IMF should act responsibly

So far, so good.

That is the International Monetary Fund's assessment of global financial health.

While it is ostensibly reassuring, it comes after the introduction of further monetary easing policies by some developed countries and might be construed as de facto encouragement for this problematic way of dealing with economic problems.

Following its monetary easing steps in January, which have already caused sharp depreciation of the yen and distorted international trade and money flows, Japan announced a major expansion of government bond purchases earlier this month.

However, IMF chief Christine Lagarde has shrugged off the downsides of this.

More worryingly, the IMF went even further during last week's IMF-World Bank spring meetings, claiming it has found no evidence that ultra-low interest rates and large-scale bond buying have led to excessive risk-taking by investors.

The global economy is trapped in a hard-to-disentangle knot of high debt ratios, ultra-low interest rates and willful bond buying in some problematic economies, such as Japan and the United States, which are short of solutions to ease the economic and financial stress they have been suffering from, especially Japan, which has been in economic stagnation for the past 20 years. But their attempts, which are focused on financial easing rather than the more painful but effective structural reforms they urgently need, are having spillover effects on other parts of the world.

Monetary easing might be necessary to bail economies out of sudden and unexpected shocks, such as those during the 2008 financial crisis. But it should not be used as tool for bolstering economic growth, as this would do more harm than good to the global economy as a whole.

Even if it did succeed in bolstering growth, it would set an undesirable precedent that a country can pursue its own economic goals at the price of others. The world is facing multiple challenges, but economic and financial challenges should undeniably be at the top of the short-term global agenda, and the international community must coordinate better to tackle the world's ongoing economic and financial woes.

To that end, willful unilateral actions must be avoided. Rather than encouraging them, the international organizations should put a stop to such an unfair and dangerous game.

(China Daily 04/22/2013 page8)