Global safety no substitute for sound fiscal policy

"The post-crisis global financial safety net needs to be truly "global" and include multiple layers consisting of individual countries, central banks, regional arrangements, and international financial institutions," Mukherjee said in his intervention at the Plenary Session on the Managing Director`s Action Plan to the International Monetary and Financial Committee.

"The IMF needs to catalyse such a global arrangement, while clearly communicating the criteria for both the inclusion as well as exclusion of specific countries," he said.

Observing that the IMF has overhauled its lending toolkit and boosted its resources with a view to strengthen its ability to mitigate the adverse consequences of future shocks, the Finance Minister said its effectiveness in this context will draw on the ability to identify triggers of systemic crises well before their onset, especially those originating in large or more integrated economies with high potential of contagion.

"It is also important to ensure that support is specific to genuine bystanders with strong fundamentals and prudent macroeconomic policies. The financial safety net should not be used as a substitute for macroeconomic adjustment or sound regulation and supervision," he said. .