WASHINGTON—The International Monetary Fund (IMF) and World Bank held three days of meetings, April 23-25, in a cautious but optimistic mood that the global recession had passed and that the economic recovery was proceeding fairly well. Recovery is faster in some parts of the world, especially Asia, and more sluggish in other parts of the world, for example, the European Union and Japan.
Protesters outside were kept far away from the meetings. The Metropolitan Police Department of the District of Columbia built a perimeter around the World Bank and IMF buildings between 18th and 20th streets and G and Pennsylvania, where no one without proper identification was allowed in.
Discussions were dominated by the role the IMF and World Bank (WB) are playing in facilitating the economic recovery. Both institutions have been undergoing reform by giving the emerging economies a greater voice, and adding more funding to meet the needs of countries like Haiti, hit by catastrophic disaster.
As the world economy has undergone the worst crisis since the Great Depression, the IMF has had to adapt: increasing its lending, providing the 186 member countries with policy advice based upon its cross-country experience, streamlining its loan process, and creating a financial safety net to limit the spread of the crisis.
The troubled financial crisis in Greece was often mentioned as it could derail recovery if allowed to spread to other countries. Dominique Strauss-Kahn, managing director of the International Monetary and Financial Committee (IMFC)—the Executive Board of the IMF—would not answer questions at a press conference Saturday about the IMF and G-20 negotiations, saying that details of the package would be made known after the negotiations are completed.
The G-20 finance ministers and Central Bank governors met in Washington during this weekend, also discussing the global economic recovery. Their meeting emphasized the attainment of “strong, sustainable, and balanced growth,” according to its communiqué of April 23. To achieve the above, the IMF has been enlisted to assist the G-20 in laying out alternatives for reforming the fiscal, monetary and financial sectors in countries and regions.
IMF Response to the Crisis
The 24 members of the IMFC plus its chairman, Dr. Youssef Boutros-Ghali and Managing Director Strauss-Kahn, discuss Saturday morning how the fund was responding to its members’ needs in handling the fallout from the crisis.
“We see a strengthening of economic recovery, but we also see an unevenness in this recovery, unevenness within countries, and unevenness between countries,” said Boutros-Ghali— nephew of Dr. Boutros Boutros Ghali, former secretary-general of the U.N.—at a press conference following the meeting.
Boutros-Ghali said he liked what he was seeing in the emerging market economies. “In some cases we have found through the discussions we had that the recovery was not yet sustainable and still dependent on fiscal measures. … In other cases, in emerging market economies, recovery is strong, beginning to retrench on the various fiscal stimuli, and the picture there is much more encouraging, much more solid.”
Indeed, the global recovery has gone better than expected, according to the IMF’s World Economic Outlook (WEO). The WEO is projecting global output expanding by 4.25 percent in 2010 and 2011; the credit crisis in advanced countries “appears to be bottoming out,” says the WEO statement.
On the downside, low-income countries will not be aided much by IMF reforms. Boutros-Ghali said that globally 65 million new people will drop below the poverty line in 2010, 18 million in Africa alone.
“All the membership agreed that this was inadmissible and that we should push for additional resources, additional support, within the IMF, and within other international organizations, so that this is addressed as early and as quickly as possible,” he said.
“Problems in the financial sector were at the heart of the recent crisis,” states the communiqué. Boutros-Ghali stressed that the remaining “weaknesses” and “vulnerabilities” need to be addressed by measures that strengthen the financial sector.
Strauss-Kahn said at the press conference, in the rebuilding phase of the crisis, “that we need coordination, is now something which is well accepted, that the rules of the game have to be almost the same everywhere, if not the same, at least they have to be consistent.”
Strauss-Kahn outlined the Fund’s main concerns: Unemployment is still rising in many countries and there is a “heavy burden of debt” especially in, but not limited to, advanced economies. The WEO also mentions concern that “temporary joblessness will turn into long-term unemployment.”
Another major concern is to reverse the rising large public debt, especially in advanced countries. What they are calling “fiscal consolidation,” it is really a euphemism for raising taxes and/or cutting spending by 2011. The IMF was not blaming the stimulus strategies, but attributed the problem to revenue loss from the financial crisis.
IMF responds to criticism
Protests at the spring meetings were much muted this year. Their message, according to the main organizer the Self Described Anarchist Collective (SDAC), is that “The IMF/WB are responsible for saddling struggling economies with unmanageable debt, driving billions into deeper poverty through the imposition of (badly misnamed) ‘poverty reduction’ programs, and threatening countries who refuse to follow their austerity programs with economic blacklisting and isolation.”
Potentially in response to years of criticism, last year, the IMF ended the “structural performance” criteria requirement in all loans and the Fund now asserts that structural reforms are only used when they are seen as critical to a country’s recovery. The stigma has been reduced because countries are no longer required to obtain formal waivers if they miss a deadline.
In response to the world crisis, the IMF says it has doubled loan access limits and increased lending to the world’s poorest countries, with interest rates set at zero (until 2012).
When a question was raised at the IMFC news conference on how the IMF was being “demonized” in Greece, Boutros-Ghali responded:
“You can pass this message to the Greek people: It is a different institution. Emerging market economies have more of a say in how the institution is run. And this is how we reach the point of saying we want to change in quota, etcetera, and all these changes are beginning to come to fruition. They should give the institution the benefit of the doubt.”
Protesters outside were kept far away from the meetings. The Metropolitan Police Department of the District of Columbia built a perimeter around the World Bank and IMF buildings between 18th and 20th streets and G and Pennsylvania, where no one without proper identification was allowed in.
Discussions were dominated by the role the IMF and World Bank (WB) are playing in facilitating the economic recovery. Both institutions have been undergoing reform by giving the emerging economies a greater voice, and adding more funding to meet the needs of countries like Haiti, hit by catastrophic disaster.
As the world economy has undergone the worst crisis since the Great Depression, the IMF has had to adapt: increasing its lending, providing the 186 member countries with policy advice based upon its cross-country experience, streamlining its loan process, and creating a financial safety net to limit the spread of the crisis.
The troubled financial crisis in Greece was often mentioned as it could derail recovery if allowed to spread to other countries. Dominique Strauss-Kahn, managing director of the International Monetary and Financial Committee (IMFC)—the Executive Board of the IMF—would not answer questions at a press conference Saturday about the IMF and G-20 negotiations, saying that details of the package would be made known after the negotiations are completed.
The G-20 finance ministers and Central Bank governors met in Washington during this weekend, also discussing the global economic recovery. Their meeting emphasized the attainment of “strong, sustainable, and balanced growth,” according to its communiqué of April 23. To achieve the above, the IMF has been enlisted to assist the G-20 in laying out alternatives for reforming the fiscal, monetary and financial sectors in countries and regions.
IMF Response to the Crisis
The 24 members of the IMFC plus its chairman, Dr. Youssef Boutros-Ghali and Managing Director Strauss-Kahn, discuss Saturday morning how the fund was responding to its members’ needs in handling the fallout from the crisis.
“We see a strengthening of economic recovery, but we also see an unevenness in this recovery, unevenness within countries, and unevenness between countries,” said Boutros-Ghali— nephew of Dr. Boutros Boutros Ghali, former secretary-general of the U.N.—at a press conference following the meeting.
Boutros-Ghali said he liked what he was seeing in the emerging market economies. “In some cases we have found through the discussions we had that the recovery was not yet sustainable and still dependent on fiscal measures. … In other cases, in emerging market economies, recovery is strong, beginning to retrench on the various fiscal stimuli, and the picture there is much more encouraging, much more solid.”
Indeed, the global recovery has gone better than expected, according to the IMF’s World Economic Outlook (WEO). The WEO is projecting global output expanding by 4.25 percent in 2010 and 2011; the credit crisis in advanced countries “appears to be bottoming out,” says the WEO statement.
On the downside, low-income countries will not be aided much by IMF reforms. Boutros-Ghali said that globally 65 million new people will drop below the poverty line in 2010, 18 million in Africa alone.
“All the membership agreed that this was inadmissible and that we should push for additional resources, additional support, within the IMF, and within other international organizations, so that this is addressed as early and as quickly as possible,” he said.
“Problems in the financial sector were at the heart of the recent crisis,” states the communiqué. Boutros-Ghali stressed that the remaining “weaknesses” and “vulnerabilities” need to be addressed by measures that strengthen the financial sector.
Strauss-Kahn said at the press conference, in the rebuilding phase of the crisis, “that we need coordination, is now something which is well accepted, that the rules of the game have to be almost the same everywhere, if not the same, at least they have to be consistent.”
Strauss-Kahn outlined the Fund’s main concerns: Unemployment is still rising in many countries and there is a “heavy burden of debt” especially in, but not limited to, advanced economies. The WEO also mentions concern that “temporary joblessness will turn into long-term unemployment.”
Another major concern is to reverse the rising large public debt, especially in advanced countries. What they are calling “fiscal consolidation,” it is really a euphemism for raising taxes and/or cutting spending by 2011. The IMF was not blaming the stimulus strategies, but attributed the problem to revenue loss from the financial crisis.
IMF responds to criticism
Protests at the spring meetings were much muted this year. Their message, according to the main organizer the Self Described Anarchist Collective (SDAC), is that “The IMF/WB are responsible for saddling struggling economies with unmanageable debt, driving billions into deeper poverty through the imposition of (badly misnamed) ‘poverty reduction’ programs, and threatening countries who refuse to follow their austerity programs with economic blacklisting and isolation.”
Potentially in response to years of criticism, last year, the IMF ended the “structural performance” criteria requirement in all loans and the Fund now asserts that structural reforms are only used when they are seen as critical to a country’s recovery. The stigma has been reduced because countries are no longer required to obtain formal waivers if they miss a deadline.
In response to the world crisis, the IMF says it has doubled loan access limits and increased lending to the world’s poorest countries, with interest rates set at zero (until 2012).
When a question was raised at the IMFC news conference on how the IMF was being “demonized” in Greece, Boutros-Ghali responded:
“You can pass this message to the Greek people: It is a different institution. Emerging market economies have more of a say in how the institution is run. And this is how we reach the point of saying we want to change in quota, etcetera, and all these changes are beginning to come to fruition. They should give the institution the benefit of the doubt.”
Friends Read Free