Sun, April 22, 2012
Business > Economy

IMF boosts funds amid still flagging global economy

2012-04-22 08:16:11 GMT2012-04-22 16:16:11(Beijing Time)  Xinhua English

WASHINGTON, April 22 (Xinhua) -- The International Monetary Fund (IMF) is ending its spring meetings with pledges of more than 430 billion U.S. dollars from individual countries in efforts to counter any fallout from the eurozone debt crisis.

The figure would nearly double the IMF's ability to put out any fires caused by ailing Europe and its spillover effects. The move comes as Spain fights to get its finances in order a month after European leaders revealed emergency eurozone funding of more than 1 trillion U.S. dollars.

Angel Gurria, head of the Organization for Economic Cooperation and Development (OECD), said the money and other funding amounted to a "formidable" package.

"This is a lot of money in any language," he said, speaking to a group of reporters Saturday on the sidelines of the Spring Meetings of the IMF and World Bank.

Some economists, however, noted that despite the fattening of IMF emergency coffers, the money is inadequate to help jump-start the still flagging global economy.

In a communique released Saturday, the IMF said further action is needed in advanced economies to "achieve credible fiscal consolidation and government debt reduction." Emerging economies continue to grow while "facing spillovers from the advanced economies," it added.

The IMF said global collaboration is key to sustaining growth and stability worldwide.

Christine Lagarde, chief of the IMF, told reporters Friday at the IMF headquarters that the recovery had entered a "timid" stage with some dark clouds on the horizon, including persistently high unemployment in many countries, long periods of slow growth and the possibility of oil price hikes.


Iran-U.S. tensions have worried many economists, who fret over the possibility of Iran closing the Strait of Hormuz amid heightened tensions with the West over the Islamic republic's nuclear program and the U.S.-led international sanctions against Tehran.

The waterway is a major thoroughfare for around one-fifth of the world's oil supply, and sealing it off could cause energy costs to surge.

Desmond Lachman, a resident fellow at the Washington-based American Enterprise Institute, said such a scenario would be devastating and would sink the global economy.

Oil prices could go even higher as summer nears in the United States, a time when motorists hit the road in increased numbers, filling their gas tanks as they head to the beach and other warm-weather destinations.


Despite a less-than-rosy global forecast, there are rays of sunshine in the United States compared to this quarter last year.

The world's largest economy has managed to ratchet down the jobless rate to 8.2 percent from 8.8 percent in March last year, although economists said the U.S. is still adding jobs at too slow a pace.

Barry Bosworth, a senior fellow at the Brookings Institution and a former presidential adviser, said there were more concerns a year ago about the economic situation in the United States, which has since improved somewhat.

Now that the funds were in place, the focus must be on the high jobless rate in many countries, growing worldwide inequalities and the threat of increased protectionism, Gurria said.

"Look at the cocktail: slow growth, high unemployment -- especially of the youth -- and growing inequality. Well, put it in a cocktail and shake it and you pour it out and it blows up in your face," he said of the world's economic condition. "It's a very explosive combination of things."


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