WASHINGTON, 15 December 2008: Government action needed to revive credit flows, stimulate domestic demand
In a wide-ranging speech at a conference at the Spanish central bank in Madrid to celebrate the 50th anniversary of Spain’s membership of the International Monetary Fund, Managing Director Dominique Strauss-Kahn said that action is needed on three fronts to prevent the current recession turning into a global depression.
• Coordinated government intervention in financial markets to get credit flowing and support bank recapitalization
• Fiscal measures to offset the abrupt fall in private demand
• Liquidity support for emerging market countries to reduce the adverse effects of the widespread capital outflows triggered by the financial crisis.
In some of the starkest language he has used since the crisis erupted, Strauss-Kahn said governments around the world have endorsed this agenda, most recently at the November meeting of the Group of 20 (G-20) industrialized and emerging market countries in Washington.
– Many have begun to implement it. But the actions taken so far are not enough. We need more, he said, according to the text of remarks as prepared for delivery. The event was also attended by former IMF managing Directors Michel Camdessus and Rodrigo de Rato.
Providing financial support to countries hit by shocks to cushion their impact and hasten recovery is a traditional responsibility of the Fund. Strauss-Kahn noted the IMF has provided prompt and very substantial support for Hungary, Ukraine, Pakistan, and Iceland, and said help for other countries would be provided.
– We are also closely monitoring the fallout from the global downturn on our low-income members and stand ready to provide additional financial support, he added. Malawi and the Kyrgyz Republic have become the first two nations to tap the IMF’s revamped borrowing program known as the Exogenous Shocks Facility (ESF), designed to help low-income countries cope with emergencies caused by events beyond their control. Several more African nations are expected to request loans in the near future, according to IMF officials.
The revamp of the IMF’s shocks facility for low-income countries is part of an effort by the IMF to improve its lending toolkit. In October, the IMF said it was launching a new short-term lending facility to channel funds quickly to emerging markets that have a strong track record, but that need rapid help during the current financial crisis to get them through temporary liquidity problems.
For other countries where policy frameworks need strengthening, the IMF has been providing member governments access to traditional lending facilities over longer periods, but on an accelerated basis.
Læs hele artiklen: www.imf.org
