MercoPress. South Atlantic News Agency

IMF calls leders for more interventionist actions

IMF chief Strauss-Khan

Governments around the globe need to take widespread interventionist action to stimulate stock markets and prevent further economic declines, the International Monetary Fund has said.

Delivering a speech in Madrid, Dominique Strauss-Kahn, the managing director of the IMF, said countries needed to act now by introducing further fiscal measures and liquidity into the financial system, as the global economic outlook deteriorated. "Many have begun to implement it. But the actions taken so far are not enough. We need more". His words come as the IMF warns it is expecting to lower its outlook for growth forecasts in light of continued declines across major economies. While the most recent forecast had major economies tipped to contract by 0.25% in 2009, the IMF first deputy managing director, John Lipsky, warned that this is likely to be revised down when it announces its new numbers in January. Strauss-Khan said governments therefore needed to continue offering guarantees to depositors and assurances to creditors to ensure markets functioned, with any interventionist action taken being very clear and comprehensive. He also said co-operation between countries was vital. '"Government actions need to have a clear objective so that effective oversight of how public money is used is possible", he said. In a sideswipe at governments, he added: "This is not always the case, and this lack of clarity goes some way to explaining the 'bailout fatigue' which is a major political risk at the moment". As well as co-ordinated government action to restore financial stability, Strauss-Khan also said further fiscal stimulus was needed to revive growth, while more forward thinking action was also required. He said: "We are facing an unprecedented decline in output, we have evidence of substantial uncertainty limiting the effectiveness of some fiscal policy measures, and we anticipate that the negative growth effects will last for some time". "For all of these reasons we are calling for stimulus measures that are large and diversified, and that will last longer than one or two quarters", he said. The IMF director general went on to say that support for emerging market countries was needed to "reduce the adverse effects of the widespread capital outflows triggered by the financial crisis", adding that low-income countries might need further help. The IMF itself may also need more funding depending on the seriousness of the slowdown, Strauss-Khan said. '"e have enough resources for now, but this can change quickly. Now is the time for the world community to get together and provide the Fund with the means to address the challenges arising from the financial crisis".