International Monetary Fund head Dominique Strauss-Kahn said this week that, while the IMF does not forecast a

“double-dip,” or second recession, risks remain.

“We have to very cautious because this recovery remains very fragile,” he said.

While hundreds of billions in stimulus spending by governments around the world avoided another Great Depression, he said, the most significant risk facing the global economy is deciding how and when to reverse those polices and deal with the resulting debt burdens.

“Now we have to fix the consequences of the policy that has been put in place to fight against the crisis,” he said. “Finding the right time to implement exit policies is really difficult .”

“If you exit too late, you waste resources. If you exit too early, you run the risk of going back into recession.”

The best indicators for timing fresh growth strategies are monitoring private demand and employment, he said. The IMF recommends that governments devise policies that will support the labour market, given still-high joblessness, which could lead to social unrest in some countries.

A key lesson from the global financial crisis is that authorities need to beef up supervision – more so than regulations – of financial institutions, he said.

“You may have the best regulations in the world, but if they’re not supervised correctly, it’s no use.”

Mr Strauss-Kahn also said he was worried that the unified political will to tackle the crisis demonstrated at the Group of 20 summits last year will vanish as the world economy recovers.

The rush of money into major emerging markets such as China, Brazil and Russia reflects recognition on the part of investors that these economies are growing rapidly.

But Mr Strauss-Kahn said this could lead to “many problems”, including asset bubbles and a sudden drop in foreign investment, much like that experienced by Eastern European countries during the global financial crisis.

(AP)