G-20 for reforms in IMF's governance, quota issues

G-20 for reforms in IMF's governance, quota issues
Call to refrain from competitive devaluation of currencies
Published : Sunday, 21 April 2013
Nazmul Ahsan

WASHINGTON, April 20: Finance Ministers and Governors from G-20 (Group of Twenty) countries have adopted 14-point communiqué, making commitments to refrain themselves from competitive devaluation of their currencies and not to target each other's exchange rate in a bid to raise their economic growth rate and create more jobs.
The Group at a meeting at the headquarters of International Monetary Fund (IMF) on Friday urged for urgent reforms in the Fund's governance and quota issues, latest by next January.
"We reiterate our commitments to move more rapidly toward more market-determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals, and avoid persistent exchange rate misalignments," the communiqué noted.
"We will refrain from competitive devaluation and will not target our exchange rates for competitive purposes, and we will resist all forms of protectionism and keep our market open."
The communiqué said excess volatility of financial flows and disorderly movements in exchange rates have adverse implications for economic and financial stability from a global perspective.
Monetary policy should be directed toward domestic price stability and continuing to support economic recovery according to the respective mandates of central banks, it noted.
"We will be mindful of unintended negative side-effects stemming from extended periods of monetary easing," it further said.
Collectively, the G-20 economies account for more than 80 per cent of the global gross domestic product (GDP), 80 per cent of world trade and two-thirds of the world population.
The countries under the group include the US, South Africa, Canada, Mexico, Brazil, Argentina, China, Japan, South Korea, India, Indonesia, Russia, Turkey, Germany, France, UK, Italy and Saudi Arabia, besides the European Union (EU).
The communiqué said policy uncertainty, private deleveraging, fiscal drag, impaired credit intermediation, and a still incomplete rebalancing of global demand continue to weigh on global growth prospects. The medium-term challenges are also present in many economies, including those related to fiscal sustainability and financial stability, it added.
It said global economy has avoided some major tail risks and financial market conditions continue to improve. However, global growth has continued to be too weak and unemployment remains too high in many countries.
The recovery remains uneven and is progressing at different speeds with emerging markets experiencing relatively strong growth, the United States demonstrating a gradual strengthening of private demand, and the recovery in the euro area as a whole yet to materialize.
Maintaining that fiscal sustainability in the advanced economies remains essential, the communiqué said large surplus economies should consider taking further steps to boost domestic sources of growth.
Further progress towards a balanced medium-term fiscal consolidation plan is necessary for the US, although significant deficit reduction has already been achieved, it noted.
The communiqué urged the IMF to complete the reforms in its governance and quota systems latest by next January.
'We remain committed, together with the whole IMF membership, to agree on the quota formula and complete the 15th General Quota Review by January."
The communiqué called upon its member countries to make compliance with Basel 111 regulations possible in 2013 and highlighted the urgencies for forging cooperation in the area of tax-related issues.
"More needs to be done to address the issues of international tax avoidance and evasion, in particular through tax havens, as well as non-cooperative jurisdictions," the communiqué said.
It extended support for Financial Action Task Force (FATF) work, notably the identification and monitoring of high-risk jurisdictions with strategic anti-money deficiencies.
"We must tackle the risks raised by opacity of legal persons and legal arrangements, and encourage all countries to take measures to ensure they meet the FATF standards regarding the identification of the beneficial owners of legal persons, other corporate vehicles and trusts, that is also relevant for tax purposes," the communiqué concluded.