IMF Chief Puts Focus on Building Stable Post-Crisis World

• Author: International Monetary Fund

At a press conference in Istanbul on October 2 ahead of the IMF-World Bank Annual Meetings, Strauss-Kahn said the Meetings were being held at a defining moment for the global economy when recovery from deep recession was getting under way.

But he warned that the crisis is not over and that unemployment would cast a long shadow over the recovery. "Growth resuming is one thing, but it doesn't mean that the crisis is behind us."

In its latest forecast for the global economy, the IMF says economic activity worldwide will expand by about 3 percent in 2010, after contracting by 1 percent in 2009.

Strauss-Kahn said that unprecedented collaboration during the crisis had helped to avoid a global financial meltdown.

G-20 sets the stage

He urged policymakers from the IMF's 186 member countries gathering in Istanbul, Turkey, to use the meetings to build on this collaboration to help reshape the post-crisis world, and strengthen forces for peace by reducing economic instability. Leaders of the Group of 20 (G-20) industrialized and emerging market countries had made a start at their summit in Pittsburgh on September 25 and the IMF would become the machinery to make this collaboration work.

With the G-20 framework adopted in Pittsburgh, the IMF would assist in the mutual assessment of economic policies between nations. And he stressed that the historic shift in country representation at the IMF proposed by the G-20 toward dynamic emerging markets and developing countries by 2011 would make the IMF more legitimate and hence more effective. By reinforcing the financial credibility and legitimacy of the IMF, "this annual meeting may be the starting point of a new IMF."

Strauss-Kahn saw several immediate policy challenges:

* A premature withdrawal of fiscal and monetary support could kill the recovery. Private demand is not yet self-sustaining.

* Efforts to fix problems in the financial sector-where progress has been partial-should stay at the top of the agenda. Without this, the recovery "could wither on the vine."

* What will be the next global growth engine? With U.S. savings on the rise, countries running current account surpluses need to shift from exports to domestic demand.

* The low-income countries need increased donor funding. The fallout from the crisis is most severe for the world's poorer countries-the "innocent victims of the crisis."

In terms of reshaping...