By Obinna Chima
 |
| IMF boss, Christine Lagarde |
The International Monetary Fund (IMF) has warned policy makers across
the world to remain cautious of the global financial crisis, saying
economic risk and market volatility were still high.
The fund however stated that the spring meeting, which comes up next week would deliberate and take decisions on the issues.
Managing Director, IMF, Christine Lagarde, stated this in a speech
titled: “Seizing the Moment—Thinking Beyond the Crisis,” presented at
the Brookings Institution, a copy of which was e-mailed to THISDAY
Thursday.
While urging the policy maker not to “let down their guard,” she pointed out that “emerging and developing nations should continue to be, a relative source of strength.”
Stating that the risk was higher in Europe, she acknowledged measures
by some countries in Europe in recent months to confront financial
crisis in that zone.
“But, let us make no mistake: the risks and the needs are still
sizeable, and it would be imprudent to think otherwise,” Lagarde argued.
The IMF boss said there was need to address three fundamental issues.
“The next steps needed to keep the crisis at bay, the building blocks
needed to achieve more lasting growth and stability to put the crisis
behind us and a strengthened IMF—can help us take advantage of the
tectonic shifts taking place in the global economy.”
She added: “Clearly, the risk that looms largest is that sovereign and
financial stresses return with renewed force in Europe. The steps taken
by the Europeans in recent months are a timely reminder of the power of
policy resolve and action. Yet there are still risks, hills to be
climbed.
“Europe must keep up and build on these efforts: continued strong
policies at country level; continued support from the European Central
Bank; continued efforts to build a healthier banking system; and
continued steps toward fiscal integration. The much expected decision of
Euro Area Ministers to strengthen the European financial firewall has
also been crucial.”
These actions, according to her, would help, slowly to restore
confidence and reduce vulnerabilities, adding that economies needed a
broader approach—and a stronger global firewall to tackle the crisis.
“In today’s global economy, with its dazzling array of instant
interconnections, a stronger European firewall can only ever be part of
the solution. A stronger global firewall will help complete the “circle
of protection” for every country.
“Here, the IMF can help. But to be as effective as possible, we need to
increase our resources. The fund needs to be able to stand behind all
its members and meet the needs of all those affected by the crisis—those
at the epicentre, and those who are bystanders.
“We are, of course, continuously reassessing global risks, taking into
account developments in the economic climate as well as all policy
actions including by Europe. The needs now may not be quite as large as
we had estimated earlier this year,” Lagarde said.
According to her, the upcoming spring meeting next week would provide
an opportunity for the fund to take decision on the issue.
She suggested that “monetary policy can also support growth where
inflation remains in check—as is the case at present in virtually all
advanced economies. For emerging economies, a bit more caution is
required, especially if rising oil prices and extended credit booms
begin to test the bounds of inflation.
“Low-income economies also need to strike the right balance. Even as
they are being hit by reduced aid flows and reduced remittances, they
must guard against current risks—especially those radiating out of
Europe. Rebuilding their policy buffers is a priority.”
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