The US called yesterday for the International Monetary Fund to be a tougher cop on exchange rate policies, as global finance policymakers struggled for consensus on easing currency tensions.
As policymakers wrapped up talks in Washington, US Treasury Secretary Timothy Geithner said the IMF should play a stronger role in surveillance of the financial system, in comments apparently aimed at China.
“One of the IMF’s core functions is to undertake rigorous surveillance of the international monetary system,” Geithner said in prepared remarks.
“Specifically, the IMF must strengthen its surveillance of exchange rate policies and reserve accumulation practices... excess reserve accumulation on a global scale is leading to serious distortions inthe international monetary and financial system, and is inhibiting the international adjustment process.”
The comments came as finance ministers and central bankers from the IMF’s 187 member states, including the G20, met in the US capital hoping to ease a fierce debate between rich and developing countries over trade-distorting currency policies.
But any glimmers of hope for a deal were quickly quashed as the US again complained that China was not moving quickly enough to let its currency rise to a fair market value and Beijing flatly rejected suggestions of rapid reform.
Recent IMF figures showed Beijing had currency reserves of $2.447 trillion, the largest in the world and nearly 30 per cent of the global total. Washington maintains that China purchases large amounts of dollars to keep the yuan artificially low, which distorts global trade by boosting Chinese exports.
The meeting of world economic powers, which coincides with annual gatherings of the IMF and World Bank, did little to ease fears of a global currency war, with the US and China facing off over Beijing’s currency policies and no agreement in sight.
“I certainly don’t anticipate there is going to be any unanimous agreement in Washington this weekend about currencies, inflexible currencies and how much they should move,” Canadian Finance Minister Jim Flaherty said last Friday.