IMF chief urges developing countries to shore up defenses

PanARMENIAN.Net - The chief of the International Monetary Fund Christine Lagarde urged developing countries on Monday, December 19, to shore up their defenses, especially foreign exchange reserves, against a possible European recession next year.

Lagarde was speaking during a visit to Nigeria in which she met President Goodluck Jonathan and Finance Minister Ngosi Okonjo-Iwaela and praised their planned economic reforms.

European Finance Ministers were discussing ways of boosting IMF resources to build a better firewall against the debt crisis on Monday, while also assessing plans for tighter euro zone fiscal rules that they hope will prevent the problems from worsening. .

"What we are saying to all developing economies is beware of what is happening in advanced economies at the moment. Beware of the clouds that are accumulating in European skies," Lagarde said.

Lagarde said there were three ways in which developing countries were likely to be hit by the crisis - financial contagion in the banking sector, a fall in trade as countries import less and a reduction in direct foreign investment.

"What we see is stalled growth in advance economies with potential recession in some of the European Union countries, including my own country (France), of course, and channels of contagion, which can be different," she said. "They could be financial channels, because the banking system of European countries has scattered all over the map."

She added that a fall in commodity prices was real risk to developing economies. "It's going to be a matter of time before the price of commodities begin to possibly reduce," she said.