World financial leaders have promised “bold and ambitious” action to boost a global recovery that has shown recent disturbing signs of weakness.
That pledge from the International Monetary Fund’s policy-setting committee comes after a week of stomach-churning swings in the financial markets triggered by growing fears that parts of Europe could be in danger of slipping into another recession.
The 188-nation IMF called increasing economic growth an “utmost priority” and pledged to make the necessary structural changes that would stimulate greater growth. But finance leaders have made similar promises in the past, only to fall short when trying to follow through.
The commitments came in a closing statement from the IMF’s steering committee at the autumn meeting of the IMF and World Bank in Washington.
Officials also endorsed the IMF’s efforts to support three West African countries hit hardest by the Ebola crisis.
IMF managing director Christine Lagarde said the IMF made US $130m available to Guinea, Liberia and Sierra Leone, and it and other international agencies stood ready to do more.
“If more is needed, it will be there,” she said.
In addition to the $130m in interest-free loans being provided by the IMF, the World Bank is providing $400m 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 meeting on Thursday sponsored by the bank to highlight the funding needs was useful, but 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,” he told a closing news conference.
International relief agencies stressed that time was critical.
“The speed and amount of governments’ pledges will make the difference between Ebola containment or pandemic,” said Nicolas Mombrial of Oxfam.
The IMF and World Bank meetings were preceded by talks among finance ministers and central bank presidents of the Group of 20 nations, which comprise 85% of the global economy. Those discussions focused on the recent growth slowdown and troubling signs that some countries in Europe could be close to another recession.
In a comment clearly aimed at Germany, US 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.
Mr Lew also called on China, now the world’s second-largest economy, and Japan, the third, 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.
US stocks ended their worst week since May 2012, and the market turbulence served as a backdrop for the finance meetings.
While Germany came under pressure at the meetings to move to support greater government spending to boost growth, German finance minister Wolfgang Schaeuble insisted in his remarks to the IMF that chancellor Angela Merkel’s government still believed the emphasis needed to remain on reducing deficits.
He said this effort “will make the economy more robust and shock resistant and thus contribute to improved global financial stability”.
Singapore finance minister Tharman Shanmugaratnam, chairman of the IMF policy committee, said the finance officials had spent a great amount of time discussing the need to move more quickly to adopt structural reforms in such areas as entitlement spending, labour markets and taxes to boost growth 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 it monthly bond purchases.
US Federal Reserve vice chairman Stanley Fischer, delivering a speech at an IMF lecture series, 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, Mr 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 lift-off 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 near zero since December 2008.