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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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