Taken from a broad vantage point, most of the other functions of the IMF are ultimately diverse modalities of surveillance. This fact does not deny their importance as distinct institutional responsibilities but emphasizes the central unity that characterizes the fundamental identity of the IMF. In many respects, each of the functions of the institution is perceived as separate, and for certain purposes, such a separation is appropriate. It is important, however, to keep in mind their essentially unified character, because this is what gives distinctness to the IMF.
As already noted, two main areas call for explicit exercise of jurisdiction on the exchange arrangements front. First is the administration of transitional arrangements allowed for in the code of conduct, according to which members upon accession to the IMF may notify the institution that they intend to maintain and adapt to changing circumstances the restrictions on current international transactions in effect on the date of their membership.36 Such an allowance, however, is accompanied by an obligation of members to consult annually with the IMF concerning the retention of restrictions inconsistent with the provisions of the code of conduct.
Second is the administration of the observance of the code of conduct. This responsibility calls for the institution to oversee members' compliance with the agreed norms and to judge the acceptability of deviations from these norms. In essence, the IMF has acknowledged that circumstances may arise when a member's actions that represent a departure from the code of conduct may be justified. The criteria for the exercise of jurisdiction in those circumstances focus on the existence of a balance of payments need for those actions and on their temporary nature. The criterion of need requires a judgment that the actions in question are essential to cope with the member's balance of payments problem. The criterion of temporary duration calls for reaching an understanding with the member concerning the policy actions that will be undertaken to eliminate the need for such departures from the rules of the game.
The regular consultation procedure between members and the institution evolved from the relatively narrow jurisdictional responsibility of administering the transitional arrangements. Over time, members recognized the general value of consultations even in the absence of jurisdictional issues. The procedure thus became the central function of the institution, and it extended beyond the narrow domain of restrictions to all economic policies that affect the balance of payments. At present, all members have an obligation to consult with the IMF on their exchange rate policies. Such consultations include an assessment of the observance of the principles of surveillance, as well as the jurisdictional and balance of payments aspects discussed above.37
A central responsibility of the IMF is the provision of financial assistance to those members which face a potential or an actual balance of payments need and are willing and capable of undertaking the policy measures required to eliminate it. This financial function is the best known activity of the institution, as illustrated by the interest typically given to conditionality, the term that has been coined to refer to the IMF's policies regarding use of its financial resources. This is not surprising in light of the importance financial arrangements with the IMF have gained over time as indicative of members' adjustment efforts, on the one hand, and as guides and catalysts for international financial flows, on the other.38
The dimension of conditionality that I want to stress here is its close relationship with surveillance. Financial assistance is among the purposes of the institution that explicitly include the provision of "confidence to members by making the general resources of the Fund temporarily available to them under adequate safeguards, thus providing them with opportunity to correct maladjustments in their balance of payments without resorting to measures destructive of national and international prosperity" (Article I(v)). This general purpose is then supplemented by a prescription that in setting conditions on the use of its resources, the IMF will seek to help members solve their balance of payments problems "in a manner consistent with the provisions" of the Articles of Agreement (Article V, Section 3(a)). Accordingly, financial assistance from the IMF is specifically geared toward encouraging observance of the code of conduct.
A possible way to visualize surveillance as a unifying theme in the IMF is to consider conditionality as the procedure specifically designed to safeguard the code of conduct in the concrete instance of a member confronting balance of payments difficulties. This particular interpretation of conditionality, by linking this function directly with the code of conduct, underscores the distinct character of the financial assistance from the IMF. Although the IMF, like other international institutions, is a lender, and it provides resources to help cover actual or potential foreign exchange needs, the central purpose of its financial activity is to buttress a code of international behavior. The institution's key contribution to international welfare is its commitment to protect this code, and the provision of financial assistance is but a means to that end.
Therefore, although it may well be best known for its financial activities, the IMF nevertheless remains primarily a surveillance institution. Furthermore, it is from this fundamental responsibility that the exercise of conditionality derives its legitimacy. This line of reasoning is critical to address the issue of symmetry in the treatment of members, an issue that often arises in comparisons between the institution's influence with regard to members that use its resources and those that do not. While, in principle, there is no differentiation among member countries beyond recognition of their diverse weights in the system at large, there is a perception that symmetry is lacking either in the influence the IMF has over members or the treatment it gives them, depending on whether they are net debtors or creditors of the institution, or, more specifically, on whether they are drawing or not drawing on its resources.39
In part, the perception responds to an aspect of reality which effectively distinguishes deficit from surplus positions. Although it is true that ex post there is symmetry between these two positions, the same proposition does not necessarily hold true ex ante. In terms of policy action, the primary responsibility for the elimination of an imbalance (and it must be stressed that this is a surveillance-based perspective) usually rests with the member in deficit.40 In principle, and without restrictions or other deviations from the code of conduct, the only responsibility of the member in surplus is to allow the effects of the policy corrections undertaken by the deficit country to work themselves through and influence behavior across the system as a whole. Thus, what may be perceived as greater influence (or different treatment) by the IMF with respect to members using its resources is but the proper (that is, symmetrical) operation of the rules of the game, when these rules are generally observed.
In part, the perception of lack of symmetry has also been fueled by the increasing emphasis the membership has tended to place on the institution's lending activities. To the extent that such an emphasis is viewed as being at the expense of surveillance--in the sense that observance of the code of conduct is not perceived to prevail uniformly across all members--a case can be made that symmetry is lacking. The strength of this case lies in pointing to a loss of balance between the exercise of surveillance and conditionality or, in other words, between surveillance at a first and at a second remove. This line of reasoning stresses that when surveillance is generally effective, not only is the need for IMF resources likely to be relatively limited, but also their use is likely to be revolving in character; that is, balance of payments problems are unlikely either to remain outstanding or to stay with the same members for long periods of time. Consequently, if external deficits characterize the situation of a large and persistent share of the membership, a presumption may well arise that surveillance has not been effective. Indeed, as long as the effectiveness of surveillance remains limited, it can hardly be expected that conditionality will be in a position to provide full assurances regarding the correction of imbalances.
There is, therefore, a need for all members to support surveillance--the responsibility for the general observance of the code of conduct--as much as, if not more than, conditionality--the responsibility for the resolution of external problems within the same code of conduct. Only then will the international environment at large also be orderly.
Over time, the IMF has also engaged in various technical assistance activities with members on a diversity of fronts. Initially, those activities covered areas of specific membership obligations, but later they extended to other related domains. Some of these activities grew from early work undertaken to secure enough country-specific information to enable the IMF to discharge its responsibilities. In these endeavors, the IMF has helped members establish national economic data bases. It has also assisted them in the field of exchange arrangements and controls. As the depository for national statistics, the IMF not only developed expertise in that field but also devised, over time, statistical concepts and definitions based on common and consistent standards, thus helping to create sets of relevant and comparable international data. Similarly, the institution developed an expertise in the sphere of exchange arrangements that could be used to transmit information across the membership.41 In addition, the IMF shared with its membership a wealth of knowledge regarding the institutions and instruments of economic policy, acquired through the exercise of surveillance. Thus, technical assistance has provided advice to members in areas that include fiscal policy, central banking and monetary policy, external debt and international reserve management, as well as legal and regulatory issues.
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