Statement by IMF Managing Director Rodrigo de Rato on IMF Executive Board Decision to Approve New Framework for SurveillancePress Release No. 07/137
June 21, 2007
IMF Managing Director Rodrigo de Rato issued the following statement today in Washington, DC:
"I welcome the IMF's Executive Board decision to provide the members of the IMF with a new legal framework for bilateral surveillance: the way in which we monitor and assess our member countries' economies.
"The change we are making is the first major revision in the surveillance framework in some 30 years, and it is the first ever comprehensive policy statement on surveillance. The new decision reflects current best practice in our work of monitoring members' exchange rate policies and domestic economic policies. It reaffirms that surveillance should be focused on our core mandate, namely promoting countries' external stability. And it gives clear guidance to our members on how they should run their exchange rate policies, on what is acceptable to the international community, and what is not.
"To three existing principles relating to exchange rate manipulation pursued for certain purposes, and to when and how it is desirable to intervene in the foreign exchange rate markets, the decision adds a fourth principle: a member should avoid exchange rate policies that result in external instability. The decision also adds seven appraisal indicators.
"Until now, our surveillance policies have been based on a framework agreed in 1977. Our members felt the time was right for bringing this key activity up to date. This updating was needed because the 1977 Decision does not address the developments that have most challenged the stability of the system in the past thirty years. Reflecting the period when it was drawn up, it focused on potential exchange rate manipulation undertaken for balance of payment reasons and on short term exchange rate volatility. By contrast, the most prevalent exchange rate related problems since then have been the maintenance, for domestic reasons, of overvalued or undervalued exchange rate pegs and, more recently, capital account vulnerabilities.
"The decision taken has very broad support, including from industrial countries, from emerging economies and from developing countries. The breadth of this support is telling, because it demonstrates very broad ownership of the way that Fund surveillance will be strengthened and of members' responsibilities in the process. This decision is good news for IMF reform program and good news for the cause of multilateralism. The new decision will sustain evenhanded treatment of Fund members, which is at the core of a cooperative institution. This progress will also help us move forward with the other elements of our reform program, to help all of our members meet the challenges of 21st century globalization," Mr. de Rato said.