The International Monetary Fund declared on Thursday it was shifting from rescue efforts to helping put the world economy back on stable ground after more than a year of global economic turmoil. Outlining its work plan for the next six months, the IMF said it would help countries devise strategies to withdraw the excess liquidity they poured into their economies to stabilise the financial system and avoid a global depression.
While the IMF has said it is still too early in the fragile recovery to withdraw support, a closed-door conference at its IMF Washington headquarters on Thursday suggested it is ready to hammer out details on exit strategies. IMF Managing Director Dominique Strauss-Kahn called the IMF work plan "ambitious but achievable" and also noted this was the opportunity for the fund to deliver on its expanded global role and show it can be relevant.
"We must take care not to lose the momentum," said Strauss-Kahn, who during the past year introduced changes in IMF lending policies and instruments that made it easier for crisis-hit countries to turn to it. Among the IMF's top priorities over the next months, the IMF said it would develop a set of principles that would ensure an orderly and co-operative exit from fiscal, monetary and financial sector support.
It said it would deliver a paper in January outlining the principles for fiscal adjustment in advanced economies, the role of tax policy in fiscal consolidation and measures to address fiscal challenges arising from ageing populations. While the fund tries to ensure a smooth global transition, it will also focus on its own mandate as a lender and economic overseer.
"The basic question is whether the fund is adequately equipped to be an effective guardian of global macroeconomic and financial stability," said Reza Moghadam, director of the IMF's strategy, policy and review department. He said the review of the IMF's mandate will be conducted in two phases, with initial proposals presented to member countries in April, followed by a more concrete plan in October.