IMF hopeful on reform but more cautious about deficits

The world economy is recovering moderately but still faces challenges such as the need for medium-term fiscal consolidation, the IMF's deputy managing director, John Lipsky, said yesterday.

Mr Lipsky said that delegates at the G20 meeting of deputy finance and central bank chiefs in South Korea "are mainly confident that there is a moderate recovery underway globally".

"Obviously there are risks and challenges, but things seem to be moving more or less in line with our forecast," he said, listing well-designed exit strategies and medium-term fiscal consolidation as challenges. He said some good progress had been made in discussing changes to the IMF's executive board, but did not elaborate. G20 members have pledged to reach an agreement on the issue by the time leaders meet in Seoul in November.

The British and American Governments have argued hard for reform, and the US, frustrated at Europe's refusal to share more IMF power with emerging economies, took unprecedented action last month to block plans that would have perpetuated Europe's long-running dominance over the 24-member board.