G20 eyes guidelines to spot big trade imbalances

Friday, 12 November 2010 22:20 - - {{hitsCtrl.values.hits}}

Seoul (Reuters): Leaders of the G20 instructed their finance ministers on Friday to draw up indicative guidelines to spot large current account imbalances that threaten to destabilise the global economy.

The guidelines, which will be composed of a range of indicators, will help with the timely identification of imbalances that “require preventive and corrective actions to be taken”, according to a communique issued after a two-day summit of the Group of 20 major economies.

Ministers will work with the International Monetary Fund on developing the guidelines, with progress to be discussed in the first half of next year.

A draft version of the communique had shown the G20 was undecided whether to describe the guidelines as “measurable” or as “quantitative and qualitative”.

In the end, no description was used.

The G20 declared global recovery to be continuing but with downside risks and said tensions and vulnerabilities in the international monetary system were clearly apparent.

Adopting the language agreed by finance ministers when they met in Gyeongju, South Korea, last month, the leaders pledged to move towards market-determined exchange rate systems and to enhance currency flexibility to reflect economic fundamentals.

Advanced economies will guard against disorderly exchange rate movements, which will help mitigate the risk of excessive volatility in capital flows facing some emerging economies, the communique said.

In that context, the G20 said those emerging economies with increasingly overvalued exchange rates that face an undue burden of adjustment would be justified in taking “carefully designed macro-prudential measures” to counter capital inflows.