The IMF says it is time to talk exit strategies since all members have now endorsed the stimulus measures taken to combat the global financial crisis and the need to clean up banks’ bad assets.
“Everybody is happy with what has been done on fiscal stimulus ... all agree on the absolute necessity of cleansing the financial system,” the head of the IMF, Dominique Strauss-Kahn, said.
He said there were substantial differences, however, over what steps should be taken to prepare for the economic upturn on the other side of the crisis, adding that countries needed to have a view three to four years ahead.
Some wanted to discuss the issue later but “our point of view is that [the] exit strategy view has to be taken into account as soon as possible,” the former French finance minister told a news conference.
As the worst global slump since the 1930s spread through last year, there were substantial differences over how much money governments should spend — even at the risk of going heavily into debt — to get their economies going again.
The US advocated spending any amount necessary while Europe generally, and especially Germany, was reluctant to commit ever more funds, preferring to wait and see the effectiveness of initial steps.
Recent economic data has suggested that the worst global slump since the 1930s Great Depression may finally be touching bottom after months of relentless bad news.
Strauss-Kahn, speaking after the spring meeting of the IMF board’s International Monetary and Financial Committee, said the 185-nation IMF had been right to stress the need to clean up the toxic assets at the banks.
The ultimate recovery “is heavily reliant on” this clean-up, he said.
Strauss-Kahn said the meeting in Washington, picking up from the G20 London summit of developed and developing countries on April 2, confirmed that the IMF was now at the center of policy coordination on the crisis.
He noted positively broad agreement on supplying the IMF with additional funds so that it can help poorer countries struggling in the crisis.
“A key achievement of today’s meeting is ensuring the doubling of the Fund’s loanable resources,” the IMF steering committee said in a statement.
In a first stage, US$250 billion will be available through a special facility to help “member countries with external financing needs,” followed by another US$250 billion, as agreed at the G20 summit.
Since then, however, there has been concern that some countries were dragging their feet on their pledges.
The possibility that the IMF would raise extra funds by selling bonds to member states was also raised, Strauss-Kahn added.
Marita Hutjes, senior adviser at Oxfam International, an anti-poverty nongovernmental organization, condemned the meeting as “a wasted opportunity for poor countries.”
“More should have been done. The poorest countries are still waiting for the bailout they’ve been promised to survive this crisis. They moved heaven and earth for banks; the question is when will they put the money on the table for poor countries?” Hutjes said.
Also See: The 'new' IMF’s role as guardian of an open financial system
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