IMF Executive Board Concludes the 2021 Comprehensive Surveillance Review

IMF News, May 20, 2021

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IMF Executive Board Concludes the 2021 Comprehensive Surveillance Review

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Bibliographic details

• Published: May 20, 2021

Overview

• Press Release No. 21/136; published May 20, 2021.
• Press officer: Maria Candia; Phone: +1 202 623-7100; Email: MEDIA@IMF.org; @IMFSpokesperson.
• The 2021 Comprehensive Surveillance Review (CSR) concluded by the Executive Board on May 10, 2021, provides strategic direction for the Fund’s surveillance work in the context of the global crisis resulting from the COVID-19 pandemic.
• Objective: Strengthen the practice of Fund surveillance by making it more timely, topical, targeted, interconnected, and better informed to help membership confront emerging macrofinancial challenges over the coming years.

Key surveillance priorities (as identified by the CSR)

• Confronting risks and uncertainties.
  • Increase emphasis on the range of potential outcomes relative to the baseline.
  • Offer more contingent policy advice.
  • Emphasize clearer communication on risks while avoiding unintended consequences.
• Pre-empting and mitigating spillovers.
  • Strengthen work on spillovers through better data, tools, and information-sharing frameworks.
  • Use the Spillovers Tool and the Spillovers Forum to support this work.
• Fostering economic sustainability.
  • Broaden focus to sustainability issues affected by demographics, digitalization, inequality, socio- and geopolitical developments, and climate change where macro-critical.
  • Incorporate macro-financial and distributional impacts of policies where macro-economically relevant, considering country-specific political economy and capacity constraints.
• Unified policy advice.
  • Promote a more unified approach to the policy mix in environments of constrained policy space.
  • Completion of the Integrated Policy Framework seen as helpful.

Main findings and thematic analysis

• Macroeconomic context:
  • Elevated uncertainties about recovery from the COVID-19 pandemic create difficult trade-offs for policymakers pursuing inclusive and sustainable growth and stability.
  • Important trends—digital technology, climate change, inequality, demographics, and geopolitics—affect economic sustainability and present opportunities and challenges.
• Surveillance aims:
  • Better position Fund engagement and policy advice by confronting risks and uncertainties, preempting and mitigating spillovers, fostering economic sustainability, and adopting a unified approach to policy advice.
• Background analytical work informing CSR:
  • Confronting Risks and Uncertainties.
  • Preempting and Mitigating Spillovers.
  • Ensuring Economic Sustainability.
  • Integrating Climate Change into Article IV Consultations.
  • Systemic Risk and Macroprudential Policy Advice in Article IV Consultations.
  • Traction of Fund advice.
  • Scenario Planning exercises.
  • Stakeholder Surveys.
  • Overview Paper and Modalities for Modernizing Surveillance outline priorities and practical changes.

Executive Board assessment and guidance

• Directors broadly agreed CSR will serve as a blueprint to help membership navigate the next five-to-ten years and will inform forthcoming work on capital flows, climate change, and data.
• General endorsements:
  • Need for surveillance to be better interconnected, more timely, topical, and targeted.
  • Support for modernizing surveillance modalities and experimentation, adaptation, and flexibility in implementation.
• Specific points from Directors:
  • Cautioned against making surveillance excessively risk-centric while welcoming greater focus on risks and uncertainties.
  • Supported strengthening spillover analysis, data use, and member dialogue.
  • Welcomed broader sustainability focus but urged selectivity to avoid over-stretching Article IV consultations.
  • Emphasized unified policy advice given constrained policy space and simultaneous use of multiple policy tools.
  • Stressed strengthening traction of Fund advice via higher quality analysis, continuous stakeholder dialogue, clear communication, and integration of capacity development (CD).
  • Noted importance of in-person missions for relationship and trust-building despite potential for virtual engagement.
  • Welcomed Board innovations such as Board Country Matters Meetings (CMMs) and the Granular Policy Initiative.
  • Supported focused Article IV Consultations with topics selected collaboratively with authorities, while continuing coverage of core areas and adhering to evenhandedness and macro-criticality.

Macro-financial, climate, and data priorities

• Macro-financial analysis:
  • Need to deepen macro-financial analysis and better integrate it into bilateral surveillance.
  • Anchor macroprudential policy advice in systemic risk analysis; integrate FSAP findings and recommendations with Article IV consultations.
  • Expand macro-financial talent at the Fund, particularly in country teams, considering budget constraints.
• Digital money:
  • Surveillance should explore potential benefits, risks, and spillovers of growing prominence of digital money.
• Climate change:
  • More systematic integration of macro-critical emerging topics, including climate change, into surveillance.
  • Coverage of climate change mitigation in Article IV consultations would be strongly encouraged for the largest emitters of greenhouse gases.
  • Account for past emissions and energy needs of developing countries where relevant.
  • Coverage must be consistent with the Fund’s surveillance mandate and in line with the Paris Agreement; where macrocritical, climate change adaptation and transition risk should be covered in Article IV reports.
• Data gaps and priorities:
  • Better data is critical to deliver on surveillance priorities.
  • Close critical data gaps in public sector data, foreign-exchange intervention data, and indicators for macrofinancial analysis through the forthcoming review of Data Provision to the Fund.
  • Some Directors urged a cautious approach to foreign-exchange intervention data and balanced consideration of authorities’ capacity to meet increased data requirements.

Modalities, implementation, and resources

• Implementation approach:
  • Proposed flexible and gradual implementation revolving around experimentation, adaptation, and flexibility within existing formal frameworks.
  • A revised surveillance guidance note is expected; Directors sought Board engagement on modalities implementation and departmental coordination in advance of the guidance note and during semi-annual work program discussions.
• Review and cycle:
  • Directors concurred that no changes to the Integrated Surveillance Decision are required.
  • Progress on CSR implementation will be reassessed in about two years in the context of an interim review.
  • The comprehensive review will remain on a five year-cycle.
• Resource implications:
  • Modernizing surveillance might require additional resources; specifics to be taken up in the context of the Fund’s overall budget discussions.

IMF Executive Board Concludes the 2021 Comprehensive Surveillance Review (Press Release No. 21/136, May 20, 2021).

References

• https://www.imf.org/-/media/images/imf/bios/imfboard.jpg
• The Executive Board
• IMF Surveillance -- A Factsheet
• Press Releases
• PRESS CENTER
• Overview Paper
• Modalities for Modernizing Surveillance
• Confronting Risks and Uncertainties
• Preempting and Mitigating Spillovers
• Ensuring Economic Sustainability
• Integrating Climate Change into Article IV Consultations
• [Systemic Risk and Macroprudential Policy Advice in Article IV

Consultations](https://www.imf.org/en/Publications/Policy-Papers/Issues/2021/05/18/2021-Comprehensive-Surveillance-Review-Background-Paper-on-Systemic-Risk-and-460306)

• Traction
• Scenario Planning
• Stakeholder Surveys
• https://www.imf.org/en/home