Rising Commodity Prices, Weak USD Cause Concern
By Scott Bobb
Rising Commodity Prices, Weak US Dollar Cause Concern
Senior Finance officials from the world's 20 major economies say they share responsibility for stabilizing rising commodity prices and are calling on countries with large foreign currency reserves to adopt more flexible exchange rates. The remarks came at the end of a two-day meeting in South Africa.
Finance ministers and central bank governors of the world's 20 leading economies Sunday ended a meeting in Cape Town saying they expect world economic growth to slow because of rising commodity prices and the weak U.S. dollar.
In a final communique, the forum known as the G-20, said it expects the downturn to be modest although it could not predict its extent and duration.
The head of the International Monetary Fund, Dominique Strauss-Kahn, told reporters that the global community must work together to address the imbalances.
"It's certainly no time for complacency for the industrialized world. And we have to work a lot to correct what is not going perfectly. And again it's no time for complacency for the emerging world itself [either]," he said.
The G-20 groups the world's most developed countries and one dozen emerging nations which together represent two-thirds of the world's population and 90 percent of its gross domestic product.
The G-20 urged countries with large foreign currency reserves to allow their currencies to float more freely on exchange markets.
The statement was seen as aimed at China which despite large trade surpluses and foreign reserves continues to peg its currency to the US dollar. This is causing pressure on free-floating currencies such as those of Brazil, Canada and the European Union. However, officials said no country was singled out during the meeting.
The communique also urged the United States to boost national savings and the European Union to accelerate growth enhancing reforms. And it urged emerging Asian economies to lower their dependence on exports by boosting domestic demand.
South African President Thabo Mbeki voiced a concern of emerging nations by calling for a greater voice for them in the decisions of the World Bank and International Monetary Fund.
"We do need this new model of engagement which actively seeks to break deadlocks, some of which are age-old, which frustrate global economic and social development and the eradication of poverty," said Mr. Mbeki.
The recently appointed heads of the World Bank and International Monetary Fund, both attending for the first time, agreed that emerging nations should be given greater quotas and more votes in these institutions.