Helping IMF members reduce vulnerabilities, promote stability, and foster growth

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IMF surveillance of national and global economic and financial developments has intensified in recent years. In today's global economy, economic developments and policy decisions in one country are more likely than in the past to affect other countries significantly, and financial market information is transmitted around the world instantaneously.

In such an environment, it is more important than ever before that developments and policies be monitored so that tensions and imbalances are identified before major problems or crises arise. The IMF fills this need by holding regular dialogues with its member countries about their economic and financial policies and by continuously monitoring and assessing economic and financial developments at the country, regional, and global levels. Through its surveillance operations, the IMF seeks to signal dangers on the economic horizon and enable its member countries to take early corrective policy action.

Country surveillance. The IMF holds regular consultations-normally once a year-with each member country about its economic policies. (These "Article IV consultations" are required by Article IV of the IMF's Articles of Agreement.) The consultations focus on the member's domestic demand pressures, inflation, and unemployment; developments in exchange rate, fiscal, and monetary policies; its balance of payments and its external liabilities and assets; the influence of its policies on the country's external accounts; the international and regional implications of its policies; and the identification of potential vulnerabilities. As financial markets around the world have become more integrated, IMF surveillance has become increasingly focused on capital account and financial and banking sector issues.

Institutional issues, such as central bank independence, financial sector regulation, corporate governance, and policy transparency and accountability, have also become increasingly important to IMF surveillance in the wake of financial crises and in the context of member countries' transition from planned to market economies.

Global surveillance. The Executive Board's conduct of global surveillance relies heavily on two staff reports-the semiannual World Economic Outlook and the Global Financial Stability Report-and also on more frequent discussions of world economic and market developments. The World Economic Outlook offers a comprehensive analysis of prospects for the world economy, individual countries, and regions and examines policy issues. It also explores selected topical issues in depth. The Global Financial Stability Report was introduced in March 2002-building on earlier international capital market reports-to provide timely and comprehensive analysis of developments in both mature and emerging financial markets and to identify potential fault lines in the global financial system that could lead to problems and crises.

Regional surveillance. The IMF also examines policies pursued under regional arrangements.

It holds regular discussions with such regional economic institutions as the European Union, the European Central Bank, the West African Economic and Monetary Union, the Central African Economic and...