The International Monetary Fund (IMF) pledged to improve its legal framework of surveillance, a key step of its governance reform that could better reflect the changing global economic reality."The current legal framework does not sufficiently account for economic realities nor adequately integrate bilateral and multilateral surveillance," said the IMF in a statement released Monday.
On Oct. 24, the Executive Board of the Washington based international financial institution concluded a comprehensive review of the IMF's surveillance activities in its Triennial Surveillance Reviews (TSR) report.
The TSR examine the way the IMF conducts its analysis of economic and financial developments and formulates policy advice, in order to make recommendations for improvement. This is a major mandate of the 187-member global lender.
The Fund acknowledged that its "pre-crisis surveillance suffered from a number of weaknesses," although its advice during the latest global financial crisis was seen as timely and responsive by country authorities.
In a separate statement on strengthening surveillance, the IMF Managing Director Christine Lagarde said that "the failure to spot the buildup of vulnerabilities in the pre-crisis period is a humbling fact that must be addressed -- or, more accurately, continue to be addressed, since there has been important progress in recent years."
The IMF said that the crisis catalyzed important improvements in surveillance which are already under way, but scope for progress remains. In particular, more could be done to promote interconnectedness, risk assessment, financial stability, external stability, and the traction of surveillance.
Directors welcomed the comprehensive TSR and the review of the legal framework for surveillance. They appreciated the broad scope of the reviews, which, for the first time, included multilateral surveillance, and welcomed the stepped-up use of external inputs.
Directors were concurred that six areas of work deserve particular attention, including interconnections, risk assessments, financial stability, external stability, legal framework, and traction.
Most directors supported, or were open to, the adoption of a new integrated surveillance decision, which would encompass both bilateral and multilateral surveillance and reflect a broader approach to global stability, and looked forward to the follow-up paper on the integrated surveillance decision in early 2012.
Over the past several years, the IMF has shifted certain quota from advanced economies to the dynamic emerging markets and developing countries, which was seen as a major step that the global institution adjusted to the new global economic reality.