Dominique Strauss-Kahn - economy - IMF - subprime

Food prices could provoke economic crisis, says IMF chief

Friday 11 April 2008

In an interview with FRANCE 24, IMF chief Dominique Strauss-Kahn said that rising food prices could lead to a financial crisis as serious as the current 'subprime' crunch.

In an exclusive interview with FRANCE 24, Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), warned that the risk of inflation from rising food prices could be as damaging to world economies as the current subprime crunch.

“The current economic crisis does not merely concern growth. There's a crisis developing that is at least as serious: the rise in inflation and the prices of raw materials, notably food," Strauss-Kahn said in FRANCE 24’s "The Business Interview."

“Several countries, particularly in Africa, will not only see economic disruption, but also considerable individual suffering, because rising prices will destabilise the food supply in these countries,” he added.

G7 trying to find a solution

The seven finance ministers of the G7 countries are meeting in Washington to discuss the current global economic crisis, which Strauss-Kahn says is the worst financial crisis since the 1930s Great Depression.

At a news conference, he called the current global turmoil "a new kind of crisis," adding that "there is no other institution but the IMF likely to work on the linkages between the financial sector and the real economy, and that is really what is at stake today."

The meeting of key finance ministers and central bank governors comes amid increasingly grim forecasts for the international economic outlook, with worries about a global slowdown and a US recession.

Federal Reserve chairman Ben Bernanke said Thursday the current financial crisis requires swift action to improve US market regulation, endorsing a plan by a US task force.

"We do not have the luxury of waiting for markets to stabilise before we think about the future," Bernanke said in a speech, the text of which was released by the Fed.

"Indeed, many of the necessary changes that have been identified, including increasing transparency, improving risk management and attaining better coordination among regulators, could provide important support to the process of normalizing our financial markets."

The G7 ministers will weigh a plan drafted by a global group, the Financial Stability Forum (FSF), that would require banks and securities firms to be more transparent in their dealings and boost capital reserves as part of improved risk management to avert future crises.

Pour aller plus loin

CREDIT CRISIS: G7 seeks to avert global recession (11/04/2008)
RECESSION - US: US in 'modest recession,' IMF says (09/04/2008)
FINANCE - LOSSES: IMF: mortgage crisis may cost $945bn worldwide (08/04/2008)