World finance officials vow to prevent further financial turbulence

2007-10-21 09:06:57

WASHINGTON, Oct. 20 (Xinhua) -- Finance ministers and central bankers vowed on Saturday to learn lessons and take actions needed to prevent further financial turbulence, according to a statement released by the International Monetary Fund's policy-making committee.

"Recent disturbances in financial markets in advanced economies are expected to have a moderating effect on growth in the near term, and downside risks to the outlook have increased," said the statement.

The committee underscores the importance of sound macroeconomic policies in the medium term and continued vigilance to maintain well-functioning financial markets and to strengthen the foundations for sustained high growth, it said.

The IMF also spoke highly of the developing countries, saying it "notes with satisfaction the resilience of emerging market and other developing economies in the face of recent financial market turbulence."

Ministers and central bank governors who attended the meeting, had a "useful" discussion on the lessons emerging from the current episode of financial market turbulence, said the statement.

"They are committed to continuing to work together, including multilaterally, to analyze the nature of the disturbances and consider lessons to be learned and actions needed to prevent further turbulence," it added.

The IMF emphasized that central banks in advanced economies have been playing a "critical role" in ensuring the smooth functioning of money markets by providing necessary liquidity while remaining watchful that financial markets continue to operate effectively.

At the same time, monetary policy should focus on achieving price stability while continuing to assess carefully the inflation outlook, taking into account both the inflationary pressures stemming from tight commodity markets and rising oil and food prices, and downside risks to growth, said the IMF.

The Washington-based agency also stressed the importance of resisting protectionism and maintaining an open global financial system.

Concerned with the continued lack of progress with the Doha multilateral trade round, the IMF urged WTO members to work toward a prompt and ambitious conclusion of the Doha Round trade negotiations launched in 2001 as a development round.

The IMF also pledged to boost the role of developing and poor countries in its decision-making, saying that the reform should enhance the representation of dynamic economies, many of which are emerging market economies, whose weight and role in the global economy have increased.

Wu Xiaoling, deputy governor of People's Bank of China, also urged the international community to analyze the root causes of the recent financial turmoil and to make efforts to safeguard global financial stability.

She warned at the meeting that credit market retrenchment in the United States may further dampen the housing market, suppressing consumption and investment, giving rise to potential risks of recession with a spillover effect on other countries.

The International Monetary Fund has warned in several reports that the global economy will slow its continued expansion due to the recent financial turmoil triggered by the U.S. subprime mortgage difficulties.

Among the major advanced economies, the projection for U.S. growth in 2007 as a whole is unchanged at 1.9 percent, but has been lowered by 0.9 percentage point to 1.9 percent in 2008.

At the same time, monetary policy should focus on achieving price stability while continuing to assess carefully the inflation outlook, taking into account both the inflationary pressures stemming from tight commodity markets and rising oil and food prices, and downside risks to growth, said the IMF.