That analysis should lead to an assessment of the risks to the world economy as a whole. The second task is to encourage countries to abide by their commitments to each other by promoting greater transparency about national policies. In agreeing the Second Amendment of the Fund’s Articles, all member countries made a general commitment to each other to pursue policies consistent with the objectives of stable global growth and low inflation. Only in relation to exchange rate arrangements were members asked to specify what framework they would follow to be consistent with this commitment. As Tim Adams, Under Secretary for International Affairs at the US Treasury, has noted recently, the nature of those commitments was left unhelpfully vague and should be clarified. In doing this, we should not lose sight of the fact that the policies of all significant members have spillover effects and all should be required to be more precise about their policy making frameworks. Clarity about the objectives of policy of member countries should make it easier for all countries to formulate their own policy. And by making their national policy frameworks sufficiently transparent, countries will be making it possible for the IMF to hold them to account and to fulfil its role as an umpire. The third task is the provision of a forum for national authorities to discuss risks to the world economy.
The Fund should be a forum in which countries can discuss these risks. It should also hold countries to account. In these ways, it can indirectly support global monetary stability. With countries naturally reluctant to cede any control over their own monetary and fiscal policies, it is likely that the IMF will have as instruments only the powers of analysis, persuasion, and, in Keynes’ own favourite words, “ruthless truth-telling”. That phrase does not conjure up many memories of any of the many international meetings I have attended. But unless the IMF has the self-confidence to play  4  BIS Review 11/2006  that role, its deliberations and statements will carry little weight. The Fund requires an independent, respected and clear voice. The Fund should focus its work on the international monetary system around three tasks. First, it should provide and share information about the balance sheets of all major countries, their composition and size, and the links between them. The Fund has been in the forefront of the analysis of balance sheets for emerging market economies, and it needs to extend this approach to its surveillance of the industrialised world. In conducting this analysis, the Fund must look at countries’ exchange rate choices. But no one price is a sufficient statistic for the effect of one country’s policies on the rest of the world - even one as important as the exchange rate. Balance sheet analysis should be at the heart of the surveillance process.