WASHINGTON Dec 11 The International Monetary
Fund must do more to quantify financial risks around the world
and monitor how each country's policies impact its neighbors,
IMF staff said on Tuesday.
The IMF has sought to play a greater role in policing the
world economy since the global financial crisis, when it was
unprepared for how quickly the crisis spread across borders and
destabilized the world economy.
Moving beyond its traditional role of analyzing exchange
rates, the IMF now looks at capital flows as well as monetary
and fiscal policies to assess the risk of cross-border
spillovers. It also examines clusters of financially
"Several teething problems are delaying progress in the
implementation of the 2011 (surveillance) priorities," IMF staff
said in their first progress report on the new strategy.
They said the IMF has made progress in analyzing financial
risks around the world, but needs to do a better job of
integrating the analysis into the IMF's annual health check of
In July, the IMF expanded the reach of its country reviews
to assess how domestic policies affect global financial
stability. Previously, the IMF only had to consider how a
country's policies affected its own economy.
In reviewing the staff report, some of the IMF's board
directors said the Fund may have practical difficulties in
trying to analyze multiple countries' policies at the same time,
but said it was important to try.
The IMF staff said it was still to early to tell whether
countries were listening to the IMF's advice.
In the past, efforts by the IMF to fix trouble spots in the
economy through multilateral consultations with the world's
major economies have failed to address problem areas.
In its new surveillance, the IMF hopes it can gain
"traction" if it provides convincing advice to the countries and
follows up on risks.
"There is some evidence that the Fund is generating more
public debate, including in advanced countries," the staff said
in the report.
The IMF staff also questioned whether the IMF had enough
resources to really dig into financial risks and surveillance
while still devoting enough time to economic problems in
The IMF board of directors said the new surveillance was
likely to cost the Fund more money, but directors divided on
whether the IMF should ask for more funds or just try to find
internal cost savings.