IMF Wants to Build ‘Global Firewall’
The International Monetary Fund wants to build a “global firewall” to prevent the world economy from being burned by another financial crisis.
The IMF took a big step forward in that direction after a number of its members pledged a combined $430 billion in additional resources at the fund’s spring meeting this week in Washington, D.C.
That nearly doubles the amount the IMF has available to lend to countries in crisis.
In the run-up to this week’s talks, IMF managing director Christine Lagarde had urged policymakers to recreate the sense of shared purpose that prevailed during the financial crisis, saying she hoped the meeting could be considered a “Washington moment.”
“I personally feel that that Washington moment was clearly in the room in the course of the meetings,” Lagarde said Saturday.
The additional resources could be used to help rescue troubled eurozone economies, although the IMF stressed that the funds will be available to all 188 members.
The IMF has provided $300 billion in emergency loans since the global financial crisis struck in 2007, including a program for Greece that is the largest in the fund’s history.
Europe: ‘Dark clouds on the horizon’
The push to increase IMF resources comes as the global economy faces multiple risks. While conditions have improved recently, the outlook for growth remains tepid. In addition, the debt crisis in Europe continues to threaten the global financial system, along with ongoing problems in the banking system and rising oil prices.
The IMF has estimated that its funding needs will reach $1 trillion over the next few years.
The firewall is “an important step forward,” but additional steps are needed to provide a “real solution to the crisis,” said Tharman Shanmugaratnam, chairman of the IMF’s governing committee.
