Washington: The bankruptcy of Lehman Brothers and sale of Merrill Lynch is part of a restructuring and consolidation of the US financial sector, the International Monetary Fund's No. 2 official said on Monday.
"This is a necessary condition for restoring the sector's effectiveness," IMF First Deputy Managing Director John Lipsky said.
But he said the speed and scale of the deepening financial turmoil added to short-term uncertainties and more financial strains could not be ruled out.
"In this respect, we welcome the measures taken by central banks to help bolster available liquidity," said Lipsky, a former vice chairman and chief economist at JP Morgan Chase.
Central banks mobilised worldwide on Monday as global stocks fell sharply after Lehman failed to find a rescuer and filed for bankruptcy, while Bank of America agreed to buy Merrill Lynch.
Meanwhile, insurer American International Group asked the US Federal Reserve for a lifeline, according to news reports.
Lipsky said the IMF was maintaining its forecast for a gradual recovery in global economic growth in 2009 despite the turmoil and developments among Wall Street's major banks.
The IMF is expected to update its global growth forecast for next year in October but finance officials, speaking on condition of anonymity, said last month the fund would likely trim its outlook because of a worsening outlook.
During its last official forecast for 2009 in July, the IMF revised up its global growth outlook for 2009 to 3.9 per cent from an April forecast of 3.8 per cent, anticipating a recovery in the US economy.
"We continue to anticipate a gradual global growth recovery in 2009, although the weekend's developments represent a potential added risk to the outlook," Lipsky said.
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