IMF Says Financial Surveillance To Be More Focused, Candid

• Author: International Monetary Fund

What began as a financial crisis in 2007 quickly spread to the global economy, and the IMF has been working to further its understanding of how the financial sector affects the rest of a country's economy.

In a recent interview, IMF Managing Director Dominique Strauss-Kahn said surveillance "is our core business."

The IMF conducts surveillance through annual reviews of countries' economies, known as Article IV consultations. In addition, a country may request an analysis of its financial sector through the IMF's Financial Sector Assessment Program.

The decade-old voluntary program, conducted jointly with the World Bank in developing and emerging economies, and by the Fund alone in advanced economies, has been carried out in over two-thirds of the IMF's 186 member countries. Assessments are currently under way for Indonesia, China, and the United States.

The changes to the program are designed in response to the global crisis and are aimed at enhancing the quality and candor of the IMF's advice. They will also link financial policy advice to the overall economic health of a country, as well as to other countries, the IMF said in a report issued on September 29.

Prior to the crisis, assessments of countries' financial sectors under the program covered a broad range of topics. This approach covered the right issues, but sometimes not in sufficient depth, the IMF said. When areas of risk were identified, reports were not always clear and candid enough. In addition, there were time lags between assessments.

Crisis prevention and exit strategies

The revised program will introduce more flexibility to tailor the scope and timing of assessments to country needs. The IMF will have the option of conducting more targeted assessments, focused specifically on financial stability. These updates will concentrate on the underlying soundness of the financial system, the...