Tharman: We Know What Needs to be Done and We Need to Do It

Risk of prolonged low growth; need to address tomorrow's problems today

Structural reforms can pay off now and in the future

Action on reforms requires political courage

Tharman notes that our real problem today is a lack of confidence in the medium to long term. “That lack of confidence inhibits today's activity and today's growth, “ he said. Structural reforms address this critical confidence gap, he says, citing Mexico and Spain as examples where such reforms have shown beneficial results. Reforms require some “political courage,” he said, but it means “uplifting possibilities for people, and particularly, for the youth.”

IMF Survey: The global economy seems to be stuck in a low growth, high unemployment rut. As the IMFC Chair, you have made a call to action now--a new policy momentum. What does that really mean?

Tharman: Well, first let’s acknowledge the positives, because there's been real progress since the financial crisis. The United States, the largest of advanced economies, a very important source of demand for everyone, including us in Asia, is clearly in recovery. Some countries which have undertaken tough reforms, like Spain, are seeing recovery--not just because wages have fallen and net exports are rising, but because domestic demand is recovering. Then the low-income countries are showing a vibrancy that wasn't there previously. So there are some real positives.

But overall, we are only halfway through this journey of recovering from the crisis. The Eurozone is barely recovered. We are facing new financial risks at the same time, which we have to focus on very closely. And we also face the risk of prolonged period of sub-par growth, or what the IMF Managing Director, Christine Lagarde, has called a “new mediocre.” This is a very real risk.

The point is, never treat a risk as a given. Never treat it as something preordained. We identify the risks in order to avoid them. That's the whole point of our discussions. There are ways of avoiding this risk of a prolonged period of sub-par growth.

IMF Survey : During the meetings we heard a lot of officials, both from advanced and emerging markets, talk about finding new ways to achieve new growth. They all said that structural reforms is a key. But structural reform is difficult to implement and the benefits come much later in the medium-term. How do you mobilize...