IMF to assess economic spillovers in new monitoring rules
IMF Managing Director Christine Lagarde (Photo: Reuters)
The International Monetary Fund approved changes to its annual economic surveillance rules on Wednesday that now make it mandatory for the Fund to assess whether the domestic policies of a country are affecting global financial stability.
Until now, IMF assessments of economic spillovers were voluntary but the 2007-2009 global financial crisis showed how quickly and easily the economic and financial policies of one country can cascade across borders and destabilize the world. "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," said IMF Managing Director Christine Lagarde. The decision was an important step in "rebooting" the way the IMF conducts surveillance - the monitoring and assessment of members' economies, and global economic and financial developments, Legarde said.
The new rules will be included in the IMF's so-called Article IV annual consultations between the IMF and governments of its 188 member countries. IMF officials said the decision had "broad support" among the membership. In 2009, former IMF Managing Director Dominique Strauss-Kahn revised IMF rules on currency surveillance policies announced in 2007 after China refused to cooperate. Beijing saw the IMF's move to step up oversight of currencies as a ploy to enlist the Fund in its campaign for a stronger yuan.
An IMF official said the new surveillance decision provided ground rules for fair and even-handed monitoring of such things as exchange rates, monetary and fiscal policies, and capital flows. The IMF is expected to publish a more substantial document on the new surveillance decision next week. IMF officials said the surveillance allowed the Fund to engage with the authorities of a country if an assessment judged that policies were "significantly influencing the effective operation of the international monetary system."