WASHINGTON — With their economies driving global output, Asian countries are going to press for better representation on the International Monetary Fund board during the weekend’s meetings of the IMF and the World Bank, an expert on East Asia said Wednesday.
Homi Kharas, a senior fellow at the Brookings Institution and formerly the chief economist in the East Asia and Pacific Region of the World Bank, said during an online news conference that the IMF governance reform is “essential and likely” because [East Asian countries] have the most dynamic economies in the world today.
If not this weekend, the Group of 20 leaders will “break any impasse” at the summit on Nov. 11-12 in Seoul, Kharas said.
Washington has long pressed for a reduction of the IMF board seats in an effort to increase both rights and responsibilities of emerging countries like China, India and Brazil.
Last week, 13 leading economists published an open letter to the IMF, calling for a 5% shift of the institution’s voting power from advanced to developing countries.
The U.S. said in August that it will veto a resolution that would allow the IMF executive board to operate at its current size, with European countries holding one-third of the 24 seats.
However, Kharas said it is unlikely that the institution’s board will be reduced to 20 so inclusion of more voices will take place while keeping the current size.
At the annual meetings, finance ministers and central bank officials discuss the global economic outlook from financial stability to job growth to governance.
East Asian nations also are concerned about global pressure aimed at China valuation of the yuan and implications for the other countries’ currency policies, Kharas said during conference.
In an earlier speech at the Brookings Institution Wednesday, Treasury Secretary Timothy Geithner called for more flexibility in currency exchange rates in remarks clearly aimed at China.
“When large economies with undervalued exchange rates act to keep the currency from appreciating, that encourages other countries to do the same, and this sets off a dangerous dynamic,” Geithner said.
IMF chief Dominique Strauss-Kahn warned Tuesday that it is risky for governments to use exchange rates to solve domestic problems. His comment came before the Japanese central bank announcement Tuesday to buy government bonds to force down the yen value.
Congressional leaders have criticized China’s currency manipulation, saying it hurts U.S. exports and jobs. Last Wednesday, the House of Representatives passed legislation to pressure China to increase the value of its currency in time for midterm elections next month. See related story on China currency bill.
At the Asia-Europe meetings in Brussels earlier this week, European leaders said China’s weakened currency hampers Europe’s economic recovery.
Despite the criticisms, U.S. and other finance leaders have been hesitant to take decisive action to avoid conflicts in trades with China.
Kharas said IMF should have a significant role in thinking about appropriate currency levels that support global growth and stability. “It has started to do this through its multilateral surveillance instrument, but so far has had limited impact,” he said.
Prior to the G20 summit, finance ministers and central bankers will hold a meeting Oct. 22-23 in Gyeongju, South Korea.