Christine Lagarde,Managing Director of the International Monetary Fund (IMF), issued thefollowing statement today in Washington, DC:
The IMF ExecutiveBoard’s approval of a new Decision on Bilateral and Multilateral Surveillanceand the production of a Pilot External Sector Report are important steps inrebooting the way the Fund conducts surveillance the monitoring and assessment ofour member countries' economies and global economic and financial developments.In the current challenging and highly interconnected global economicenvironment, it is critical to have effective surveillance to enable the earlydetection of risks and provide timely policy advice. While oversight ofmembers’ exchange rate policies remains at the core of Fund surveillance underthe Articles, the new Decision will provide a basis for the Fund to engage moreeffectively with members on domestic economic and financial policies.
Together with otherefforts made to implement my October 2011 action plan on strengtheningsurveillance, improvements on these two fronts will ensure that the Fund is ina better position to address the possible effects of spillovers from members’policies on global stability; monitor the stability of members’ externalsectors in a more comprehensive manner; and engage members in constructivedialogue to address issues of global importance.First, the newDecision on Bilateral and Multilateral Surveillance will:
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Help ensureconsistency in the Fund’s assessment and views on individual economies andglobal stability;
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Make Article IVconsultations a vehicle for both bilateral and multilateral surveillance;
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Emphasize that theFund attaches importance to both a member’s exchange rate and domesticpolicies;
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Ensure appropriatecoverage of spillovers from members’ policies that may have an impact on globalstability; and,
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Clarify themodalities of multilateral surveillance and lay out a framework for possiblemultilateral consultations.
The approval of theDecision demonstrates very strong ownership of the way Fund surveillance isbeing strengthened and of both the Fund’s and members' responsibilities in thisprocess. I would expect this support to lead to greater traction in the Fund’spolicy advice to member countries.
Second, the PilotExternal Sector Report which staff has prepared is aimed at making externalsector surveillance more effective. The pilot report:
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Assessesdevelopments in global external positions in depth for the largest economiessimultaneously, and points to potential policy responses.
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Uses thenewly-developed pilot External Balance Assessment approach together withjudgment to assess external balances while acknowledging the uncertaintiesinherent in such assessments.
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Draws on therecommendations of the Triennial Surveillance Review, and the philosophy of thenew Decision, by bringing together bilateral and multilateral surveillance in asingle report.
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Broadens the focusof the Fund’s external sector surveillance to encompass more systematically, inaddition to exchange rates, developments in current accounts, capital accounts,reserve accumulation, capital flow measures, and foreign assets andliabilities.
This is a test runand the IMF is looking to further refine the new methodology and analysis overcoming months. Feedback and comments on the new report and methodology are ofcourse welcome.Progress on thesetwo fronts reinforces the Fund’s commitment to the core elements in the conductof Fund surveillance: dialogue and persuasion, evenhandedness, candor,attention to country-specific circumstances, and consistency within amultilateral framework.