WASHINGTON (AFP) – Global finance chiefs sought ways to help Arab economies flourish amid pro-democracy revolts erupting across the region as the IMF and World Bank met in Washington Saturday.
While the Arab Spring that has seen dictators in Egypt and Tunisia fall since January has captivated the two key global institutions in their spring meetings, looming in the background were destabilizing “imbalances” in the world’s most powerful economies.
International Monetary Fund and World Bank policy makers made support for Arab countries a key priority, highlighting the social-political impact of skyrocketing food prices and joblessness around the world and especially in the Middle East-North Africa (MENA) region.
“We can together build a better future for these countries. And that’s not only important for Egypt and Tunisia, it’s important for the whole world because this example is an example that is going to have a lot of consequences,” IMF managing director Dominique Strauss-Kahn said Friday.
“The upheaval in the MENA region is not only a reflection of discontent over jobs, low wages and poverty, but also represents a day of reckoning for trade and economic policy choices made … over past decades,” Supachai Panitchpakdi, the secretary general of the UN Conference on Trade and Development, told the opening meetings said in a statement.
But two years after a global recession, finance ministers and central bank governors were also confronting persistent weaknesses in the global financial system, skewed trade balances and exchange-rate policies amid a two-speed recovery.
Weak growth in developed countries, particularly in the United States were the crisis began, persists, while emerging countries’ more robust expansion is drawing warnings of overheating.
The developed and emerging countries traded barbs over the so-called imbalances, with big-deficit economies like the United States and European countries assailing surplus states like China, and vice-versa.
“The United States will do its part to address our external deficit and repair our public finances,” US Treasury Secretary Tim Geithner said in an opening statement.
“However, others, especially those whose fundamentals call for greater exchange rate flexibility, must also contribute,” he added — a direct call to China.
Beijing meanwhile countered that deficit countries to get their houses in order.
“Systematically important advanced countries need more rigorous fiscal consolidation targets due to their tremendous spillover effects,” said Yi Gang, deputy governor of the People’s Bank of China, in a statement.
He called on the Europeans specifically to better address the eurozone debt crisis.
European countries “need to seek political consensus, beef up fiscal consolidation efforts, and make intraregional cooperation mechanisms more effective so as to dispel market mistrust and enable stabilizers to play their role.”
Addressing the International Monetary and Financial Committee (IMFC), the IMF’s 24-nation steering panel, on Saturday morning, Financial Stability Board chief Mario Draghi stressed that “sovereign and banking risks are closely intertwined in some countries.”
“There is a need to decisively press ahead with the repair and strengthening of weak banking systems, using the forthcoming rounds of stress tests to address expeditiously any weak points identified,” said Draghi, the head of the Italian central bank.
The IMFC meeting will be followed later in the day by a meeting of the Development Committee, which advises the IMF and the World Bank on aid to developing countries.
The IMFC was directly affected by the pro-democracy turmoil that swept the Arab crescent this year. Until February it was headed by Egyptian Finance Minister Youssef Boutros-Ghali, who was obliged to step down after he was fired, along with half the government, by then-president Hosni Mubarak in Cairo.
A week later, Mubarak himself was ousted by popular revolt. The IMFC chairmanship went to Singapore’s finance minister, Tharman Shanmugaratnam.
The post-revolution period in Egypt and Tunisia and aid to other Arab countries swept by protests seeking social justice and better economic futures have been the center of attention in Washington since Thursday.
France and the United States announced Thursday a “joint action plan” for five international financial institutions to aid development in the Middle East and North Africa.
The IMF was tasked with providing an economic evaluation of the countries potentially involved, initially seen as Tunisia and Egypt.
Strauss-Kahn said the IMF was ready with aid if asked. But Tunisia and Egypt have so far not done so.
Tunisian authorities are negotiating with a number of countries and development agencies at this point, while Egypt is studying its options, officials from the two countries have said.