## Opening Address to the 2009 Annual Meetings of the Boards of Governors of the World Bank Group and the International Monetary Fund

_IMF News, October 6, 2009_

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## Bibliographic details
- Authors: Dominique Strauss-Kahn Managing Director
- Published: October 6, 2009

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### Global economic outlook and risks
- Projection: global economic activity will expand by about 3 percent in 2010, after contracting by 1 percent in 2009.
- Recovery characterized as underway but fragile: "the crisis is not over. The recovery will be sluggish, and private demand is not yet self-sustaining."
- Key demand-side risks:
  - Deleveraging expected to persist.
  - Consumption remains tentative where household balance sheets are weak.
  - Rising unemployment likely to continue in many countries through 2010.
- Humanitarian and political stakes:
  - Low-income countries: up to 90 million people may have been pushed into extreme poverty.
  - Weak social safety nets could lead to social unrest, political instability, or war.
- Policy caution: premature withdrawal of policy support could kill the recovery; credible exit strategies should be designed but not implemented too soon.

### Financial sector repair and regulatory priorities
- Remaining needs to secure recovery:
  - Fully recognize losses.
  - Increase bank capital and repair bank balance sheets.
  - Widen the regulatory perimeter.
  - Boost capital and liquidity buffers.
  - Pay greater attention to systemically important institutions.
- Coordination successes cited during crisis:
  - Central bank cooperation including coordinated interest cuts and swap lines.
  - Fiscal policy coordination delivering a 2 percent of GDP global fiscal stimulus.
  - Estimated contribution: "a third of the growth gain from this stimulus came from this very act of coordination."

### IMF actions and operational changes over the past year
- Emergency financing and access:
  - Stepped up emergency financing dramatically, with commitments amounting to over twice as much as during the Asian crisis.
  - Doubled access limits for all borrowers.
- Liquidity and concessional support:
  - Injected $283 billion of extra liquidity in Special Drawing Rights into the global economy.
  - Scaled up concessional lending, up to $17 billion through 2014, including $8 billion in the next two years.
  - Will lend at zero interest to low-income countries through the end of 2011.
- New instruments and program design:
  - Introduced a new Flexible Credit Line, granting rapid upfront financing in large amounts to countries with a proven track record, with no additional conditionality.
  - Streamlined conditionality to focus only on core policy measures critical for macroeconomic stability and growth.
  - Accommodated higher budget deficits in both concessional and non-concessional lending programs.
  - Programs include special provisions for protecting the poorest and most vulnerable.

### Reform agenda — "the Istanbul decision"
- Four key reform areas requested by the IMFC: mandate, financing role, multilateral surveillance, and governance.
- Mandate:
  - Propose reviewing the IMF mandate to encompass the whole range of macroeconomic and financial sector policies that affect global stability, beyond traditional focus on current accounts and currency movements.
- Financing role:
  - Build on the Flexible Credit Line and provide insurance to more countries to reduce incentives for excessive self-insurance (large reserves), which fosters global imbalances and hinders rebalancing from export-led to domestic demand.
  - Assess whether enhancing financing instruments can address precautionary demand for reserves, given limited IMF resources relative to that demand.
- Multilateral surveillance:
  - IMF to help with G-20 mutual assessment of policies, representing a new kind of multilateral surveillance aligned with emphasis on macro-financial linkages and cross-country spillovers.
  - New Early Warning Exercise, run jointly with the Financial Stability Board, to refine understanding of tail risks and vulnerabilities, including cross-border dimensions.
- Governance:
  - IMFC endorsed G-20 proposal to shift quota shares toward dynamic emerging markets and developing countries by at least five percent from over-represented to under-represented countries; this will be done by January 2011.
  - Implementation gap: only 36 out of the needed 111 countries have passed legislation related to the 2008 quota and voice reform; countries urged to move ahead quickly.

### Strategic message and call to action
- Historical lesson: international cooperation prevented a deeper crisis; momentum must continue to shape a post-crisis world that delivers sustainable broad-based growth, peace, and stability.
- Institutional appeal: IMF must adapt to better serve its 186 member countries and remain effective and responsive to members' needs.
- Closing emphasis: the current moment is a historic opportunity to reshape the global economy and realize the ideal that "the brotherhood of man will have become more than a phrase."

*Opening Address to the 2009 Annual Meetings of the Boards of Governors of the World Bank Group and the International Monetary Fund, October 6, 2009 — Dominique Strauss-Kahn*

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## References

- [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)
- [Dominique Strauss-Kahn](https://www.imf.org/external/np/omd/bios/dsk.htm)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp100609_