Strong efforts urged to cope with crisis

The IMF called for its members to take new policy stimulus, saying "strong and complementary policy efforts are needed to rekindle activity."

"Policy efforts so far have addressed the immediate threats to financial stability, but they have done little to resolve the uncertainty about the long-term solvency of financial institutions," it said, noting the process of loss recognition and restructuring of bad loans is still incomplete.

In current circumstances, "the timely implementation of fiscal stimulus across a broad range of advanced and emerging economies must provide a key support to world growth," said the international organization.

"Given that the current projections are predicated on strong and coordinated policy actions, any delays will likely worsen growth prospects," it warned.

The IMF urged countries that have policy room to make a firm commitment to do more if the situation deteriorates further.

"Fiscal stimulus packages should rely primarily on temporary measures and be formulated within medium-term fiscal frameworks that ensure that the envisaged buildup in fiscal deficits can be reversed as economies recover and that fiscal sustainability can be attained in the face of demographic pressure," it said.

Meanwhile, countries that have more limited fiscal space should focus their efforts on supporting the financial sector and credit flows, while ensuring that budgets adjust to less favorable external conditions.

"It will be important to avoid cutbacks in foreign aid in response to tightening budget constraints, lest hard-won economic gains in developing countries are lost," said the IMF.

"Moreover, international cooperation will be critical in designing and implementing these policies," it added.

Given the strong efforts, the IMF projected the global economy would experience a gradual recovery in 2010, with growth picking up to 3 percent.

"However, the outlook is highly uncertain, and the timing and pace of the recovery depend critically on strong policy actions," it warned.

(Xinhua News Agency January 29, 2009)