This weekend, the Finance Ministers and Central Bank Governors of the Group of 20 (G-20) discussed the global financial crisis during its annual meeting in Sao Paulo, Brazil. In an announcement following the meeting, the G-20 discussed the “important implications for the nature and effectiveness of the policy options available to developing country governments.”
In a separate announcement, the World Bank emphasized the G-20’s “vital role in responding to challenges facing the world economy and must maximize its effectiveness” and that the G-20 “should focus primarily on concrete policy outcomes.”
Further, the G-20 stressed “all countries must address the risks associated with excessive leverage and improve their regulatory and supervisory regimes in order to deliver improved risk assessment and management by financial institutions, to enhance transparency and accountability in financial markets, as well as to strengthen international cooperation to identify and respond preemptively to national and international systemic risks.” The G-20 focused on several goals for the IMF, stating “we believe that the IMF must enhance its early warning capabilities with due regard to systemically important economies, in order to anticipate stresses and identify at an early stage vulnerabilities, systemic weaknesses and spillover risks across financial markets that can endanger both the international financial system and the global economy. We also underline the importance of strengthening the IMF surveillance and policy advice leading to appropriate and timely macroeconomic policy responses from all countries.”
In response, the IMF Managing Director weighed in on the G-20 meeting proposing two themes for the Washington summit meeting later this month:
- Deal with the immediate fallout from the financial crisis, for example through coordinated policy responses by providing financing to restore confidence and growth.
- Tackle longer-term issues relating to the international financial architecture, such as fixing, what he termed “an inadequate regulatory system” and developing a reliable early warning and response system.