IMF –World Bank Crisis :Root Causes Of Financial Crisis should be Tackled
he global economy hung in the balance on Tuesday between hopes for recovery and fears of continued hardship as the IMF and the World Bank prepared to hold annual meetings in Istanbul.With economic growth returning to many countries in the world after the worst global recession since World War II, a strong sense of uncertainty about the future still prevailed as unemployment and poverty levels continue to rise.Many are now looking to the two 186-member financial institutions set up in the dark days of the world war in 1944 to help bolster a tentative recovery and mitigate the painful social effects that the economic crisis is having.Some 13,000 people are set to attend the meetings of finance ministers, central bankers and academics from the member states, which end on Wednesday A major protest against the meetings is also expected to be held on Tuesday and extra police and security guards have been deployed around Istanbul, Turkey's biggest city and commercial capital.Conferences leading up to the meetings began last Thursday with a Turkish journalist throwing a shoe at the International Monetary Fund's managing director Dominique Strauss-Kahn in protest against IMF policies.Reflecting economic fears, finance chiefs have sounded a cautious noteThere are many risks out there. These include growing unemployment lines, rising protectionism and still-large output gaps," World Bank president Robert Zoellick said on the eve of the talks.The global economy could still suffer a setback, not least in 2010 when governments plan to withdraw much of their economic stimulus and debt rollovers could be combined with a rise in interest rates," he said.Strauss-Kahn said: "There is no way to say the crisis is over when we still have this big rise in unemployment in front of us."The IMF has given out tens of billions of dollars (euros) of credit in recent months to prop up faltering economies around the world and the World Bank has stepped up its lending for 2009 to record levels.
The two Washington-based institutions are also looking beyond the crisis at ways of managing a global economic system in a way that will make it less prone to downturns and at a world where US consumer spending will no longer play such a dominant roleWorld leaders of the Group of 20 (G20) major developed and emerging economies last month tasked the IMF with monitoring economic and financial stability around the world in order to help spot problems early.Developing nations are also to be given greater voting rights in both the IMF and World Bank under complex reforms that are still being thrashed out as emerging economies like Brazil, China and India lobby for a bigger role.
We feel that the financial crisis the world financial crisis can not be solved without rectifying the causes of the present crisis. The world leaders and economists should recognise that the crisis was caused by careless and risky lending much more than deposits would allow ( caused by greedy managers ),not supervising the financial institutions properly, selling debts time and again, unclear role of derivatives, stock-market manipulations, basic evil of interest and classical capitalism. They have to rectify all these.Classical capitalism should go.Market and financial supervision is a must.Derivatives must be controlled, stock market regulations must be tightened to eliminate high speculation by few market players. If possile interest should be replaced by other modes as in Islamic Finance.Some bold initiatives would be necessary.
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