IMF endorses G20 economic plan
Monday, October 05, 2009
The International Monetary Fund yesterday endorsed a Group of 20 programme for sustainable global economic growth, including an increase in voting rights for under- represented countries.
"We welcome the outcomes of the G20 summit in Pittsburgh and support its commitment to articulating policies for strong, sustained and balanced growth in the global economy," the IMF's policy-setting International Monetary and Financial Committee (IMFC) said after a meeting in Istanbul.
The G20 largest rich and emerging market economies, meeting in the United States city just more than a week ago, asked the IMF to shepherd their co-ordinated programme to build sustained growth as the world economy recovers from the worst recession since the Second World War.
"We call on the fund to assist the G20 mutual assessment by developing a forward-looking analysis of whether polices are collectively consistent with more sustainable and balanced trajectories for the global economy," the IMFC said in a statement.The committee, which represents the Washington-based institution's 186 member nations, also pledged to maintain stimulus support for growth and provide further support if needed.
"We commit to maintaining supportive fiscal, monetary and financial sector policies until a durable recovery is secured," it said, adding that members "stand ready to act further as needed to revive credit, recover lost jobs, and reverse setbacks in poverty reduction".The IMFC said it supports giving more voting power to emerging market and developing states.
In a statement, it said it supports a shift of at least five per cent of voting power from countries with ample representation to those with little influence. The committee, which sets the IMF's agenda, said it was also committed to protecting the voting share of its poorest members.
Asian central banks must be prepared to keep interest rates low for longer than in previous slowdowns, however, as the drivers of economic recovery may not last into 2010, said the IMF.Government incentives to encourage car-buying in the US, Germany and China are helping sales at automakers such as Toyota and Nissan.
As the incentives are withdrawn, "global demand for autos and related inputs may dissipate, perhaps sharply", said the fund. The impact of inventory restocking by companies may also fade in 2010 and fiscal stimulus from governments may be withdrawn, said the IMF.
Asia is leading the world's emergence from its deepest recession since the Second World War after policy makers slashed interest rates to unprecedented lows and governments announced more than $950 billion (Dh3.45 trillion) of stimulus measures.
The IMF predicts gross domestic product (GDP) in developing Asia will expand at more than twice the pace of advanced economies next year.Still, demand for Asia's exports will not be strong in the next 12 to 18 months, and the region's central banks "generally have the room to maintain accommodative monetary conditions until there are clear signs of sustained growth in private demand", said the IMF.
In Asian countries such China where bank lending is surging, policymakers may need to start raising interest rates earlier than the rest of the world, "to avoid a build-up of future problems for banking systems", said the report.
'Asian currencies must float more freely 'Canadian Finance Minister Jim Flaherty said Asian countries must allow their currencies to float more freely to help the world economy stabilise. The lack of flexibility in some Asian currencies "creates imbalances, it creates distortions in the world market place and that's what we are trying to avoid", he said yesterday after a G7 meeting in Istanbul.
"If we are going to have our currencies as market currencies then we all need to have our currencies fluctuate."G7 finance ministers repeated their mantra that "excessive volatility and disorderly movements" in exchange rates threaten the global recovery.
The dollar has dropped 14 per cent against a basket of seven currencies since early March.While US fiscal "issues" contribute to imbalances, Flaherty said Asian countries such as China have fuelled lopsided flows in trade and investment and that may prevent the global economy from attaining sustainable growth in the future.
Flaherty acknowledged that Canadian companies may have to deal with a stronger currency. "There's clearly upward pressure on the Canadian dollar and we will have to deal with that over time," Flaherty said.
"We would like to see an orderly adjustment."Flaherty also said global leaders should not neglect the need to repair their financial systems and urged bankers to accept increased regulation of their industries.
emirates/24/7
