In the fulfillment of its mandate, the International Monetary Fund (Fund) collects and uses different types of information, which bear on a wide variety of subjects. For instance, the Fund collects quantified economic data on countries’ monetary reserves, external trade, balance of payments, exchange rates, budgetary resources and expenditure, etc. The Fund also collects information on national legislation, mainly exchange control regulations, trade regulations, fiscal and banking legislation, and more generally economic and financial legislation. Last but not least, the Fund is interested in the policy intentions of its members, both those that will have a direct effect on the exchange rate of their currencies or on their balance of payments and those that may have an indirect effect through fiscal, monetary and other economic or financial policies. In order for the Fund to have a significant role in the prevention or resolution of international financial crises, whether they affect one or several countries, the provision of accurate and timely information is essential.
The Mexican crisis of 1994 was memorably described by the Managing Director of the Fund, Mr. Camdessus, as the first financial crisis of the twenty-first century. Since then there have been crises in Thailand, Korea, Indonesia, Russia, the Czech Republic, Brazil, and Ecuador—all occurring before the twenty-first century had officially started. At the present rate, it is going to be quite a perilous century.
In recent years the IMF has been at the vanguard in promoting fiscal transparency. To this end, the IMF has, among other activities, developed a standard against which the transparency of fiscal management systems can be assessed. This standard is represented by the Code of Good Practices on Fiscal Transparency—Declaration on Principles (henceforth the Code). The Code, adopted by the IMF Interim Committee1 in April 1998, is one element in a wider effort to promote international standards and codes as a means of improving economic and financial management. In particular, the adoption of standards is the beginning of a difficult process of assessing and reducing vulnerabilities in the context of a new financial architecture.
In the wake of the recent Asian crisis, the IMF launched a number of initiatives aimed at avoiding future crises. Among these initiatives, which were termed pillars of a “new architecture of the international financial system,” was the promotion of the observance by Fund members of certain standards and codes prepared by international entities and professional associations and the development of new codes.
At the time of the Bretton Woods Conference, in 1944, during which the Articles of Agreement of the IMF were adopted, a distinction was made between payments for current international transactions, which all Fund members undertook to liberalize over time, and international capital movements, over which they retained the right to impose controls. These two principles were embodied in Article VIII, Section 2(a) (current payments) and Article VI, Section 3 (capital movements). The reason for the distinction may be found in the purposes of the Fund.