As FY2010 drew to a close,1 the global economy appeared to be emerging from the worst recession in over 60 years. The recovery remained uneven, however, with some economies growing very robustly, while others were experiencing more tepid rebounds, and downside risks were increasing-and continued to do so in early FY2011. Policies are needed to address these risks and set the stage for a return to strong and sustained global growth.
The past year has been a roller coaster for the global economy.4 The severe financial crisis that followed the collapse of Lehman Brothers in September 2008 had a significant negative effect on the world economy, with global output falling by ½ percent in 2009. Advanced economies were the most significantly affected by the financial crisis, having to deal with a serious credit crunch, battered balance sheets, and rising unemployment. In these countries, output fell by 3¼ percent in 2009. The crisis was transmitted swiftly across the globe through a number of channels-including a collapse in trade, a drying up of capital flows, and a drop in remittances. When the dust had settled, it became obvious that several emerging markets and low-income countries had been severely affected by the global crisis, the worst in over 60 years.
The global economy went through a period of unprecedented financial instability in 2008-09, accompanied by the worst global economic downturn and collapse in trade in many decades. The IMF played a leading role in helping its member countries deal with the immediate challenges posed by the crisis and begin to shape a new, stronger global financial system.
At the October 2009 Annual Meetings, the IMFC endorsed the following broad priorities for the IMF for the period ahead: (1) reassessing the institution’s mandate to encompass the full range of macroeconomic and financial sector policies that bear on global stability; (2) continuing to strengthen its financing capacity, to help members cope with balance of payments problems, including financial volatility, and reduce the perceived need for excessive reserve accumulation; (3) sharpening multilateral surveillance and better integrating it into bilateral surveillance, and undertaking further strengthening of cross-country, regional, and multilateral surveillance; and (4) reforming Fund governance, to increase the institution’s legitimacy and effectiveness.
In FY2010, the IMF continued the implementation of internal reforms approved in 2008. Work progressed on restructuring the income and expenditure sides of the IMF accounts. Sales of IMF gold envisioned in the 2008 reforms, with the intention of enabling a move to a new income model for the Fund and supplementing its resources for concessional lending, were approved by the Board and began. On the expenditure side, further progress was made in aligning the Fund’s medium-term budget with revised objectives involving permanent reductions in expenditures and numbers of staff.
Ms. Françoise Le Gall, Ms. L. Effie Psalida, Mr. Pietro Garibaldi, Mr. Julian Berengaut, Mr. Jerald A Schiff, Ms. Kerstin Westin, Mr. Augusto López-Claros, Mr. Richard E Stern, and Mr. Dennis Jones
Are the three Baltic countries, Latvia, Estonia, and Lithuania, ready for accession to the European Union? Have their economies overcome the problems of transition? The answers to these questions and their implications for policy are provided in this collection of analyses. Rather than a country-by-country description, the volume provides a cross-country perspective of developments from 1994 through mid-1997. The seven sections of this paper discuss recent macroeconomic and structural policies, exchange rate regimes, fiscal issues, financial systems, private sector development, and accession to the European Union.
The global economy went through a period of unprecedented financial instability in 2008-09, accompanied by the worst global economic downturn and collapse in trade in many decades. No country escaped the reach of this economic storm. The IMF played a leading role in helping the membership deal with the immediate challenges posed by the crisis and work toward a new, strengthened global financial system. To address these challenges, the Fund focused its efforts on (1) providing policy advice and timely financial support that met members’ needs, (2) analyzing what went wrong, with the aim of fortifying the financial system against a recurrence of crises down the road, and (3) assembling the building blocks of a new international financial architecture. At the same time, the crisis accelerated some elements of the Fund’s work program and redirected resources toward the following areas: advancing surveillance priorities, reforming the Fund’s lending framework, supporting low-income countries, increasing the Fund’s activities in the area of capacity building, reforming the Fund’s corporate governance, and augmenting the Fund’s resources. Work toward modernizing the IMF, which accelerated in FY2008 with the Fund’s restructuring exercise, continued in FY2009,1 and other institutional work focused on strengthening internal accountability and transparency, revamping the institution’s human resources function, and safeguarding the Fund’s finances and other operations, as well as putting the institution on a stronger financial footing.
On the heels of a major financial crisis that originated in advanced country markets in 2007, the global economy sank in 2008-09 into the deepest recession since World War II.4 Although the IMF’s 2008 Annual Report had highlighted the risks from the spreading financial crisis, the crisis advanced further and faster during FY2009 than expected, despite strong policy efforts in key economies. Emerging markets and lowincome countries, which had been relatively sheltered from financial strains owing to their limited exposure to U.S. mortgage-related assets, were drawn into the storm, as international credit markets, trade finance, and many foreign exchange markets also came under heavy pressure.