Bold policy

The IMF called for its members to take new bold policy stimulus to jump-start their economies.

"This difficult and uncertain outlook argues for forceful action on both the financial and macroeconomic policy fronts," said the IMF.

Past episodes of financial crisis have shown that delays in tackling the underlying problem mean an even more protracted economic downturn and even greater costs, both in terms of taxpayer money and economic activity.

"Policymakers must be mindful of the cross-border ramifications of policy choices," said the IMF. "Initiatives that support trade and financial partners will help support global demand, with shared benefits."

In advanced economies, scope for easing monetary policy further should be used aggressively to counter deflation risks.

Although policy rates are already near the zero floor in many countries, whatever policy room remains should be used quickly, according to the IMF.

Emerging economies also need to ease monetary conditions to respond to the deteriorating outlook.

However, in many of those economies, the task of central banks is further complicated by the need to sustain external stability in the face of highly fragile financing flows, the IMF warned.

The 185-member organization also warned against the rising protectionism.

"Greater international cooperation is needed to avoid exacerbating cross-border strains," said the IMF. "Coordination and collaboration is particularly important with respect to financial policies to avoid adverse international spillovers from national actions."

"A slide toward trade and financial protectionism would be hugely damaging to all, a clear warning from the experience of 1930s beggar-thy-neighbor policies," it warned.

(Xinhua News Agency April 23, 2009)