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Finance ministers see world out of recession by mid-2010
By Harry Dunphy |
April 27, 2009, Monday
|
Print Edition
Print Edition
FINANCE ministers see signs the global economy is stabilizing but caution it will take until the middle of next year for the world to emerge from the worst recession in decades.
During a day-long session on Saturday of the International Monetary Fund's policy-steering committee, many ministers said stimulus packages, bank recapitalization and other actions taken by governments and central banks to deal with the crisis are starting to show results.
Egyptian Finance Minister Youssef Boutros-Ghali, who chairs the committee, summed up the mood, saying "we can see a break in the clouds."
He said some financial markets are trending up and other economic indicators are positive but warned of "downside risks."
"Things will continue looking negative for a while but at a lesser and lesser pace," Boutros-Ghali said. "Toward the end of the year, we will start seeing the light, start seeing movement toward stabilization and then recovery." Last week, the IMF said the global economy is likely to shrink by 1.3 percent this year, the first fall in six decades.
More assessments of the global economic situation were expected yesterday when the World Bank's policy-steering committee was scheduled to meet.
IMF Chief Dominique Strauss-Kahn said ministers were satisfied with the measures various governments took to boost their economies. He called early disagreements over the extent of spending needed as childish.
He said there was a general agreement that a global economic recovery depends on "the absolute necessity of cleansing the financial system" of bad debts or toxic assets on many bank balance sheets. Such a step is expected to unfreeze credit markets.
In their communique the ministers said they agreed on an immediate increase of US$250 billion for the IMF's lending coffers so that it can "continue acting promptly to make available, under adequate safeguards, substantial resources to member countries with external financing needs."
They said a further US$250 billion will be added later to an "expanded and more flexible" line of credit known as the New Arrangements to Borrow.
US President Barack Obama is seeking congressional approval for up to US$100 billion for the NAB, matching commitments for the same amount made by Japan and the European Union.
In a victory for emerging economic powerhouses such as China and Brazil, Strauss-Kahn said the IMF will sell bonds to raise funds to lend to struggling nations. The emerging economies pushed for the move as an alternative to offering longer-term loans to the IMF.
The debate is tied up in demands the emerging economies are making for a greater say at the 185-nation IMF - at the expense of the current power structure that favors the United States and Europe. The ministers said work on changing voting rights should start before their next round of meetings in October.
Bonds would be a temporary way to provide the IMF with extra resources "without undermining the reform process," said Brazil's Finance Minister Guido Mantega.
During a day-long session on Saturday of the International Monetary Fund's policy-steering committee, many ministers said stimulus packages, bank recapitalization and other actions taken by governments and central banks to deal with the crisis are starting to show results.
Egyptian Finance Minister Youssef Boutros-Ghali, who chairs the committee, summed up the mood, saying "we can see a break in the clouds."
He said some financial markets are trending up and other economic indicators are positive but warned of "downside risks."
"Things will continue looking negative for a while but at a lesser and lesser pace," Boutros-Ghali said. "Toward the end of the year, we will start seeing the light, start seeing movement toward stabilization and then recovery." Last week, the IMF said the global economy is likely to shrink by 1.3 percent this year, the first fall in six decades.
More assessments of the global economic situation were expected yesterday when the World Bank's policy-steering committee was scheduled to meet.
IMF Chief Dominique Strauss-Kahn said ministers were satisfied with the measures various governments took to boost their economies. He called early disagreements over the extent of spending needed as childish.
He said there was a general agreement that a global economic recovery depends on "the absolute necessity of cleansing the financial system" of bad debts or toxic assets on many bank balance sheets. Such a step is expected to unfreeze credit markets.
In their communique the ministers said they agreed on an immediate increase of US$250 billion for the IMF's lending coffers so that it can "continue acting promptly to make available, under adequate safeguards, substantial resources to member countries with external financing needs."
They said a further US$250 billion will be added later to an "expanded and more flexible" line of credit known as the New Arrangements to Borrow.
US President Barack Obama is seeking congressional approval for up to US$100 billion for the NAB, matching commitments for the same amount made by Japan and the European Union.
In a victory for emerging economic powerhouses such as China and Brazil, Strauss-Kahn said the IMF will sell bonds to raise funds to lend to struggling nations. The emerging economies pushed for the move as an alternative to offering longer-term loans to the IMF.
The debate is tied up in demands the emerging economies are making for a greater say at the 185-nation IMF - at the expense of the current power structure that favors the United States and Europe. The ministers said work on changing voting rights should start before their next round of meetings in October.
Bonds would be a temporary way to provide the IMF with extra resources "without undermining the reform process," said Brazil's Finance Minister Guido Mantega.
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