Asia's prosperity vital for the world: IMF chief
Asia's prosperity is vital not only for the region but for the world, the International Monetary Fund said yesterday.
“Asia is a vibrant region with a large population. It is clear to us that this region of the world is where growth is originating and is going to come from in the years to come,” said Christine Lagarde, managing director of the IMF.
Her comments came at the conclusion of the two-day conference, 'Advancing Asia: Investing for the Future', organised by the IMF and the Indian government at the Taj Palace in New Delhi.
The conference saw participation from senior officials, corporate executives, academics and civil society representatives of more than 30 Asian countries. The Daily Star is a media partner of the event.
Lagarde went on to term the conference a productive and constructive one. “It has really been a great success.”
“We took stock of Asia's strong economic performance and its ongoing policy challenges -- monetary, fiscal and structural -- in the face of an increasingly uncertain global economic environment.”
A combination of monetary, fiscal and structural reforms will make economic growth sustainable and inclusive, she said.
The issues of climate change, inclusive growth, gender inequality that dog Asia require attention as of now.
Lagarde said the IMF is Asia's partner and wants to continue to be one. “That partnership with IMF and Asia is embedded in the quota reform that we have just completed.”
The IMF in January announced implementation of quota reforms that will give more voting rights to emerging economies such as India and China in the functioning of the multilateral institution.
The agreement to establish a South Asia Regional Training and Technical Assistance centre, which will serve Bangladesh, Bhutan, India, Maldives, Nepal, and Sri Lanka, will be the first IMF-supported hub to combine both technical assistance and training.
Lagarde said the IMF also needs to adopt and adjust its approach, both in terms of surveillance, lending and capacity building, to the specific needs of the region and to the specific needs of the countries.
“Clearly there has been a lot of talk about spillover and the impact of monetary policy decisions made elsewhere. All of that needs to be taken into account by us as an institution to be absolutely relevant and tailored to the needs of our members.”
Citing the issues of coordination in policies raised in the various discussions, Lagarde said the IMF can play a significant role as a forum for coordination.
In a session on Saturday, Raghuram Rajan, governor of the Reserve Bank of India, called for global central banks to adopt a system for assessing the wider impact of their actions, including unconventional monetary policies now in use.
Rajan proposed that a group of academics should measure and analyse the "spillover" effects of monetary policies and indicate which should be used and which avoided.
He suggested a traffic light system, grading policies green, orange or red.
The monitoring system could be implemented through an international agreement along the lines of the Bretton Woods currency accord or via the IMF.
“The international community has a choice. We can pretend all is well with the global financial non-system and hope that nothing goes spectacularly wrong. Or, we can start building a system for the integrated world of the 21st century,” Rajan added.
In her closing remarks, Lagarde also welcomed the formation of the Asian Infrastructure Investment Bank and BRICS Bank, saying the banks would be instrumental in meeting the huge demand for investment in infrastructure in Asia and many other parts of the world.
“There is so much investment needed in infrastructure, and to have one, two, three, four players on the international scene addressing those needs is great. If they can work together, the better.”
She said the IMF itself does not do investment, but provides a lot of technical assistance in the projects that are well managed.
“We are in the business of helping countries in disarray, when there is a significant balance of payment issue, when there is impossibility for a country to finance and refinance itself. Then, we are called upon for help. But we do not finance projects.”
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