G20 ministers vow to avoid currency war
Tuesday, 26 October 2010
From Fazle Rashid
NEW YORK, Oct 25: The Group of Twenty (G20) finance ministers and central bank governors, in a meeting ahead of Group's summit meeting in November in South Korea, made a collective vow to avoid a currency war but failed to reach consensus on the US proposal to set a numerical limit on trade imbalance identified as a major irritant of global economic stability.
G20 officials have decided to strengthen nascent role of the International Monetary Fund (IMF) as international arbiter. The G20 officials agreed to boost IMF's resources. But doubts have been expressed about Fund's ability to policing its members and exerting influence on the powerful member nations. At present there is no effective umpire who can call "a foul on countries for their policies".
IMF managing director Dominique Strauss-Kahn admitted, "we don't have real teeth to act". "To be able to say to a country publicly what you are doing is wrong, we probably need to expand the mandate of the Fund", the IMF chief was quoted as saying by New York Times (NYT) in a story today.
G20 officials agreed to "pump up fund's resources by doubling it quotas that will determine how much each country need to contribute and how much it can borrow from IMF." Previous pledges to boost Fund's resources remain unfulfilled. IMF will shift six per cent of voting rights from richest and give to dynamic emerging market.
China, Brazil, Russia and India will be among the Fund's largest shareholders but the US with 17 per cent voting will have the right to veto any IMF decision.
World's five most powerful currencies are renminbi, dollar, yen, euro and the pound.
G20 officials agreed on a policy framework to contain large current account surpluses and deficits. The Summit of G20 to be held next month will "seek to agree specific guidelines on reducing global trade imbalances". But how this will be done has not been made clear.
The IMF is still disliked in many Asian nations for conditions it imposes on recipient countries. For the Fund coming changes will breath a fresh air. Tougher IMF surveillance is good but no one in the past took it very seriously, an expert said. The threat of additional surveillance by the IMF is not going to make big countries with large imbalances change their policies, he commented
NEW YORK, Oct 25: The Group of Twenty (G20) finance ministers and central bank governors, in a meeting ahead of Group's summit meeting in November in South Korea, made a collective vow to avoid a currency war but failed to reach consensus on the US proposal to set a numerical limit on trade imbalance identified as a major irritant of global economic stability.
G20 officials have decided to strengthen nascent role of the International Monetary Fund (IMF) as international arbiter. The G20 officials agreed to boost IMF's resources. But doubts have been expressed about Fund's ability to policing its members and exerting influence on the powerful member nations. At present there is no effective umpire who can call "a foul on countries for their policies".
IMF managing director Dominique Strauss-Kahn admitted, "we don't have real teeth to act". "To be able to say to a country publicly what you are doing is wrong, we probably need to expand the mandate of the Fund", the IMF chief was quoted as saying by New York Times (NYT) in a story today.
G20 officials agreed to "pump up fund's resources by doubling it quotas that will determine how much each country need to contribute and how much it can borrow from IMF." Previous pledges to boost Fund's resources remain unfulfilled. IMF will shift six per cent of voting rights from richest and give to dynamic emerging market.
China, Brazil, Russia and India will be among the Fund's largest shareholders but the US with 17 per cent voting will have the right to veto any IMF decision.
World's five most powerful currencies are renminbi, dollar, yen, euro and the pound.
G20 officials agreed on a policy framework to contain large current account surpluses and deficits. The Summit of G20 to be held next month will "seek to agree specific guidelines on reducing global trade imbalances". But how this will be done has not been made clear.
The IMF is still disliked in many Asian nations for conditions it imposes on recipient countries. For the Fund coming changes will breath a fresh air. Tougher IMF surveillance is good but no one in the past took it very seriously, an expert said. The threat of additional surveillance by the IMF is not going to make big countries with large imbalances change their policies, he commented