The road ahead - a changing global economy, a changing IMF
October 12, 2012 00:00 By The Nation
International Monetary Fund Managing Director Christine Lagarde is urging members of the IMF and World Bank to join forces in putting the crisis behind, amid changes that reshaping the globe.
In her opening speech at the IMF/World Bank Annual Meetings which started today, she said that to achieve the brighter future, it is necessary to putting the current crisis behind, complete reform of the financial sector; and address inequality and building inclusive growth.
To put the crisis behind, a package of policies covers accommodative monetary policy; the right pace of fiscal adjustment, mindful of not undercutting growth but with solid and realistic plans to bring debt down over the medium term; finishing the banking sector clean-up; and structural reforms to boost productivity and growth. All of this should be complemented by a rebalancing of global demand toward the dynamic emerging markets.
"Let us not delude ourselves: without growth, the future of the global economy is in jeopardy...One lesson is clear from history—reducing public debt is incredibly difficult without growth. High debt, in turn, makes it harder to get growth. The road ahead of us is narrow and long," she noted.
Then, to get a better financial system which is crucial to the modern global economy, the world must urgently complete the agenda of financial sector reform: better regulation, better supervision, better resolution of cross-border entities, sensible incentives in financial institutions, and a level playing field for the sector.
"We are making progress, especially on the Basel III agenda for better capital and liquidity buffers. But I fear that we are losing momentum, both on implementing the agreed reforms and on making more progress in areas like derivatives, shadow banking, and too-important-to-fail institutions," she said.
"The bottom line is the costs of reform are affordable. The costs of complacency are not. We have been there."
She also vowed to make the IMF a premier forum for global cooperation, under new approaches, new tools and new relevance. Lagarde calls for trust for the IMF and the building of resources necessary to stand by in light of global interconnectedness.
During the crisis, the IMF has so far committed US$540 billion and disbursed $157 billion in 126 lending programmes—57 non-concessional, 69 concessional. We are helping all kinds of countries with all kinds of problems—financing to help adjustment and transition, insurance to prevent contagion and certify good policies. IMF members earlier this year decided to boost the resources by $456 billion, to bring the total lending power to over $1 trillion.
"We need an IMF that represents the world, looks like the world, and in which the world finds a safe and comfortable home."
Lagarde also members to finalise the votes on the Board reforms at the Tokyo meting. For the first time, Brazil, China, India, and Russia will all be among the top ten IMF shareholders. For the first time, for any international financial institution, all members of the Executive Board will be elected.