Washington: To promote strong, balanced, and sustainable growth of the world economy, China on Sunday asked the advanced economies to work out a path towards fiscal sustainability by strengthening coordination and cooperation. Agencies
"For advanced countries, to achieve stable recovery so as to lay a solid foundation for the global recovery, they should, first and foremost, work out a path towards fiscal sustainability," People's Bank of China's Deputy Governor Yi Gang said in his address to the spring meeting of the IMF.
Noting that IMF has set targets for fiscal consolidation of advanced nations, i.e., to reduce government debt to the pre-crisis average of 60 per cent of the GDP within 20 years, Yi said efforts should be made to reach the target to restore market confidence and reduce the difficulty and cost of government and banking sector financing, and to address global imbalances from its root cause.
"In particular, systematically important advanced countries need more rigorous fiscal consolidation targets due to their tremendous spillover effects," he said.
Stating that more effective measures are needed to reduce sovereign debt risks, he said at the current stage, the European sovereign debt crisis remains severe, the various countries concerned need to seek political consensus, beef up fiscal consolidation efforts, and make intraregional cooperation mechanisms more effective so as to dispel market mistrust and enable stabilizers to play their role.
It is also necessary to accelerate reform and restructuring of the banking sector, so as to eliminate vulnerability of the sector, cut off the transmission channels of crises and risks, restore its viability, and support solid recovery of the real economy, Yi said.
"It is necessary for major central banks to closely monitor the domestic and global inflation situation, conduct adequate coordination and communication with the various parties on the timing, pace and implementation of an exit from quantitative easing, so as to avoid the possible shocks to global markets," he said.
Observing that the majority of emerging market economies and developing countries have continued to grow strongly, he said, but great volatility of cross-border massive capital flow brings heightened risks in terms of inflation and asset bubbles.
"Therefore, emerging market economies and developing countries will need to focus on managing the challenges of capital flow and inflation expectations," Yi said.
Washington: To promote strong, balanced, and sustainable growth of the world economy, China on Sunday asked the advanced economies to work out a path towards fiscal sustainability by strengthening coordination and cooperation.