WASHINGTON: A deal to end the raging global currency dispute is unlikely to come when economic powers meet in Washington on Friday according to a top IMF official.
Youssef Boutros-Ghali, who heads the International Monetary Fund’s steering committee, said he backed calls for leading economies to hammer out an accord on currency exchange rates, but said it was unlikely to come soon.
Economy ministers and central bankers for the IMF’s 187 member states meet Friday as anger grows about beggar-thy-neighbor currency policies that are skewing world trade.
In a letter Monday to Boutros-Ghali, the Institute of International Finance, a group of leading global banks, called for "urgent action" by the core of the world’s major economies, namely the United States, Japan and the Euro zone, leading to support on exchange rate and macroeconomic issues ahead of a Group of 20 summit.
When asked if action before next month’s summit in Seoul was feasible, Boutros-Ghali said "this late in the game, no. But in the coming three to six months, yes absolutely."
Boutros-Ghali, who is also Egypt’s minister of finance, was speaking at the US Chamber of Commerce, where he told business executives that global economic rebalancing was vital for financial stability.
"The surplus countries need to learn to spend more, and the deficit countries need to save more," he said.
Put differently, the countries need to flip their trade positions: the United States needs to export more, while China and other chronic surplus nations need to boost their imports.
"These issues impact the rest of the world," he said. "If everybody is trying to export, we’re going to have a problem."
Boutros-Ghali insisted that developing countries like Egypt were strong enough to have a "healthy deficit" and still maintain substantial growth.
He said exporters in the West should feel hopeful that Asian economies were prepared to import and consume more from abroad, but that such countries would have to overcome a "tradition of discipline" that promotes thrift over extravagance.
The IMF on Wednesday said rich and emerging economies must dramatically change the way they trade with each other or risk throttling the recovery.
In its latest economic outlook, the IMF said growth would slow more than previously expected in 2011, as the United States, Europe and Japan continue to struggle and China remains overly dependent on exports.
