The Group of 20 (G20) major economies agreed on Saturday to shun competitive currency devaluations but stopped short of setting targets to reduce trade imbalances that are clouding global growth prospects.
G20 finance ministers also recognised the quickening shift in economic power away from Western nations by striking a surprise deal to give emerging nations a bigger voice in the International Monetary Fund (IMF).
In the reshuffle, Europe will give up two seats and China will overtake traditional powerhouses Germany, France and Britain to become the third-most powerful member. India will also wield more power in the fund.
“Our complaint was that the quota share should reflect ground reality and economic strengths currently. Otherwise, it would have eroded the credibility of the institution. That has now been corrected,” finance minister Pranab Mukherjee said.
A closing communique contained no major policy initiative after a US proposal to limit current account imbalances to 4 per cent of GDP, a measure aimed squarely at shrinking China’s surplus, failed to win enough backing.
The US itself came under fire from Germany and China for the super-loose monetary policy stance it has adopted to try to breathe life into the sluggish American economy.
The main aim of the two days of talks, which precede a G20 summit in Seoul on November 11-12, was to ease currency strains that some economists feared could escalate into trade wars.
Developing countries are worried that Washington, by flooding the US banking system with cash, is pumping up their asset prices and exchange rates, thus undermining the competitiveness of the export industries on which they rely for growth.
The statement also said advanced countries would be vigilant against excessive volatility and disorderly movements in exchange rates.
“If the world is going to be able to grow at a strong, sustainable pace in the future... then we need to work to achieve more balance in the pattern of global growth,” US treasury secretary Timothy Geithner said.