Welcome to iMFdirect, the International Monetary Fund’s new blog.
The global economy has pulled back from the brink. Financial systems are beginning to function more normally. The panic that threatened to spread among depositors and savers earlier this year has receded. But enormous economic challenges remain, challenges that are often global in scope and may require a global response.
It is against that background that economists and policymakers at the International Monetary Fund are now preparing for the IMF-World Bank Annual Meetings in early October. And as we do that, we wanted to open up our work to a broader audience. In coming weeks, senior staff and IMF management would like to discuss with you, through this blog, some of the key issues.
The 2009 Annual Meetings will be in Istanbul, Turkey. They will bring together Ministers of Finance and Central bank governors from all 186 member countries, as well as academics, market participants, civil society, and journalists from around the world. And this year, the meetings will follow just after world leaders come together in Pittsburgh for the G-20 summit.
When G-20 leaders gathered in London in April, they did not yet have the bleak official numbers for GDP in the first quarter of 2009. But they knew that things were bad. Their agreement contained many important pledges for action, notably the commitment to the necessary economic steps—on fiscal, monetary, and financial policy—to stabilize their own economies. They also supported an unprecedented increase in IMF resources as part of a package “to restore credit, growth and jobs in world economy.” Low-income countries were not forgotten. IMF Managing Director Strauss-Kahn called for a doubling of the Fund’s concessional lending. G-20 leaders agreed.
With unusual speed, the additional money has been largely raised, or committed. New IMF facilities have been agreed for both our general and concessional lending. Just last week, we announced a big package to support the world’s poorest during the crisis, including additional resources for lending to low-income countries of up to $17 billion over the next five years. Earlier, the new flexible credit line was introduced, with three countries now using it. Reforms to conditionality have also been implemented.
Much has been done—by governments and by international institutions—to address the immediate crisis. But with unemployment still set to rise around the world, and only a sluggish recovery on the cards, much remains to be done. And as the crisis eases, policymakers may face a more difficult environment.
We at the IMF have argued that macroeconomic policies need to continue to support demand to ensure the recovery is sustained. The momentum for reforms to restore financial sector health must also be maintained. The time to implement exit strategies will only come when deflationary risks dissipate and sustainable growth is clearly underway. But it is not too soon to design them, so as to be ready when the time comes. A sound financial system, fiscal sustainability and price stability should be the foundation of these strategies.
We look forward to hearing your views and insights on the road to Istanbul. A key issue I see is how to foster in the next phase the global cooperation that helped stem the crisis. I will be sharing some thoughts on that in the days ahead.