WASHINGTON, April 10 The International Monetary
Fund on Thursday urged world leaders to pick up the pace on
fiscal and financial policies to push forward on the "marathon"
to growth - or risk a prolonged global slump.
In a 14-page "Global Policy Agenda" for the world's economic
policymakers, the IMF outlined a long list of tasks that remain
incomplete, from reining in shadow banking risks in China to
speeding up financial reforms.
The Washington-based Fund also said it was "utterly
disappointed" the United States again failed to pass historic
reforms to the IMF meant to give more power to emerging markets.
"The key challenge remains transforming a modest and fragile
recovery into more rapid, balanced, and sustainable growth," the
IMF said ahead of its twice-yearly meetings with the World Bank
that kick off on Friday. "This is a marathon, not a sprint."
Taking stock since the last meetings in October, the IMF saw
similar risks on the table, including the chance for huge market
and exchange rate volatility if the U.S. Federal Reserve botches
its exit from a massive monetary stimulus program, withdrawing
too quickly or not communicating well enough.
"Such a scenario could be especially disruptive if financial
stability risks from very accommodative monetary policies,
including excessive risk-taking and leverage, are left unchecked
by supervisory authorities," the IMF said, echoing risks
highlighted in its global financial stability report earlier
The Fund said more coordination between central bank and
financial regulators could limit exchange price swings, and said
central bankers should have wider discussions of their plans.
And the IMF said some major emerging market countries were
calling for even more cooperation on monetary policy, as they
blamed Fed policies for destabilizing capital flows.
The IMF cautioned advanced economies to avoid withdrawing
easy money too quickly, as the recovery is still fragile,
inflation low, and countries are still struggling to crawl out
from piles of debt in the wake of the global financial crisis.
It also warned emerging markets, which still contribute the
bulk of global growth, could slow even more.
"Geopolitical tensions that have recently come to the fore
could also cloud the growth outlook," the IMF repeated,
referring to the conflict between Russia and some Western
countries over Moscow's annexation of Ukraine's Crimea region.
The Fund focused especially on a potential "hard landing" in
China, the world's second-largest economy, which could have
negative repercussions on other emerging markets.
COSTS OF SLOW GROWTH
Overall, the IMF urged countries to do more to boost growth,
including through structural reforms if countries have no space
to further boost spending or cut interest rates. Growth is also
a top priority for the Group of 20 leading advanced and emerging
market economies, whose finance ministers meet on Friday.
"The costs of continued sluggish growth are clear - there
will only be modest income gains and gradual reductions in
unemployment," the IMF said.
But the Fund saved its sharpest words for the lack of
progress in passing 2010 reforms to its voting shares, or
quotas, which double the Fund's resources and give greater voice
to emerging markets like China. The reforms have been held up by
the U.S. Congress, but a bid to get it to approve the changes
last month was dropped amid concerns it could hold up a bill
providing aid to Ukraine.
"The delay in making effective the 2010 reform package is
utterly disappointing," the IMF said. "These reforms are
essential to ensure the continued legitimacy, relevance,
financial strength and effectiveness of the Fund."
(Reporting by Anna Yukhananov; Editing by Andrea Ricci)