In this vein, the Fund’s work should focus mainly on economies, developed or emerging, that have played an increasing role in the global economy developments. On multilateral surveillance, the Fund should deepen its analysis, while improving its communication capability and persuading the countries involved to adopt its recommendations. In this context, we are particularly interested, and strongly support the high priority given by the Fund’s management to the first multilateral consultations involving several systemically important members or groups of members such as China, the Euro Area, Japan, Saudi Arabia and the United States. This exercise constitutes an important collaborative effort among major countries that could provide an important forum for debate on issues of systemic or regional importance with a special focus on how to address global imbalances while maintaining robust global growth. The success of this exercise in making an effective contribution to orderly adjustment, thus reducing the burden of disorderly adjustments on the global economy, will depend crucially on the commitment of countries participating in the consultation. On the bilateral surveillance front, it is essential that the Fund’s staff make a clear contribution to strengthening macroeconomic and financial resilience of member countries. This could be achieved by promptly recognizing, and taking into account, cross-country differences, and also by upgrading the Fund’s capacity to perform stress-testing analysis. In particular, we are of the view that the Article IV consultations should focus more on core macroeconomic issues against the backdrop of the challenges posed by globalization.

•  Modern regulation and supervision of the financial sector, so as to ensure efficient financial intermediation and manageable risk levels. •  Openness to foreign trade in goods and services and to financial flows, in order to improve domestic efficiency and to reap the benefits of globalization. •  Quality and transparency of macroeconomic and financial information by adopting international standards and codes of best practices. This improves the effectiveness of policies by allowing markets to internalize changes in a more orderly and gradual way. At the same time, it establishes a framework for a greater responsibility and creates incentives for a better design of policies. Achieving macroeconomic stability together with trade and financial integration pose important challenges for the countries’ institutional and policy frameworks, at both the domestic and the global level. Therefore, progress in these fronts must be simultaneous, and at a pace that countries feel  BIS Review 2/2007  1  comfortable with, because otherwise, economic integration may increase exposure to external shocks and local vulnerabilities, while macroeconomic instability, in turn, could hinder integration. The long-lasting weakness and volatility of growth rates of the region have made it difficult for governments to reduce poverty significantly and the endemic inequality in income distribution. In the current positive cycle of booming commodity prices, governments face the difficult tradeoff between continuing to bring down public debt vis-à-vis facing social pressures for increased spending. All this maintaining macroeconomic stability. Balancing these objectives requires having in place very flexible budget processes, and tax and spending structures.