RAY SUAREZ: Finance ministers from around the world arrived in Washington today to begin a weekend of meetings with one crucial purpose: finding ways to provide new medicine for an ailing global economy.
The occasion: annual meetings at the World Bank and the International Monetary Fund.
But this year’s meetings are anything but routine. This time, they’re set amid an urgent backdrop: The global economy is in its worst recession since the Great Depression.
And this weekend, finance ministers are trying to come to terms with delivering hundreds of billions of dollars in aid promised by world leaders. Carolyn Atkinson is with the International Monetary Fund, the IMF.
CAROLINE ATKINSON, International Monetary Fund: The attempt to raise money is a big item on the agenda. We want to reach agreement amongst all of those countries or their representatives on the new money for the IMF, on the new lending programs that we hope to do, the ways in which we hope to lend them, on some agreement to move on help for the low-income countries.
So we have a very full agenda that was, in a sense, the ball was set rolling by the G-20.
Banking systems in trouble
RAY SUAREZ: At the G-20 summit in England earlier this month, world leaders, including President Obama, pledged $1 trillion in new money to the IMF. The IMF will use the money to help bail out developing countries, and those countries have been hit in different waves.
Ngozi Okonjo-Iwela of Nigeria is a managing director of the World Bank.
RAY SUAREZ: What kind of problems are developing economies having because of the global financial crisis?
NGOZI OKONJO-IWELA, managing director, World Bank: Well, the developing economies have to be looked at in several ways in this crisis. There are some of them, the emerging market countries, particularly in Eastern Europe, whose financial systems were hit in much the same way as you see in the developed countries, in the first wave, because of the strong linkages of their banking systems to those in Western Europe.
So they saw an immediate transmission of the crisis to their banking systems. And so the monies being asked for would help to stabilize, recapitalize, and steady their banking systems in much the same way that is being looked at either in the U.S. or Western Europe, and also help to stimulate their economies.
Deploying funds is difficult
RAY SUAREZ: But getting the money to those countries is easier said than done. So far, the IMF has not been able to line up all of the money promised, including some of the biggest shares pledged by the U.S., Japan and Europe.
This weekend, ministers will discuss how to secure those funds, says Simon Johnson, a former chief economist for the IMF, but that's just the first step.
SIMON JOHNSON, MIT Sloan School of Management: But the question is going to be not "Can they come up with the cash?" but "Can they deploy it? Can they use it in a way that actually stabilizes the world, that stabilizes individual countries in Eastern Europe, or changes attitudes in Asia, for example, towards the world trading system?" That's going to be the difficult question.
RAY SUAREZ: Even before the latest meetings, emerging economies, like Latvia's, have already asked the IMF for emergency loans. Einars Repse is Latvia's finance minister.
EINARS REPSE, finance minister, Latvia: The economic situation is deteriorating. Our GDP fall this year is expected to exceed 12 percent.
RAY SUAREZ: So Latvia asked for some help. The money will initially be used to simply bolster the government's capital reserves, but Repse says there's a reason the loan was important.
EINARS REPSE: It will be more as a safety deposit in case we need to strengthen liquidity of our banking system.
Stronger economies also need help
RAY SUAREZ: Simon Johnson says countries not hit as hard as the Baltic states by the recent meltdown also need a boost. These countries have made strong gains in recent years and don't want to shrink their economies to regain stability and won't have to, with a hand from the IMF and World Bank.
SIMON JOHNSON: They're also trying to provide money to high-performing countries, so-called -- or you could call them the platinum club. Mexico has come in. Poland has come in. Colombia has come in, all countries with good policies who could use this as a cushion to, let's say, do a little bit more fiscal stimulus, have less contractionary policies, and generally, you know, buffer themselves against the world's tumult.
Now, this is all a beginning. This is relatively small scale. It's not at the level of being able to move the world economy dramatically to a different place, but it's helpful.
RAY SUAREZ: The United States remains a central force in the global effort to shape a response to the financial crisis.
So today, Treasury Secretary Timothy Geithner held a conference here at the Treasury Department, bringing together the seven largest industrial economies. He had a message for them: Live up to your commitments to fund the emergency response and reform the global finance system.
TREASURY SECRETARY TIMOTHY GEITHNER: It is very important that we deliver on these commitments to mobilize additional resources for the IMF and the World Bank and the regional development banks and important for them to deploy those resources in ways that are directly relevant to, and particularly helpful to, address the challenges in emerging and developing countries.
Recovery in the United States depends significantly on establishing recovery in those large and previously rapidly growing markets.
Geithner hopeful about future
RAY SUAREZ: The finance ministers had a message for Geithner, too: Fix the banks and remove toxic assets from their balance sheets. Overall, Geithner said he was encouraged by the tone of today's meeting and hopeful about where things were headed.
TIMOTHY GEITHNER: Now, without underestimating the very considerable challenges still ahead, there are signs that the pace of deterioration in economic activity and in trade flows has eased.
Some measures of spending, some measures of output activity in the United States and other economies may have begun to stabilize. Financial conditions in some markets have shown modest improvement. And these are encouraging signs.
But it is too early to say the risks have receded, and it's too early to conclude that we're beginning to emerge from this remarkably challenging set of pressures still working their way through the financial system.
RAY SUAREZ: The meetings continue throughout the weekend.