{ "title": "Making the Most of an Historic Opportunity: Three Principles for Reshaping the Global Economic and Financial Framework", "publication": "IMF News, October 2, 2009", "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sp100209", "canonical": "https://www.imf.org/en/news/articles/2015/09/28/04/53/sp100209", "overlayPath": "/en/news/articles/2015/09/28/04/53/sp100209/index.md", "summary": "Speech delivered in Istanbul, Çırağan Palace, October 2, 2009. As Prepared for Delivery.", "publishDate": "2009-10-02", "sections": [ { "heading": "Overview", "content": "- Speech delivered in Istanbul, Çırağan Palace, October 2, 2009. As Prepared for Delivery.\n- Central thesis: the 2008–09 financial crisis presents an historic opportunity to reshape the global economic and financial framework to achieve strong, sustainable, and balanced growth.\n- Three guiding principles:\n - International policy collaboration is essential.\n - Financial stability demands better regulation and supervision.\n - The international monetary system must be more stable, and anchored by a global lender of last resort." }, { "heading": "Economic Backdrop and Near-Term Outlook", "content": "- Crisis impact and social costs:\n - Asset markets sold off globally, decimating savings.\n - Global activity and trade experienced their steepest drops since World War II.\n - Unemployment in the OECD economies has reached a post-war record high.\n - Up to 90 million people in low-income countries may have been pushed into extreme poverty on account of the crisis.\n - The crisis has already thrown about 15 million people out of work in the advanced economies.\n- Growth outlook:\n - Recovery underway but fragile.\n - Growth projected at about 3 percent in 2010.\n - Over the medium term, growth likely to remain modest and lower than in previous post-crisis episodes.\n- Main near-term risks:\n - Recovery stalls if private demand in advanced economies remains too weak when policy stimulus and inventory restocking lose steam.\n - Reversal in financial markets, particularly if non-performing loans increase more than expected.\n - Unemployment certain to worsen before improving.\n- Policy implications:\n - Maintain macroeconomic and financial support measures until a sustainable recovery is underway.\n - Leaders of the G-20 pledged at Pittsburgh to avoid any premature withdrawal of stimulus.\n - Prepare now for eventual unwinding of crisis support measures to ensure credibility and address fiscal sustainability concerns.\n - Recommend policies to support labor demand (temporary cuts in employers’ social security contributions; subsidies for workers put on short-time), active labor market policies (job search assistance and training), and measures to cushion poorer segments of the labor force (earned-income tax credits or similar support)." }, { "heading": "Principle 1 — International Policy Collaboration is Critical", "content": "- Rationale:\n - Coordinated fiscal and monetary stimulus helped arrest the decline in output and stabilize financial markets.\n - Global financial interconnectedness means unilateral actions have cross-border consequences.\n- Key elements and initiatives:\n - G-20 launched the “Framework for Strong, Sustainable and Balanced Growth” with a cooperative mutual assessment (“peer review”) of countries’ policy frameworks.\n - IMF tasked to assist in mutual assessment by developing forward-looking analysis of collective policy consistency with sustainable and balanced global trajectories.\n - The IMF’s mandate to assess members’ policies aligns with this role; surveillance should leverage cross-country perspectives and new engagement forms (e.g., Early Warning Exercise in cooperation with the Financial Stability Board).\n- Country-level responsibilities:\n - Some countries need to increase savings; others need policies to support increased domestic demand, including structural reforms.\n - Avoid ring-fencing and withdrawal from global markets; seek ways for all countries to benefit from financial integration while containing negative spillovers.\n- Surveillance and traction:\n - G-20 peer review can complement IMF surveillance.\n - Encourage candid, even-handed, and balanced analysis to improve policy traction." }, { "heading": "Principle 2 — Financial Stability Requires Better Regulation and Supervision", "content": "- Core lesson: inadequate regulation and supervision—and insufficient appreciation of systemic risks—were key failings in the crisis.\n- Progress to date:\n - Strengthening prudential oversight, improving risk management, increasing transparency, promoting market integrity, reinforcing international cooperation.\n- G-20 commitments and timelines:\n - Develop, by the end of 2010, international rules to improve both the quantity and quality of capital and to discourage excessive leverage.\n - Endorse Financial Stability Board recommendations on compensation practices aligning pay with long-term value creation.\n - Improve over-the-counter derivatives markets to enhance transparency, mitigate systemic risks, and protect against market abuse.\n - Make significant progress, by the end of 2010, on cross-border resolution issues and systemically important financial institutions.\n- Immediate actions needed:\n - Move faster to repair bank balance sheets; stress tests needed in several countries to identify capital shortfalls.\n - Restart securitization markets under proper regulation to diversify credit risk and provide alternate funding.\n- Emerging and developing countries:\n - Financial development should continue to support growth, within a framework that controls excess risk while rewarding innovation.\n- Risks and warnings:\n - Complacency as markets recover could undermine reforms.\n - Abundant liquidity risks fueling asset bubbles and sudden reversals of capital flows, especially when advanced economies tighten policy.\n - Systemically important institutions have grown larger through crisis-era consolidation; new rules needed to address their specific risks.\n- IMF role:\n - Not a global financial regulator, but improved financial sector surveillance and a modernized Financial Sector Assessment Program can contribute to reform." }, { "heading": "Principle 3 — A Strengthened International Monetary System Anchored by a Global Lender of Last Resort", "content": "- Reserve accumulation and its drivers:\n - Official foreign reserves rose from about $2 trillion in the late 1990s, to over $8 trillion today.\n - Primary driver: absence of adequate insurance against sudden stops in private capital flows → countries self-insured.\n- Costs of self-insurance:\n - Country-level: inefficient use of resources; foregone investments in education or infrastructure; complications for monetary and exchange rate policy and potential inflationary pressures.\n - Global-level: export-led reserve accumulation contributed to current account surpluses and ever-widening global imbalances.\n- Need for reliable emergency financing and a global lender of last resort:\n - IMF has potential to provide such insurance.\n - G-20 called for tripling IMF lending resources to $750 billion; commitments received to meet this target and expected to exceed it.\n - To date, IMF has already committed more than twice the amount lent during the Asian crisis.\n - Introduction of the Flexible Credit Line (FCL) as a pre-emptive insurance facility; Mexico, Poland and Colombia have used the FCL with favorable market reception (decline in sovereign spreads).\n - Membership agreed a $283 billion SDR allocation; about $110 billion has gone to emerging and developing economies.\n- Limitations and uncertainties:\n - $500 billion in new lending resources provided through the New Arrangements to Borrow are temporary (require approval every five years) and contingent (activated only when a crisis is looming or underway).\n - These features could add uncertainty about availability of Fund crisis financing and mean the IMF cannot yet serve as a fully credible global lender of last resort.\n- Options and recommendations to strengthen credibility and stability:\n - Increase the resource base of the IMF; discussions have suggested figures such as $1 trillion or more, and permanent additional resources via a quota increase would enhance credibility.\n - Assess the role of regional reserve pooling arrangements and cooperation between the IMF and such arrangements.\n - Make SDR allocations more responsive to global developments and flexible to country circumstances.\n - Build on the FCL’s success and enhance predictability of access to IMF crisis financing (e.g., make consideration of FCL eligibility an automatic part of regular surveillance).\n - Design alternative contingent instruments with elements of automaticity for members that do not qualify for the FCL." }, { "heading": "Governance Reform and Closing Thoughts", "content": "- Legitimacy and effectiveness:\n - IMF must be regarded as the institution of all members for surveillance to be seen as even-handed and independent and for the Fund to be an effective global lender of last resort.\n- G-20 governance commitments:\n - Modernize IMF governance by shifting quota share to dynamic emerging market and developing countries by at least five percent, from over-represented to underrepresented countries, using the current IMF quota formula as a starting basis.\n - Protect the voting share of the poorest members of the IMF.\n - Urgent call for all 186 member countries to move quickly to make the commitment a reality, hopefully before January 2011, and to proceed with ratification of the April 2008 quota and voice reform.\n- Additional governance improvements:\n - Strengthen channels for the Fund’s Governors to give strategic direction and hold management accountable.\n - Ensure selection of the Managing Director and senior leadership is open, transparent, and merit-based.\n- Final appeal:\n - Use this historic window to build a safer, more stable financial system and a more credible and effective IMF to secure prosperity and more peaceful coexistence.\n - Quotation invoked: Kemal Atatürk — “Countries are diverse, but civilization is one, and it is necessary to participate in this single civilization for the progress of the nation.”" }, { "heading": "Key Statistics and Exact Figures from the Speech", "content": "- About 3 percent — projected global growth in 2010.\n- Up to 90 million — people in low-income countries potentially pushed into extreme poverty due to the crisis.\n- About 15 million — people thrown out of work in the advanced economies by the crisis.\n- Foreign reserve holdings: from about $2 trillion in the late 1990s, to over $8 trillion today.\n- G-20 called for tripling IMF lending resources to $750 billion.\n- To date, IMF has already committed more than twice the amount that it lent during the Asian crisis.\n- $283 billion SDR allocation agreed by the membership.\n- About $110 billion of the SDR allocation has gone to emerging and developing economies.\n- $500 billion — new lending resources made available through the New Arrangements to Borrow.\n- Quota share shift committed: at least five percent to dynamic emerging market and developing countries.\n- Number of IMF member countries referenced: 186.\n- Target timing urged: before January 2011.\n\nSpeech — Istanbul, Çırağan Palace, October 2, 2009. As Prepared for Delivery.\n\n---\n\n Content in this bundle\n\n- 100209apdf (PDF){rel=\"external\" type=\"application/pdf\"}\n- 100209cpdf (PDF){rel=\"external\" type=\"application/pdf\"}\n- 100209jpdf (PDF){rel=\"external\" type=\"application/pdf\"}\n- 100209rpdf (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp100209" } ], "bullets": [ "[Markdown version](/en/news/articles/2015/09/28/04/53/sp100209/index.md)", "[Structured JSON version](/en/news/articles/2015/09/28/04/53/sp100209/index.json)", "[Bundle manifest](/en/news/articles/2015/09/28/04/53/sp100209/bundle-manifest.json)", "Published: October 2, 2009", "Speech delivered in Istanbul, Çırağan Palace, October 2, 2009. As Prepared for Delivery.", "Central thesis: the 2008–09 financial crisis presents an historic opportunity to reshape the global economic and financial framework to achieve strong, sustainable, and balanced growth.", "Three guiding principles:", "Crisis impact and social costs:", "Growth outlook:", "Main near-term risks:", "Policy implications:", "Rationale:", "Key elements and initiatives:", "Country-level responsibilities:", "Surveillance and traction:", "Core lesson: inadequate regulation and supervision—and insufficient appreciation of systemic risks—were key failings in the crisis.", "Progress to date:", "G-20 commitments and timelines:", "Immediate actions needed:", "Emerging and developing countries:", "Risks and warnings:", "IMF role:", "Reserve accumulation and its drivers:", "Costs of self-insurance:", "Need for reliable emergency financing and a global lender of last resort:", "Limitations and uncertainties:", "Options and recommendations to strengthen credibility and stability:", "Legitimacy and effectiveness:", "G-20 governance commitments:", "Additional governance improvements:", "Final appeal:", "About 3 percent — projected global growth in 2010.", "Up to 90 million — people in low-income countries potentially pushed into extreme poverty due to the crisis.", "About 15 million — people thrown out of work in the advanced economies by the crisis.", "Foreign reserve holdings: from about $2 trillion in the late 1990s, to over $8 trillion today.", "G-20 called for tripling IMF lending resources to $750 billion.", "To date, IMF has already committed more than twice the amount that it lent during the Asian crisis.", "$283 billion SDR allocation agreed by the membership.", "About $110 billion of the SDR allocation has gone to emerging and developing economies.", "$500 billion — new lending resources made available through the New Arrangements to Borrow.", "Quota share shift committed: at least five percent to dynamic emerging market and developing countries.", "Number of IMF member countries referenced: 186.", "Target timing urged: before January 2011.", "[100209apdf (PDF)](/-/media/websites/imf/imported/external/arabic/np/speeches/2009/100209apdf.pdf){rel=\"external\" type=\"application/pdf\"}", "[100209cpdf (PDF)](/-/media/websites/imf/imported/external/chinese/np/speeches/2009/100209cpdf.pdf){rel=\"external\" type=\"application/pdf\"}", "[100209jpdf (PDF)](/-/media/websites/imf/imported/external/japanese/np/speeches/2009/100209jpdf.pdf){rel=\"external\" type=\"application/pdf\"}", "[100209rpdf (PDF)](/-/media/websites/imf/imported/external/russian/np/speeches/2009/100209rpdf.pdf){rel=\"external\" type=\"application/pdf\"}", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "related": [ { "title": "100209apdf", "role": "document", "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported/external/arabic/np/speeches/2009/100209apdf.pdf", "binary": { "path": "/-/media/websites/imf/imported/external/arabic/np/speeches/2009/100209apdf.pdf", "mime": "application/pdf" } }, { "title": "100209cpdf", "role": "document", "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported/external/chinese/np/speeches/2009/100209cpdf.pdf", "binary": { "path": "/-/media/websites/imf/imported/external/chinese/np/speeches/2009/100209cpdf.pdf", "mime": "application/pdf" } }, { "title": "100209jpdf", "role": "document", "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported/external/japanese/np/speeches/2009/100209jpdf.pdf", "binary": { "path": "/-/media/websites/imf/imported/external/japanese/np/speeches/2009/100209jpdf.pdf", "mime": "application/pdf" } }, { "title": "100209rpdf", "role": "document", "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported/external/russian/np/speeches/2009/100209rpdf.pdf", "binary": { "path": "/-/media/websites/imf/imported/external/russian/np/speeches/2009/100209rpdf.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/news/articles/2015/09/28/04/53/sp100209/index.md", "json": "/en/news/articles/2015/09/28/04/53/sp100209/index.json", "bundleManifest": "/en/news/articles/2015/09/28/04/53/sp100209/bundle-manifest.json" }, "generatedAtUtc": "2026-09-27T10:37:44.720Z" }