Raising concern over recession-hit countries ahead of the G-20 meeting in Moscow, the US said the focus of the G-20 nations is to ensure growth strategies in the world’s largest economies are mutually compatible and that they promote growth globally.

“For us, the central focus of the G-20 is charting a path to shared growth. The surest path to shared growth is through growing and rebalancing demand, which, of course, requires currencies to adjust,” US Undersecretary of the Treasury for International Affairs Lael Brainard told reporters.

Market-determined exchange rates

“To ensure that growth strategies in the world’s largest economies are mutually compatible and that they promote growth globally, we’re going to make sure we’re going to continue to emphasise the commitment to market-determined exchange rates and to refrain for those countries who are still in transition from any move to competitive devaluation,” Brainard told reporters in response to a question.

Brainard, who would represent the US during the G-20 ministerial, said that while tail risks have eased, global growth is weak.

“One-third of the G-20 is in recession. We need to do more to get people back to work. Toronto 2.0 is not the right answer. We must avoid jeopardising the recovery with a premature shift to restraint,” she said.

This will be the first G-20 ministers and governors meeting under the Russian presidency.

Near-term growth

The G-20 has to do a better job at balancing medium-term fiscal consolidation with the imperative of supporting near-term growth, she said adding that the findings by the International Monetary Fund and OECD of large fiscal multipliers than previously estimated support the need for caution.

Strengthening demand will require greater progress on global rebalancing. In the absence of offsetting demand growth from surplus economies, the overall growth will remain weak, she noted.

“To ensure growth strategies in the world’s largest economies are mutually compatible and promote global growth, the G-20 needs to deliver on the commitment to move to market-determined exchange rates and refrain from competitive devaluation.

“...Greater transparency of exchange rate operations, including intervention and reserve accumulation, is needed to strengthen the adjustment process,” she stressed.

Quota reforms

The G-20 meet among other things would also discus quota reforms.

“The IMF is the world’s first responder when financial crisis hits. US has a huge stake in the continued strength and effectiveness of the IMF. The IMF promotes financial stability and economic growth abroad, which, in turn, supports US exports and jobs at home,” she said.

“Passage of IMF quota legislation is important to enable us to maintain our strong leadership position and influence in the fund and to restore the primacy of the IMF’s quota-based financial structure, in which US has the largest share. We are actively working with Congress to secure legislation implementing the 2010 IMF quota reform,” US official said.

Financial reform agenda

Looking forward to a good discussion on the international financial reform agenda in Moscow, Brainard said the United States is actively engaged in implementing this agenda fully.

“Our largest banks have built capital to meet the Basel III 2019 standards well in advance of many of their global peers. We are forging ahead and putting in place a strong framework to address the opacity of OTC derivative markets and mitigate systemic risk while working cooperatively to iron out cross-border issues,” she said.

The US resolution regime for banks and non-bank institutions is at the forefront of global efforts to tackle systemic risk, and we’re acting strongly to address the risks posed by shadow banking, she added.

(This article was published on February 12, 2013)
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