Oct

10

IMF Warns of Far-reaching Effects of Finance Crisis

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The International Monetary Fund has warned that if the governments of major economies do not take co-ordinated measures to deal with the global finance crisis, its crippling effects could spill over to emerging markets.

In its Global Financial Report, the IMF forecast a gloomy picture for the world economy and declared that the situation had been brought on by the worst crisis in the “mature finance markets” since the Great Depression of the 1930s. Dominique Strauss-Kahn, the managing director of the fund emphasized that government initiative was the need of the hour, not only to restore confidence in the national markets but also to address the situation in a co-ordinated manner at the international level.

According to the IMF, the total amount of money lost by banks due to mortgage-related losses would reach $1.4 trillion. The banking sector has not only been devastated by its losses in markdown, but the recent collapse of stock markets and the freezing of the credit market has it even more difficult for them to raise fresh capital. Close on the heels of the IMF forecast, several central banks announced Wednesday that they were launching concerted efforts to cut interest rates.