IMF And World Bank Convene
LIANE HANSEN, host:
This is Weekend Edition from NPR News. I'm Liane Hansen. The fall meetings of the International Monetary Fund and World Bank resume today in Washington. At the top of the agenda, the financial meltdown that the IMF says could send the world into recession. NPR's John Ydstie has been following the story and has this report.
JOHN YDSTIE: The weekend of meetings began on Friday afternoon. G7 finance ministers and central bankers huddled to try to come up with coordinated action that would unfreeze credit markets and restore confidence in the financial system. When the officials emerged, they vowed to do everything necessary to solve the crisis and issued a five-point action plan focusing on strengthening banks and unfreezing credit. President Bush met with the G7 officials and the heads of the IMF and World Bank at the White House yesterday. He urged collaboration in meeting the challenge.
President GEORGE W. BUSH: All of us recognize that this is a serious global crisis and therefore requires a serious global response for the good of our people. We resolve to continue our strong efforts to return our economies to the path of stability and long-term growth.
YDSTIE: But the G7 statement left it to each country to determine how to implement the action plan, and that left some Wall Street traders and investors disappointed, especially those who had hoped the G7 would adopt a British proposal to have governments guarantee interbank lending which is at the heart of the credit crunch.
Late yesterday afternoon, the head of the IMF, Dominique Strauss-Kahn, who was involved in the development of the G7 plan, defended it as just the concrete action the markets are looking for. He pointed to the first bullet point in the plan, in which the G7 countries agree to prevent the failure of vital financial institutions.
Mr. DOMINIQUE STRAUSS-KAHN (Managing Director, International Monetary Fund): That's a very important thing both for people working in markets and for simple citizens, that no one is going to let an important financial institution to fail.
YDSTIE: There's a good deal of doubt, though, that the G7 plan will quickly restore confidence to battered financial markets, since many of its elements will take time to implement. The IMF, whose primary concern is developing economies, fell in line behind the G7 proposal during a meeting of its managing committee yesterday. Strauss-Kahn said the crisis is still most severe in rich countries, but it's spreading to emerging nations. One effect is a backtracking by rich countries who had pledged aid to poor nations to deal with the skyrocketing cost of food. He said failing to provide the aid could have serious long-term effects.
Mr. STRAUSS-KAHN: Already, there are tens of millions of children being - suffering of malnutrition, which will have consequences for the decades ahead. So just, we're in a big crisis, but don't forget the other one.
YDSTIE: Strauss-Kahn also said the IMF is providing aid for some emerging nations who are suffering as capital invested there is being withdrawn by rich countries who suddenly need their funds. John Ydstie, NPR News, Washington.