IMF may create programme to dissuade buildup of reserves

The International Monetary Fund (IMF) is considering creating a new programme to discourage member countries from building up currency reserves, said John Lipsky, IMF's first deputy managing director.

"We are exploring the possibility of improving our existing facilities or adding other insurance-like facilities that would give our members greater confidence that they don't need to self-insure by building up reserves," Lipsky told reporters at a conference in Mexico.

Some economists see the massive accumulation of currency reserves by exporters like China as one of the causes of the global financial crisis. The reserves were often reinvested in US dollar assets, which helped keep US interest rates low and, along with weak lending oversight, fuelled the housing bubble.

Earlier this month, the IMF called upon member nations to increase the amount of capital it can deploy in times of crisis by perhaps $1 trillion (Dh3.67trn) or more.

The IMF wants to dissuade countries such as China from building big currency war chests by convincing them that the IMF could come to their aid in times of need.

In separate comments, Lipsky warned countries not to scale back stimulus measures used to fight the global recession, saying that could jeopardise a return to weak growth next year. "This is no time to take risks with premature withdrawal of the stimulus," he said.

The IMF said earlier this month that the international economy had started to recover.

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