{
  "title": "“Summoning the Will to Act” — John Lipsky, Acting Managing Director, International Monetary Fund",
  "publication": "IMF News, May 19, 2011",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sp051911",
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  "summary": "Global recovery is gaining strength but remains \"fragile and uneven, and beset by uncertainties.\"",
  "publishDate": "2011-05-19",
  "sections": [
    {
      "heading": "Economic backdrop: a strengthening, yet fragile recovery",
      "content": "- Global recovery is gaining strength but remains \"fragile and uneven, and beset by uncertainties.\"\n- Two main challenge groups:\n  - Aftermath of the crisis:\n    - \"Substantial progress\" rebuilding buffers and strengthening regulation in the financial sector, but work remains on \"supervision and cross-border resolution.\"\n    - Fiscal challenge: \"At the end of 2010, government debt was as much as 25-30 percentage points of GDP above the pre-crisis level for several advanced economies—and is projected to continue rising, in the absence of bold measures to rein it in.\"\n    - IMF engagement in Europe:\n      - Agreed joint IMF-EU financing package for Portugal worth €78 billion \"aimed at reigniting growth and employment.\"\n      - Completed the first and second reviews of Ireland’s program.\n      - Ongoing mission in Greece to support the adjustment program.\n    - Emphasis: primary responsibility for peripheral euro area countries lies with those countries themselves; need for a \"comprehensive and consistent—and ... cooperative and shared\" European solution comprising:\n      - (i) strengthening area-wide crisis management frameworks;\n      - (ii) accelerating financial sector repair;\n      - (iii) improving fiscal and macroeconomic coordination; and\n      - (iv) promoting high-quality growth.\n  - Unevenness of the recovery:\n    - Many advanced economies: \"moderate recovery\" with \"unemployment remains stubbornly high\" and \"risk of higher structural unemployment.\"\n    - A few advanced economies with structural reform, e.g., Germany, show growth \"notably above-trend.\"\n    - Emerging economies: \"recovery has been quite robust—and in some, overheating is an increasing concern.\"\n    - Commodity prices and headline inflation rising; \"increasing food prices—that recently eclipsed the highs set in 2008—have particularly difficult implications for low-income countries.\"\n- Policy cooperation is more difficult as countries are at different stages of recovery, yet global problems require global solutions; IMF role emphasized given \"near-universal membership of 187 countries.\""
    },
    {
      "heading": "Modernizing IMF surveillance for an interconnected world",
      "content": "- Objective: \"deepen our understanding of the complex and growing interlinkages across the world,\" with emphasis on drivers of capital flows and the \"quality of growth\" including income distribution and unemployment.\n- Recent and ongoing tools and reviews:\n  - Early Warning Exercise: \"Since its inception in 2008, the Early Warning Exercise has become firmly established.\"\n  - FSAP: \"last year, the Financial Sector Assessment Program (or FSAP) was made mandatory for countries with systemic financial sectors.\"\n  - Trilateral Surveillance Review: \"ongoing ... which should be completed this fall,\" to assess detection and warning of risks and the \"effectiveness, candor, and evenhandedness\" of surveillance.\n- Three priority surveillance areas called out:\n  - Spillovers:\n    - Rising trade and financial interlinkages increase exposure to spillovers from other countries’ policies.\n    - In-depth analysis of outward spillovers from the five largest economies: \"China, the Euro Area, Japan, the United Kingdom, and the United States.\"\n    - Results to be presented in a series of Spillover Reports \"to be discussed by our Board, alongside each country’s Article IV report, this July.\"\n    - Aim: facilitate policies that serve both national and global interests.\n    - Support for the G-20 Mutual Assessment Process (MAP) with IMF analytical input to address internal and external imbalances.\n  - Capital flows:\n    - Capital flows now dominate international transactions for many countries; size and volatility can exacerbate macroeconomic and financial stability risks.\n    - Policy guidance:\n      - \"First line of defense in dealing with surging capital inflows should be macroeconomic policies, though capital flow management measures could be useful in certain circumstances.\"\n      - Recommend structural reforms \"including the deepening of domestic financial markets\" and prudential measures to strengthen financial resilience.\n    - Ongoing work to understand drivers of capital flows in supplier and recipient countries and to explore a \"voluntary and cooperative approach\" or \"an agreed reference framework for individual country policies.\"\n  - Quality of growth:\n    - Need to better incorporate social factors (e.g., income distribution, unemployment) into analysis and policy advice.\n    - \"Recent developments in the Middle East and North Africa show that we must deepen our understanding of the broader factors that may affect macroeconomic stability.\"\n    - IMF will draw on outside experts to \"gain a better appreciation of the social factors that affect macroeconomic stability.\""
    },
    {
      "heading": "Strengthening the global financial safety net",
      "content": "- IMF has increased financial resources and created \"insurance-like instruments intended for crisis prevention, rather than crisis resolution\":\n  - Flexible Credit Line (for members with appropriate policies).\n  - Precautionary Credit Line (for members implementing policy adjustments).\n- Remaining concerns:\n  - \"Doubts remain about whether the global financial safety net adequately reflects potential risks, in view of rising trade and financial linkages.\"\n  - Countries lack confidence in \"secure access to international liquidity at times of systemic crises.\"\n  - Need to \"create proper incentives in designing safety net tools\" to avoid paradoxical outcomes.\n- Ongoing analytical work:\n  - Studying causes of systemic crises, cross-border linkages, and past systemic crises and policy responses to better appreciate global liquidity needs.\n  - Exploring ways to provide short-term liquidity at times of systemic stress via collaboration with \"major central banks, systemic risk boards, and regional financial arrangements.\"\n  - Lessons from ad hoc central bank arrangements during the recent crisis to inform more systematic mechanisms.\n  - Ongoing work on \"the role and composition of the SDR\" as a potential mechanism to improve global liquidity provision."
    },
    {
      "heading": "Conclusion and policy recommendations",
      "content": "- Core IMF contributions to sustain collaboration and systemic stability:\n  - Increase understanding about global economic interlinkages.\n  - \"Demonstrate analytically the benefits of enhanced policy collaboration.\"\n  - \"Facilitate the international dialogue needed to find global solutions.\"\n- Role of the Bretton Woods Committee: advocate for international cooperation and \"summon the will of policymakers to act\"—reminding leaders that acting in the global interest serves their national interest.\n\nSource: “Summoning the Will to Act” by John Lipsky—Acting Managing Director, International Monetary Fund, Annual Meeting of the Bretton Woods Committee; May 19, 2011.\n\n---\n\n\n References\n\n- Japan and the IMF\n- United Kingdom and the IMF\n- United States and the IMF\n- IMF Policy Advice -- A Factsheet\n- Speeches\n- John Lipsky\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp051911"
    }
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    "Published: May 19, 2011",
    "Global recovery is gaining strength but remains \"fragile and uneven, and beset by uncertainties.\"",
    "Two main challenge groups:",
    "Policy cooperation is more difficult as countries are at different stages of recovery, yet global problems require global solutions; IMF role emphasized given \"near-universal membership of 187 countries.\"",
    "Objective: \"deepen our understanding of the complex and growing interlinkages across the world,\" with emphasis on drivers of capital flows and the \"quality of growth\" including income distribution and unemployment.",
    "Recent and ongoing tools and reviews:",
    "Three priority surveillance areas called out:",
    "IMF has increased financial resources and created \"insurance-like instruments intended for crisis prevention, rather than crisis resolution\":",
    "Remaining concerns:",
    "Ongoing analytical work:",
    "Core IMF contributions to sustain collaboration and systemic stability:",
    "Role of the Bretton Woods Committee: advocate for international cooperation and \"summon the will of policymakers to act\"—reminding leaders that acting in the global interest serves their national interest.",
    "[Japan and the IMF](http://www.imf.org/external/country/JPN/index.htm)",
    "[United Kingdom and the IMF](http://www.imf.org/external/country/GBR/index.htm)",
    "[United States and the IMF](http://www.imf.org/external/country/USA/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Speeches](https://www.imf.org/en/news/searchnews)",
    "[John Lipsky](https://www.imf.org/external/np/omd/bios/jl.htm)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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