WASHINGTON – World financial leaders are pledging to act boldly to give a weak and uneven global recovery some momentum, but they have often fallen short in the past when trying to follow through on their promises.
The pledge from the International Monetary Fund’s policy-setting committee comes after a week of volatile swings in the financial markets, powered by concerns that parts of Europe may be sliding into another recession.
The IMF called increasing economic growth an “utmost priority” during the fall meeting of the IMF and World Bank. In a closing statement Saturday from the steering committee of the 188-nation IMF, the finance leaders also committed to making the necessary structural changes that would boost growth.
Officials also endorsed the IMF’s efforts to support three West African countries battling the Ebola crisis.
Managing Director Christine Lagarde said at a news conference that the IMF has made $130 million available to Guinea, Liberia and Sierra Leone and that the IMF and other international agencies stood ready to do more.
“If more is needed, it will be there,” Lagarde said.
In addition to the $130 million in interest-free loans being provided by the IMF, the World Bank is providing $400 million for the Ebola efforts.
In its closing statement, the World Bank policy committee said “swift and co-ordinated action and financial support are critical to contain” the Ebola crisis.
World Bank President Jim Yong Kim said a Thursday meeting sponsored by the bank to highlight the funding needs was useful, but he stressed that the situation remained critical. “We call on all countries that are watching: If you have any sense that you want to help with this epidemic, do it now,” Kim told reporters at a closing news conference.
International relief agencies stressed that time was urgent.
“The speed and amount of governments’ pledges will make the difference between Ebola containment or pandemic,” said Nicolas Mombrial, an official with Oxfam.
Protesters gathered outside the bank to assert that some of its projects harm the environment, but their number was nowhere near the thousands that used to gather when financial crises wracked parts of the world.
The IMF and World Bank meetings were preceded by talks among finance ministers and central bank presidents of the Group of 20 advanced and emerging nations, which comprise 85 per cent of the global economy. The talks focused on measures to strengthen the global economy and make the recovery more robust.
In a comment clearly aimed at Germany, Treasury Secretary Jacob Lew told finance ministers that European countries with “external surpluses and fiscal flexibility” needed to do more to address weakness in demand that was holding back growth.
Germany, Europe’s largest economy, ran a large trade surplus last year.
Lew also called on China, now the world’s second-largest economy, and Japan, No. 3, to make the necessary policy adjustments to increase their own growth.
A string of weak reports on economic activity in Germany jolted financial markets this past week.
U.S. stocks ended their worst week since May 2012.
German Finance Minister Wolfgang Schaeuble insisted in his remarks to the IMF that German Chancellor Angela Merkel’s government still believed the emphasis needed to remain on reducing deficits.
He said that this effort “will make the economy more robust and shock resistant and thus contribute to improved global financial stability.”
Singapore Finance Minister Tharman Shanmugaratnam, who is the chairman of the IMF policy committee, said the finance officials spent a great amount of time discussing the need to move more quickly to adopt structural reforms in such areas as pensions and health programs, labour markets and taxes to get more spending money in consumers’ pockets and avert a prolonged period of weak growth.
“It will require some political courage and some degree of realism on the part of national legislatures, but it can be done,” he said.
The finance officials also stressed the importance of the Federal Reserve and other central banks to communicate clearly their intentions so that emerging market economies have time to prepare their own economies and avert the shocks that were felt last year when the Fed first announced that it was thinking of starting to reduce its monthly bond purchases.
Fed Vice Chairman Stanley Fischer, delivering a speech at an IMF lecture series on Saturday, said, “We have done everything we can, within the limits of forecast uncertainty, to prepare market participants to what lies ahead.”
In response to an audience question about the timing of the Fed’s first interest rate hike, Fischer said, “If the world is growing much faster, it (interest rates) will lift off sooner and if the world is growing more slowly, then quite likely the liftoff will be later.”
The widespread view is that the Fed’s first increase in its benchmark short-term rate will occur around June of next year. This rate has been at a record low of zero since December 2008.