WASHINGTON
Officials including United States Treasury Secretary Timothy Geithner and Egyptian Finance Minister Youssef Boutros-Ghali said the lender should outline how countries can expand their economies without damaging those of other nations.
China is accused of keeping the yuan undervalued to boost exports, while low interest rates in the US and other industrial nations are blamed for propelling capital flows into emerging markets.
“The IMF has an important role to play to help ensure that progress towards rebalancing strengthens," Mr Geithner said at the IMF's annual meeting on Saturday in Washington. “It is ultimately the responsibility of countries to act but the IMF must speak out effectively about challenges and marshal support for action."
Currency intervention has returned to the fore as countries from China to Brazil and Japan try to restrain their exchange rates to secure a trading edge.
That has roiled currency markets as has the prospect of easier monetary policy from the Federal Reserve. The US dollar fell last week to its lowest in 15 years against the yen.
IMF Managing Director Dominique Strauss-Kahn accepted the role of currency cop and said the fund would publish reports highlighting linkages between economies as part of a “systemic stability initiative”. The IMF's steering committee also said it should “deepen its work” on capital flows, exchange rate movements and the accumulation of reserves. “The need to have this kind of spillover report has been discussed for months and now it's part of our toolbox,” Mr Strauss-Kahn said.
It may already be too late to stop a shift towards protectionism.
Ukraine's Deputy Premier, Mr Serhiy Tigipko, said in a Washington interview that his country may become the latest emerging market to consider capital controls to prevent short-term investments from fuelling volatility in its currency, the hryvnia.
India may also intervene “to prevent volatility and prevent the disruption of the macroeconomic situation”, Reserve Bank of India Governor Duvvuri Subbarao told reporters in Washington.
The IMF studies will focus on the US, China, the UK, Japan and the euro area. They will show, for instance, how US monetary policy affects capital flows to other countries.
Canadian Finance Minister Jim Flaherty said there is broad support for Mr Strauss-Kahn's enhanced role and warned the restraining of some currencies risks fanning protectionism.
China, the world's fastest growing major economy, has limited gains in the yuan to about 2 per cent against the dollar since June.
“There's general agreement that the IMF has an important role to play," Mr Flaherty told reporters. “There have been discussions here with respect to developing rules of the road or guidelines with respect to how countries deal with their currencies.”
The IMF has a weak record on pushing governments to change their policies towards trade and exchange rates. A 2006 effort to oversee the rebalancing of the world economy petered out and China has repeatedly rejected the fund's analysis.
“For lack of a better alternative, the IMF has to play an active role in trying to mitigate currency competition,” said Mr Eswar Prasad, a senior fellow at the Brookings Institution and a former IMF official. “But the IMF power is really limited to persuasion because it has few good instruments to promote cooperation among member countries who are unwilling to modify their policies.”
While UK official questioned the new approach, telling reporters it sounded like the IMF would now just carry out its regular reviews of economies at the same time, Mr Boutros-Ghali said “the IMF is the place to deal with these issues”.
Developing economies that compose the Group of 24 said low interest rates in the advanced world have left them vulnerable to exchange rate appreciation and overheating. Brazil has already stepped up intervention in the currency market in a bid to prevent its currency, the real, from rallying.
Chinese officials said they
“We are committed to a more flexible exchange regime,” People's Bank of China Deputy Governor Yi Gang said yesterday.
About pharoah88
Go to Message
x 0
x 0
