To Spur Global Economy, International Monetary Fund Leaders Urge ‘Growth-Friendly’ Policies During Tight Times

Acknowledging that the global economy is still on tenterhooks, world financial leaders Saturday called on countries to implement "growth-friendly fiscal policy" as part of a "more forceful and balanced" mix of policies to support economic growth and create jobs.

Global financial leaders convened in Washington, D.C., for the 2016 Spring Meetings of the International Monetary Fund and World Bank Group, scheduled from Friday through Sunday. The meetings followed a week that started off with the IMF lowering its outlook for economic growth in 2016 to 3.2 percent, down from the 3.4 percent it forecast in January.

Financial markets in recent months have been rife with turmoil, tied to fluctuating commodity prices, China's economic slowdown and sluggish growth in key markets. Other uncertainties, such as the risk of the so-called Brexit, in which Britain has threatened to leave the European Union, and geopolitical tensions, have intensified fears of volatility and economic stagnation.

"The IMF is alert but not alarmed," said Agustin Carstens, chairman of the IMF's steering committee, Agence France-Presse reported.

Members of the International Monetary and Financial Committee called in a statement released Saturday for all countries to implement "fiscal strategies [that] aim to strengthen growth, job creation, and confidence" and to make "tax policy and public spending ... as growth-friendly as possible."

The committee also urged advanced economies, where recoveries have been limited due to "a combination of weak demand, low productivity growth, and remaining crisis legacies," to have supportive policies, beyond monetary policy, to "achieve balanced and sustainable growth."

The IMF described its own role in helping countries implement those policies as multi-faceted, from offering advice and analysis of countries' reforms and policies to helping countries weather volatile and uncertain periods, with financial assistance if necessary.

But whether countries will be able to implement those policies and whether those policies will succeed remains to be seen, of course. "Clearly the question is, how much is going to get done?" Christine Lagarde, managing director of the IMF, told AFP.

Actually implementing growth-friendly policies could pose a challenge to many countries. Several key central banks have already brought interest rates to extreme lows or even made them negative, such as in the case of the European Central Bank, leaving those institutions with limited room to further cut rates.

Other countries are hard-pressed to cough up the financial resources necessary to spur growth. In recent weeks, the IMF could begin bailout programs for several countries, including Angola and Tunisia. Meanwhile, requests for financial assistance to the World Bank are reaching levels typical of a financial crisis, World Bank President Jim Yong Kim said.