IMF's number two calls for fiscal stimulus, structural reforms, urges action

Lipton called on authorities worldwide to help build up the resilience of emerging markets, bolster aggregate demand - not just attract it from abroad -, avoid zero-sum policies such as measures that might harm trade or capital flows and carry out structural reforms.

As regards measures to bolster aggregate demand, in his remarks Lipton emphasised the need for looser fiscal policies "particularly in countries that have current account surpluses" and warned against the risk of using negative interest rates to try and "attract demand from the rest of the world in a way we should avoid."

According to the remarks prepared for the speech he would deliver in the US capital, Lipton highlighted how year-to-date the fall in equity prices across the world had averaged more than 6.0%, translating into a loss in global market capitalisation of over $6trn, which was worth 8.5% of global gross domestic product.

That decline was also half the $12.3trn loss suffered during the most acute phase of the global financial crisis, with some Asian markets such as China and Japan particularly hard hit.

However, the most disconcerting trend in global capirtal markets of late, Lipton said, had been the rise in global capital risk aversion, which had led to a sharp retrenchment in global capital and trade flows.

Speaking in Washington DC David Lipton, the International Monetary Fund's first deputy managing director, David Lipton, attempted to rekindle the "spirit of action and cooperation" that characterised the early years of the recovery effort.

"We are clearly at a delicate juncture, where risk of economic derailment has grown," he said.