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IMF urges quick, effective moves to buoy growth

Published: Friday, July 3 2015 7:31 a.m. MDT

CORRECTS FIRST NAME OF NODA - Japan's Prime Minister Yoshihiko Noda, left, and U.S. Treasury Secretary Timothy Geithner shake hands as they meet on the sidelines of the annual meetings of the IMF and the World Bank Group in Tokyo, Friday, Oct. 12, 2012.  (Yuriko Nakao, Pool, Associated Press) CORRECTS FIRST NAME OF NODA - Japan's Prime Minister Yoshihiko Noda, left, and U.S. Treasury Secretary Timothy Geithner shake hands as they meet on the sidelines of the annual meetings of the IMF and the World Bank Group in Tokyo, Friday, Oct. 12, 2012. (Yuriko Nakao, Pool, Associated Press)

TOKYO — Global financial ministers called Saturday for quick and effective action to safeguard faltering economic growth and rebuild shaken confidence as they ended an annual meeting of the International Monetary Fund.

The IMF's International Monetary and Financial Committee also urged emerging economies to adapt their own policies to help counter slowing growth in Europe and the United States.

The IMFC said decisive action was needed to "break negative feedback loops and restore the global economy to a path of strong, sustainable and balanced growth."

The annual meeting of the IMF and World Bank, convened in Tokyo this year, has highlighted frustrations among many countries over drag on growth from the lingering debt crisis in Europe, and alarm over a possible blow to the world's largest economy if the U.S. fails to resolve an impasse over its budget deficit.

Participants march during a demonstration against the annual meetings of the IMF and World Bank being held in Tokyo, Saturday, Oct. 13, 2012.  (Koji Sasahara, Associated Press) Participants march during a demonstration against the annual meetings of the IMF and World Bank being held in Tokyo, Saturday, Oct. 13, 2012. (Koji Sasahara, Associated Press)

"Global growth has decelerated and substantial uncertainties and downside risks remain," the IMFC said in a communique. It exhorted advanced economies to carry through with needed structural reforms and "credible fiscal plans."

In her "Global Policy Agenda," Christine Lagarde, the IMF's managing director, struck a relatively gloomy tone.

"A lot has been done, but — with limited progress in addressing legacy issues such as debt overhangs and weak financial systems and continued uncertainty on key policies — confidence still has yet to be restored," the agenda says.

While most of the attention during the meeting was focused on the crises facing the biggest economies, the IMF and World Bank — whose mission is to fight poverty — have also emphasized the need to help protect the poor from the spillover of slowdowns in richer nations.

Sweden's Minister of International Development Cooperation Gunilla Carlsson, center, speaks as Peru's Finance Minister Luis Miguel Castilla, left, and President of the Japan International Cooperation Agency(JICA) Akihito Tanaka listen at a seminar during the annual meetings of the IMF and World Bank in Tokyo, Saturday, Oct. 13, 2012. (Itsuo Inouye, Associated Press) Sweden's Minister of International Development Cooperation Gunilla Carlsson, center, speaks as Peru's Finance Minister Luis Miguel Castilla, left, and President of the Japan International Cooperation Agency(JICA) Akihito Tanaka listen at a seminar during the annual meetings of the IMF and World Bank in Tokyo, Saturday, Oct. 13, 2012. (Itsuo Inouye, Associated Press)

The IMF announced it would devote $1.1 billion in funds from windfall sales of gold to help fortify funds for low-cost loans for low-income countries.

The risk of the U.S, the world's biggest economy, running into a "fiscal cliff" of tax increases and deep spending cuts next year unless the Obama administration and Congress resolve a deadlock over the budget has overshadowed the gathering of top financial officials. Such a prospect would deal a heavy blow to the economy, eroding progress made since the 2008 global crisis.

Despite making progress on getting its fiscal house in order, the United States still has much work to do, Treasury Secretary Timothy Geithner told fellow financial leaders at the gathering Saturday. The comment came just hours after the U.S. government announced that the budget deficit had topped $1 trillion for a fourth straight year despite a modest improvement thanks to stronger economic growth.

Participants march during a demonstration against the annual meetings of the IMF and World Bank being held in Tokyo, Saturday, Oct. 13, 2012.  (Koji Sasahara, Associated Press) Participants march during a demonstration against the annual meetings of the IMF and World Bank being held in Tokyo, Saturday, Oct. 13, 2012. (Koji Sasahara, Associated Press)

"It is important that we in the U.S. enact a balanced framework to bring down our fiscal deficit and debt over several years, while continuing to provide support for jobs and growth in the short term," Geithner said.

The Treasury Department said Friday that the deficit for the 2012 budget year totaled $1.1 trillion, though a 6.4 percent increase in tax revenues thanks to stronger growth helped contain the deficit.

The overwhelming emphasis of the Tokyo gathering has been on coddling fragile growth around the globe.

At Saturday's meeting of the IMFC, which advises the IMF and monitors the world financial system, officials from developing and emerging economies urged the U.S. and European nations to prevent malaise in their regions from slowing global growth.

"Advanced countries should rethink their macroeconomic strategies and avoid simultaneous fiscal contractions and the consequent overburdening of monetary policies," Guido Mantega, Brazil's finance minister, told the committee.

In this photo released by World Bank, World Bank President Jim Yong Kim, second right, speaks as South Korean Finance Minister Bahk Jae-wan, left, U.S. Treasury Secretary Timothy Geithner, second left, and Japan's Vice Finance Minister Tsutomu Okubo, right, listen to him at a ministerial meeting on the global agriculture and food security program at the annual meetings of the IMF and World Bank meetings in Tokyo Friday, Oct. 12, 2012.  (Ryan Rayburn, World Bank) EDITORIAL USE ONLY, Associated Press) In this photo released by World Bank, World Bank President Jim Yong Kim, second right, speaks as South Korean Finance Minister Bahk Jae-wan, left, U.S. Treasury Secretary Timothy Geithner, second left, and Japan's Vice Finance Minister Tsutomu Okubo, right, listen to him at a ministerial meeting on the global agriculture and food security program at the annual meetings of the IMF and World Bank meetings in Tokyo Friday, Oct. 12, 2012. (Ryan Rayburn, World Bank) EDITORIAL USE ONLY, Associated Press)

"In many advanced economies, fiscal and structural policies are severely hampered by political paralysis," Mantega said. He urged that spending be focused on areas that can have a maximum impact and on social safety nets to protect the poor.

He and other finance ministers expressed concern over monetary easing in the U.S. and other countries that is meant to encourage more bank lending, but that some worry could destabilize markets while failing to stave off recession.

During the meetings in Japan, Lagarde urged countries to not sacrifice growth for the sake of austerity, saying they should temper spending cuts to help create jobs and support future growth.

Balancing those sometimes competing priorities is the central puzzle facing policymakers as the world economy slows further, even in dynamic Asia.

Liberia's President Ellen Johnson Sirleaf, right, speaks as Deputy Director in the Global Economy and Development Program Homi Kharas listens during a seminar at the IMF and World Bank annual meetings in Tokyo, Saturday, Oct. 13, 2012. (Itsuo Inouye, Associated Press) Liberia's President Ellen Johnson Sirleaf, right, speaks as Deputy Director in the Global Economy and Development Program Homi Kharas listens during a seminar at the IMF and World Bank annual meetings in Tokyo, Saturday, Oct. 13, 2012. (Itsuo Inouye, Associated Press)

Slower growth elsewhere is sapping the potential in the poorest countries, many of which depend on exports of minerals, oil and other commodities to the industrial countries.

"We should all be committed in our resolve to avoid a worst case scenario where strains in the euro area deepen, fiscal cliff and debt ceiling problems in the U.S. are not resolved, and growth in emerging market economies continues to decline," Pravin J. Gordhan, South Africa's finance minister, told the meeting on Saturday.

To fortify a "safety net" for crises while supporting improvements to make farming more efficient and sustainable, ministers also have pledged new funds for the Global Agriculture and Food Security Program, a trust fund set up in 2010.

Associated Press writer Malcolm Foster contributed to this report.

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