-2017. It is the first comprehensive stocktaking of Fund program
performance since the global financial crisis, building on the 2011 RoC,
the 2015 Crisis Program Review, and various Independent Evaluation Office
(IEO) studies. Consistent with the Fund’s commitment to learning, the RoC
draws lessons for the design of future programs to ensure that they adapt
to the evolving needs of the membership.

The RoC assesses the extent to which programs met the overarching
objectives of resolving members’ balance of payments problems and achieving
medium-term external viability, while fostering sustainable economic growth
and providing adequate safeguards for Fund resources. In doing so, the RoC
considers the role of program design and the implementation of the Guidelines on Conditionality, as well as other factors
affecting program outcomes, including external shocks and member ownership.
Conditionality encompasses underlying macroeconomic and structural
policies, as well as the specific methods used in Fund arrangements to
ensure the achievement of program goals. The RoC findings and
recommendations draw on quantitative and qualitative analysis, including
stakeholder surveys and in-depth case studies.

The RoC complements other ongoing Fund policy reviews, including: the
Review of Facilities for Low-Income Countries (LICs), the Debt
Sustainability Framework (DSF) Review for Market Access Countries (MAC),
the Review of the Fund’s Debt Limits Policy (DLP), the Strategy for IMF
Engagement on Social Spending, and the workstream on Building Resilience in
Developing Countries Vulnerable to Large Natural Disasters.

Executive Board Assessment


Executive Directors welcomed the first comprehensive stocktaking of the
Fund’s lending operations since the 2008 global financial crisis. They
noted the finding that three‑quarters of Fund‑supported programs had
achieved success or some success, despite the extremely challenging
post‑crisis environment. Directors agreed that there is room for
improvement, drawing lessons for future program design from success and
failure and case studies. They broadly agreed with the findings and, with
some caveats, supported the key recommendations, some of which would
require further discussions in the upcoming reviews of relevant Fund

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Growth optimism

Directors shared the assessment that growth assumptions were often too
optimistic, driven largely by global forecasting errors and the
underestimation of the impact of policy adjustment and overestimation of
structural reform payoffs. Directors thus welcomed the proposals to
increase the scrutiny of baseline assumptions, deepen the discussion of
risk scenarios, and improve contingency planning in program design. While
inflation was not a major issue during the period, Directors supported
exploring reforms to modernize the review‑based monetary policy
conditionality framework.

Quality of fiscal adjustment

Most Directors saw room for more granular fiscal conditionality,
particularly capital spending floors or revenue targets, to help improve
the quality, composition, and growth orientation of fiscal adjustment. At
the same time, they stressed the need to retain sufficient flexibility and
take due account of member countries’ implementation capacity. Where
relevant, Directors also supported focusing on the quality of social
spending and prioritizing structural conditions on social issues. They
favored taking a case‑by‑case approach and streamlining conditions to
maintain parsimony. Directors emphasized the importance of close
collaboration with other international financial institutions, as
appropriate, and of early engagement with country authorities, which would
also help strengthen ownership.

Public debt

Directors welcomed the comprehensive analysis of debt vulnerabilities,
which were a key concern during the review period. In cases of high debt
vulnerabilities, the review found that, based on a limited sample, programs
that included debt operations tended to be more successful than those
without such undertakings, but mainly in small and non‑systemic cases.
While the positive impact of debt restructuring on program outcomes could
not be generalized, Directors saw a need to mitigate bias in judgment on
debt sustainability and to carefully evaluate, on a case‑by‑case basis, the
costs and benefits of debt operations. Directors also noted various factors
at play in programs that experienced a large overshooting of public debt,
most of which went off track. They welcomed ongoing efforts to improve debt
transparency, strengthen data reporting capacity, and sharpen debt
sustainability analysis (DSA) tools. For PRGT‑supported programs, enhancing
domestic resource mobilization and the quality of investment is also
important, which could help strengthen the Fund’s catalytic role in
mobilizing external concessional financing. Directors looked forward to
further discussion of debt‑related issues in the context of the reviews of
DSA for market access countries and of the Fund’s debt limits policy,
including plans to update guidance on the treatment of collateralized debt
in the program context.

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Structural conditionality

Noting the marked increase in the volume of structural conditions,
Directors called for further prioritization of reforms critical to specific
program objectives to ensure both the parsimony and depth of structural
conditionality. They agreed that the selection of conditions should be
informed by structural gaps identified in surveillance and technical
assistance, and involve collaboration with relevant institutions. A number
of Directors called on the Fund to continue building expertise in shared
areas of responsibility such as labor, product, and financial market
reforms, which are key to competitiveness and private-sector‑led growth.
Some Directors felt that the Fund should further strengthen cooperation
with other international institutions, notably the World Bank, on emerging
issues such as governance and anti‑corruption.

Given difficulties with implementation of structural conditions, Directors
stressed the need for more realistic implementation timetables and
estimates of reform payoffs Most Directors welcomed, or were open to
considering, the proposed follow‑up paper to explore the case for
longer‑duration arrangements in the General Resources Account (GRA) for
members seeking to address large and persistent structural challenges,
along with appropriate measures to safeguard Fund resources. Some Directors
expressed concern that longer engagement could increase the risk of reform
fatigue and undermine the revolving nature of Fund resources. Directors
generally saw merit in greater use of successor Policy Coordination
Instruments to support ongoing structural reforms.


Reflecting the lessons from case studies, Directors highlighted the
benefits of anchoring Fund‑supported programs with integrated national
reform plans and improving two‑way communication to support broad public
buy‑in. They welcomed plans to strengthen the analysis of institutional and
political capacity. Where programs have gone off track, Directors
encouraged greater use of staff‑monitored programs (SMPs) to ensure
monitoring of macroeconomic policies while authorities build support for
delayed critical reforms. More broadly, Directors called on staff to
consider ways to de‑stigmatize SMPs, promoting their use for building a
policy track record, which would help facilitate access to Fund resources.

Tailoring and uniformity of treatment (evenhandedness)

Directors welcomed the finding that Fund‑supported programs were generally
well‑tailored to country needs and perceived as being consistent with the
principle of uniformity of treatment. However, they saw scope for better
tailoring and streamlining program objectives and structural conditions,
particularly for fragile and small states, in light of their economic
circumstances and capacity constraints. Many Directors also encouraged
staff to ensure the application of the 2017 Staff Guidance Note on the
Fund’s Engagement with Small Developing States, and to integrate critical
resilience‑building measures into the programs.

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Directors noted the concerns among some stakeholders regarding the
perceived lack of evenhandedness in program access, both within and between
the GRA and PRGT. They acknowledged that differences in access are largely
driven by underlying Fund policy frameworks. They were generally open to
further discussion on the proposals to increase PRGT access norms and
limits, and to promote more blending of GRA and PRGT resources, while
maintaining PRGT self‑sustainability. They looked forward to further
discussion in the context of the forthcoming review of facilities for
low‑income countries

Directors welcomed ongoing efforts to improve the Monitoring of Fund
Arrangements (MONA) database, and looked forward to periodic reports to the
Board on program performance. These efforts will enhance transparency,
support the monitoring and evaluation of programs on a timely basis, and
improve Board oversight including with respect to evenhandedness—an area in
which a number of Directors also saw a role for the Independent Evaluation
Office. Directors also noted that the observed increase in off‑track
programs warrants close scrutiny, including by the Board. Some Directors
called for further consideration of ways to improve the Board’s monitoring
of delays in program implementation.

Next steps

Directors recognized the multiple tradeoffs involved in program design and
the potential benefits of a shift toward more realism, granularity,
gradualism, and parsimony. They agreed that the Guidelines on
Conditionality remain broadly appropriate, and that most of the
recommendations could be implemented through a revised Operational Guidance
Note and delivery of related workstreams. Directors considered that
successful implementation of the recommendations would require a change in
culture, and continued adaptation and learning.


An explanation of any qualifiers used in summings up can be found here:

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