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Asia needs greater say, G7 warns IMF

IMF members were to hold annual talks yesterday amid warnings the global financial monitor faces irrelevance unless it better reflects the growing voice of Asian and other emerging powers.

The International Monetary Fund's policymaking committee was to convene a day after the G7 economic powers urged China to make "critical" reform of its currency regime and warned of the impact of record oil prices.

The G7 nations also called on the IMF to sharpen its focus on currency surveillance, after appealing for action from China and other emerging Asian powers to help redress global economic imbalances.

The World Bank, the IMF's sister institution in charge of development issues, was to hold its own spring meeting today.

The White House on Friday called for reinforcing international financial institutions as well as strengthening the discipline of financial markets.

White House spokesman Scott McClellan also urged the institutions "to promote a stable and prosperous global financial system."

Both organizations can take heart from a world economy expected to grow a robust 4.9 percent this year, thanks in part to long-awaited recoveries in Japan and Europe.

"Yet risks remain from oil market developments, global imbalances and growing protectionism. We underscored that global economic adjustment is a shared responsibility," the G7 ministers said.

Crude oil futures closed above US$75 a barrel in New York for the first time on Friday on mounting anxiety over the Iranian nuclear crisis and a US gasoline supply crunch.

Another cloud on the horizon is the growing realization that the WTO's bid to liberalize global trade looks doomed to collapse.

EU Trade Commissioner Peter Mandelson said on Friday the WTO's 149 member governments had failed to narrow differences enough to reach a framework agreement on key components of a trade deal by the target date of April 30.

That failure now throws into serious doubt that an overall pact can be thrashed out by the end of the year, as the WTO had hoped.

Closer to home, yesterday's meeting of the IMF under the chairmanship of UK Chancellor of the Exchequer Gordon Brown was to address calls by IMF chief Rodrigo Rato for a fundamental shake-up of IMF voting rights.

Long dominated by the US, European countries and Japan, the IMF is locked in debate over how to better represent emerging economic heavyweights such as China, which now has fewer IMF votes than Belgium.

Developing country finance ministers on Friday said concrete progress on their demands for reform were "imperative" ahead of the next IMF-World Bank meetings in Singapore in September.

If, as seems likely, a deal is not done by September, Rato has suggested a two-stage process so that "the most under-represented members" are given an ad-hoc rise in their IMF influence pending a more comprehensive reform.

"It is essential for the IMF's relevance that we make early progress on this," he said on Thursday.

The G7 ministers backed the two-stage approach.

"An ad-hoc quota increase would help better to reflect members' international economic weight," they said.

But IMF members remain deeply divided over who should lose out in return for emerging powers winning a greater say.

Yesterday's talks would also debate an admission by Rato in a recent self-appraisal that the IMF should get back to its founding mission.

"We supported the strengthening of IMF surveillance, including through increased emphasis on the consistency of exchange rate policies with domestic policies and a market-based international monetary system and on the spillover effects of domestic policies on other countries," the G7 ministers said.

"Greater exchange rate flexibility is desirable in emerging economies with large current account surpluses, especially China, for necessary adjustment to occur," their statement read.

The G7 communique was the powerful club's most forceful yet on the need for China and other Asian economies to play their role in rectifying the global imbalances.

"It's natural, since China is such a huge part of the global economy, it should be a focal point," US Treasury Secretary John Snow told a news conference.

French Finance Minister Thierry Breton identified Japan and Malaysia as other countries that need to change their currency behavior.

"I'm convinced that the Japanese authorities will let the markets freely set the value of their currency," he said, after repeated accusations by some Western companies that Tokyo is putting a lid on the yen.

The G7 ministers said: "In emerging Asia, particularly China, greater flexibility in exchange rates is critical to allow necessary appreciations, as is strengthening domestic demand, lessening reliance on export-led growth strategies, and actions to strengthen financial sectors."

Chinese President Hu Jintao (胡錦濤) pledged on Thursday after White House talks with US President George W. Bush to "advance the reform" of exchange rates and take steps to boost imports, but was vague on how this will be done.
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