'IMF to work more closely with Asia'
The International Monetary Fund (IMF) is looking to work ever more
closely with Asia to lessen the impact of the global crisis on the
region and to help promote sounder and stronger growth globally, IMF
First Deputy Managing Director David Lipton said yesterday.
In his first major speech since his appointment late last year to the
IMF management position, Lipton told participants at Asian Financial
Forum in Hong Kong that Asia's economies today are strong and showing
great promise, in part because of the reforms introduced courageously,
and not without painful consequences, when Asia faced its own crisis in
the nineties. But now, it is problems in the rest of the world, Europe
in particular, that pose a risk to Asian prosperity. Now, Asia has a
stake in seeing Europe solve its problems and even in playing a role in
that process.
Beyond that, Asia has its own challenges, both in the near and longer
term, Lipton warned, but by working together, more and better than in
the past, Asia and the IMF can help ensure stability and prosperity for
the region and for the world, he added.
Reflecting on the global outlook, Lipton observed that at the global
level, the pace of economic activity is weakening, and the risks for
Europe and the world are high. But, he stressed, "Rather than allow
ourselves to be paralyzed by pessimism, it is time to focus on the more
hopeful perspective of working our way through this crisis. If there is
good news, it is that we know what policies are needed, and we are busy
trying to muster the finance to support those policies. Without bold
action however, Europe could be swept into a downward spiral of
collapsing confidence, stagnant growth, and fewer jobs. And in today's
interconnected global economy, no country and no region would be immune
from that catastrophe. This is especially true for Asia," Lipton said,
reflecting its tight trade and financial links with Europe.
He said Asia emerged from the 2008 financial crisis with its global
standing strengthened and called on Asian policy makers to stay the
course with fiscal normalization to rebuild buffers eroded since the
2008 crisis; pause monetary tightening as long as inflation forecasts
remained within central banks targets; ensure liquidity and funding in
the banking sector; and further reduce external vulnerabilities by
lengthening debt maturities, securing credit lines and further expanding
currency swap arrangements, either bilaterally or through the
multilateral Chiang-Mai Initiative. Lipton added that should downside
risks materialize in force, policymakers in Asia would need to respond
swiftly, as they did in 2008/2009.
"As Asia goes forward, the IMF stands ready to be a partner," Lipton
said, adding that "The IMF learned important lessons from Asia's
experience that we are now applying to programmes across the globe,
including in Europe." Two areas he singled out where the IMF's work can
support the region's interests are enhancing economic and financial
surveillance for crisis prevention, and strengthening the global
financial safety net, including sharper surveillance of economic
spillovers and macrofinancial linkages, but also new lending tools, such
as the precautionary credit line, specifically tailored for crisis
by-standers. Efforts are also underway to better integrate IMF resources
with regional reserve pooling arrangements such as the Chiang Mai
Initiative and enhance cooperation with them.
At the same time, Asia looks set to take a bigger role at the IMF,
Lipton said. He noted the importance of an increased role for Asian
members within the IMF, which is reflected among other recent
developments in the package of quota and voice reforms that were agreed
in 2010. These reforms will increase emerging Asia's representation by
more than a quarter, with Japan and China the second- and third-largest
shareholders and India also in the top 10. |