International cooperation must be significantly enhanced to deal with common global challenges, such as economic spillovers, Managing Director of the International Monetary Fund (IMF) Christine Lagarde said in Lima on Thursday.
Speaking to the press prior to the World Bank Group-IMF Annual Meetings, Lagarde warned policymakers around the world that "no country can go it alone and international cooperation is more needed than ever."
In its Global Policy Agenda released Thursday, the IMF identified economic spillovers as one of the key threats facing the global economy.
However, she said that if policymakers could work together to upgrade their policies to reinvigorate growth, the impact of such spillovers could be mitigated.
The IMF has been offering advice to countries about how to upgrade their monetary policies to better cope with global pressures.
In terms of energy, countries spending a high amount of public resources on energy subsidies, such as Angola, India or Indonesia, were advised to significantly reduce them and move toward a carbon tax.H The likes of Egypt and Nigeria were advised to commit to rapid energy pricing reforms, given the difficulty that some regions in the countries have little access to power despite abundant resources.
Export-dependent countries seeing revenues falling like Azerbaijan or Kazakhstan were advised to allow for exchange rate adjustments.
Commenting on China's gross domestic product, Lagarde said that "China' s slowdown was predictable and expected. The IMF sees it as a good thing. To grow at 6.8 percent with a model that is no longer based on exports and infrastructure but on domestic consumption is good."
"There will be bumps on the road as no transition can be done smoothly with no disruption or volatility. We all need to get used to these bumps. We welcome China's transition process coupled with more market-determined exchange rate fluctuations," said the IMF's managing director.
"The expected slowing of activity in China as it transitions to safer, more sustainable growth and recent market volatility are having larger-than-anticipated spillovers. In China, fiscal, social security, and state-owned enterprise reforms are needed to transition to more domestically-driven growth, which will benefit the global economy over time," according to the Global Policy Agenda.
In order to encourage international cooperation, the IMF introduced in its Global Policy Agenda a new strategy called AIM, which hinges on three pillars that promote integration and common solutions to global problems.
