Financial authorities in advanced economies should begin to clarify their strategies to withdraw counter-crisis measures, senior International Monetary Fund officials said today.
For most countries some fiscal and monetary stimulus may need to be maintained well into 2010, and withdrawal could begin in 2011 if developments proceed as expected, Jose Vinals, director of the IMF's monetary and capital markets department, and Paolo Mauro, a division chief in the fiscal affairs department, said at a conference with the Korea Development Institute (KDI).
"Now is the time to clarify the strategy that governments and central banks intend to adopt to return their budgetary and monetary positions to normalcy. Failure to do so would destabilise expectations and weaken the effect of the fiscal and monetary support currently being provided," they said in a paper released by the KDI, a state-run think tank.
They said that an exit resulting in balanced growth would require normalising monetary policy, carefully withdrawing financial sector support, and avoiding policy inconsistencies across countries.
Given the notable surge in government debt in many countries, ensuring fiscal sustainability is also a key priority and policy challenge, they said.
Reuters