At the regional level, countries can make a valuable contribution to regional and global stability by joining voluntarily with their neighbors in mutual surveillance. The objective should be to complement IMF surveillance by developing a “club spirit” through which neighboring countries can encourage one another -- and, at times, exert some peer pressure on one another -- to pursue sound policies. We welcome the efforts being made in this direction in various fora. To be effective, such regional surveillance will, of course, have to be based on sound economic analysis. In this connection, the management and staff of the IMF are ready to contribute to regional surveillance in Asia, as they already do in Europe, the G-7, and other fora. Indeed, one of the tasks of our new regional office in Tokyo could be to help promote more intensive regional surveillance. V. The response of the Fund At the multilateral level, the international community sees it as indispensable to work and cooperate through a central institution, the IMF, in order to help countries deal with the opportunities and risks of globalization. And given the challenges of the global financial markets, the international community has encouraged the Fund to strengthen its capacity in this respect. The Fund’s response centers on four broad areas. First, we have strengthened Fund surveillance, which, as you know, lies at the heart of the IMF’s efforts to maintain an orderly international monetary system.
As you may know, the membership has just agreed to an increase of 45 percent, equivalent to about $ billion, in IMF quotas. This will raise the capital base of the institution to some $ billion. In addition, the Fund has taken steps to augment its financial resources through the agreement on the New Arrangements to Borrow. Under these arrangements, participants would be prepared to lend up to the equivalent of some $ billion when additional resources are needed to forestall or cope with an impairment of the international monetary system, or deal with an exceptional situation that poses a threat to the stability of the system. We hope that participants who have not yet done so will complete the necessary legislative action so that these arrangements can enter into force soon. BIS Review 111/1997  -6-  Furthermore, in order to allow all members to participate on an equitable basis in the SDR system, agreement has been reached on a proposal to amend the Fund’s Articles of Agreement to authorize a special one-time allocation of SDRs of about $ billion that would equalize all members’ ratios of SDR allocations to quotas and would double the amount of SDRs allocated to date. These resources will supplement members’ reserves, giving them more flexibility in economic policies and a cushion against adverse developments. Last but not least, recent experience has demonstrated once again that early warnings cannot always prevent crisis from blowing up.