By Steve Herman
Global finance ministers are calling for increasing the pace of reform to rebuild confidence at a time of faltering economic growth.
At their the joint meeting with the World Bank in Tokyo, leaders of the International Monetary Fund issued a communique acknowledging economic growth is decelerating, amid risk and uncertainty.
The chairman of the IMF’s steering committee, Singapore’s Finance Minister Tharman Shanmugaratnam, says the situation is improved from earlier in the year.
“We’re in a better position now than we were six months ago. It remains challenging,” he said. “There remain downside risks. And, in particular, we were all quite candid about the nature of those downside risks. The fiscal cliff in the U.S. and the uncertainties over how it will be resolved is a major uncertainty that affects the entire world. That’s, in fact, a major spillover.”
Unless the U.S. Congress acts by the end of the year, cuts in spending and rises in taxes will automatically be implemented.
U.S. Treasury Secretary Timothy Geithner acknowledged to his counterparts his country has made progress but still has much work to do in order for its fiscal affairs to be in order. His comment in Tokyo came hours after the U.S. Government announced the budget deficit was above one trillion dollars for the fourth straight year.
Frustration was also expressed among participants here with the slow pace of debt reform in Europe.
About the only disagreements to emerge publicly from the sessions concerned how much time troubled countries, such as Greece, should get to slash budgets and whether monetary easing intended to encourage more bank lending will actually destabilize markets while failing to prevent recession.
IMF managing director Christine Lagarde says there was no objection to the recommendations given to the membership.
“I think there is a general consensus that collective action is going to produce results,” she said.
But Lagarde’s Global Policy Agenda – a written statement issued Saturday – sounded gloomy with expressions of frustration. It notes limited progress in addressing debt overhangs and weak financial systems and says confidence has not been restored because of continued uncertainty on key policies.
The IMF and World Bank governors’ joint Development Committee is expressing concern that financial crises “mean fewer jobs where millions are needed.” The committee also called on the bank to step up work with other agencies and donors to break the cycle of emergency aid for the Sahel, in Africa, where it says hunger threatens the lives of 19 million people and the stability of the region.
For the less fortunate in poorer countries, the IMF has announced it is devoting more than $1 billion from windfall sales of gold for low-cost loans.