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IMF to consider boosting precautionary financing: Lagarde
February 4, 2016 / 3:59 PM / 2 years ago

IMF to consider boosting precautionary financing: Lagarde

WASHINGTON (Reuters) - International Monetary Fund Managing Director Christine Lagarde said on Thursday that low oil and commodities prices would continue for some time, and the Fund will consider strengthening and broadening its array of precautionary financing instruments.

Christine Lagarde, Managing Director of the International Monetary Fund (IMF) attends the session "The Global Economic Outlook" during the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland January 23, 2016. REUTERS/Ruben Sprich

In a speech at the University of Maryland, Lagarde said that advanced economies should take steps to support growth through accommodative monetary policy and infrastructure spending, while emerging economies can help by boosting non-commodity revenues and allowing more flexible exchange rate policies.

She called for a stronger global financial safety net to help limit the effects of China’s slowdown, but offered few details.

“One could think about strengthening and broadening the global precautionary financing instruments that work for everyone,” Lagarde said. “One could also increase the size of the safety net. Over the next few months, the IMF will be considering with our members these and other issues related to the international monetary system.”

Lagarde said that the implementation of new voting reforms that have boosted the influence of emerging markets like China and Brazil have doubled the Fund’s permanent resources.

She said that the rebalancing of China’s economy from exports and investment to domestic consumption and services would lead to more sustainable growth.

“In the short run, however, it will lead to slower growth, and this slowdown creates spillover effects -- through trade and lower demand for commodities, and amplified by financial markets.”

Reporting By David Lawder Editing by W Simon

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