We need a new balance in policies that meets the needs of a new phase of the economic recovery globally, said Singapore Finance Minister Tharman Shanmugaratnam, who chaired the twenty-ninth meeting of the IMFC.
This doesn't mean a sudden withdrawal of macroeconomic policiesespecially monetary policiesthat support the recovery. But it does mean much greater focus on structural reforms, Tharman said.
Old and new risks
Tharman highlighted a few key areas that merit greater attention, according to the IMFC.
In addition to the need for structural reformssuch as repairing balance sheets, strengthening banking systems, and improving the functioning of labor marketshe cited a few key risks to the global economy. Risks to financial stabilitynot only legacy risks but also new oneswere of particular concern, such as an increase in corporate debt in some countries that is not matched by growth in investment.
He also noted concern about the continued risk of volatility in capital flows to emerging markets. This heightened risk partly reflects a change in the structure of global financethere is not just a higher volume of capital flows but also a change in the composition of these flows.
Geopolitical risks also warrant vigilance, Tharman said, noting that the IMF plays an important role in helping stabilize geopolitical crises and de-escalate the associated economic risks.
Not just more, but also better growth
IMF Managing Director Christine Lagarde emphasized the need to sustain the global recovery through the pursuit of better, more inclusive, and more balanced growth.
She noted the IMFC's strong endorsement of her Global Policy Agenda, which provides encouragement for the IMF to move forward with what it can offer the global community to promote growth.
The IMF's work on inequality supports the quest for inclusive growth, Lagarde said. She added that higher quality growthwhere such factors as climate change and environmental degradation are taken into accountis critically important. This is also an area of focus for the IMF's work.
We've worked on the removal of energy subsidies; we will soon be publishing work on the setting of the right price for energy, Lagarde noted. For all issues of macroeconomic relevance, she said, the IMF will provide analysis and work with its member countries to help them pursue their chosen growth path.
IMF governance reform
Both Tharman and Lagarde expressed regret for the continued delay in advancing the IMF quota and governance reforms agreed in 2010. These reforms to the Fund are not just institutional reforms, they're reforms that will enable us to have a safer and better world, because the Fund provides critical public goods, Tharman said.
At the G-20 press conference on April 11, Tharman said that there was significant goodwill among ministers to find a way forward on the quota issue and that there was consensus on the absolute importance of maintaining a strong and adequately resourced IMF.
We have a way forward, said Lagarde, noting that the IMFC set an end-2014 deadline for ratification of the 2010 reforms. If this deadline is not met, the IMF will develop options for next steps.
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