G20 summit agrees to reform IMF

Andrew Walker

Finance ministers from the G20 leading economies have agreed reforms of the International Monetary Fund, giving major developing nations more of a say.

At a meeting in South Korea, they agreed a shift of about 6% of the votes in the IMF towards some of the fast-growing developing countries.

Those nations will also have more seats on the IMF’s Board, while Western Europe will lose two seats.

But the US will retain the veto it has over key decisions.

Such decisions require an 85% vote – Washington holds 17% under the IMF’s weighted voting system.

The ministers also agreed to refrain from competitive devaluations of their currencies and move towards more market-determined currency systems.

‘Currency manipulation’

The talks in the city of Gyeongji come against a background of strains in financial markets which some have called a currency war.

Much of the tension in the currency market is being blamed on the US and China, although it is not clear that either country will be restrained by the latest agreement.

The pressure has been on China to end its policy of holding the yuan down to maintain its competitiveness.

There was, however, no timetable for change in the devaluations agreement, so Beijing has kept to its long-held position that it will reform its currency policy gradually.

In the US, low interest rates and other central bank policies have led many investors to seek higher returns in developing countries, which tends to push their currencies higher, undermining competitiveness.

This is partly a result of policies in the US which mean investors are seeking higher returns elsewhere. US officials would argue the weak dollar is not the result of a deliberate devaluation, but rather a side effect of policies aimed at stimulating the domestic US economy.

It is possible that there will be more dollar weakness: One of the policies behind it – the Federal Reserve boosting the US money supply – might be extended in the next few weeks.

German Economy Minster Rainer Bruederle suggested that US policies, if not reversed, amount indirectly to currency manipulation – an accusation more often levelled at China.

\\BBC NEWS

Tagged with: , , , ,
Posted in Economics, Money

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Clustrmaps
Stats (July 2006-)
  • 146,352 unique hits
FAIR USE NOTICE
This site may contain copyrighted material. Such material is made available for educational purposes, to advance understanding of human rights, democracy, scientific, moral, ethical, and social justice issues, etc. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 107 of the US Copyright Law. This material is distributed without profit.
%d bloggers like this: