IMF'S POLICY-SETTING PANEL
Implement Agreed Policies Now to Restore Confidence—IMF
October 13, 2012
- IMF members call for implementation of key policy steps to restore confidence
- Focus on jobs and growth, debt sustainability, repair of financial systems
- Call for member countries to complete final step of governance reform
Against a backdrop of slowing global growth and a renewed loss of confidence, the IMF is urging policymakers to implement policies agreed in recent months as part of efforts to rekindle growth and spur job creation.
At the Annual Meetings in Tokyo, the IMF’s policy steering committee called on its members to act decisively to break negative feedback loops and restore the global economy to a path of strong, sustainable, and balanced growth.
“IMFC members all agreed we are in better position today than we were six months ago. We are in a better position with regard to the policy footing to get growth started as well as fiscal consolidation,” Singapore Finance Minister Tharman Shanmugaratnam said October 13 at the closing press conference of the International Monetary and Financial Committee (IMFC).
Tharman said the membership has achieved clarity on the important tasks at hand, including addressing the medium- and longer-term challenges of achieving fiscal sustainability and structural reforms, and determining over the short run the policies essential to supporting growth. He also said that the IMF is better equipped to address the challenges of the globalized economy because of its revamped surveillance toolkit.
Commitment to implementation
Managing Director Christine Lagarde spoke of the strong commitment to policy implementation that marked the IMFC deliberations and focused on the willingness of the membership to undertake credible medium-term fiscal consolidation.
“There is a very strong commitment to policy implementation—a global policy agenda has been approved and it sets out what the membership has agreed to do,” she said.
The eurozone remains at the epicenter of the crisis, with real GDP projected to decline this year. But uncertainty about whether the United States will be able to resolve the so-called fiscal cliff is also sapping confidence.
“The fiscal cliff in the U.S. and the uncertainties about how it will be resolved affects the entire world. It’s not just actions that are a spillover effect, it’s non-action that can lead to spillovers effects. Whether Europe with a stronger policy footing will be able to deliver on time remains an uncertainty, but we are more optimistic now than three months ago,” Tharman said.
Tharman stressed the need to focus on the medium and long-term narrative. “We need to focus on the task of fiscal sustainability and structural reforms to regain competitiveness and growth,” he said.
A stronger firewall
The Annual Meetings in Tokyo also saw confirmation of earlier pledges to boost the Fund’s resources by $456 billion, bringing its total lending power to over $1 trillion. “Our global safety net is not an illusion, it is real. It is so real, it has increased. We are now up to $461 billion, and approximately half of it has been signed as bilateral agreements,” Lagarde said.
Member countries also signed off on the use of windfall profits from gold sales to boost the IMF’s Poverty Reduction and Growth Trust for concessional lending. “On concessional funds, we have a PRGT trust fund that needed to be replenished. We have secured all the necessary approval from the membership to replenish the fund,” she said.
Call to complete governance reform
In their communiqué, IMFC members also called for completion of the 2010 quota and voice reform, which gives more say to faster-growing economies in Asia and elsewhere. “Most of the conditions required for the entry into force of the reforms have been achieved. We reaffirm the urgency of making these important reforms effective and call on members who have yet to complete the necessary steps to do so.”