II. The Fund’s Existing Mandate: An Overview

To place the ongoing discussion of the reform of the Fund’s regulatory authority in context, it is helpful to provide an overview of the Fund’s existing mandate. The powers conferred upon the Fund under the Articles can be divided into three categories: (i) regulatory powers, relating primarily to the Fund’s responsibility to monitor and promote the observance of members’ obligations under the Articles; (ii) financial powers; and (iii) advisory powers. The underlying theme that unifies both the scope and content of these powers is the promotion of the stability of the international monetary system; i.e. the arrangements that directly control the balance of payments of member countries. The most important powers in each of these categories are briefly summarized below.

A. Regulatory powers

Bilateral surveillance

Although the par value system was abrogated at the time ofthe Second Amendment of the Fund’s Articles,5 Article IV, Section 1 of the Fund’s Articles continues to give primacy to exchange rates and exchange rate policies, the general obligation of members set forth in Article IV being the promotion of a ‘stable system of exchange rates’.6 Although the Articles specifically recognize that domestic policies must also be scrutinized by the Fund, the objective of this scrutiny is to assess the extent to which these domestic policies contribute to—or undermine—the external stability of the member and, thereby, the stability of the overall exchange rate system.7 Pursuant to Article IV, Section 3(b), the Fund is required to oversee members’ compliance with its obligations under the Articles and this oversight responsibility provides the basis for periodic Article IV Consultations with individual members, which normally take place annually.8

Framework Paper), (visited 5 August 2010); and ‘The Fund’s Mandate—An Overview’ (the Overview Paper), (visited 5 August 2010).

  • 5 The Second Amendment of the Articles of Agreement became effective on 1 April 1978.
  • 6 Articles of Agreement, Article IV, Section 1.
  • 7 The scope of members’ domestic obligations under Article IV, Section 1 is discussed in greater detail in Section IV of this chapter.
  • 8 The Executive Board of the Fund has adopted general decisions regarding the periodicity of Article IV Consultations, see Selected Decisions and Selected Documents of the International Monetary Fund, 34 Issue, Washington, DC, 31 December 2009, 64—6 (Selected Decisions).
 
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