* Finance leaders warn on over-reliance on monetary policy
* China says rich nation policies could be harmful
* IMFC recommits to avoid competitive forex devaluations
* IMF to look at impact of unconventional policies
By Lesley Wroughton and Krista Hughes
WASHINGTON, April 20 Global finance officials on
Saturday said monetary policy alone was not enough to restore
confidence in the shaky global economy as they urged countries
to take other steps to reinvigorate growth and create jobs.
"We need to act decisively to nurture a sustainable recovery
and restore the resilience of the global economy," the
International Monetary Fund's steering committee said at the
conclusion of the world lender's spring meeting.
Central banks in the biggest economies should continue their
accommodative monetary policies amid an uneven and weak economic
recovery, the International Monetary and Financial Committee
said in a communique.
Easy-money initiatives alone, however, cannot be counted
upon to provide sufficient stimulus, it said as it called for
"credible" plans to tighten budgets over time and structural
reforms to make economies more productive.
"The commodity that is in shortest supply now is
confidence," Singaporean Finance Minister Tharman
Shanmugaratnam, chairman of the IMFC, told a news conference.
But in order to shore-up confidence, a range of policy
actions were needed to nurse the recovery, he said.
"There is strong and common recognition that achieving
growth and jobs cannot rest on one policy alone - there is no
single bullet that will get us to normal growth and some
normality with regard to jobs," said Tharman.
MINDING THE CENTRAL BANKS
Aggressive stimulus from central banks in the United States,
Britain, the euro zone and now Japan has so far failed to spark
a reliable recovery, and questions are already being raised over
how much more monetary policy can - or should - do.
The head of China's central bank, Zhou Xiaochuan, told the
IMF panel that "the marginal benefits and costs" of central bank
policies in rich nations needed to be re-evaluated.
"Unconventional monetary policies alone cannot solve the
structural problems faced by advanced economies," he said.
IMF Managing Director Christine Lagarde told reporters the
extraordinary efforts by these central banks were appropriate
for now, but acknowledged the concerns of emerging countries
about the potential for destabilizing capital flows and upward
pressure on their currencies.
"We affirm our commitment to refrain from competitive
devaluations and any form of trade and investment
protectionism," the IMFC said, echoing a line from a communique
issued on Friday by the Group of 20 leading economies.
Worries nations may try to seek a trade advantage by
lowering the value of their currencies have been heightened by
Japan's recent efforts to overcome years of deflation.
The Bank of Japan earlier this month pledged to pump $1.4
trillion into its economy, some of which is expected to find its
way into emerging markets. In the days following the BOJ's
announcement, for example, the Mexican peso jumped 2.5 percent
against the dollar to its strongest level in 20
Lagarde said the IMF would step up its efforts to monitor
the spillover effects on emerging nations from the extraordinary
monetary easing in the developed world to guard against the risk
of asset bubbles forming in poorer countries.
"Prolonged easing could exacerbate the financial
vulnerabilities and affect the stability of the international
monetary system," Zhou warned the IMF committee.