IMF chief calls for coordinated action to tackle financial crisisNovember 10th, 2008 - 10:57 pm ICT by IANS
Washington, Nov 10 (IANS) IMF Managing Director Dominique Strauss-Kahn has urged the Group of Twenty (G-20) leaders to deal with the immediate fallout from the financial crisis through coordinated policy responses and by providing financing to restore confidence and growth.Strauss-Kahn’s call to take action to help counter the global economic slowdown came in a letter to G-20 industrialised and developing economies and European leaders. The letter was released as ministers from systemically important countries agreed on the need for a coordinated response at a meeting Sunday in Sao Paulo, Brazil.
“There is scope for fiscal expansion in many advanced and some emerging market economies; and with inflation declining, some central banks have scope for further monetary easing,” he said.
US President George W. Bush has invited G-20 leaders, including Indian Prime Minister Manmohan Singh, to a summit here Nov 15 to develop a common approach to combating the global economic crisis, triggered initially by the sub-prime mortgage meltdown in the United States.
The summit will also see participation of Strauss-Kahn, World Bank President Robert Zoellick and UN Secretary General Ban Ki-Moon.
In his letter to the leaders, sent Nov 6, Strauss-Kahn said the Washington summit meeting should tackle two broad themes:
* Deal with the immediate fallout from the financial crisis, for example through coordinated policy responses and by providing financing to restore confidence and growth;
* Tackle longer-term issues relating to the international financial architecture, such as fixing, what he termed “an inadequate regulatory system” and developing a reliable early warning and response system.
Strauss-Kahn, a former French finance minister who took over as head of the IMF one year ago, said the design of financial regulation around the world requires a rethink, including regulating some aspects that had previously not been regulated.
But he said that ultimately, regulation had to be done by national authorities, “subject to surveillance by a body or network of institutions alert to systemic implications across financial instruments, markets and countries.”
The IMF, he said, had already begun intensifying its early warning capabilities and would strengthen collaboration with others in this area.
He strongly endorsed recent proposals for a new Bretton Woods agreement, a reference to the original pact reached in 1944 to establish the International Monetary Fund and the World Bank following World War II.
But he said it took time to prepare for the Bretton Woods agreement and underlying issues needed to be discussed adequately.
“I therefore very much welcome the initiative taken by the President of the United States to bring together the G-20 leaders, to follow up with various working groups, and to culminate these efforts in a conference, hopefully within the year ahead.”
He said that emerging markets were now under great stress as the “capital flows that have sustained growth dry up across the board. The international community must take action.”
The IMF has moved rapidly to help several emerging markets with new loans and policy advice to help combat fallout from the crisis.
G-20 finance ministers and central bank governors gathered November 8-9 in Sao Paulo for a regular annual meeting that included a preparation session for next weekend’s summit meeting.
In their communiqué, the G-20 ministers said that the IMF and World Bank needed to be reformed so that they “more adequately reflect changing economic weights in the world economy and be more responsive to future challenges.”
They said emerging and developing economies should have greater voice and representation in these institutions.
They welcomed progress already made in reforming the IMF and said further reform was needed to improve the legitimacy and effectiveness of the two institutions.
The G-20 comprises the seven major industrialised nations-Britain, Canada, France, Italy, Japan, Germany, and the United States-plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, and Turkey. It also includes the 27-nation European Union, represented by France.