Statement by IMF Managing Director Christine Lagarde on Strengthening IMF Surveillance

Press Release No. 12/262
July 18, 2012

Ms. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), issued the following statement today in Washington, DC:

The IMF Executive Board’s approval today of a new Decision on Bilateral and Multilateral Surveillance and the production of a Pilot External Sector Report are important steps in rebooting the way the Fund conducts surveillance—the monitoring and assessment of our member countries' economies and global economic and financial developments. In the current challenging and highly interconnected global economic environment, it is critical to have effective surveillance to enable the early detection of risks and provide timely policy advice. While oversight of members’ exchange rate policies remains at the core of Fund surveillance under the Articles, the new Decision will provide a basis for the Fund to engage more effectively with members on domestic economic and financial policies.

Together with other efforts made to implement my October 2011 action plan on strengthening surveillance, improvements on these two fronts will ensure that the Fund is in a better position to address the possible effects of spillovers from members’ policies on global stability; monitor the stability of members’ external sectors in a more comprehensive manner; and engage members in constructive dialogue to address issues of global importance.

First, the new Decision on Bilateral and Multilateral Surveillance will:

  • Help ensure consistency in the Fund’s assessment and views on individual economies and global stability;
  • Make Article IV consultations a vehicle for both bilateral and multilateral surveillance;
  • Emphasize that the Fund attaches importance to both a member’s exchange rate and domestic policies;
  • Ensure appropriate coverage of spillovers from members’ policies that may have an impact on global stability; and,
  • Clarify the modalities of multilateral surveillance and lay out a framework for possible multilateral consultations.

The approval of the Decision demonstrates very strong ownership of the way Fund surveillance is being strengthened and of both the Fund’s and members' responsibilities in this process. I would expect this support to lead to greater traction in the Fund’s policy advice to member countries.

Second, the Pilot External Sector Report which staff has prepared is aimed at making external sector surveillance more effective. The pilot report:

  • Assesses developments in global external positions in depth for the largest economies simultaneously, and points to potential policy responses.
  • Uses the newly-developed pilot External Balance Assessment approach together with judgment to assess external balances while acknowledging the uncertainties inherent in such assessments.
  • Draws on the recommendations of the Triennial Surveillance Review, and the philosophy of the new Decision, by bringing together bilateral and multilateral surveillance in a single report.
  • Broadens the focus of the Fund’s external sector surveillance to encompass more systematically, in addition to exchange rates, developments in current accounts, capital accounts, reserve accumulation, capital flow measures, and foreign assets and liabilities.

This is a test run and the IMF is looking to further refine the new methodology and analysis over coming months. Feedback and comments on the new report and methodology are of course welcome.

Progress on these two fronts reinforces the Fund’s commitment to the core elements in the conduct of Fund surveillance: dialogue and persuasion, evenhandedness, candor, attention to country-specific circumstances, and consistency within a multilateral framework.



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