Changing the Surveillance Framework:
Part of the challenge entails reorienting surveillance, the process through which the BW institutions policy advice is delivered, to make it more effective. The surveillance features of today has a number of features that make it poorly suited to a small open emerging market economy that fragile credibility, a limited buffer against shocks, and considerable exposure to a rapidly changing economic and financial environment.
Surveillance does not provide a meaningful check on ex ante policies, and resources are only made available when the financial need to acute. Access to supplemental resources on a precautionary or contingent basis could make a critical difference in preventing short-term liquidity crisis from becoming full-scale solvency problems leading to default. Of course, access to such contingent financing should be limited to countries whose policies were judged reasonably sustainable, and consistent with a reduction in balance sheet risks over time. With an enhanced surveillance framework designed to help keep policy on a stronger path that does reduce risk over time, and with contingent finance that could be mobilised quickly, the institutions would be better positioned to contain the risk of deeper financial crisis.