IMF says clean up banks to tackle dire world crisis

(Agencies)
Updated: 2009-03-23 23:48

But the prerequisite for success was the restoration of a healthy financial sector, he said.

Although bailing out banks was politically unpopular, businesses and households could not survive without a working banking system, he said.

The IMF's experience of 122 banking crises around the world had taught it that economic recovery was impossible until banks were cleaned up, whether this was done quickly or slowly.

"You can put in as much stimulus as you want. It will just melt in the sun as snow if at the same time you are not able to have a generally smaller financial sector than before but a healthy financial sector at work," he said.

Despite the need for many countries to run huge deficits, emerging countries must not ignore the importance of rebuilding confidence in order to attract private capital in a globalized world, he said.

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