Growth should lead to reforms: IMF

Protectionism may hamper economic growth, says Anne Krueger

The IMF has said that stronger global growth in most regions should prompt world governments to implement critical economic reforms, including macroeconomic and structural policy measures, to achieve a robust, balanced and sustainable growth.

"Improved prospects in most regions point to stronger global growth going forward," the IMF's policy-setting body, the International Monetary and Financial committee said in a statement yesterday.

"It encourages countries to take advantage of the current environment to strengthen the foundation s for sustainable growth," the IMF panel said.

The priority now is to implement the macroeconomic and structural policy measures that will help achieve a robust, balanced and sustainable recovery.

Structural reforms, it said, were essential to improve growth potential and priority should be given to medium-term fiscal consolidation; reforms of pension and health care systems; better function of labour and product markets; and reducing vulnerabilities in banking and corporate sectors.

The committee called on all countries and regions to play their part in addressing global imbalances.

It urged "a move toward more exchange rate flexibility as appropriate" in "some emerging market countries."

The committee, after hearing a report by WTO Director General Supachai Panitchpakdi, called for constructive and determined efforts by all countries to achieve early progress in the Doha round.

Amid the outcry in the US over outsourcing of jobs, the International Monetary Fund (IMF) has said the worldwide slide back to protectionism would harm prospects for economic growth in all countries and could undermine what has already been achieved.

Voicing its concern over recent anti-outsourcing protests, especially in countries like the US, IMF Acting Managing Director Anne Krueger said "it would be a setback nobody wants to contemplate."

"In completing the Doha round, countries must not lower their sights in striving for an ambitious agreement. A weaker multilateral agenda risks further boosting regional and bilateral initiatives which, over time, can fragment the global trading system and reduce its transparency," she said, addressing the spring meeting of IMF's policy-setting body, the International Monetary and Financial committee, yesterday.

She said the continued huge US current account deficit now matched by a fiscal deficit of similar size""and surplus elsewhere, notably in Asia," remained a serious concern."

Global interest rates were very low and would have to rise eventually, but the timing and speed of future moves remained subject to considerable uncertainty, she said, adding the medium-term fiscal positions across the globe remained very difficult.

"Finally, while the Doha round of trade negotiations appear to be regaining some momentum, differences among the negotiating parties remain large, and there are risks of further delay, which may disappoint expectations of healthy and sustained medium-term growth in global trade.