Emerging economies win skirmish in seeking larger role in the IMF

Emerging powers won a battle on Saturday for heightened International Monetary Fund scrutiny of rich countries' economic policies as world financial leaders sought to defuse mounting tensions over currencies. The IMF's 187 member countries gave voice to long-running frustrations of emerging economies, which say the Fund has traditionally not been tough enough on its biggest shareholders, led by the United States. Now, with the US and Europe in the doldrums, and emerging economies providing the major growth engine for the world, the tables appear to be turning. "Stronger and even-handed surveillance to uncover vulnerabilities in large advanced economies is a priority," the IMF's steering committee said in a communiqué. The statement reflected the arguments of developing countries that weak finances and sluggish growth in the US are a fundamental cause of imbalances in the global economy, with US policies fueling the dollar weakness that is causing strains for many emerging market currencies. This view was driven home by Chinese Central Bank Governor Zhou Xiaochuan on Saturday and won broader support. The US, in contrast, has pointed its finger at China, saying its huge current account surplus and undervalued Yuan are partly to blame for the imbalances that have caused the dollar to fall, and raised concerns about a "currency war." US Treasury Secretary Timothy Geithner said there is a direct link between planned reforms at the IMF designed to give emerging powers a greater voice and foreign exchange rate policies, and said if emerging markets want more influence they must release their grip on tightly managed currencies. IMF chief Dominique Strauss-Kahn put it slightly differently: "You cannot be at the center and be a free rider." Strauss-Kahn said he hoped to get an agreement possibly within weeks on giving emerging countries more IMF voting power, which would be in time to meet a deadline of the Group of 20 summit next month in Seoul.