DUBAI: Christine Lagarde, managing director of the International Monetary Fund, is confident that recent turbulence in global stock markets is a “correction” rather than the beginning of another global financial crisis.
She told the World Government Summit in Dubai that the markets were “functioning well, and there is plenty of finance to fund global economies.”
Lagarde said in Davos last month that a benign global economic backdrop should not be an excuse to put off urgent economic reforms. “You have to repair the roof when the sun is shining,” she said.
Asked in Dubai if world economic policymakers had left it too late now that “storm clouds” were gathering in global stock markets, she replied: “No, it is not too late, and certainly recent market trepidations are not concerning me about the imperative to fix the roof. You have seen here in the UAE how a country can implement a reform program to diversify away from oil dependency.”
But she added that some countries in the Middle East had been slower to bring in economic reforms. “In this region there are some countries that thought they had plenty of time to fix the roof when oil was at $100 a barrel. They didn’t do it then, and now they are worried.” She did not specify which countries she was referring to.
She said that since the global financial crisis the world’s policymakers had focused on improved regulation on a national level to prevent such panics in the future. But now there was a need for trans-national regulation of sectors such as “shadow banking” and crypto-currencies. “Now we need to regulate activities, not entities,” she said.
Lagarde said that governments should not shy away from reforms, even when there were unpopular measures involved. “Some countries have brought in value-added tax. Nobody likes VAT, but ask the people if they like security, good roads, good schools, and the response will be different.”
She added that there was a need for a cultural shift in companies and public bodies to deal with gender harassment in the workplace and in society. “It is not just about women. Men, too, are occasionally subject to harassment.”
