Given its role in stabilising economies in trouble, and as a lender of the last resort, it is not surprising that the IMF has often found itself in the midst of controversies, mostly about whether it is even-handed—the IMF programmes in the EU, the argument has been for long, are more lenient than those in Asia. During the build up to the global financial crisis, there were doubts raised over whether the IMF knew the extent of the problem—its estimates of sub-prime mortgages rose in various reports, but to be fair, few others knew the extent of the problem either. To that extent, the Independent Evaluation Office (IEO) of the IMF was an excellent idea, with the aim being to provide another perspective of the work being done by the Fund. Problem is, as the latest IEO report points out, the evaluation exercise seems to have become a ‘box-ticking’ exercise where the recommendations are accepted but not really tracked—this may explain, the IEO says, why recommendations deemed to have been met or said to be on track for completion get raised again in subsequent IEO reports.
The IEO deals with the issue of whether IMF reports sufficiently acknowledge risks and uncertainties—a problem identified in successive IEOs—and have the required degree of candour in stating problems upfront. Fortunately, the IEO says there is a much sharper appreciation of risks in IMF reports now. The issue of not being even-handed, however, refuses to go away—the IEO of 2013 pointed to different standards of candour between large and small countries, and between advanced and non-advanced countries. Some of this, it is true, could be genuine mistakes or poor economics, depending upon how you look at it. In January last year, for instance, the IMF chief economist pointed out that the IMF’s latest calculations showed a sharp hike in the fiscal multiplier during balance sheet recessions. That is, the impact of fiscal correction in a Greece, for instance, was 2-3 times greater than the IMF originally envisaged—in all probability, the result of a liquidity trap.
That, however, is quite different from the other problems the IEO talks about. “Staff were found not to deliver (IEO, 2011a), or to feel strong pressure not to deliver (IEO, 2013), candid messages about risks and vulnerabilities to the larger or more advanced economies”, the latest IEO notes. Nearly half of the mission chiefs for advanced economies had said, IEO