In order to detect financial tensions as early as possible, we have sought to make our dialogue with member countries more continuous and probing and put more emphasis on the continuous and timely provision of accurate data. We are also concentrating more on policies decided at a regional level, on the regional implications of national economic policies, on banking and financial sector soundness, and on the policies and institutions that sound financial systems require. BIS Review 111/1997  Second, we are doing what we can to help markets function more smoothly. Considerable progress has been made in liberalising current account transactions worldwide so that countries can take advantage of the opportunities offered by the expansion of world trade. Now, we must turn our attention to fostering an orderly liberalization of capital account transactions, so that countries can also reap the benefits of global capital markets, while minimizing their risks. To this end, IMF members have agreed that the Fund’s charter should be amended to make the liberalization of capital movements one of the purposes of the Fund and to extend the Fund’s jurisdiction to capital movements, with appropriate safeguards, including transitional arrangements, to ensure that liberalization is neither premature nor unduly delayed. At the same time, the IMF is actively encouraging all countries to be transparent about their economic performance by improving the dissemination of economic and financial data to the public. Greater transparency will help strengthen market discipline and avoid market surprises that can lead to disruptive market reactions.

But regardless of the exchange rate arrangement chosen, appropriate macroeconomic policies are essential to ensure its success;  •  two, maintaining a proper policy mix -- among other reasons -- so that high domestic interest rates do not damage the domestic economy, attract excessive amounts of short-term capital, or preclude further monetary tightening if market conditions require; indeed, it is important to keep the option of using the interest rate instrument open, so that the authorities have some room for manoeuvre in times of international instability;  •  three, strengthening structural policies -- especially the policies and institutions such as better prudential supervision, needed to underpin a sound financial system;  •  and four, carrying out other supporting reforms -- what we call “second generation” reforms -- to promote domestic competition, increase transparency and accountability, improve governance, help ensure that the benefits of future growth are widely shared, and otherwise strengthen the foundations for future growth. BIS Review 111/1997  III. Restoring confidence As developments have shown, confidence, once lost, is hard to regain. Restoring confidence takes a strong commitment to economic adjustment and reform demonstrated by the implementation of often painful measures. It also requires a free flow of timely, accurate, and comprehensive information so that markets can assess the extent of underlying problems and the seriousness of efforts to correct them and uncertainty can be reduced. And, of course, restoring confidence takes time. This process is now under way in Southeast Asia.