After the International Monetary Fund (IMF) warned against serious risks due to inflation, world finance officials urged the organisation to keep closer tabs on the global economy to prevent future crises.
WASHINGTON, April 12 (Reuters) - World finance officials on
Saturday urged the International Monetary Fund to keep closer
tabs on the global economy in the hope future crises like the
one currently shaking world markets can be prevented.
After one of its twice-yearly meetings, the IMF's 24-nation
steering committee said global financial instability had
increased and inflation risks had risen due to a sharp run-up
in the cost of food and other commodities.
"Policy-makers should continue to respond to the challenge
of dealing with the financial crisis and supporting activity,
while making sure that inflation is kept under control," the
International Monetary and Financial Committee said in a
As rich countries struggle to get a handle on financial
turmoil that has rocked markets for nine months and worry the
U.S. dollar may have fallen too far, emerging and developing
nations wondered whether they would be spared from a crisis
that may have already pushed the U.S. economy into recession.
The IMFC said developing economies had shown resilience in
the face of the crisis sparked by mounting U.S. mortgage
defaults, but cautioned that inflationary risks had picked up.
"For many counties, containing inflation and addressing
vulnerabilities remain key priorities," it said.
Concerns over rising prices for food and other commodities,
and related shortages of key staples, has shaken developing
economies worldwide, sparking often-violent protests. Haiti's
government fell on Saturday after senators fired Prime Minister
Jacques Edouard Alexis following a week of food riots.
Developing countries called on the IMF and World Bank to
stand ready with emergency funding to help the poorer nations
of the world in case financial market woes spread to their
economies and the food crisis worsened.
Just 12 months ago, finance ministers and central bank
chiefs were basking in five consecutive years of strong world
growth, unaware a U.S. housing boom was about to go bust,
triggering what may be the biggest financial shock since the
All of this has taken place at a time the IMF,
traditionally a lender of last of resort in times of crises,
has sought a new role for itself amid a sharp decline in
borrowing from emerging and developing economies.
The Washington-based lender has also sought to boost its
relevance by giving emerging economies China, India, Brazil,
Mexico and South Korea more voting power in the institution.
While voting power changes and a new financial model aimed
at putting the fund on sounder footing still need the approval
of all of the IMF's 185 member countries, they were endorsed by
"The fact that the most relevant economic and financial
multilateral institution in the world shows the capability to
reform itself at this very moment, constitutes by itself a
response to the crisis and an indication that a global crisis
has to be addressed with a global view," IMFC Chairman Tommaso
Padoa-Schioppa told a news conference.
While emerging economies such as China, India, Mexico,
South Korea and Brazil support the changes in their relative
voting power, some nations that stand to lose from the shift --
such as Russia, Argentina, Saudi Arabia, Iran and Egypt --
oppose the move, saying it does not go far enough.
The changes, to be decided by April 28, will complete a
number of institutional reforms that have been in the works for
years. With reforms nearly done, financial leaders said it is
time for the IMF to focus on financial stability.
But even as ministers called for more IMF attention to
policing the global crisis, advanced countries complained its
growth forecasts for 2008 and 2009 were overly pessimistic.
"I think it's useful that the fund took a very dry and
realistic view of the situation," Padoa-Schioppa said in
defense of the IMF.
IMF Managing Director Dominique Strauss-Kahn said
forecasting growth was especially tough in the current
environment. "I don't think really that the difference between
0.1 or 0.2 has such an importance," he said.
There was widespread acknowledgment, however, that risks to
global growth had risen with a sharp slowdown in the U.S.
"The risk that the U.S. will fall into a recession in 2008
has increased and real GDP growth in the euro area is also
slowing down," European Monetary Affairs Commissioner Joaquin
Date created : 2008-04-13