International Monetary Fund: spring meetingTHE GLOBAL economy appears to be recovering and the worst is definitely over, chairman of the International Monetary Fund Youssef Boutros-Ghali said in Washington at the weekend.
However, Mr Boutros-Ghali, who is also the Egyptian minister for finance, said the global economy is “not out of the woods yet”.
“We see a strengthening of economic recovery but we also see an unevenness in this recovery, unevenness within countries, and unevenness between countries.”
This note of caution, coupled with considerable self-congratulation for having saved the economic world via extraordinary policy measures, were twin themes of the spring IMF meetings which were otherwise uninspiring.
Ireland sent a particularly low-key delegation with neither the Minister for Finance nor the Central Bank governor attending.
Noting that problems in the financial sector were at the heart of the recent global crisis, the IMF said: “Strengthening financial regulation, supervision and resilience remains a critical but as yet incomplete task.”
It undertook to redouble its efforts to forge a collaborative and consistent approach as this and most other things were classified as work in progress with a spate of further reports and analyses to be done for upcoming meetings.
IMF managing director Dominique Strauss-Kahn warned that advanced economies, in trying to plug loopholes in financial regulation, risked creating inconsistent regulatory regimes that result in fresh problems of co-ordination.
“The rules of the game have to be almost the same or they have to be consistent,” he said.
Mr Strauss-Kahn said the world faced several key issues as it moved into the fourth phase of the crisis – continued high unemployment, rising sovereign debt and the risk from excessive capital flows into emerging markets which are leading the recovery and where the opportunities are greatest.
The three key issues on the IMF agenda were: financial sector reform, mutual assessment of the G20 economies and fund quotas and governance. All of them remain work in progress. By contrast, the World Bank agreed a change in quotas, the only concrete decision to emerge over the weekend.
IMF members are committed to completing the governance and quota reforms by January next year.
“The aim is to reflect the shift in world economic power toward dynamic emerging market economies through a redistribution of quotas to reflect the contribution of each member to the fund and the relatively voting power.”
The sands are shifting but slowly and there is considerable disquiet among emerging countries about the pace of progress. The new Group of Twenty (G20) industrialised and emerging market countries held joint meetings with the IMF for the first time, a reflection of their new status even if they have yet to see this reflected in their voting power.
This prompted ECB president Jean-Claude Trichet, who was there as an observer, to say that “it was quite moving to have emerging friends”.
The weekend activities had, thus, elements of a “love in”. The crisis has resulted in some strange bedfellows and they found that they got on reasonably well even if they failed to take any concrete decisions.
As international meetings go, it could have been a lot worse. Participants were struck by the economic improvement that has occurred since the corresponding meeting this time last year.
The only note of criticism came from Oxfam which said that it would be shameful if Canada “blocked a tax on banks that could provide hundreds of billions of dollars for countries that have been devastated by the economic meltdown”.
