The International Monetary and Financial Committee acknowledged that "accommodative monetary policies" adopted by the US and other advanced economies after the 2008 global crisis have helped support global growth.
The recovery in the US has gained ground, stimulus measures have induced a recovery in Japan, the euro area is emerging from recession, and in some other advanced economies, including Britain, growth is already picking up, it noted.
While such policies remain "appropriate, and should be accompanied by credible fiscal policies and further financial sector and structural reforms," the panel said normalisation of monetary policy "should be well timed, carefully calibrated, and clearly communicated".
Where country circumstances allow, medium-term fiscal plans should be implemented flexibly to take account of near-term economic conditions to support growth and job creation, while placing government debt on a sustainable track, it said.
"These actions will help to mitigate risks and manage spillovers, including those stemming from increased capital flow volatility, and to achieve strong, sustained and balanced growth," the panel said.
In particular, the panel asked the US "to take urgent action to address short-term fiscal uncertainties" and the euro area to "build on progress toward banking union and further reduce financial market fragmentation."
The growth in emerging market economies continues to account for the bulk of global growth, but has moderated, in a few cases to a more sustainable level, the panel noted.
Fundamentals and policy frameworks are generally stronger, but domestic structural challenges remain, it said and recent volatility in capital flows and financial markets has created new challenges in some countries.
In view of the current state of global economy, the panel said the "Fund should continue to provide a forum to stimulate analysis and multilateral dialogue that promotes policy coherence and concerted action to manage spillovers."
Besides helping manage spillovers "arising from the eventual and welcome normalisation of monetary policy", it should also help "mitigate risks, and support strong, sustainable and balanced growth, and job creation," the panel said.
The panel said it attached "the highest priority to the IMF governance and quota reform to enhance the Fund's credibility, legitimacy and effectiveness", and urged all members who have yet to ratify the 2010 reforms to do so without delay.
(Arun Kumar can be contacted at email@example.com)
--IANS (Posted on 13-10-2013)