IMF sup­ports call for ac­tion against eco­nomic slide

The Pak Banker - - FRONT PAGE -

WASH­ING­TON: The In­ter­na­tional Mon­e­tary Fund (IMF) strength­ened its call for con­certed ac­tion to fore­stall a global eco­nomic slide on Wed­nes­day, warn­ing of the in­creas­ing risks of pol­icy in­er­tia. IMF Deputy Man­ag­ing Di­rec­tor David Lip­ton said that there is an in­creas­ingly "dan­ger­ous" view that pol­i­cy­mak­ers world­wide have ex­hausted their op­tions for boost­ing growth or have sim­ply lost their will.

To counter that, he said, lead­ers must ex­pand ef­forts, in­clud­ing fis­cal and mon­e­tary stim­u­lus and ur­gently needed struc­tural re­forms, to sup­port growth. Fis­cal pol­icy - govern­ment spend­ing and tax breaks - "has to take a more prom­i­nent place in the pol­icy mix," Lip­ton told a con­fer­ence of the Na­tional As­so­ci­a­tion for Busi­ness Eco­nom­ics.

"The bur­den to lift growth falls more squarely on ad­vanced economies" which have fis­cal room to move, he said. "The down­side risks are clearly much more pro­nounced than be­fore, and the case for more force­ful and con­certed pol­icy ac­tion, has be­come more com­pelling," ac­cord­ing to his pre­pared re­marks.

He said the Fund's most re­cent pro­jec­tions for growth "may no longer be ap­pli­ca­ble" amid a pullout of cap­i­tal from emerg­ing economies and a sharp con­trac­tion in global trade.

"More­over, risks have in­creased fur­ther, with volatile fi­nan­cial mar­kets and low com­mod­ity prices cre­at­ing fresh con­cerns about the health of the global econ­omy," he said.

Lip­ton said the tur­bu­lent down­turn in global mar­kets is a re­ac­tion in part to wor­ries that pol­i­cy­mak­ers have run out of op­tions, or lost their re­solve.

"For the sake of the global econ­omy, it is im­per­a­tive that ad­vanced and de­vel­op­ing coun­tries dis­pel this dan­ger­ous no­tion by re­viv­ing the bold spirit of ac­tion and co­op­er­a­tion that char­ac­ter­ized the early years of the re­cov­ery ef­fort." Pos­si­bly most dis­con­cert­ing, he added, "is that the rise in global risk aver­sion is lead­ing to a sharp re­trench­ment in global cap­i­tal and trade flows." He warned coun­tries against trade pro­tec­tion­ist and weak-cur­rency tac­tics to boost their growth, call­ing those "zero sum eco­nomic poli­cies" that, over the long run, "will make all coun­tries worse off." Last month the IMF warned that the world econ­omy is "highly vul­ner­a­ble" and called for ac­tion from the Group of 20 lead­ing economies.

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