OCTOBER 2003
IMF Decides Against Mandatory Disclosure of Article IV Reports

The International Monetary Fund executive board has decided not to require the disclosure of a key document, the Article IV staff report.

The board opted instead to say that publication of the Article IV reports is "voluntary by presumed." This new formulation very slightly ratchets up the existing policy of voluntary disclosure while still permitting governments to block publication.

The board's compromise decision came in the context of a wider review of IMF disclosure policies, but the policy of Article IV reports was "the key issue," according to a four page Public Information Notice issued Oct. 10 (http://www.imf.org/external/np/sec/pn/2003/pn03122.htm). The IMF also released a staff document summarizing the issues, prepared for the board meeting (http://www.imf.org/external/np/pdr/trans/2003/092903.htm). Article IV reports are a key assessment document describing conditions in member countries.

The IMF summary indicates that "most" directors sought more transparency, but "many other" directors felt that the current voluntary approach is effective and that a policy of "presumed" disclosure would "undermine the candor of discussions and documents and the advisory role of the Fund." A similar split existed in 2001 when the board last discussed disclosure policy. The new policy will not go into effect until July 2004.

IMF statistics suggest some progress in the publication rates for Article IV reports and related documents in recent years, but also show that publication rates "continue to be uneven across regions." While virtually all developing countries agree to publish the Article IV reports, only slightly more than half of developing countries (51 out of 98) consented to publication for the year ending March 25, 2003, according to IMF statistics. That rate of publication, 52 percent, has risen from 47 percent for the previous year. About two-thirds of those developing countries agreed to the release of a short summary of the report in the form of a Public Information Notice (PIN).

Created a New Category for Disclosure: `Voluntary by Presumed'

Under the current "voluntary" policy for Article IV reports, governments preferring nondisclosure tell the IMF staff not to release them.

The concept of "presumed" publication, already in effect for some documents, is intended to create an expectation of publication, but would still permit governments to object to disclosure.

Presumed disclosure operates, or could operate, in a variety of ways. A soft presumption of disclosure already applies to certain other documents (Letters of Intent and Memoranda of Economic and Financial Policies which describe government policy intentions) for example, "whereby the explicit consent of a member for publication is required." Another possibility, not in use, is the "default option" under which a document would be released within a certain time frame unless a member objects.

Crafting a three-worded compromise, the board adopted a "voluntary but presumed" standard for article IV staff reports. In practice this continues to leave open the option of a government veto on publication. The policy states that publication would be expected to occur within 30 days of board consideration, with the staff reminding members of that deadline. However, according to the PIN, "... Directors emphasized that presumption of publication requires the explicit consent of the member prior to publication, without which the report would not be published."

Related Reports Also Get VBP Treatment

Article IV staff reports are summarized in a Public Information Notice (PIN), usually released simultaneously, but PINS also may be withheld at the option of the government. This choice will basically stay the same under the voluntary but presumed standard. However, the IMF has now decided that in the event a member does not wish a PIN to be published, a brief press release will be issued to say that the consultation has been concluded. The notice apparently will not point out that the government has opted against disclosure, leaving the message as an inference. These policies will not go into effect until July 2004.

The "voluntary but presumed" standard will also apply to the Use of Funds Report, a document prepared in parallel with the Article IV staff report, and to Post-Program Monitoring staff reports.

Pressure Applied for Release in Emergency Cases

The board went beyond the voluntary but presumed standard for just one situation: in "exceptional access cases" when a crisis dictates the need for special assistance. In these situations, a stronger disclosure policy has been devised. Unless the government agrees to publication, the IMF managing director "will generally not recommend Board approval of a program or completion of a review." Again, this policy will not go into effect for eight months, and certain arrangements will be "grandfathered."

This policy is similar to that applied to Poverty Reduction Strategy Papers that embody agreed-upon poverty-fighting plans and are supposed to be generated by governments with public input. PRSPs, interim PRSPs and PRSP progress reports must be disclosed or the fund management will not recommend board approval. The PRSP countries have always concurred.

When the IMF board first considered disclosure policy in July, it tasked the legal staff with reporting back on whether the fund has the right to compel release of documents. That report was prepared, fund sources said, but was not released.

IMF sources said the legal issues surrounding mandatory release were debated, but remain unresolved.

The staff legal analysis pointed out that a clause in the Article of Agreement states that release of board documents requires a 70 percent vote. However, a counter argument holds that this applies to board-approved materials is not binding for staff documents, including Article IV reports.

Politically Sensitive Material

The board decided not to set a policy allowing deletions of highly politically sensitive material from fund documents, but that decision should not be read as meaning that such deletions are prohibited. The accompanying staff report of Sept. 29 discloses that since May 2002 "there have been some instances of deletions in the approval of which factors other than high market-sensitivity played a role." Fund rules permit market sensitive materials to be excised.

The staff recommended against creating a policy on politically sensitive material "given the small number of such requests to date and the practical difficulties of implementing such a policy." Besides, the report added, "The present policy allows politically sensitive material that is also market sensitive to be deleted."

The "majority" of the board concurred, noting in part "the risks of undermining the candor and comprehensiveness of board documents." But in an apparent bid to discourage too much candor, the PIN continues, "Directors urged the staff to continue to avoid language that would exacerbate domestic political challenges to implementing reforms."

The board also agreed that the existing deletions policy is appropriate.

Other Changes

The board examined possible liberalization in a variety of other areas, usually ending with the status quo or moderately more disclosure.

One improvement will be the publication of the board agenda at the same time it is circulated to the board.

The board applied current policies on deletions and corrections of country staff reports to police papers. The directors stuck with case-by-case disclosure of administrative papers.

Voluntary disclosure will continue to be the rule for Reports on the Observance of Standards and Codes and Financial System Stability Assessments, largely out of concern that disclosure would undercut voluntary participation in these programs. The board decided that FASB technical notes (FTNs) may be disclosed "when the authorities request publication and management consents to it."

By Toby McIntosh

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