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US, impatient over China’s progress on currency

business Updated: Oct 07, 2010 00:21 IST

The United States is increasingly looking to the International Monetary Fund to hold countries like China accountable for “rebalancing” the global economy, a Treasury Department official said.

Exchange rates are expected to be a major topic when finance ministers gather here this weekend for the annual meetings of the IMF and the World Bank.

A senior Treasury official said the United States was looking to the IMF to ensure that countries contribute to “strong, sustainable and balanced growth” — the mantra adopted when leaders of the Group of 20 economic powers, including President Obama, gathered in Pittsburgh in September 2009 to coordinate the world’s emergence from the financial crisis.

In practical terms, the slogan means that export-oriented economies like China, Japan and Germany should stimulate domestic demand while heavily indebted countries, like the US, should reduce their trade and budget deficits.

The unity of the G-20 countries has been repeatedly tested this year, by the European debt crisis, China’s reluctance to allow its currency to appreciate in value, steep budget cuts in Britain, and Japan’s recent move to devalue the yen, among other developments.

The official, who spoke on the condition of anonymity under ground rules set by the Treasury said, “The United States has been very consistent in its position that the leading economies should be supporting exchange rates based on market fundamentals,” the official said, adding: “We expect that countries will continue to move toward honoring the full set of their G-20 commitments.”

José Viñals, director of the monetary and capital markets department at the IMF, called for countries to tackle the high public debts through fiscal consolidation over the medium term, address lingering vulnerabilities in their banking systems and make more progress on overhauling financial regulations.

The New York Times