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IMF Managing Director Dominique Strauss-Kahn Welcomes Historic Action by the G20

Mr. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), today welcomed the actions of the Group of 20 nations to sustain the global recovery. He called their commitments to act together to generate strong, sustainable and balanced growth and to modernize global economic governance “historic decisions to adapt global economic cooperation to the needs of the 21^st century. The commitment by the leaders of the G20 to a shift in representation is a groundbreaking step to improve the IMF’s legitimacy and effectiveness”.

Commenting on the outcome of the G20 Summit held on September 24-25 in Pittsburgh, Pennsylvania, the Managing Director said:

“I am very encouraged by the outcome of the G20 summit, including the new role given to the IMF. International cooperation has been key to the response to this crisis. The active engagement of leaders is needed to sustain the global economic recovery and is reflected in their discussion of the ‘Framework for Strong, Sustainable and Balanced Growth’. The IMF’s expertise will support this cooperative process of mutual assessment”.

“The IMF will take up many of these issues when our 186 member countries, including those represented here in Pittsburgh, gather in Istanbul next week. Our 2009 Annual Meetings offer a unique forum for the world’s economic and financial leaders to promote a cooperative policy response. I am heartened by the G20’s endorsement of such a multilateral approach.”

The Managing Director cautioned policymakers that supportive policies should be sustained until the recovery is secured. “This is a fragile recovery, even if risks appear to be receding,” Mr. Strauss-Kahn underlined. “I remain concerned about high unemployment, which we expect to rise next year, as well as financial sector problems that could persist, particularly if steps to restore banks to health are not completed in a timely fashion. Therefore, a premature exit from accommodative monetary and fiscal policies should be avoided.

Mr. Strauss-Kahn repeated that looking forward, getting back to steady and balanced world growth will require further increases in savings by some countries and policies, including structural reforms, that support increased domestic demand growth elsewhere. Mr. Strauss-Kahn said that “Global rebalancing of demand could have important implications for investment and innovation. With consumers in emerging markets playing a bigger role, the composition of global production is likely to change. This makes it all the more important for policy makers to accelerate reforms that reduce barriers to competition and thus support innovation.”

The Managing Director also welcomed the G20’s continuing support of the IMF, including delivering on the pledge made in London to raise US$500 billion in order to stem the spread of the crisis. He noted the leaders’ reaffirmation of their London Summit initiative to reach agreement on IMF quotas by January 2011. “The April 2008 quota and voice reforms were a first step to enhance the voice and representation of the world’s emerging and developing countries. Today’s G20’s commitment to a shift in quota share to dynamic emerging market and developing countries of at least five percent from over-represented to under-represented countries, and to protect the voting share of the poorest in the IMF, is a decisive move. This historic decision, and the emergence of the G20 as a key forum for international economic cooperation, will lay the foundation for a deeper partnership in global economic policy between emerging and developing countries and the advanced economies”, Mr. Strauss-Kahn said.

“Of course, much remains to be done to implement quota reforms. In particular it is critical to complete the April 2008 reforms. I urge countries who have not done so yet to ratify the 2008 quota and voice reforms so that deeper measures are possible. This ratification is a critical step to raise the quota share of dynamic emerging markets and to preserve the voice of low-income countries, while we move on to the next goal of a general quota increase by 2011,” Mr. Strauss-Kahn concluded.