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Posted on April 12, 2011
Group of 20 finance chiefs may identify six to seven countries that have persistently large trade or capital-flow imbalances when they meet in Washington April 14-15, South Korean officials said.
“One of the major expected achievements will be how to apply the yardsticks and agree on who can affect global imbalances most,” Lee Jun Kyu, senior adviser to finance minister Yoon Jeung Hyun, said yesterday in Gwacheon, south of Seoul. “There still remain differences and difficulties but a sensible outcome would be likely.”
Seeking to smooth lopsided trade and investment flows, the G-20’s finance ministers and central bankers concluded talks in Paris on Feb. 20 by listing the data they will monitor to see whether imbalances are forming. The criteria are public debt and fiscal deficits, private debt and savings rates, trade balances and net investment-income flows and transfers.
Sohn Byung Doo, director general of the G-20 bureau at the ministry, said the G-20 won’t reveal to the public which major countries are responsible for global imbalances. Identifying the names internally will help the G-20 craft economic policy guidelines for each country to be agreed by November when the leaders meet in Cannes, France, Sohn said.
The issue of currency swaps among central banks, with the International Monetary Fund as a mediator, may be raised this week as a way to enhance the global financial safety net, Lee and Sohn said. The idea, dropped last year due to strong opposition from some advanced economies, reemerged last month at a Nanjing seminar of G-20 finance chiefs, they said.
Emerging countries may want to shift the focus of the talks on capital control away from whether the measures are appropriate to who has caused the problem and why, the two said.
The IMF announced last week a staff proposal to endorse capital controls in limited circumstances, which aroused opposition from Brazil and other nations seeking greater freedom to stem inflows of money. The proposal backs the use of capital controls as a last resort after nations strengthen banking systems and adopt measures such as building up reserves, tightening fiscal policies and lowering interest rates.
“Minister Yoon will try hard in Washington to bridge between advanced and emerging countries on several sensitive issues so that the G-20 can continue to work as an effective premier forum,” Lee said.
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