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External Relations Department Washington, D.C. 20431 Telephone 202-623-7300 Fax 202-623-6278

Factsheet URL: http://www.imf.org/external/np/exr/facts/surv.htm

IMF Surveillance

The IMF is mandated to oversee the international monetary system and monitor theeconomic and financial policies of its 188 member countries. This activity is knownas surveillance. As part of this process, which takes place both at the global leveland in individual countries, the IMF highlights possible risks to stability and adviseson needed policy adjustments. In this way, it helps the international monetary systemserve its essential purpose of facilitating the exchange of goods, services, andcapital among countries, thereby sustaining sound economic growth.

Why is IMF surveillance important?

In today's globalized economy, where the policies of one country typically affect many othercountries, international cooperation is essential. The IMF, with its near-universalmembership of 188 countries, facilitates this cooperation. There are two main aspects to theIMFs surveillance work: bilateral surveillance, or the appraisal of and advice on the policiesof each member country; and multilateral surveillance, or oversight of the world economy.

Consulting with member states

IMF economists continually monitor members economies. They visit member countriesusually annuallyto exchange views with the government and the central bank and focuson whether there are risks to domestic and global stability that argue for adjustments ineconomic or financial policies. Discussions mainly focus on exchange rate, monetary, fiscal,and financial and policies. During their missions, IMF staff also typically meets with otherstakeholders, such as parliamentarians and representatives of business, labor unions, andcivil society to help evaluate the countrys economic policies and direction. On return to

headquarters, the staff presents a report to the IMFsExecutive Board for discussion. TheBoards views are subsequently transmitted to the countrys authorities, concluding aprocess known as Article IV consultation. In recent years, surveillance has becomeincreasingly transparent. Almost all member countries now agree to publish aPublicInformation Notice summarizing the views of the Board, as well as the staff report andaccompanying analysis. Many countries also publish a statement by staff at the conclusionof an IMF mission.

Overseeing the bigger world picture

The IMF also monitors global and regional economic trends. Its key instruments ofmultilateral surveillance are the regular publications:World Economic Outlook(WEO),Global Financial Stability Report(GFSR), andFiscal Monitor. The WEO provides detailedanalysis of the state of the world economy, addressing issues of pressing interest, such asthe current global financial turmoil and economic downturn. The GFSR provides an up-to-date assessment of global financial markets and prospects, and highlights imbalances andvulnerabilities that could pose risks to financial market stability. The Fiscal Monitor updatesmedium-term fiscal projections and assesses developments in public finances.

The IMF also publishesRegional Economic Outlook reports, providing more detailedanalysis for the five major regions of the world, and cooperates closely with other groups

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such as the Group of Twenty (G-20) industrialized and emerging market economies. Inparticular, since 2009, the IMF has been supporting the G-20s efforts to sustaininternational economic cooperation through theirmutual assessment process, launched atthe G-20 Summit in Pittsburgh. The IMF provides analysis of whether policies pursued bymember countries are consistent with sustained and balanced global growth.

Since 2011, the IMF has prepared, on a pilot basis, spillovers reports analyzing the impactof economic policies in the worlds five largest economiesChina, the euro area, Japan, theUnited States, and the United Kingdomon partner economies. Twice a year, the IMF alsoprepares a Global Policy Agenda that pulls together the key findings and policy advice frommultilateral reports and defines a future agenda for the Fund and its members.

Keeping surveillance relevant

Surveillance in its present form was established by Article IV of the IMFs Articles ofAgreement, as revised in the late 1970s following the collapse of the Bretton Woods systemof fixed exchange rates. Under Article IV, member countries undertake to collaborate withthe IMF and with one another to promote stability. For its part, the IMF is charged with(i) overseeing the international monetary system to ensure its effective operation, and(ii) monitoring each member's compliance with its policy obligations.

In 2010, the IMF undertook a review of its surveillance mandate. This resulted in measuresto integrate all dimensions of IMF surveillancemultilateral, bilateral and financialandmake it more effective. These measures helped address some of the weaknesses identifiedin pre-crisis surveillance which were set out in the report by the IMFs IndependentEvaluation Office on IMF Performance in the Run-up to the Financial and Economic Crisis.

In October 2011, the latest comprehensive review of the effectiveness of its surveillance, orTriennial Surveillance Review, was completed. The reviewwhich covered both bilateraland multilateral surveillancedrew extensively from feedback from all major stakeholders,analysis by IMF staff, as well as from studies and commentaries by external experts. Thereview highlighted progress since the beginning of the global financial crisis but also foundremaining gaps. In particular, IMF surveillance was seen as too fragmented, with riskassessments lacking depth and insufficient focus on interconnections and transmission ofshocks. Surveillance was also found to have less impact for larger member countries. Thesubsequent recommendations focus on improvements in six key areas: interconnectedness,risk assessments, external stability, financial stability, traction and the legal framework. TheManaging Directors action plan, endorsed by the Board, is being implemented.

As part of broader efforts to make progress on this action plan, on July 18, 2012, theExecutive Board met on two important topics. It adopted a newDecisionon Bilateral andMultilateral Surveillance (Integrated Surveillance Decision) to strengthen the underlyinglegal framework for surveillance. It also discussed aPilot External Stability Reportpresenting a broad and multilaterally consistent analysis of the external sector for theworlds largest economies. In September 2012, the Executive Board endorsed a newFinancial Surveillance Strategythat proposes concrete and prioritized steps to furtherstrengthen financial surveillance. These actions will help ensure that the Fund is in a betterposition to address the possible effects of spillovers from members policies on globalstability; monitor the stability of members external sectors in a more comprehensivemanner;; and engage members in constructive dialogue safeguard the effective operation ofthe international monetary system and support global economic and financial stability.

THIS INFORMATION IS CURRENT AS OF SEPTEMBER 2012

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