Emerging powers win battle in IMF
By Lesley Wroughton and Emily Kaiser |
October 11, 2010, Monday
|
Print Edition
Print Edition
EMERGING powers won a battle on Saturday for heightened IMF scrutiny of rich countries' economic policies as world financial leaders sought to defuse mounting tensions over currencies.
The International Monetary Fund's 187 members gave voice to long-running frustrations of emerging economies, which say the IMF has traditionally not been tough enough on its biggest shareholders, led by the United States.
Now, with the US and Europe in the doldrums, and emerging economies providing the major growth engine for the world, the tables appear to be turning.
"Stronger and even-handed surveillance to uncover vulnerabilities in large advanced economies is a priority," the IMF's steering committee said in a communique.
The statement reflected the arguments of developing countries that weak finances and sluggish growth in the US are a fundamental cause of imbalances in the global economy, with US policies fueling the dollar weakness that is causing strains for many emerging market currencies.
This view was driven home by Chinese central bank Governor Zhou Xiaochuan on Saturday and won broader support.
"The IMF is no longer the institution designed to look after the developing countries solely," Thai Finance Minister Korn Chatikavanij said.
"Its role needs to be more broad-based, and it needs to realize that mistakes in the larger economies have global impact."
The finance leaders struck no deal on currencies but their IMF communique sought to defuse these escalating tensions by acknowledging both sides' points of view.
US Treasury Secretary Timothy Geithner said there is a direct link between planned reforms at the IMF designed to give emerging powers a greater voice and foreign exchange rate policies, and said if emerging markets want more influence they must release their grip on tightly managed currencies.
IMF chief Dominique Strauss-Kahn put it slightly differently: "You cannot be at the center and be a free rider."
Strauss-Kahn said he hoped to get an agreement possibly within weeks on giving emerging countries more IMF voting power, which would be in time to meet a deadline of the Group of 20 summit to be held next month in Seoul, South Korea.
The International Monetary Fund's 187 members gave voice to long-running frustrations of emerging economies, which say the IMF has traditionally not been tough enough on its biggest shareholders, led by the United States.
Now, with the US and Europe in the doldrums, and emerging economies providing the major growth engine for the world, the tables appear to be turning.
"Stronger and even-handed surveillance to uncover vulnerabilities in large advanced economies is a priority," the IMF's steering committee said in a communique.
The statement reflected the arguments of developing countries that weak finances and sluggish growth in the US are a fundamental cause of imbalances in the global economy, with US policies fueling the dollar weakness that is causing strains for many emerging market currencies.
This view was driven home by Chinese central bank Governor Zhou Xiaochuan on Saturday and won broader support.
"The IMF is no longer the institution designed to look after the developing countries solely," Thai Finance Minister Korn Chatikavanij said.
"Its role needs to be more broad-based, and it needs to realize that mistakes in the larger economies have global impact."
The finance leaders struck no deal on currencies but their IMF communique sought to defuse these escalating tensions by acknowledging both sides' points of view.
US Treasury Secretary Timothy Geithner said there is a direct link between planned reforms at the IMF designed to give emerging powers a greater voice and foreign exchange rate policies, and said if emerging markets want more influence they must release their grip on tightly managed currencies.
IMF chief Dominique Strauss-Kahn put it slightly differently: "You cannot be at the center and be a free rider."
Strauss-Kahn said he hoped to get an agreement possibly within weeks on giving emerging countries more IMF voting power, which would be in time to meet a deadline of the Group of 20 summit to be held next month in Seoul, South Korea.
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