IMF calls for country-specific exits from stimulus
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The International Monetary Fund's policy-steering body, the International Monetary and Financial Committee (IMFC) Saturday called for the implementation of country-specific exits from stimulus, and pledged to deliver on the long-expected quota and governance reform.
Country-specific exits from stimulus
"The worst is definitely behind us. But, we are not out of the woods yet. We see a strengthening of economic recovery, but we also see an unevenness in this recovery, unevenness within countries, and unevenness between countries," Youssef Boutros- Ghali, IMFC chairman and Egyptian Minister of Finance, said at a press conference after a meeting of the committee in Washington.
IMF Managing Director Dominique Strauss-Kahn echoed his view on the same occasion, saying that recovery has been faster in Asia and more sluggish in other parts of the world such as Europe and Japan.
"We will continue to work to phase in country-specific exits from stimulus, recognizing the diverse pace of recovery and potential spillovers across countries and regions," the committee said in a communiqu issued after its meeting, which is part of the IMF/World Bank spring meetings.
The communiqu echoed a Friday statement of the G20 finance ministers and central bank governors, who said stimulus measures should be maintained in economies where growth is still highly dependent on policy support until the recovery is firmly driven by the private sector and becomes more entrenched.
Strengthening the financial sector
Noting that problems in the financial sector were at the heart of the recent crisis, the committee said: "Strengthening financial regulation, supervision, and resilience remains a critical but as yet incomplete task."
"We agree to redouble efforts to forge a collaborative and consistent approach for a stable global financial system that can support the economic recovery," said the committee.
It said it is looking forward to the completion of reviews under the Financial Sector Assessment Program of countries with systemically important financial systems and support continued efforts to map systemic risks and transmission channels.
On the controversial bank tax, the committee said the IMF is working on "a range of options on how the financial sector can make a fair and substantial contribution to cover the burden" of strengthened regulation.
"If you want really to decrease the likelihood of the crisis, if you want to curb the behavior, I need to have different tools," said Strauss-Kahn.
He stressed that the bank tax should not replace but goes together with regulation.
Support to low-income countries
The committee welcomed the recovery in many low-income countries, contributing it to their improved microeconomic frameworks, effective policy responses and the support of the international community.
It welcomed the IMF's recent adoption of a framework for mobilization of loan resources for concessional lending to low- income countries and said the IMF is considering proposals for providing debt relief to countries hit by major disasters such as Haiti.
"2010 will see 65 million people added to the lines of poverty. Eighteen million in Africa ... this was inadmissible and that we should push for additional resources, additional support, within IMF, and within other international organizations," said Ghali.
Pledge to deliver on reform
The committee urged members to approve the quota and voice reform package adopted by the IMF in 2008, which aims to increase the representation of developing countries.
"We urge all members to promptly consent to the 2008 quota and voice reform ... we call for an acceleration of the substantial work still needed on the full range of the quota and other governance reforms," the communiqu said.
On April 28, 2008, a large-scale quota and voice reform package was adopted by the IMF Board of Governors, with the aim of making quota more responsive to economic realities by increasing the representation of fast-growing economies and giving low-income countries more say in the IMF's decision-making.
The package called for, among other things, a new quota formula, ad-hoc quota increase to all 54 countries that were under- represented, tripling the number of basic votes to increase the voice of low-income countries, realigning quota and voting shares every five years. For the package to become effective, the approval of 112 member countries representing at least 85 percent of total voting power is required.
According to a report of the IMF's Executive Board to the IMFC, 70 members, representing about 73 percent of voting power have accepted the package to date. Strauss-Kahn said member countries have shown strong political will in pursuing the reforms, a proof of confidence in multilateralism.
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