IMF Asked to Aid G-8 With Exit Strategies For Crisis Policies

• Author: International Monetary Fund

G-8 finance ministers and central bank governors, meeting June 12-13 in the southern Italian town of Lecce, warned, however, that despite improved business and consumer confidence in the advanced economies, "the situation remains uncertain and significant risks remain to economic and financial stability."

They also noted that unemployment may continue to rise even after production picks up.

IMF Managing Director Dominique Strauss-Kahn said it was a credit to governments around the world that their policy actions were starting to have effect, but the recovery was weak and a lot remained to be done, particularly in the financial sector. He told reporters that the situation in some emerging market countries was still worrying.

While it was important to begin thinking about exit strategies for the postcrisis period, such as cutting back budget deficits, "it is even more important to first exit from the crisis." So it was essential to continue work to provide stimulus to the global economy and to clean up bank balance sheets.

Promoting sustainable recovery

In a communiqué issued at the end of the talks, ministers said they had discussed the need to prepare appropriate strategies for unwinding the extraordinary policy measures taken to respond to the crisis once the recovery is assured. "These "exit strategies", which may vary from country to country, are essential to promote a sustainable recovery over the long term," the statement said. "We asked the IMF to undertake the necessary analytical work to assist us with this process."

The ministers from the United States, Japan, Germany, France, Britain, Italy, Canada, Russia, plus the European Union were meeting ahead of a summit of G-8 national leaders in July in earthquake-stricken L'Aquila in central Italy.

In addition, the communiqué referred to the IMF's role in providing rapid resources to counter the crisis, step up help to low-income countries, and reform the governance structure of the multilateral institution:

* Boosting IMF resources. "We have led efforts to provide the IMF with the necessary resources to expand its lending capacity and are fully committed to swiftly implement the London Summit commitment, and urge other countries to participate."

* Strengthening concessional lending. "We are also exploring ways to...