IMF Managing Director Dominique
Strauss-Kahn Points to Three Principles to Reshape the Global Economy in the
Press Release No. 09/346
October 2, 2009
International Monetary Fund Managing Director Dominique Strauss-Kahn called
today for policymakers to embrace three core principles to guide the global
economy toward more sustainable and broad-based growth in the wake of the
current crisis—sustained international policy cooperation, improved financial
sector regulation, and a stronger international monetary system.
Mr. Strauss-Kahn, in a speech at Istanbul’s Ҫıraǧan Palace entitled “Making
the Most of an Historic Opportunity,” stressed that the first principal is
maintaining the unprecedented policy cooperation observed during the crisis. The
Group of 20 leaders have also provided the world with the tools to adapt global
collaboration to the needs of the 21st century, he added. IMF
governance reform will facilitate this cooperation at the multilateral level.
Moving ahead with an IMF quota shift—towards dynamic, emerging, and developing
countries from over-represented to under-represented—is key, he said.
The second principle is strengthened financial sector regulation and
supervision, which is necessary to fix the mistakes that led to the crisis in
the first place. Key priorities include widening the regulatory perimeter and
taking measures to curb excessive risk-taking and leverage, including by raising
the amount and quality of capital and liquidity buffers.
He stressed that “It is clear that we must make use of this historic window
of opportunity to revamp the financial sector framework. The time is now to
build a safer, more stable financial system that can support sustainable
economic growth over the long term.”
A strengthened international monetary system with a global lender of last
resort is the third principle, the Managing Director underlined. The lack of an
adequate insurance facility for the global economy has led many emerging markets
to self-insure by building excessively large buffers of foreign reserves and
created dynamics that “have contributed to ever-widening global imbalances, with
damaging consequences for the sustainability of economic growth and the
stability of the international monetary system.” The IMF has the potential to
serve as an effective and reliable provider of such insurance—the lender of last
resort—but its resources are currently limited relative to the precautionary
demand for reserves, he said.
“As we take on the challenge of reshaping the global economic and financial
framework, we should keep our key objective firmly in focus: namely to obtain
growth that is balanced, and that can be sustained. We must find ways to move
beyond the costly boom and bust cycles that have been the hallmark of recent
Mr. Strauss-Kahn is currently in Turkey ahead of the 2009 Annual Meetings of
the World Bank Group and IMF. He was speaking at an event hosted by the Central
Bank of Turkey.