IMF Lagarde’s Lecture on‘Decisive Action to Secure Durable Growth’

5 Apr

By Keffyalew Gebremedhin The Ethiopia Observatory (TEO)

Describing the state of the global economy in her well-received Lecture of Tuesday April 5, 2016 at the Goethe University of Frankfurt, Germany, IMF Managing Director Christine Lagarde set out, without being sufficiently convincing, to assure a concerned populace and governments that “the recovery continues; we have growth; we are not in a crisis.”

At the same time, her list of problems and vulnerabilities in the global economy are too many. Therefore, on the eve of the annual IMF Spring Meetings, she emphasized:

    “Overall, the global outlook has weakened further over the last six months — exacerbated by China’s relative slowdown, lower commodity prices, and the prospect of financial tightening for many countries. Emerging markets had largely driven the recovery and the expectation was that the advanced economies would pick up the “growth baton.” That has not happened…More broadly, global trade has slowed and financial stability risks have increased — with the recent market turmoil partly reflecting lower confidence in the effectiveness of policies. Given that these dynamics could become self-reinforcing, global financial stability is not yet assured.”

The above skepticism was somewhat reinforced by Ms Lagarde’s immediate move onto localizing her optimism into what could be termed as the new growth poles in a few nations that can be counted with the fingers one has.

In the circumstances, her operative phrase “recovery continues” sounded unreal to many, i.e., merely intended to assuage the growing concerns of the global community about the uncertain state of the global economy.

She also touched upon the fact that the prevailing perceptions today harbor sentiments about “the cards [being] stacked against the common man — and woman — in favor of elites”. This is notwithstanding that, as she put it, inequality on a global, cross-country scale has been declining.

For instance, the first for the IMF chief to be described as “a bright spot” is India. At such a time of global uncertainties, at Frankfurt India is acknowledged for its “strong growth and rising real incomes”. Since the current decline has evoked in the minds of peoples the 2008 financial and economic crises, her claim about India seemed lone star in another leaner time in the life of the global economy.

For that matter, the Indian essential policy measures seemed less innovative, as they seemingly redounded upon the delayed impact of those usual IMF treatments from two or three decades ago, usually characterized by – for lack of a better description – shifting of expenditures. In India’s case it tis said that it has, for instance, “reduced spending on costly energy subsidies [to] invest more in growth-enhancing social infrastructure.”

So has also done Japan, rather innovative and reformatory, while on the same strand, which Ms Lagarde observes has allowed Japan to invest in childcare to help more women work to boost growth over the medium-term.

The next growth centers, according to the IMF chief, are the ASEAN 5 – Indonesia, Malaysia, Philippines, Thailand and Vietnam. She said those nations are performing well, while countries such as Mexico continue to grow.”

Missing in her list of growth economies is the US, whose current state she described “as flat due partly to the stronger dollar.” Nor is the Euro area in any better shape, according to her Lecture, afflicted by low investments, high unemployment and weak balance sheets that weigh on growth.

In the current troubled time, the yester years’ miracles by the emerging economies today also seemed consigned to a distant era, when Christine Lagarde made mention of their prospects.

“For emerging and developing economies,” she observed, “risks relate to rising vulnerabilities — lower commodity prices, higher corporate debt, volatile capital flows and — for some countries—de-risking and reduced bank lending.”

Adding to this the situation in Brazil, Russia and African low-income nations, the IMF chief thought, the economic problems of Brazil and Russia are larger than initially expected. Certainly, the Middle East has been hit hard by the oil price decline.

In the circumstances, it is clear that many African and low-income nations also face diminished prospects, according to Ms. Lagarde.

In terms of the solutions, it is obvious that each country has to take relevant measures suitable to its needs. For instance, it is suggested that commodity-exporters and for many low-income developing countries must focus on increased diversification.

Her conclusion brought out what was lost in her opening remarks. There, the IMF chief has no doubt that “the global economy faces a time of increased risk and uncertainty.”

She underlines that this calls for quality leadership. Unfortunately, this is the thing very much lacking in many of our countries, especially high population and low-income countries such as mine, Ethiopia, where the small band of elites are the ‘targets of growth and development’ by overt brigandage!

Shakespeare has put it cogently in Romeo and Juliet (Act 3 Scene 5) that his two famous characters speak of how reality could be unclear, whether it is night or daylight, even when confronted by the danger of death, as follows:


    Are you going? It’s still a long time until daybreak. Don’t be afraid. That sound you heard was the nightingale, not the lark. Every night the nightingale chirps on that pomegranate-tree. Believe me, my love, it was the nightingale.


    It was the lark, the bird that sings at dawn, not the nightingale. Look, my love, what are those streaks of light in the clouds parting in the east? Night is over, and day is coming. If I want to live, I must go. If I stay, I’ll die.


    That light is not daylight, I know it. It’s some meteor coming out of the sun to light your way to Mantua. So stay for a while. You don’t have to go yet.

The prevailing frustrations in individual nations is about the secrecy that covers up for bad performance and persistent losses. Ms Lagarde acknowledges, these “are leading people to question established institutions and international norms.”

Surely, this we know that in Africa in more cases with state violence and repression, especially in Ethiopia, where deceit and mafia sets the rules the road, it is going to be a long night especially now under such a difficult economic situation.

Political and economic inequality, aggravated by ethnic inequality, and lack of accountability cannot be the path to peace and prosperity!

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