Independent Evaluation Office

International Monetary Fund

Executive Summary

January 10, 2011

This evaluation assesses the performance of IMF surveillance in the run-up to the global financial and economic crisis and offers recommendations on how to strengthen the IMF’s ability to discern risks and vulnerabilities and to warn the membership in the future. It finds that the IMF provided few clear warnings about the risks and vulnerabilities associated with the impending crisis before its outbreak.

Advanced economies were not included in the Vulnerability Exercise launched after the Asian crisis, despite internal discussions and calls to this effect from Board members and others
The IMF’s ability to correctly identify the mounting risks was hindered by a high degree of groupthink, intellectual capture, a general mindset that a major financial crisis in large advanced economies was unlikely, and inadequate analytical approaches. Weak internal governance, lack of incentives to work across units and raise contrarian views, and a review process that did not “connect the dots” or ensure follow-up also played an important role, while political constraints may have also had some impact
Looking forward, the IMF needs to (i) create an environment that encourages candor and considers dissenting views; (ii) modify incentives to “speak truth to power;” (iii) better integrate macroeconomic and financial sector issues; (iv) overcome the silo mentality and insular culture; and (v) deliver a clear, consistent message on the global outlook and risks”.

EKAI Center:

The IEO report has highlighted the inability of the IMF and its responsibility for the failure to prevent and respond to the outbreak of the financial crisis. Reasons? Most notable, from a scientific point of view, clearly stated in the report: "lack of integration of macroeconomic and financial sector analysis". It is impossible to estimate the evolution of the economy based on nominal data without taking account of the importance of debt accumulation and asset prices. The reasons for this incredible irresponsibility are a different matter.

Attached: Full text of the report (english):