The IMF has promised to deliver swift assistance to countries grappling with severe economic difficulties. The Managing Director of the IMF, Dominique Strauss-Kahn, said yesterday that the IMF Board had approved the use of the funds Emergency Funding Mechanism, which means that funds can be delivered within two weeks, bypassing the usual, more protracted procedures.
“The doors of the fire house are open” said an IMF source. Mr Strauss-Kahn said: “we are ready to answer any demand by countries facing problems”. He warned that the world was “on the cusp of a global recession” and pointed out that “100 per cent” of world economic growth in 2009 would be accounted for by developing and merging economies, as the advanced nations stagnate.
The IMF chief refused to be drawn on which countries might be the first to apply for such a facility, but said that both developed and developing nations would be expected to make sue of it. The Icelandic government, probably the lost high profile sovereign victim of the financial crisis, has thus far indicated that it is not seeking IMF assistance.
On the dangers facing the global economy, Mr Strauss-Kahn said that losses to the worlds financial system as a result of sub prime and other problem lending was $1.4 trillion, and stressed the importance of national and international organisations encouraging and in some cases funding the recapitalisation of major financial institutions: “there is no way to have a way out of the situation that we are in without enough recapitalisation of the financial institutions.” Mr Strauss Kahn also said that “we need to look further at fair value accounting” adding to chorus of calls for a move away form “marking to market” unsaleable mortgage backed securities at fires sale prices.
The dangers posed by the credit crunch to the world’s poorest nations were stressed by World Bank President Robert Zoellick. Mr Zoellick said that they faced a “triple jeopardy” from “food, fuel, and finance”: “We must look beyond the financial rescue to the human rescue. The poorest cannot be asked dot pay the biggest price. For the poor, the costs of crisis can be life long”.