The International Monetary Fund called on Saturday for greater action to be taken to shore up the global financial recovery, stressing that economic growth alone was not enough without by jobs.
In a communique following its semi-annual meeting, the IMF’s policy committee said the recovery is gaining strength but remains vulnerable.
“There was a sense around the table in all our discussions that we are still in a fairly fragile situation,” said Singaporean Finance Minister Tharman Shanmugaratnam, who chaired the meeting.
“We have to be extremely watchful, but we also need to develop the capabilities of the fund to address risk proactively, to anticipate possible scenarios that could turn out to be ugly, and to require that countries, including especially systemically significant countries, take actions early to prevent another major crisis.” Of particular concern is slow job creation in developed countries, where unemployment remains high, and the risks of “overheating” and inflation in developing countries, Managing Director Dominique Strauss-Kahn said.
“We certainly need macro—financial stability in order to have growth, but, on the other hand, growth is not enough,” Mr. Strauss-Kahn said at the close of the twice-annual IMF and World Bank meetings in Washington.
“Growth is not enough because the old paradigm — following which, if you had growth the rest will follow — doesn’t work anymore. We need to absolutely take into account the problem of growth, which is our mandate, but also some ideas in the way growth will become transformed or produce jobs.” More international cooperation and surveillance are needed to address these issues, the IMF said, urging nations not to back down amid a their economies regain stability.
“Credible actions are needed to accelerate progress in addressing challenges to financial stability and sovereign debt sustainability, and to ensure timely fiscal consolidation in advanced economies, whilst taking steps to avoid overheating in emerging market countries and dealing with risks from higher commodity prices,” the statement said.
Among the issues discussed were, inflation in food and fuel prices, which is of particular concern in the developing world.
World Bank President Robert Zoellick said that food prices, which are near 2008 highs, are “the biggest threat today to the world’s poor, where we risk losing a generation.” The IMF addressed concerns about capital flows amid demands from developing countries that capital flows from industrial countries into developing countries must be more closely monitored.
Developing nations have complained that inflows from developed countries could hurt their economies.
Both capital outflows from rich countries and inflows from developing nations must be addressed, the IMF said.
The meetings have focussed both on concerns that the developing world is at risk of “overheating” and that growth is too slow in the developed world.