New IMF reform tackles currency manipulation

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WASHINGTON, June 19 (AFP): The International Monetary Fund (IMF) has launched a new surveillance system on exchange-rate policies aimed at preventing a country from jeopardising the health of the global economy.
The IMF said the major reform updates a 30-year-old programme and targets currency manipulation that could destabilise trade and private capital flows.
However, IMF officials sidestepped questions about China, criticised for keeping its yuan currency undervalued in order to gain a competitive edge in exports.
The new legal framework for monitoring a country's programme does not target any specific country, but provides a level playing field for all its 185 members by being clearer and broader in scope, IMF officials insisted.
"It reaffirms that surveillance should be focused on our core mandate, namely promoting countries' external stability," IMF managing director Rodrigo Rato said Monday, according to the prepared text of a speech he delivered in Montreal, Canada.
"And it gives clear guidance to our members on how they should run their exchange-rate policies, on what is acceptable to the international community, and what is not."
Perhaps the most delicate issue of exchange-rate policy revolves around the claim of some US lawmakers that China is keeping its yuan currency undervalued to gain an unfair competitive edge. The US trade gap with China ballooned to 232.5 billion dollars in 2006.
Last week the US Treasury declined to label China a currency manipulator, saying that although its tightly controlled exchange rates have spawned a host of economic problems, it was unable to determine that Beijing intentionally left the yuan undervalued.
US Treasury Secretary Henry Paulson welcomed the IMF reform Monday.
"The revised decision sends a strong message that the IMF will put exchange-rate surveillance back at the core of its duties and rigorously implement its rules on exchange rate surveillance going forward," Paulson said.
The new policy was adopted Friday by the 24-member executive board with "very broad support, including from industrial countries, from emerging economies and from developing countries," Rato said.
Details of the procedures for enacting the reform will be published by Thursday, a senior IMF official, speaking on condition of anonymity, said in a teleconference with journalists.
The IMF set out four guiding principles to be used on a bilateral basis to determine whether a country's behaviour is acceptable.
The first three were clarifications of existing principles, and a fourth one was added that reflects how the economic landscape has changed since the 1977 initial framework was established.