[T]here is no sign yet of a fundamental reversal of the financial market dislocation and deleveraging that represents both a sign of and a contributor to the still unfolding global economic strains. To the contrary, the virulent combination of financial stress and shrinking advanced economy demand is impacting emerging economies, with potentially significant negative effect.Lipsky has previously stressed the involvement of the United States in the world economy with a "coherent approach" by the countries as a whole. The crisis has presented particular problems for emerging economies.
Perhaps this was to soften Today's news about emerging economies. We've already blogged here about the problems of Hungary and Iceland (See Hungary Following the Way of Iceland). Iceland's economic woes have continued to grow in the wake of problems with European regulators over guarantees for depositors who lost money after Iceland banks failed last month. As mentioned before, Iceland is not alone. Pakistan can be added to the group of countries receiving aid from the International Monetary Fund with its deal for a $7.6 billion loan to help stabilize its economy, but may need double that amount.
Like the United States Treasury these days, the IMF seems to be giving out loans at an unprecedented rate. John Lipsky is busy for a pretty good reason. The emerging economies are in considerable difficulty with the financial crisis. The financial crisis has revealed perhaps more than ever the important work that the IMF does and its role in crisis response. This is by my estimation an important time for the IMF to establish itself as a key policy maker both in terms of helping to shape economic policies going forward through its loan restrictions and in working with the G-20 to respond to the financial crisis. It is too early to tell the strength of the role the IMF may have in the world economy following the financial crisis, but I suspect its influence will be expanded.