IMF Chief calls for greater united effort for global recovery

IMF Managing Director Christine Lagarde on Friday in Tokyo called for greater global cooperation to put the world on a strong path to recovery and build on sweeping demographic and technological changes that are driving a shift in global economic power.

In a keynote speech at the plenary session of the IMF-World Bank 2012 Annual Meetings in Tokyo, Lagarde said top priority was for the world to get beyond the current crisis and to restore sufficient growth to generate jobs for the millions of unemployed. Getting stronger growth would also help tackle the huge debt overhang in advanced economies—the highest level since World War II. Speaking at the Tokyo International Forum conference center, Lagarde told delegates from 188 countries that, in many ways, Asian dynamism symbolises the future of the world.

From the Middle East to Africa, the world was going through rapid change, but also faced major challenges, said Lagarde.

Ahead of the annual meetings — which bring together more than 10,000 participants, including members of civil society and the private sector — the IMF released a gloomier picture of the global economy, saying it had marked down global growth to 3.3% this year and a still sluggish 3.6% in 2013.

Lagarde outlined three milestones on the road forward: Getting beyond the crisis and restoring growth; Completing reform of the financial sector; and addressing inequality and building inclusive growth.

In bringing an end to the crisis, the first priority would be to restore growth. “Without growth, the future of the global economy is in jeopardy,” she said. Restoring growth would be essential to address the huge legacy of public debt — now averaging almost 110% of GDP for the advanced economies.

She said it was urgent to complete the agenda for financial sector reform “to move beyond the system that gave us the crisis.” At the same time Lagarde expressed concern that reform momentum is waning, calling for action on better regulation, better supervision, better resolution of cross-border entities, and better internal incentives in financial institutions.

But, rejecting “unfettered globalisation,” she told delegates growth must be inclusive and benefit all, pointing to IMF research that shows less inequality is linked to greater macroeconomic stability and more sustainable growth. She said this had profound policy implications.

“It means focusing on efficiency but also keeping equity in mind when setting fiscal policy. It means fairness in sharing the burden of adjustment, and protecting the weak and vulnerable. It means better financial inclusion, so that all have access to credit and financial markets. It means better transparency and governance, so that the doors of opportunity are open to all — and if they close, one knows why,” Lagarde stated.

Turning to the role of the International Monetary Fund, Lagarde said the 188-member global institution is the premier forum for global economic cooperation. “While multilateral institutions were important in the past, they are even more important for our future,” she declared.

She underlined that the IMF had adapted to the crisis and outlined what it would be like in the future.

The IMF, she said, must always be a trusted adviser on economic policies by sharpening its economic surveillance and analysis; have the resources necessary to stand by its membership in an interconnected world — the IMF has committed $540 billion in the current crisis and disbursed $157 billion in 126 lending programs; and the institution must reflect its global membership by adjusting its representation toward dynamic emerging markets.

To stress her clarion call of greater united effort Lagarde shared impressions of her trip to Sendai, the centre of last year’s devastating earthquake and tsunami in Japan, where so much has been rebuilt. “It is an inspiration to the world,” she said. “They understand what we must all understand — only by standing together as one can we overcome the turmoil of today and improve our collective future.”

“There is a tough road ahead to transform our optimism into reality,” Lagarde stated.

She emphasised the need for action and cooperation. “The key now is to move from deliberation — talking about it — to action, moving on the policies we know are needed, and moving together on all fronts.”

Lagarde said she wanted to share some sense of what the future might look like for the global economy. “Helping each other in difficult times is the only way forward… the spirit of cooperation is the only way forward.”