Facing a shaky world economy and political attacks on free trade, global finance leaders meeting in Washington are searching for ways to increase cooperation to battle a variety of economic threats.
The International Monetary Fund is urging countries to launch a new round of public works projects to improve roads and other types of infrastructure, in hopes the higher government spending will boost growth. But in an era of high budget deficits, that call has not met with much support.
The discussions are being held as part of the spring meetings of the 189-nation IMF and its sister lending organisation, the World Bank.
Leaders of both institutions are sounding the alarm about the need for greater efforts to boost growth to make sure the world economy does not topple back into recession.
The Group of 20 (G20), representing the world’s biggest economies, is wrapping up two days of talks on Friday, with Treasury Secretary Jacob Lew and Federal Reserve Chair Janet Yellen representing the United States. Those talks will be followed by meetings on Saturday of the policy-setting panels of the IMF and World Bank.
Lew met his counterparts from China and Japan on Thursday.
In a statement, the US side said that both Lew and Chinese Finance Minister Lou Jiwei had discussed the importance of China moving toward a market-determined exchange rate in an “orderly and transparent way, while clearly communicating its policies and actions to the market.”
In August and then again in January, China’s government roiled markets with actions that raised concerns about the world’s second-largest economy slowing more drastically than forecast; a development that led to anxiety about the potential economic fallout for other nations.
In opening news conferences on Thursday, IMF Managing Director Christine Lagarde and World Bank President Jim Yong Kim stressed the need for stronger policies to combat the growing risks.
The two officials sought to address the political backlash against globalisation, which has helped propel the presidential campaign of Republican front-runner Donald Trump in the United States, and has triggered an upcoming vote in Britain over whether the country should exit from the European Union.
Both Lagarde and Kim said the answer to stagnant wages in many industrial nations and complaints about jobs being lost to trade competition, was to pursue growth-oriented policies, such as a boost in government infrastructure spending.
Kim rejected the idea that countries can boost stagnant wages by raising trade barriers. He said that lowering trade barriers had helped lift millions of people around the world out of poverty.
This movement toward isolationism and the movement away from trade is very bad for poor people. It is very bad for our efforts to reduce poverty.Jim Yong Kim, President, World Bank
Lagarde said that the recovery from the 2008 financial crisis and the deep recession that followed was still “too slow and too fragile.” She noted that the IMF has once again had to reduce its estimate for global growth, cutting the projection to 3.2 percent for this year, down from a 3.4 percent forecast made just three months ago.
Lagarde said growth at this rate was not enough to lift living standards or create sufficient job opportunities for the nearly 200 million around the world who are officially unemployed and looking for jobs.
And she said anemic growth puts added strain on middle-class families and the poor, and “emboldens the voices of protectionism and fragmentation.”
Asked about the leaked documents from a Panama law firm that have revealed details of offshore financial accounts, Kim said such tax havens can have a devastating effect on global poverty by reducing government resources.
The finance ministers of five leading European nations — Britain, Germany, France, Italy and Spain — held a joint news conference Thursday, calling on the international community to do more to fight tax fraud and money laundering by sharing ownership and tax data, helping establish the true beneficiaries behind companies and other entities, and preventing the use of tax havens.
No single country can tackle international tax evasion alone. Strong words of condemnation are not enough, populist outrage doesn’t by itself collect a single extra pound or dollar in tax or put a single criminal in jail. What we need is international action.George Osborne, Britain’s Treasury chief
But Susana Rice, a tax policy expert with the international aid group, Oxfam, said the proposal did not go far enough because the shared information would not be released to the public.
If the proposed registry of beneficial owners of companies and trusts is hidden from the public, how can we know who is hiding their profits and fortunes and trying to avoid paying their fair share?Susana Rice, tax policy expert
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