IMF`s Financial Counsellor and Director of the Monetary and Capital Markets Department Tobias Adrian remarked at a press conference in Bali on Wednesday that financial imbalances continue to build up, and the new financial system remains untested as short-term risks to financial stability have increased, and risks in the medium term remain elevated after a decade of global financial crisis.
"The global financial system is certainly stronger now than it was before the global financial crisis, thanks to a decade of reform and recovery. However, financial imbalances continue to build up, and the new financial system remains untested," he noted.
In addition, policy uncertainties in some countries have increased, and it might undermine international investors` confidence.
"Any of those concerns could become trigger events that could expose the vulnerabilities that have been building during years of accommodative monetary policy," Adrian noted.
Despite the growing financial imbalances, the IMF is optimistic that the global economic expansion remains strong, supported by still-easy monetary policy.
"It remains crucial to strengthen the resilience of the financial system by addressing financial vulnerabilities," he emphasized.
In a bid to enhance the resilience, the Fund suggests policymakers, among others, to ensure that the post-crisis regulatory reform agenda is completed and implemented, as well as resist calls for rolling back reforms.
Secondly, central banks should continue to normalize monetary policy gradually and communicate their decisions clearly.
In particular, the emerging markets, including Indonesia, the authority should build buffers against external risks, pursue exchange-rate flexibility, as well as consider timely and targeted foreign-exchange interventions.
"This is a time for more proactive measures to safeguard financial stability. Confidence must not become complacency," Adrian noted.
Reporter: Azizah Fitriyanti
Editor: Fardah Assegaf
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