How might this work in practice? Member countries would each provide a systematic description of their chosen policy frameworks in key areas - relating to monetary, fiscal, financial, and exchange rate policies. For these purposes, a policy framework is just a more or less formal description of a country’s policy objectives and the policy instruments that have been assigned to meet them, including any policy rules, targets or strategies that may be used as a guide to decision-taking. This approach would exploit the Fund’s already significant access to information about members’ policy frameworks, and if necessary its power to request more. And it would also avoid prescription and explicitly recognise members’ undoubted right to choose their own policy frameworks, providing that they are consistent with their commitments under the Articles. Given this starting point, Fund surveillance could then focus on two key sets of issues. First, is an individual country’s set of monetary, fiscal, financial, and exchange rate frameworks internally consistent? The key questions would be: is this a sustainable approach to policy? And is policy being implemented in a way which is consistent with the stated framework? Taken together are the policy frameworks adopted by a member consistent with its obligations under the Fund’s Articles, including the member’s overarching commitment to collaborate with the Fund and other members to assure external stability? The Asian crisis of the late 1990s illustrates the problems that can develop from internally inconsistent financial and exchange rate policies.

First, the Fund does not devote enough time and effort to overseeing the system as a whole, through assessing global economic prospects and analysing international economic linkages and policy spillovers (so-called multilateral surveillance). Instead, the great bulk of the Fund’s effort has been devoted to producing reports on individual member countries (so-called bilateral surveillance). Second, these individual country assessments have often lacked focus. The subjects covered have ranged widely, reflecting the preoccupations of the day, including much detail on so called ‘structural’ issues. Nor has bilateral surveillance been good at picking up multilateral issues - areas where a country’s policies might have wider effects, or where it might be particularly exposed to global risks. The Fund’s analysis needs to be better focussed on the big global issues, including financial issues and on the interactions between different regions and countries. This means devoting more effort to analysing multilateral issues and to integrating bilateral and multilateral surveillance; and it means being ruthlessly selective in dealing with structural issues, by testing their relevance to external stability. It also means putting more emphasis on the surveillance of those countries with the most potential to create waves in the international monetary system. Finally, the relatively puny effort devoted to multilateral surveillance is not having enough influence on members’ policies. According to the Independent Evaluation Office (IEO) report published earlier this year, there is ‘too much weight on providing information on economic developments and too little on analysing economic policy linkages and identifying scope for collective action’.