WASHINGTON, Sept 24: Global economic imbalances pose serious risks to the world’s prosperity, and countries must share the work of fixing them, International Monetary Fund Managing Director Rodrigo Rato said on Saturday.
“The question is not whether they will be reduced, but whether their reduction will happen in an orderly or disorderly way,” the fund chief told delegates at semi-annual meetings of the IMF and World Bank.
In his speech, Rato called on oil producers to spend more to boost output amid rocketing energy prices, on Europe and Japan to speed economic growth, on Asia to increase investment and on the United States to tighten fiscal discipline.
He also encouraged emerging countries to practice economic prudence while risk premiums remain narrow and interest rates low, saying such benign market conditions may be fleeting.
“The current exceptionally favourable conditions in financial markets cannot be expected to last forever,” Rato told the Washington meeting.
Turning to emerging Asia, Rato noted steps toward currency flexibility in China and Malaysia but said he saw more scope for exchange rate flexibility in the region.
“The recent moves in China and Malaysia are welcome, and I hope that the authorities will use the flexibility afforded by their new arrangements,” he said, adding that higher domestic demand in Asia was also key to orderly global adjustments.
Rato also urged countries to work toward a favourable outcome of the Doha Round of global trade talks.
“The large economies carry a particular responsibility to work for a good agreement, and to head off pressures for protectionism, which would be enormously damaging to the world economy,” he said.
The IMF chief said the Fund needed to ensure its advice was taken seriously by its 184 member countries. He urged governments to consider proposals to boost the stature of big emerging nations within the institution.
