Global Resilience, Sustainable Recovery Are IMF Work Priorities

The IMF’s work agenda for the coming months centers on invigorating a sustainable recovery and making the global economy more resilient.

Against the backdrop of a global economy that has avoided the worst, but is still in a fragile and uneven recovery, the work program discussed by the IMF Executive Board on June 3 is designed to help place the global economy on sustained and balanced growth path.

The Board’s biannual discussion of its work program focused on translating the policy priorities laid out in the Global Policy Agenda into a specific action plan for the 188-member institution over the next six to twelve months. The IMF’s Global Policy Agenda was presented by Managing Director Christine Lagarde at the recent IMF–World Bank Spring Meetings.

In addition to assisting members with identifying emerging risks and designing calibrated policies to encourage stronger and sustainable growth, the work program emphasizes the need to address medium-term structural issues to restore the world economy’s resilience—strengthening financial systems, addressing high deficits and debt, supporting growth and jobs, and narrowing global imbalances and anticipating spillovers.

IMF Survey spoke with Siddharth Tiwari, Director of the IMF’s Strategy, Policy, and Review Department, about the key components of the work program.

IMF Survey: At the 2013 Spring Meetings, the emphasis was on a better balance of monetary, fiscal, and structural strategies. How is this reflected in the work program?

Tiwari: At the time of the Spring Meetings, it was recognized that even though sentiment had improved, growth and jobs were still lagging in many countries. New risks were also emerging because of limited progress in addressing legacy issues of the crisis. Against this background, policies that balanced the need to support growth with the need to overcome weak fundamentals, be it fiscal, financial, business or household, were needed. The current work program focuses on these issues.

• For the euro area, the Fund’s analysis will seek to promote a common understanding on options for fiscal and financial sector repair and reform, as well as growth-promoting structural reforms.

• In other advanced economies, especially the United States and Japan, we will be analyzing the implications of unconventional monetary policies, while taking into account their growth and structural reform priorities.

• Emerging market economies, which have been growing at a robust pace, need to recalibrate their policies to guard against financial excesses and rebuild policy buffers. For this, our work will focus on their growth performance and prospects, and on financial sector deepening, which should help bolster their resilience and capacity to absorb and manage capital flows.

• In low-income countries, our advice will focus on rebuilding policy buffers while meeting pressing infrastructure and social needs. We will further strengthen our policy advice on the management of natural resource wealth, financial deepening, and structural transformation. Our work on reviewing the Fund’s debt limits policy envisaged for end-2013 should also help low-income countries scale up investment while safeguarding debt sustainability.

IMF Survey: How will the work program tie into the IMF’s ongoing work to examine the role of unconventional monetary policy during and after the global crisis?

Tiwari: At the time of the Spring Meetings, concerns were being raised about the spillovers from loose and unconventional monetary policies in advanced economies and the risks associated with exit. The current work program envisages a number of papers on the topic of unconventional monetary policy. A paper on The Global Impact of Unconventional Monetary Policy, due in September, will examine the impact of this policy on advanced and emerging market economies, its contribution to narrowing global imbalances, and the implications of exit strategies.

Monetary policy trends before and during the crisis and architecture issues will be the subject of an umbrella paper in November on Monetary Policy: Its Role Now and in the Future. At the same time, the Spillover Report in July will look at stabilization dividends from unconventional monetary policy and at exit issues.

IMF Survey: How does the IMF’s work program for the months ahead address the global objective of job creation and inclusive growth?

Tiwari: Job creation and inclusive growth are imperatives that resonate in the entire membership, and the work program includes a number of initiatives in this area. A guidance note, drawing on the Board discussion in March on the Jobs and Growth paper is planned for later this year. This will allow Fund staff to tailor its advice and recommendations to differing countries’ challenges and constraints.