Assessing the IMF’s COVID-19 Priorities: Health, Support for the Vulnerable and Climate Change

By Luma Ramos

The International Monetary Fund (IMF) is a multilateral organization that seeks global financial stability and monetary cooperation. It has three core activities: surveillance, technical assistance, and emergency lending. Surveillance is understood as overseeing the international monetary and financial system and monitoring the economic and financial policies of its 190 member countries.

The IMF’s surveillance guidelines are currently under review. The  Comprehensive Surveillance Review (CSR) will review the IMF’s Article IV report processes—the IMF’s chief bilateral surveillance mechanism, and the Financial Sector Assessment Programs (FSAP) that more formally assesses IMF member financial systems.

In a new working paper, Luma Ramos, Post-Doctoral Researcher, and Kevin Gallagher, Director of the Boston University Global Development Policy Center, established a methodology to measure the extent to which IMF country surveillance in the aftermath of the COVID-19 economic crisis has identified risks and mitigation measures to improve health outcomes, protect vulnerable people and firms, and address climate change. Additionally, they designed the IMF COVID-19 Surveillance (ICS) Monitor, an interactive exploration of the IMF’s attention to health, vulnerable people and climate change amid the COVID-19 pandemic.

In their research, Ramos and Gallagher assessed to what extent the IMF’s in-country assessments made by the Fund’s economists, known as Article IV consultations, addressed these critical subjects of health, support for the vulnerable and climate change. To do so, they applied textual analysis techniques to all Article IV consultations conducted between January 1, 2019 and February 1, 2021, totaling 151 consultations for 137 countries, with 128 consultations in 2019 and 23 in 2020. Due to COVID-19 travel and work restrictions, an entire cycle of Article IV reports was not completed by the IMF in 2020.

The methodological approach was anchored in a method first developed by Mihalyi and Mate, following a similar process of data acquisition and processing. To examine the amount of IMF surveillance related to ‘health,’ ‘support for the vulnerable,’ and ‘climate change,’ the authors measured the frequency of these keywords as a percent of the total word pool in each publication. Table 1 below illustrates the findings:

Table 1: ICS Monitor Analysis of Key Terms

Source: Boston University Global Development Policy Center, 2021.

The table shows the ICS Monitor results are relatively small and very asymmetrical.  This evidence corroborates arguments from the Fund’s own Independent Evaluation Office in 2019 that the financial surveillance had so far been uneven. Indeed, a close look at the Article IV consultations reveals the IMF staff treat health, support for the vulnerable, and climate change differently across members. It is also hard to argue there was any significant change or breakthrough over time, as the time series is short, with few publications in 2020.

In 2019, the highest average mention among the Article IV consultations was ‘support for the vulnerable’ at 0.25 percent, and in 2020, ‘health’ at 0.76 percent. ‘Climate change’ received the least amount of IMF attention in both years, with 20 reports in 2019 making no mention of ‘climate change’ at all.

Overall, Ramos and Gallagher found the IMF has previously given relatively little attention to health, support for the vulnerable, and espe­cially, climate change. That changed in 2020 when the IMF pivoted significantly and increased focus on health and support for the vulnerable in Article IV consultations during the COVID-19 pandemic. Attention to climate change, however, remains secondary, at best.

Surprisingly, despite the severity of these issues in developing countries, the highest scores in 2019 were exclusively for high-income countries. Similarly, in 2020, seven out of the top ten countries were high-income, with three also upper-middle-income countries also featured on the list.

Conversely, in 2019, the ten countries with the lowest mentions for the keywords comprises exclusively low-middle and low-income countries. Figure 1 below illustrates these results:

Figure 1: ICS Monitor Analysis of Key Terms, Top 10, Average and Bottom 10 Countries, in 2019

Source: Boston University Global Development Policy Center, 2021.

As observed in Figure 1, in wealthier countries, the IMF’s staff identified and emphasized policy adjustments in health, support for the vulnerable, and climate. However, in poorer nations who are most in need of the IMF’s advice, there were fewer recommendations and assessments in these subjects. This evidence reveals asymmetrical guidance in key surveillance themes across countries.

Overall, the preliminary analysis conducted by Ramos and Gallagher shows, contrary to recent rhetoric, the Fund still lacks suf­ficient attention to climate change in its Article IV consultations. However, it is difficult to make comparisons over time at this point, as there were no Article IV consultations for low-income countries in 2020.

A lasting contribution of this research by Ramos and Gallagher will be an ongoing effort to use these indices as independent variables to examine the extent to which the IMF’s advice leads countries to better post-COVID-19 outcomes.

As the Fund engages in its regular review of surveillance guidelines, the IMF should be sure to adapt its tools to the current global challenges and incorporate the physical and transition risks from climate change into its analyses, which is emerging as one of the largest macro-critical issues of our time.