The Hindu Business Line : Energy hot topic at IMF, World Bank meetings

AGAINST the backdrop of continuing rise in oil prices and the Wall Street taking a beating last week, plunging to new lows for 2005, the Finance Chiefs of the Group of Seven Industrialised nations focussed on the energy sector as they gathered for the Spring Meetings of the International Monetary Fund (IMF) and the World Bank.

The G-7's statements were about economic growth remaining robust through 2005. But there were no illusions on the impact of oil price hikes and market volatility on economic growth.

"I think we recognise the volatility of oil prices, and particularly the high level in recent months could have a damaging effect on growth," said Britain's Finance Minister and Chair of the International Monetary and Financial Committee (IMFC), Mr Gordon Brown. Although the G-7 and IMFC have welcomed efforts by producing countries to increase production and have called for conserving energy, the urgency of the matter was not lost especially on the kind of ramifications it had for oil importing developing nations.

In his remarks to the IMFC, as the lead speaker, the Indian Finance Minister, Mr P. Chidambaram, spoke of the high level of oil prices, the possibilities of further increases and the strain this has placed on the performance of many developing economies, particularly the oil importing ones.

"The burden of high oil prices has, however, fallen disproportionately on the developing countries," Mr Chidambaram said.

"In India, for example, the average price of the Indian basket of imported oil was $28 in 2003-04, it increased to $39 in 2004-05. So far, in 2005-06, it is ruling at $52 per barrel. I need hardly emphasise the need for moderation and stability in oil prices," he told the policy-making committee of the fund.

Officials of the G-7, the IMF and the World Bank had gathered for the spring session at a time when the Wall Street is witnessing its worst session in two years.

Worried about oil prices and a softening economy, the Dow Jones Industrials plunged 191 points last Friday.

"I don't comment on stock market moves. What I do comment on is the underlying fundamentals, and they remain strong," the US Treasury Secretary, Mr John Snow, said, following a meeting of the G-7.

He conceded that high energy prices "hurt", but was keen on keeping the accent on the positive.

"Does productivity remain high? It does. Is inflation rearing its head? No. Is capital spending strong? Yes. Are jobs being created? Of course," Mr Snow said.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page