The International Monetary Fund (IMF) on Saturday urged advanced economies to secure a sustained recovery from the crisis, saying the implementation of credible medium-term fiscal consolidation plans remains critical in many advanced economies, namely, the euro-zone, the US and Japan.
The European Central Bank's decision on Outright Monetary Transactions and the launch of the European Stability Mechanism are welcome. But further steps are necessary," the International Monetary and Financial Committee said in a statement released after the IMF-World Bank meetings in Tokyo.
"We look forward to timely implementation of an effective banking and a stronger fiscal union to strengthen the monetary union's resilience, and structural reforms to boost growth and employment at the national level," the IMF's policy-setting body said.
On the US, the committee said that it is essential to resolve the fiscal cliff, raise the debt ceiling, and make progress toward a comprehensive plan to ensure fiscal sustainability. The IMF also called on Japan to secure funding for this year's budget and further progress in medium-term fiscal consolidation.
The Washington-based lender also called on the international community to provide broader support for Arab countries in transition. "We welcome the increased engagement of the IMF with small states and look forward to further work in this area," it said, adding that the fund has increased its support for Arab countries in transition and continues to work with these authorities as they develop home-grown national reform strategies to deliver inclusive growth and jobs.
The IMF pointed out that global growth has decelerated and substantial uncertainties and downside risks remain." Key policy steps have been announced, but effective and timely implementation is critical to rebuild confidence. We need to act decisively to break negative feedback loops and restore the global economy to a path of strong, sustainable and balanced growth," it said.
The fund expressed concern over slowing activity in emerging markets and developing economies, chiefly due to weaker external and domestic demand.
"These economies will need to ensure flexibility in policy implementation to support growth, consistent with global rebalancing. The potential impact from large and volatile cross-border capital flows should be closely monitored, " the statement said.
As for the 2010 IMF quota and governance reforms aimed at increasing voting rights of emerging economies through redistribution of quotas and the number of board members, the IMF said most of the conditions required for the entry into force of the reforms have been achieved.
"We reaffirm the urgency of making these important reforms effective and call on members who have yet to complete the necessary steps to do so," the statement said.
On Friday, IMF Managing Director Christine Lagarde said the fund has so far secured over 75 percent of the total voting rights, or more than 120 countries. But to fully implement the governance reform, the IMF needs to secure more than 85 percent of the total voting rights among 188 member economies. If the reform is implemented, Brazil, China, India, and Russia will all be among our top 10 shareholders.