17 December 2014, Lagos – The International Monetary Fund (IMF), in seeking to prevent the global economy from settling into a “new mediocre,” has published a new work program that lays out its strategic priorities for the period ahead.
A key focus of the agenda discussed by the IMF’s Executive Board recently would be to spur inclusive, job-rich growth.
The new work program stresses the need to manage monetary normalisation in advanced economies, enhance the quality of public expenditure, safeguard financial stability, and carry out structural reforms to raise productivity and strengthen growth.
The twice-yearly discussion of the IMF’s work agenda translates the Global Policy Agenda into a specific action plan for the institution over the next 12 months.
Director of the IMF’s Strategy, Policy, and Review Department, Siddharth Tiwari noted that the current global economic situation was disconcerting, with around 200 million people still unemployed six years after the global financial crisis.
“Our view is that supportive fiscal and monetary policies need to work in tandem with structural policies to accelerate the recovery,” he said.
According to Tiwari, the IMF would examine in the coming months, how structural reforms such as increasing infrastructure investment, lowering barriers to trade, reducing tax distortions, and promoting financial deepening and inclusion could jump-start growth.
This work is expected to be complemented by looking at the role fiscal policy can play to raise long-term growth.
“Obviously, there is not a one-size-fits-all approach and our analysis will focus on the needs of different groups of countries”, he added.
“In addition, the 2014 Triennial Surveillance Review also made recommendations on how we can address structural reform issues in the IMF’s surveillance, and we will be following through with these recommendations in the months ahead.
“Bold measures are needed to help overcome the risk of getting stuck in a “new mediocre” and, as usual, the IMF will be there to assist its members.”
Speaking on the role of fiscal policy in raising economic growth, Tiwari stated that the forthcoming IMF’s Fiscal Monitor would focus on the role of automatic stabilisers—that is, features of the tax and transfer system that offset fluctuations in economic activity without direct intervention by policymakers.
Corporate and personal income taxes are examples of automatic stabilisers, as are unemployment insurance and welfare benefits.
“In addition, we will explore how improving tax compliance can support growth by creating space for productive expenditures, and examine how public investment frameworks can be reformed to maximise the growth impact of investment in a fiscally sustainable way.
“Other work on fiscal policy and growth will analyse issues such as the linkages between fiscal policy and productivity, and how public debt restructuring and fiscal reform episodes affect growth,” he said.
Furthermore, Tiwari said in the next 12 months, the IMF would examine new monetary policy questions posed by the global financial crisis, including the interaction between monetary policy and financial stability.
Other work, according to him, would cover the role of exchange rate intervention and some follow-up work on assessing what level of reserves is adequate for countries in various circumstances.
“The IMF will also continue to assist low-income developing countries in strengthening their monetary policy frameworks, making them more credible, countercyclical, and forward-looking.
“And, of course, we will continue to provide country-specific policy advice and explore the impact and spillovers of the impending normalisation of monetary policy in some major advanced economies,” he added.
– This Day