IMF: U.S. should reduce deficits

Sept. 20, 2004 at 11:27 AM
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NEW YORK, Sept. 20 (UPI) -- The United States should make an effort to reduce its fiscal and trade deficits, the head of the International Monetary Fund said Monday.

In a speech to the Council on Foreign Relations in New York, the IMF Managing Director Rodrigo de Rato also said both Japan and the European Union should press ahead with more structural reform. Moreover, he suggested policies pursued by leading industrialized nations could adversely affect the global economy.

"Even if a country is not itself at risk, it may be contributing to global imbalances and placing the rest of the world at risk," Rato said.

But while he was critical of some of the economic policies pursued by the IMF's top shareholders, Rato also acknowledged the problems the IMF itself faces as an international lending agency. One of the biggest criticisms against the IMF is that it imposes harsh conditions on borrowers, even if it proves to be deeply unpopular politically within the borrowing country.

"It has become increasingly clear that success (of IMF loans) depends not only on the design of sufficiently strong policies, but also upon the underlying reforms being owned by the borrower," Rato said.

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