The following changes have been made:

1. The staff's proposals are now set out in a single decision, with the additional information to be provided under Article VIII, Section 5 set forth in an Annex to the decision.

2. With regard to Annex A listing the additional national data to be provided, the revised text would:

• clarify the scope of paragraph (iv) on the provision of information relating to the composition of financing by specifying expressly that information is to be provided on foreign financing on one hand and on domestic bank and non bank financing on the other hand;
  
  
• amend paragraph (iv) to state that members shall provide information on the residency and nonresidency of the holders of central government and central government-guaranteed debt only if the debt data are amenable to classification on the basis of the residency or nonresidency of the holder;

3. In the body of the decision, the revised text would:

• in the first paragraph

  (i) postpone by approximately six months the "starting date" for the collection of data. Under the revised draft decision, members shall provide the data specified in Annex A for the relevant periods commencing after December 31, 2004 (as opposed to six months after the date of adoption of the decision as provided for in the previous draft). Accordingly, members shall provide such information only for the periods starting after December 31, 2004; in particular, the decision would not apply to data whose relevant period has started before the specified date and is still on-going on the date the decision becomes effective. Moreover, even after the starting date, there would be no breach of obligation by a member if it were unable to provide the required information (Article VIII, Section 5(b)); and

  (ii) provide for a review of the decision no later than December 31, 2007. This review could take place in the context of one of the periodic reviews of data provision to the Fund;

• in paragraph 3, clarify that the Fund will give the benefit of any doubt to a member in assessing the member's ability to provide information required under Article VIII, Section 5;
  
  
• in paragraph 11(c), add that the deadline to be specified by the Executive Board for a member to provide information that it is failing to provide will, in principle, not exceed 90 days;
  
  
• in paragraph 12, modify the first two sentences and delete the third sentence, so that the adoption of a statement of concern is no longer a precondition for a declaration of censure; and
  
  
• in paragraph 13, add a sentence—parallel to the first sentence in paragraph 11(d)—specifying that the Managing Director will report on the status of remedial actions (if any) specified by the Board in a declaration of censure.

4. During the Board discussions, a number of Directors were of the view that the Managing Director should be required (and not merely empowered) to recommend one of the remedial actions under paragraph 11(d) and a declaration of censure under paragraph 12, and to issue complaints under paragraphs 14 to 16, when the conditions specified in those paragraphs are met. Under the revised draft decision, these steps remain discretionary rather than mandatory.

The main reason why the staff continues to recommend this approach is that, with respect to remedial actions, declaration of censure, and complaints, the greater flexibility inherent in this approach will avoid the automatic application of rules that may lead to undesirable results. For instance, requiring the Managing Director to make a complaint in any case in which a member has failed to take all remedial actions specified by the Executive Board could result in complaints against members in situations that would not warrant the imposition of a sanction under Article XXVI, e.g., when a member that has cured the breach of obligation by providing the required information has simply failed to take some other remedial action that may be of lesser importance.

There are also reasons that are specific to each type of measure contemplated in these paragraphs. First, with respect to decisions of the Board on remedial actions (paragraph 11(d)) or censure (paragraph 12), the Managing Director's recommendation is not a condition for a Board decision; the language is not "the Board may decide upon the recommendation of the Managing Director" (which would have made it a condition) but "the Managing Director may recommend and the Board may decide" (which allows the Board to specify a remedial action other than the action recommended by the Managing Director or to adopt a decision under paragraphs 11(d) or 12 without a recommendation by the Managing Director; it also allows the Board not to take a decision even if the Managing Director makes a recommendation). Second, with respect to complaints, under the proposed framework and pursuant to Rule K-1, the Managing Director is obligated to report to the Executive Board any case in which it appears to him that a member is not fulfilling its obligations under the Articles of Agreement; under the draft decision, when remedial actions need to be taken within a specified period, the Managing Director is also obligated to report to the Board on whether or not these actions have been taken by the member. Third, where the Managing Director does not make a complaint against a member that has breached Article VIII, Section 5, it is well established in the practice of the Fund that any member of the Fund (e.g., through its Executive Director) or the Executive Board itself may issue a complaint for the imposition of sanctions against a member under Article XXVI (see Compulsory Withdrawal from the Fund—Legal Aspects (EBS/97/19)).

Accordingly, the following draft decision, which may be adopted by a majority of the votes cast, is proposed for adoption by the Executive Board:

Proposed Decision

Strengthening the Effectiveness of Article VIII, Section 5

1. Pursuant to Article VIII, Section 5, the Fund decides that all members shall provide the information listed in Annex A to this decision, which is necessary for the Fund to discharge its duties effectively. Members shall provide the data specified in Annex A for the periods commencing after December 31, 2004. Annex A shall be reviewed no later than December 31, 2007.

2. When a member fails to provide information to the Fund as specified in Article VIII, Section 5 or in a decision of the Fund adopted pursuant to that Article including information listed in Annex A (hereinafter "information required under Article VIII, Section 5"), the procedural framework set forth in paragraphs 5 through 17 below shall apply. Failure to provide information includes both the nonprovision of information and the provision of inaccurate information.

3. A member has an obligation to provide information required under Article VIII, Section 5 to the best of its ability. Therefore, there is no breach of obligation if the member is unable to provide information required under Article VIII, Section 5 or to provide more accurate information than the information it has provided. However, a member that is unable to provide final data is obligated to provide provisional data to the best of its ability until it is in a position to provide the Fund with final data. When assessing a member's ability to provide information, the Fund will give the member the benefit of any doubt.

4. In the context of performance criteria associated with the use of the Fund's general resources, a member may be found in breach of its obligation under Article VIII, Section 5 only if (i) it has reported that a performance criterion was met when in fact it was not, or that a performance criterion was not observed by a particular margin and it is subsequently discovered that the margin of non-observance was greater than originally reported, and (ii) a purchase was made on the basis of the information provided by the member, or the information was reported to the Executive Board in the context of a review which was subsequently completed or of a decision of the Executive Board to grant a waiver for non-observance of the relevant performance criterion.

Procedures prior to report by the Managing Director to the Executive Board

5. Whenever it appears to the Managing Director that a member is not providing information required under Article VIII, Section 5, the Managing Director shall call upon the member to provide the required information; before making a formal representation to the member, the Managing Director shall inform, and enlist the cooperation of, the Executive Director for the member. If the member persists in not providing such information and has not demonstrated to the satisfaction of the Managing Director that it is unable to provide such information, the Managing Director shall notify the member of his intention to make a report to the Executive Board under Rule K-1 for breach of obligation unless, within a specified period of not less than a month, such information is provided or the member demonstrates to his satisfaction that it is unable to provide such information.

6. Whenever it appears to the Managing Director that a member has provided inaccurate data on information required under Article VIII, Section 5, the Managing Director shall consult with the member to assess whether the inaccuracy is due to a lack of capacity on the part of the member. If, after consulting with the member, the Managing Director finds no reason to believe that the inaccuracy is due to a lack of capacity on the part of the member, he shall notify the member of his intention to make a report to the Executive Board for breach of obligation under Rule K-1 unless the member demonstrates to his satisfaction within a period of not less than one month that it was unable to provide more accurate information.

7. If the Managing Director concludes that the nonprovision of information or the provision of inaccurate information is due to the member's inability to provide the required information in a timely and accurate fashion, he may so inform the Executive Board. In that case, the Executive Board may decide to apply the provisions of paragraph 10 below.

Report by the Managing Director

8. After the expiration of the period specified in the Managing Director's notification to the member, the Managing Director shall make a report to the Executive Board under Rule K-1 for breach of obligation, unless the Managing Director is satisfied that the member's response meets the requirements specified in his notification. The report shall identify the nature of the breach and include the member's response (if any) to the Managing Director's notification , and may recommend the type of remedial actions to be taken by the member.

Consideration of the report

9. Within 90 days of the issuance of the Managing Director's report, the Executive Board will consider the report with a view to deciding whether the member has breached its obligations. Before reaching a decision, the Executive Board may request from the staff and the authorities additional clarification of the facts respecting the alleged breach of obligation; the Executive Board will specify a deadline for the provision of such clarification.

10. If the Executive Board finds that the member's failure to provide information required under Article VIII, Section 5 is due to its inability to provide the information in a timely and accurate fashion, the Executive Board may call upon the member to strengthen its capacity to provide the required information and ask the Managing Director to report periodically on progress made by the member in that respect. The member may request technical assistance from the Fund.

11. (a) If the Executive Board finds that the member has breached its obligation, the Executive Board may call upon the member to prevent the recurrence of such a breach in the future and to take specific measures to that effect. Such measures may include the implementation of improvements in the member's statistical systems or any other measures deemed appropriate in view of the circumstances.

(b) In addition, if the Executive Board finds that the member is still not providing the required information, the Executive Board will call upon the member to provide such information.

(c) The Executive Board will specify a deadline for taking any remedial actions specified under (a) and (b); in principle, the deadline will not exceed 90 days for actions specified under (b). The decision may note the intention of the Managing Director to recommend the issuance of a declaration of censure if the specified actions are not implemented within the specified period. In order to assist the Executive Board in identifying the appropriate actions to address a breach of obligation under Article VIII, Section 5, the member may, before the Board meeting, provide the Executive Board with a statement specifying the remedial actions it intends to take and a proposed timeframe. The member may also request technical assistance from the Fund.

(d) At the expiration of the period specified by the Executive Board, the Managing Director shall report to the Executive Board on the status of the specified actions. If the member has not taken the specified actions within the specified period, and depending on the circumstances of such failure, the Managing Director may recommend and the Executive Board may decide: (1) to extend the period before further steps under the procedural framework are taken; (2) to call upon the member to take additional remedial actions within a specified timeframe; or (3) to issue a declaration of censure against the member.

Declaration of censure

12. If a member fails to implement the actions specified by the Executive Board before the established deadline, the Managing Director may recommend and the Executive Board may decide to issue a declaration of censure. Before the adoption of a declaration of censure, the Executive Board may issue a statement to the member setting out its concerns and giving the member a specified period to respond.

13. The declaration of censure will identify the breach of obligation under Article VIII, Section 5 and the specified remedial actions the member has failed to take within the specified timeframe. The declaration may specify a new deadline for the implementation by the member of the specified remedial actions; in addition, the declaration may identify further remedial actions for the member to implement before the specified deadline. It will note that the member's failure to implement any of the actions called for in the declaration within the specified timeframe may result in the issuance of a complaint for ineligibility under Article XXVI (a) and the imposition of this measure. At the expiration of the period specified by the Executive Board, the Managing Director shall report to the Executive Board on the status of the specified actions.

Sanctions under Article XXVI

14. Following the adoption of a declaration of censure, if the Executive Board finds that the member has failed to implement any of the actions called for in the declaration within the specified timeframe, the Managing Director may issue a complaint to the Executive Board and recommend that the Executive Board declare the member ineligible to use the general resources of the Fund for its breach of obligation under Article VIII, Section 5. The Executive Board decision declaring the member ineligible to use the general resources of the Fund will note that the member's persistence in its failure to fulfill its obligations under Article VIII, Section 5 following the declaration of ineligibility may result in the issuance of a complaint for the suspension of the member's voting and related rights and in the imposition of this measure.

15. If the member persists in its failure to fulfill its obligations under Article VIII, Section 5 for six months after the declaration of ineligibility, the Managing Director may issue a complaint and recommend that the Fund suspend the member's voting and related rights. The Executive Board decision suspending the member's voting and related rights will note that the member's persistence in its failure to fulfill its obligations under Article VIII, Section 5 following the declaration of suspension of voting and related rights may result in the issuance of a complaint for compulsory withdrawal and in the initiation of the proceedings for the compulsory withdrawal of the member from the Fund.

16. If the member persists in its failure to fulfill its obligation under Article VIII, Section 5 for six months after the suspension of its voting rights, the Managing Director may initiate proceedings for the compulsory withdrawal of the member from the Fund.

17. All the Executive Board decisions arising from a breach of obligation taken under the procedures described above, including a decision to issue the statement of concern referred to in paragraph 12 above, will give rise to a public announcement with prior review of the text by the Executive Board.

ANNEX A

The data referred to in paragraph 1 of this decision are the national data on the following matters:

(i) reserve, or base money;

(ii) broad money;

(iii) interest rates, both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds;

(iv) revenue, expenditure, balance and composition of financing (i.e., foreign financing and domestic bank and nonbank financing) for the general and central governments respectively¹; the stocks of central government and central government-guaranteed debt, including currency and maturity composition and, if the debt data are amenable to classification on the basis of the residency or nonresidency of the holder, the extent to which the debt is held by residents or nonresidents;

(v) balance sheet of the central bank;

(vi) external current account balance;

(vii) exports and imports of goods and services;

(viii) the international reserve assets and reserves liabilities of the monetary authorities, specifying separately any reserve assets which are pledged or otherwise encumbered as well as net derivative positions;

(ix) gross domestic product, or gross national product;

(x) consumer price index;

(xi) gross external debt²; and

(xii) consolidated balance sheet of the banking system.