IMF First Deputy Managing Director John Lipsky Urges Continued International Collaboration to Aid RecoveryPress Release No. 09/219
June 19, 2009
International Monetary Fund (IMF) First Deputy Managing Director John Lipsky called on Friday for forceful policies to tackle financial sector stress and continued international collaboration to ensure signs of economic improvement lead to a sustained global recovery.
“It is far too early to conclude that the goal of restoring global growth has been accomplished,” Mr. Lipsky told the Turkish Industrialists’ and Businessmen’s Association (TÜSIAD) in Bodrum. “In this context, it should be clear that continued strong policy actions will be needed to ensure a turnaround in economic activity during the remainder of this year and 2010. First and foremost, robust growth will not be achieved until continuing financial sector problems are addressed forcefully.”
Policies should focus in the near term on restructuring weakened financial institutions by cleansing banks’ balance sheets of impaired assets, assessing bank viability and ensuring bank recapitalization where needed, Mr. Lipsky said. “Policy responses should be coordinated internationally to avoid regulatory arbitrage and competitive distortions, and to ensure reasonable burden-sharing of crisis costs,” he said.
Fiscal policy in advanced and many emerging market economies should remain expansionary at least through 2010, but preparations should start now to unwind exceptional measures such as public intervention in the financial sector, Mr. Lipsky said. He noted the request by G-8 Finance Ministers last week for the IMF to take the lead in helping countries devise exit strategies.
Mr. Lipsky said Turkey, like other emerging market countries, had experienced a severe contraction in output and economic activity. There were early indications of a recovery, including a stabilizing lira exchange rate, rebounding consumer confidence and increased lending to the private sector, but Turkey’s rising fiscal deficit and weakening loan quality could cloud the economic outlook unless they were forcefully addressed, he said.
Turkey will host the Annual Meetings of the IMF and World Bank Group in Istanbul in October, 2009, becoming the first country to hold the event twice.