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Posts Tagged ‘G-20 major economies’

IMF chief to activate crisis fund next week

Posted by Admin on March 27, 2011

http://in.finance.yahoo.com/news/IMF-chief-activate-crisis-reuters-2530807212.html

On Friday 25 March 2011, 5:01 AM

 

By Lesley Wroughton

WASHINGTON (Reuters) – The head of the International Monetary Fund will seek to activate a $580 billion crisis fund next week, a confidence-building step at a time of heightened global uncertainty.

“The biggest worry is the high risk of contagion from Portugal and general global uncertainty will trigger a new wave of borrowing from the fund,” a source familiar with the plan said. Two other sources also said economic worry spots were behind the expected move.

The IMF confirmed that IMF chief Dominique Strauss-Kahn would seek to activate the fund — New Arrangements to Borrow — but said it was a “natural consequence of ratification of NAB on March 11, which was previously announced.”

Still, the global worry list has expanded in recent weeks because of Japan’s earthquake and nuclear crisis, as well as unrest spreading in the oil-producing Middle East and North Africa.

Concerns about Portugal’s debt crisis increased on Wednesday after the sudden departure of its prime minister made it likely that the country may not avoid turning to the European Union and IMF for financial help.

Sources emphasized that Portugal had not requested IMF bailout money and insists it is adamantly opposed to requesting IMF help. The country first has to request IMF help to trigger formal discussions on a rescue loan and program.

So far, Portugal has managed to finance itself in capital markets although government borrowing costs spiked on Thursday and rating agency Fitch cut Portugal’s credit rating by two notches to A- saying risks to the country had risen after parliament failed to pass fiscal consolidation measures.

The concern is that Portugal’s debt woes has wider repercussions, with neighboring Spain holding about one-third of Portuguese public debt.

In a statement on March 11 announcing the NAB had taken effect, the IMF called it a tool to “provide supplementary resources to the IMF when these are needed to forestall or cope with a threat to the international monetary system.”

The NAB was expanded ten-fold from $53 billion last year to include 13 new contributors, among them large emerging market economies like China, Brazil, India, Russia and Mexico.

The United States is the largest contributor to the fund through a $100 billion credit agreement approved by President Barack Obama in 2009.

The move was in response to a call by the Group of 20 leading economies in 2009 to triple the IMF’s lending resources to shore up confidence in its ability to respond to crises.

The IMF has been at the center of the response to the financial meltdown and recession as the global lender of last resort, recently approving emergency loans to Ireland and Greece.

(Editing by Dan Grebler, Bernard Orr)

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G-20 refuses to back US push on China’s currency

Posted by Admin on November 13, 2010

Foto Oficial de Líderes del G-20

Group of Twenty (G-20) Nations

SEOUL, South Korea – Leaders of 20 major economies on Friday refused to back a U.S. push to make China boost its currency’s value, keeping alive a dispute that raises fears of a global trade war amid criticism that cheap Chinese exports are costing American jobs.

A joint statement issued by the leaders including President Barack Obama and China’s Hu Jintao tried to recreate the unity that was evident when the Group of 20 rich and developing nations held its first summit two years ago during the global financial meltdown.

But deep divisions, especially over the U.S.-China currency dispute, left G-20 officials negotiating all night to draft a watered-down statement for the leaders to endorse.

“Instead of hitting home runs sometimes we’re gonna hit singles. But they’re really important singles,” Obama told a news conference after the summit.

Other leaders also tried to portray the summit as a success, pointing to their pledges to fight protectionism and develop guidelines next year that will measure the imbalances between trade surplus and trade deficit countries.

The G-20’s failure to adopt the U.S. stand has underlined Washington’s reduced influence on the international stage, especially on economic matters. In another setback, Obama also failed to conclude a freetrade agreement this week with South Korea.

The biggest disappointment for the United States was the pledge by the leaders to refrain from “competitive devaluation” of currencies. Such a statement is of little consequence since countries usually only devalue their currencies — making it less worth against the dollar — in extreme situations like a severe financial crisis.

The statement decided against using a slightly different wording favored by the U.S. — “competitive undervaluation,” which would have shown the G-20 taking a stronger stance on China’s currency policy.

The crux of the dispute is Washington’s allegations that Beijing is artificially keeping its currency, the yuan, weak to gain a trade advantage.

U.S. business lobbies say that a cheaper yuan costs American jobs because production moves to China to take advantage of low labor costs and undervalued currency.

A stronger yuan would shrink the U.S. trade deficit with China, which is on track this year to match its 2008 record of $268 billion, and encourage Chinese companies to sell more to their own consumers rather than rely so much on the U.S. and others to buy low-priced Chinese goods.

But the U.S. position has been undermined by its own central bank’s decision to print $600 billion to boost a sluggish economy, which is weakening the dollar.

Also, developing countries like Thailand and Indonesia fear that much of the “hot” money will flood their markets, where returns are higher. Such emerging markets could be left vulnerable to a crash if investors later decide to pull out and move their money elsewhere.

Obama said China’s currency policy is an “irritant” not just for the United States but for many of its other trading partners. The G-20 countries — ranging from industrialized nations such as U.S. and Germany to developing ones like China, Brazil and India — account for 85 percent of the world’s economic activity.

“China spends enormous amounts of money intervening in the market to keep it undervalued so what we have said is it is important for China in a gradual fashion to transition to a market based system,” Obama said.

The dispute is threatening to resurrect destructive protectionist policies like those that worsened the GreatDepression in the 1930s. The biggest fear is that trade barriers will send the global economy back into recession.

The possibility of a currency war “absolutely” remains, said Brazilian Finance Minister Guido Mantega.

Friday’s statement is also unlikely to resolve the most vexing problem facing the G-20 members: how to fix a global economy that’s long been marked by huge U.S. trade deficits with exporters like China, Germany and Japan.

Americans consume far more in foreign goods and services from these countries than they sell abroad.

The G-20 leaders said they will try to reduce the gaps between nations running large trade surpluses and those running deficits.

The “persistently large imbalances” in current accounts — a broad measure of a nation’s trade and investment with the rest of the world — would be measured by what they called “indicative guidelines” to be determined later.

The leaders called for the guidelines to be developed by the G-20, along with help from the International Monetary Fund and other global organizations, and for finance ministers and central bank governors to meet in the first half of next year to discuss progress.

Analysts were not convinced.

“Leaders are putting the best face on matters by suggesting that it is the process that matters rather than results,” said Stephen Lewis, chief economist for London-based Monument Securities.

“The only concrete agreement seems to be that they should go on measuring the size of the problem rather than doing something about it.”

___

Associated Press writers Erica Werner, Kelly Olsen, Jean H. Lee, Greg Keller, Luis Alonso and Kim Hyung-jin in Seoul contributed to this report.

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Group of 20 vows to avoid currency devaluations

Posted by Admin on October 23, 2010

Foto Oficial de Líderes del G-20

G - 20

GYEONGJU, South Korea – The world’s leading advanced and emerging countries vowed Saturday to avoid potentially debilitating currency devaluations, aiming to quell trade tensions that could threaten the global recovery.

The Group of 20 also agreed to give developing nations more say at the International Monetary Fund, part of what it described as an ambitious set of proposals to reform the IMF governance.

The grouping, which accounts for about 85 percent of the global economy, said in a statement that it will “move towards more market determined exchange rate systems” and “refrain from competitive devaluation of currencies.”

The agreement comes amid fears that nations were on the verge of a so-called currency war in which they would devalue currencies to gain an export advantage over competitors — causing a rise in protectionism and damaging the global economy.

“Our cooperation is essential,” the statement said. “We are all committed to play our part in achieving strong, sustainable and balanced growth in a collaborative and coordinated way.”

The agreement, which includes no specific numerical commitments, appeared to be a step forward from a similar meeting two weeks ago in Washington when finance officials failed to resolve differences.

U.S. Treasury Secretary Timothy Geithner had pushed in a letter to G-20 members for a commitment to polices that would reduce current account and trade imbalances “below a specified share” of gross domestic product “over the next few years.”

The statement said that large imbalances — such as China’s vast trade surplus with the rest of the world — would be “assessed against indicative guidelines to be agreed.” Geithner’s proposal had drawn resistance from export-reliant countries such as Japan which called it “unrealistic.”

The G-20 statement came at the end of a meeting of G-20 finance ministers and central bank governors held ahead of a summit of leaders next month.

South Korean Minister of Strategy and Finance Yoon Jeung-hyun expressed satisfaction with the accord.

“A lot of people raise questions with respect to the effectiveness of the G20 framework,” he told reporters. But he emphasized that the G-20 is making a “significant contribution” by achieving its goals for bolstering theworld economy.

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Geithner suggests major currencies “in alignment”

Posted by Admin on October 21, 2010

 

Official portrait of United States Secretary o...

Mr.Geithner

 

GYEONGJU, South Korea (Reuters) – Treasury Secretary Timothy Geithner on Thursday said major world currencies were “roughly in alignment” and called on Group of 20 finance leaders to agree to “norms” on exchange rate policy.

Laying out his agenda for this weekend’s G20 meetings in South Korea , Geithner said in a Wall Street Journal interview he would seek numerical targets for “sustainable” trade surpluses and deficits as a way to help rebalance the global economy.

He is hoping that by persuading major emerging and advanced economies to cooperate on foreign exchange policies, he can coax China into allowing the value of its yuan to rise further.

“Right now, there is no established sense of what’s fair,” Geithner told the Journal.

“We would like countries to move toward a set of norms on exchange rate policy,” he added.

Geithner also sought to provide some reassurances that the United States is not deliberately trying to devalue its dollar.

The Journal said that in the interview he suggested that he saw little reason for the dollar to sink further against the euro and the yen, saying that these “major currencies” were “roughly in alignment now.”

The comments briefly lifted the dollar in Asian trade, pushing it up to 81.84 yen from about 81 yen. It settled back down to 81.15, near a 15-year low.

Geithner on Monday in California vowed that the United States would not engage in dollar devaluation, saying “No country around the world can devalue its way to prosperity.”

CURRENCY TAKES CENTER STAGE

While past G20 meetings avoided direct confrontation on thorny exchange rate issues, the meetings starting on Friday in Gyeongju are expected to address the problem head-on. The dollar’s protracted slide and China’s tightly controlled trading band for the yuan have put upward pressure on other emerging market currencies that are allowed to move more freely.

While some criticism has been leveled at U.S. Federal Reserve monetary easing for weakening the dollar, U.S. officials point to China’s determination to prevent its yuan from rising as the main source of tensions.Actions by several countries, including Brazil this week, to stem the rise of their currencies and protect their exporters, has fueled talk of a “currency war.”

“When large economies with undervalued exchange rates act to keep their currencies from appreciating, that compels other countries to do the same, setting off a dynamic of competitive nonappreciation,” a senior Treasury official told a news briefing on Wednesday, referring to China.

Geithner repeated his view that China’s yuan is significantly undervalued, but if the pace of appreciation since September were sustained, it would correct the undervaluation over time.

“If China knew that if it moved more rapidly, other emerging markets would move with them, it would be easier for them to move,” Geithner said.

CURRENT ACCOUNT TARGETS

One key form of agreement that the United States is promoting are specific targets on current account balances. This would build on commitments made by the G20 in Pittsburgh, Pennsylvania, last year to help rebalance growth away from exports in fast-growing countries and to boost savings in advanced import-consuming economies.

“We are exploring whether we can agree to commit to keep the external imbalances to levels that are more sustainable, making allowances for different kinds of countries, such as commodity producers,” Geithner told the Journal.

China projects that its current account surplus will fall below 4 percent of gross domestic product in the next three to five years, down from about 9 percent in 2008.

But getting buy-in from the divergent G20 members won’t be easy. India, Asia’s third-largest economy, signaled it would oppose plans to set specific limits on current account balances.

“I do believe that this has to be looked at more fundamentally and by artificially linking current account deficit levels to the GDP you are merely skimming the surface. I am not sure that this will be supported by very many emerging economies,” a finance ministry official told Reuters.

Brazil, one of the countries complaining most loudly about the rise of its currency, is not sending its two top economic officials to the Gyeongju meetings.

Brazilian Finance Minister, Guido Mantega, is staying home to deal with currency issues after announcing a new tax on foreign buyers of government bonds on Monday.

And tensions over the pace of the yuan’s rise appear likely to continue. Since China depegged the yuan’s from the dollar in mid-June, it has risen about 2.6 percent.

However, China has signaled through a state newspaper that the recent faster pace of yuan appreciation may not be sustained. Chinese exporters could withstand a further yuan rise of almost 6 percent before they started to lose money, a Reuters poll showed on Wednesday.

U.S. officials maintain that the yuan is probably undervalued by some 20 percent.

(Editing by Tomasz Janowski)

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