The world’s top finance officials wrapped up three days of talks yesterday after failing to reach a consensus on measures to head off what some see as a looming currency war.
The IMF steering committee, which has been struggling to address friction among key economies including China and the US, said on Saturday the organization should continue its study.
“While the international monetary system has proved resilient, tensions and vulnerabilities remain as a result of widening global imbalances, continued volatile capital flows, exchange rate movements and issues related to the supply and accumulation of official reserves,” the IMF panel said in a statement after its meeting on Saturday.
“We call on the Fund to deepen its work in these areas, including in-depth studies to help increase the effectiveness of policies to manage capital flows,” the statement said.
The statement from the International Monetary and Financial Committee, the policy arm of the IMF, stopped short of any specific call on China or others to change policies of using a low currency and accumulation of reserves to boost exports.
“There are frictions, obviously,” committee chair Youssef Boutros-Ghali said at the conclusion of talks at IMF headquarters in Washington. “These are being addressed. We have come to the conclusion that the IMF is the place to deal with these issues.”
IMF managing director Dominique Strauss-Kahn, when asked about the lack of a stronger statement, said, “There is only one obstacle, and that is an agreement of the members.”
He added: “I don’t believe action can be done in a way other than in a cooperative way.”
US Treasury Secretary Timothy Geithner said earlier in the day that the IMF “must strengthen its surveillance of exchange rate policies and reserve accumulation practices,” adding that “excess reserve accumulation on a global scale is leading to serious distortions in the international monetary and financial system.”
Recent IMF figures showed Beijing had currency reserves of US$2.447 trillion, the largest in the world and nearly 30 percent 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 final communique appeared to be a setback for the US. It had urged the IMF to be a tougher cop on exchange rate policies, a position echoed by a number of Europeans and other officials.
Japanese Finance Minister Yoshihiko Noda told the panel earlier that “it is not sustainable that certain countries achieve growth while imposing costs on other countries. Now it is critical that the international society work together to resolve these problems.”
The finance ministers and central bankers from the IMF’s 187 member states, including the G20, met in the US capital hoping for a consensus on the thorny question of currency policies.
However, China’s top central banker on Friday rejected demands for a quick yuan revaluation, declaring that the emerging giant would reform gradually rather than engage in “shock therapy.”
Central bank Governor Zhou Xiaochuan (周小川) said the yuan would move toward an “equilibrium” level.
Other participants at the IMF downplayed the notion of a currency war.
“I don’t think there is a war,” French Finance Minister Christine Lagarde said. “In a war, there is always a loser and we cannot have a loser.”