IMF’s Lipsky says recovery is under way

City A.M. Reporter
THE world economy is recovering moderately but still faces challenges such as the need for medium-term fiscal consolidation, the IMF’s first managing director, John Lipsky, said yesterday.

“They are mainly confident that there is a moderate recovery underway globally,” he told reporters, referring to delegates at the G20 meeting of deputy finance and central bank chiefs in South Korea.

“Obviously there are risks and challenges, but things seem to be moving more or less in line with our forecast,” he said, listing well-designed exit strategies and medium-term fiscal consolidation as challenges.

He said some good progress has been made in discussing changes to the IMFs executive board, but did not elaborate. G20 members have pledged to reach an agreement on the issue by the time leaders meet in Seoul in November.

The US, frustrated at Europe’s refusal to share more IMF power with emerging economies, took unprecedented action last month to block plans that would have kept Europe’s long-running dominance over the 24-member board. Emerging economies have called for a bigger say in international institutions such as the IMF in line with their increasing contribution to the global economy and the resultant importance in global economic policy coordination.

A senior Indonesian official said emerging economies want more voting powers as well as a readjustment in the way the global economic policy is made. “For emerging markets, the important thing is not only the size of the increase of the quota, but the general idea of the relationship between the quota and governance of the IMF – and that needs to come in one package,” said Hartadi Sarwono, deputy governor of the Indonesian central bank. One senior official from a member country, who attended the whole of the meetings, said there was no discussion about specific currencies or currency issues, although issues related to reducing the global imbalances were a key topic.