In what former US Federal Reserve Chairman Alan Greenspan recently dubbed as a “once-in-a-century credit tsunami,” the global financial meltdown has undeniably created ripples of negative economic impacts that threaten not only banking systems but also modest achievements made in the field of development.
“The worst-case scenario, a deep global recession, is not absurd to contemplate,” World Bank Chief Economist and Senior Vice President Justin Yifu Lin said of the effects of the financial woes during a lecture at the Korea Development Institute on Oct. 31, 2008.
Lin urged both developing and developed nations as well as international financial institutions to act together to mitigate the impact of the current financial crisis.
“The World Bank can help countries to avoid the financial crisis becoming a humanitarian crisis and to navigate the challenges of strengthening and, if necessary, rescuing banking systems and adopting other financial reforms,” the World Bank’s first chief economist from a developing country said.
Lin, the founder and director of the China Center for Economic Research, said that the global lender “can expand its lending and grants substantially, focusing on the structural and social areas that are its mandate,” citing the bank’s US$ 1.2 billion rapid financing facility for the food crisis and the 15th replenishment of the International Development Association resources of US$ 41.6 billion for infrastructure and social investments in low-income countries.
He also said the bank’s private lending arm, the International Finance Corporation, can provide assistance to developing countries that seek to inject capital in their domestic banks.
As the bank’s chief economist, Lin plays a significant role in guiding the bank’s intellectual leadership and shaping its research agenda.
“Every country has its special development chances and obstacles that we must identify,” the chief economist said. “As an international institution, we can help with our resources. It would be wrong to say: we have the solution for your problems.”
Lin is a former vice chairman of the All-China Federation of Industry and Commerce of the People’s Republic of China. He obtained a doctorate in economics from the University of Chicago, a master’s in business administration from the National Chengchi University and a master’s degree in Marxist political economy from Peking University.
“If indeed the world does find itself in a global recession next year, as we fear is possible, further and more creative multilateral action may be necessary,” Lin concluded in his Korea Development Institute lecture, urging public and private stakeholders to provide fiscal stimulus focusing on social and infrastructure investments to the developing world.