CAIRO, Sept 15: Dominique Strauss-Kahn, the head of the International Monetary Fund, said on Monday he expected the global financial sector to shrink as a result of the international credit crisis.

“The financial sector, not only in the US but also in the rest of the world, will be at the end of the crisis smaller than the financial sector today,” the IMF’s managing director told reporters in Cairo.

“The financial sector will shrink,” he said, expecting “a phase of consolidation of the financial sectors.”

He spoke amid fears of a domino effect in the global financial system after troubled investment giant Lehman Brothers sought bankruptcy protection.

“What we see today with Lehman Brothers is something that started months ago.”

“The kind of bank we see in the United States but don’t see in Europe for instance, which are investment banks standing alone, is that kind of bank that are going to be less numerous in the future,” he said.

“The consequences on the financial sector are not over, and we are going to see more,” he said, but added that “the causes are for a large part behind us.”

Strauss-Kahn stopped short of describing the economic situation as a recession, speaking instead of “an important slowdown.”

“It is an important slowdown, it’s not a very deep slowdown, more a protracted slowdown,” he said, predicting things will pick up next year.

“All the elements which were at the roots of the crisis are probably unwinding slowly and 2009 may see the beginning of the recovery,” he said.

Strauss-Kahn was in Egypt for talks with officials, including President Hosni Mubarak, on the country’s economic reform programme.—AFP