IMF will monitor nations' domestic economic policies

The International Monetary Fund approved changes to its annual economic surveillance rules 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 destabilise 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.

New rules of the game

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, Lagarde 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.

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.”