When the IMF lends to a country, it seeks assurances that the country’s central bank is able to manage the funds it receives and provide reliable information. IMF safeguards assessments are a due diligence exercise to fulfill this objective.
The IMF’s Articles of Agreement require “adequate safeguards” for the use of its resources. This is to ensure that loans to member countries are repaid as they fall due, making those funds available to other members in need. Safeguards include limits on how much can be borrowed, conditions on the loans, measures to deal with misreporting and arrears, and safeguards assessments of central banks.
A safeguards assessment is a diagnostic review of a central bank’s governance and control framework. Six key areas denoted by the acronym GELRIC are assessed to help safeguard IMF disbursements and minimize the risk of inaccurate reporting of key data to the IMF (misreporting).
Are governance bodies established to provide appropriate structures and systems for close independent oversight of the central bank’ operations? Do key decision-making bodies, such as the board, audit committee, governor and his/her deputies, exercise strong professional diligence in the execution of their fiduciary duties to the central bank? What is the composition of the key governance bodies and how are they appointed? Do they have the requisite capacity to discharge their mandate?
Does the central bank publish its annual financial statements that are independently audited in accordance with international standards? What is the process for selecting and rotating external auditors? Are audits subject to robust internal processes to ensure audit quality? Do external auditor’s communicate with those charged with oversight (for example, the central bank board and audit committee)?
Does the legal framework provide the central bank with an appropriate level of autonomy and does it support the other five GELRIC areas? Does the central bank law provide for strong governance arrangements, including autonomy and transparency? Are internal and external checks and balances in place? Is the central bank safeguarded from government interference or override?
Does the central bank adhere to international good practices for transparent accounting and financial reporting? Are financial statements published in a timely manner? Is monetary data reported under IMF programs consistent with the published financial information and the underlying accounting data?
Does the central bank’s internal audit function comply with international standards? Does the function have sufficient capacity and organizational independence to evaluate the effectiveness of the bank’s risk management, control, and governance processes? Are the monitoring and reporting mechanisms well established?
Is the central bank committed to building and maintaining a robust control environment? Are operational and financial risks well managed? Are controls in place for foreign reserves management, lending, currency and banking operations, and cybersecurity and business continuity arrangements? Do internal processes support accurate and timely reporting of monetary program data to the Fund?
Central banks, country authorities, and the IMF staff play a role in the assessment process. Central banks provide information on the GELRIC areas to the IMF, including financial statements, internal and external audit reports, legislation relevant to the central bank, and reports or summaries of internal controls. IMF staff review the materials and typically conduct visits to the central bank to complete the safeguards assessment. Meetings are held with the bank’s staff, governance bodies, and external auditors. A report is then produced with prioritized recommendations to address identified vulnerabilities, which may become part of program benchmarks.
Country authorities provide official comments on safeguards reports before they are finalized. The reports are confidential and are not shared with the IMF’s Executive Board. Instead, the Board receives a summary of key findings and recommendations in country staff reports, and receives thematic safeguards activity reports every two years.
If the central bank consents, safeguards reports may be shared on a confidential basis with the World Bank, or where relevant, the European Central Bank (ECB). Also, with consent from the central bank, the IMF can provide confidential briefings to donors who request information on the assessment findings.
IMF staff monitor the implementation of recommendations until the member’s credit outstanding falls below the post-program monitoring threshold. After that, monitoring is normally limited to a review of central banks’ annual external audit results.
Flexible Credit Line (FCL) and Short-term Liquidity Line (SLL) arrangements, which have rigorous qualification criteria, are exempt from full safeguards assessments. Instead, these arrangements are limited to a review of the most recent external audit of the central bank.
Safeguards assessments are not required for augmentations of existing arrangements or for successor arrangements within 18 months of a prior assessment. Assessments are also not required for central banks that have a strong track record and that completed an assessment within the past four years.
Where IMF lending is provided as direct budget support to the government, an agreement between the central bank and the government must be reached on their respective roles and obligations for repayments to the IMF. A fiscal safeguards review of state treasuries is required for cases where a member requests exceptional access, and at least 25 percent of IMF financing is expected to be used for direct budget support to the government.
The safeguards assessments policy was introduced in March 2000, following instances of misreporting and allegations of misuse of IMF resources. It is now an integral part of the IMF’s lending activities and is normally reviewed every five years.
This page lists safeguards assessments of central banks completed to date.
The last update was in March 2023
