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Mon, Oct 04, 2004 - Page 12 News List

IMF urges all nations to protect economic upswing

LOOMING THREAT Imbalances in the world economy and rising oil prices are posing risks to global economic recovery, the IMF warns, and urgent action is needed

AFP , WASHINGTON

Britain's Chancellor of the Exchequer Gordon Brown takes questions at a press briefing on the work of the International Monetary and Finance Committee, during the annual meetings of the International Monetary Fund and World Bank in Washington. Brown chairs the panel which helps set spending policies for the IMF. At left is IMF Managing Director Rodrigo Rato.

PHOTO: AP

With the global economy under threat from rising oil prices and sharp regional growth differences, the International Monetary Fund (IMF) appealed to governments on Saturday to act boldly to preserve a worldwide recovery.

"The world economy is strengthening but the recovery has been uneven," British Chancellor of the Exchequer Gordon Brown said after a meeting of the IMF's policymaking International Monetary and Financial Committee, of which he is chairman.

"And with oil prices doubling and imbalances worsening, we agreed that action must be taken to address risks to the recovery."

The committee in a final statement also looked ahead to what it hoped would be funding for further debt relief earmarked for the world's poorest countries but made no mention of concrete measures having been approved Saturday.

But Brown cited a several proposed initiatives for more vigorous measures to ease the debt burden carried by developing countries, notably obligations to multilateral lending bodies such as the IMF and the World Bank.

"There is a growing consensus that multilateral debt relief has to be dealt with as soon as possible," Brown said.

The IMF committee in its statement took aim at three factors clouding the horizon for the world economy, which is projected to expand five percent this year before losing steam in 2005 in the face of oil market volatility.

It said in effect that the US had to take steps to reduce its gaping budget deficit, which tends to drive up interest rates as Washington borrows money to finance the shortfall, while Europe and Japan needed to implement macroeconomic reforms to boost growth.

A third problem highlighted by the committee was the need for greater currency flexibility in Asia, notably China where a peg with the dollar is seen as undervaluing the yuan and thereby distorting regional trade.

The three factors have contributed to imbalances in the world economy, with the US and Japan growing about twice as fast as the eurozone this year.

"The committee considers that bold reforms on a wide front are needed to strengthen fiscal positions, removal structural impediments to growth, support the correction of global imbalances, reduce financial and corporate vulnerabilities and accelerate poverty reduction," the statement said.

After separate discussions Saturday, the World Bank's Development Committee appealed to all countries, developed and developing, to take an active role in WTO multilateral trade liberalization talks scheduled to wrap up by the end of the year.

It stressed the "the importance of translating recently agreed WTO frameworks into tangible results."

The WTO's ruling General Council in early August salvaged floundering trade talks with the adoption of an accord setting out the path ahead for the deadlocked round.

The breakthrough was aimed mainly at eventually securing a cut in agriculture subsidies -- notably in the US and the EU -- and lowering barriers to the multi-billion-dollar farm trade.

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