Washington, April 15:
The International Monetary Fund (IMF) called for a flexible, non-coercive approach to monitoring exchange rate regimes of member countries after the US had pressed for stepped-up intervention by the IMF.
â€œDialogue and persuasion should remain key pillars of effective surveillance,â€ the IMFâ€™s policy-setting committee said here in a statement after a twice-yearly meeting.
IMF action on exchange rates, the committee added, â€œshould pay due regard to country circumstancesâ€ and be characterised by even-handedness. Earlier in the day US treasury secretary Henry Paulson, in an address to the committee, re-asserted Washingtonâ€™s insistence that the IMF take a more muscular approach to currency volatility.
â€œLet us be clear: exercising firm surveillance over membersâ€™ exchange-rate policies is the core function of the institution,â€ he said. â€œFor us, reform of the IMFâ€™s foreign-exchange surveillance is the lynchpin on which other reforms depend, and we look forward to action in this important area very soon.â€ Paulson, in language that would be repeated in the committee statement, said IMF action should be â€˜even-handed and candidâ€™ and reflect current economic circumstan-ces in a particular country.
But the US treasury chief also warned that â€œif exchange-rate issues are not debated critically and ope-nly at IMF, alternative ven-ues and approaches will ne-cessarily emerge.â€
There have been bills introduced in US Congress demanding trade sanctions on China for what it is seen as its refusal to allow its currency, the yuan, to appreciate.
US insistence on vigorous IMF action may therefore reflect Bush administration frustration with Beijing. The relatively weak Chinese currency, according to the US argument, makes Chinese goods more attractive on US markets and threatens jobs held by American workers.
But China, in a statement to the IMF released here yesterday, said its exchange-rate regime â€˜will be improved in a gradual and controllable manner.â€™ â€œExchange-rate flexibility will gradually increase, with attention paid to the value of a basket of currencies.â€ The statement said that since currency reforms in July 2005, the yuan in fact had appreciated by seven per cent against the dollar as of March this year.