Business / Economy

Lagarde hails China's role at IMF

(Xinhua) Updated: 2014-03-22 14:07

However, while China still has significant buffers to weather shocks, the margins of safety are diminishing and a faster unwinding of the stimulus is thus warranted, she noted.

After a severe global financial crisis, the economic recovery is understandably weaker and it may take longer to return to growth potential. Although the direction is positive, the global growth is still too low, too fragile, and too uneven, Lagarde said.

She pointed out that market vulnerabilities in some emerging markets could interact with risks related to the unwinding of unconventional monetary policies in some advanced economies. New geopolitical risks could also threaten financial stability in some emerging economies.

In terms of how to navigate the possible bumpiness and stay strong, Lagarde suggested emerging economies implement credible macroeconomic policies and flexible exchange rates, which are central to weathering the turbulence, although specific policy priorities will vary depending on country circumstances.

For example, where inflation is relatively high, further monetary tightening in the context of strengthened policy frameworks may be necessary. In other cases, more decisive fiscal consolidation may be needed to shore up credibility. Policymakers must also stand ready to handle possible increases in financial stability risks.

She said emerging Asia remains a bright spot among the emerging economies, with China being a key driver.

On the IMF's reforms, Lagarde said the institution has certainly stood the test of time and has helped promote global financial stability and the linchpin of global prosperity.

But the global economy is going through momentous changes which call for a new multilateralism for a new era, she added.

"That means that institutions like the IMF must be brought fully up to date, and made fully representative of the changing dynamics of the global economy. This is why the IMF's governance reforms are so important, and we are working hard on that," she said.

Lagarde said the IMF should be able to serve all of its members as an objective and trusted advisor, seek to understand the complex interconnections that run through the global economy, and have necessary tools and enough resources to prevent and manage future crises.

"And, within our mandate, we must work more on issues like inequality and climate change -- collaborating with institutions that have a more specific remit in these areas," she said.

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