IMF told to Toughen Scrutiny of Rich Powers

By Lesley Wroughton & Emily Kaiser|Reuters

Emerging powers won a battle on Saturday for heightened IMF scrutiny of rich countries’ economic policies as world financial leaders sought to defuse mounting tensions over currencies.

The International Monetary Fund’s 187 member countries gave voice to long-running frustrations of emerging economies, which say the Fund has traditionally not been tough enough on its biggest shareholders, led by the United States.

Now, with the United States and Europe in the doldrums, and emerging economies providing the major growth engine for the world, the tables appear to be turning.

“Stronger and even-handed surveillance to uncover vulnerabilities in large advanced economies is a priority,” the IMF’s steering committee said in a communique.

The statement reflected the arguments of developing countries that weak finances and sluggish growth in the United States are a fundamental cause of imbalances in the global economy, with U.S. policies fueling the dollar weakness that is causing strains for many emerging market currencies.

This view was driven home by Chinese Central Bank Governor Zhou Xiaochuan on Saturday and won broader support.

“The IMF is no longer the institution designed to look after the developing countries solely,” said Thailand’s finance minister, Korn Chatikavanij. “Its role needs to be more broad-based, and it needs to realize that mistakes in the larger economies have global impact.”

The United States, in contrast, has pointed its finger at China, saying its huge current account surplus and undervalued yuan currency are partly to blame for the imbalances that have caused the dollar to fall and raised concerns about a “currency war.”

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