Washington: The International Monetary Fund’s steering committee yesterday urged member countries to boost “growth-friendly” spending and said the IMF should explore new lending tools to help countries deal with slowing global growth.
“Downside risks to the global economic outlook have increased since October, raising the possibility of a more generalised slowdown and a sudden pull-back of capital flows,” the International Monetary and Financial Committee (IMFC) said in a statement issued after its meeting in Washington.
Echoing the same sentiments from a Group of 20 finance ministers and central bank governors statement, the 24-member IMFC said countries should “refrain from all forms of protectionism and competitive devaluations, and to allow exchange rates to respond to changing fundamentals.”
The committee said a more “forceful and balanced policy mix” was needed to stimulate growth and avoid deflation.
“Growth-friendly fiscal policy is needed in all countries,” it said, adding that accommodative monetary policies should continue in several advanced economies and structural reforms should be implemented with policies that support demand.
The committee called on the IMF to review its lending tools “to explore ways to strengthen its approach to helping members manage volatility and uncertainty – including through financial assistance, also on a precautionary basis.”
The statement gave membership backing to IMF managing director Christine Lagarde’s campaign for a stronger global financial safety net – a broader set of precautionary financing tools such as IMF credit lines that would reduce reliance on costly reserves for many emerging markets.
The panel, chaired by Mexican central bank governor Agustin Carstens, also said that a new formula for the IMF’s voting shares, due for completion by October 2017, is likely to increase the share of emerging market and developing countries.