By Fuad Rajeh
WASHINGTON, Oct. 10 (Saba)-The annual meetings of the WB and IMF have started in Washington D.C. and there is a special focus on emerging markets amid concerns about low economic growth and possible financial problems as a result of US shutdowns.
At a press conference at the IMF HQ2 on Wednesday, José Viñals, Financial Counsellor and IMF's Head of Monetary and Capital Markets Department, briefed journalists about the global financial stability report which put the spotlight on key financial challenges in the world including those facing normalization of the US monetary policy, possible shocks to emerging markets, corporate debt in the Euro area.
According to the report, policymakers should focus on important transitions facing the global financial system; while warning that "a failure to implement effective policies and reforms could potentially derail a smooth transition to greater financial stability".
On Tuesday, a press conference at the IMF HQ 2 put the spotlight on world economic outlook. In this context, IMF officials said economic growth has been low and slow and risks are likely to continue in coming years.
In general, IMF officials are demanding sound reforms and fiscal policies to address local imbalances with the aim to help build a strong financial system and then avoid financial problems.
"There is a need to execute new fiscal rules," said Viñals on Tuesday.
Another press conference was held on Wednesday in which the IMF gave a brief on the fiscal monitor report. The report talked about tax system and public finance. IMF official Martine Guerguil said emerging economies are being the focus since they are witnessing changes more than others.
The fiscal monitor report said slow growth and rising borrowing costs erode fiscal space in emerging economies and that more balanced and fairer tax policies can strengthen revenue and improve growth prospects.
Separately, the World Bank Group President Jim Yong Kim on Wednesday announced that the World Bank has set an interim target to reduce global poverty to 9 percent in 2020, which, if achieved, would mark the first time the rate has fallen into the single digits.
The milestone was based on a World Bank economic analysis of global poverty trends toward reaching a goal of ending extreme poverty by 2030. Living in extreme poverty is defined as below $1.25 a day.
World Bank Group economists found if developing countries continued their strong growth rates in the coming seven years – far from a given -- the global rate would dip below 10 percent for the first time since such figures were first reported in the World Development Report in 1990.
Since 1990, when 43 percent of the people living in developing countries lived in poverty, global poverty has been in a steady retreat. An estimated 1.9 billion people lived in poverty in 1990, and that number fell to 1.2 billion in 2010.
Reaching 9 percent in 2020 would mean an estimated 690 million people would be still living in extreme poverty. If achieved, the world would have 510 million fewer people living in poverty in 2020, compared to a decade earlier. That would be the equivalent of half of the population of the continent of Africa, or more than double the population of Indonesia.
“Setting this target reminds us we are on the cusp of something historic – ridding the world of the scourge of people living in such abysmal conditions,” Kim said on the eve of the opening of the 2013 Annual Meetings of the World Bank Group and the International Monetary Fund.
“It also means that all of us – developing country leaders and their partners, including the World Bank Group – need to up their game now in order to end extreme poverty. We need to help developing countries accelerate growth, attract private investment, and create good jobs.”
Last April, the Governors of the World Bank Group endorsed two goals for the organization: end extreme poverty by 2030 and boost shared prosperity of the bottom 40 percent of the population in all developing countries. This week, the Governors will consider a World Bank Group strategy that for the first time will unite all parts of the institution – the Bank, which works with governments; IFC, the private sector arm; and MIGA, which issues political risk insurance – and align them toward meeting its two goals.
Kim cited research by the World Bank Group that showed if developing countries continued historic growth rates for the next two decades, global poverty would be reduced to 8 percent in 2030 – far from the target. The World Bank Group has defined ending extreme poverty as reaching 3 percent poverty globally, due to constant fluctuations of populations above and below the line because of conflict, disasters, loss of employment, and other factors.
In order to meet the 2030 target, Kim said, developing countries would have to match their growth during the fastest-growing period of the past two decades. That period varied per country, and was caused by multiple factors.