In a virtual disapproval of China’s recent devaluation of yuan that triggered shocks in the global economy, world’s 20 big economies today called for moving towards market-determined currency rates and resist from competitive devaluation.
The G20 group of economies also expect that monetary policy tightening is possible in some advanced economies, an euphemism for a likely interest rate, especially in the US.
“We reiterate our commitment to move toward more market-determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals, and avoid persistent exchange rate misalignments.
“We will refrain from competitive devaluations, and resist all forms of protectionism,” said the communique issued at the end of the two-day meeting of the G20 Finance Ministers and Central Bank Governors.
The statement did not name China but it comes against the backdrop of unsettling currency devaluation done by China recently that sent markets globally into a tailspin.
The G20 countries reaffirmed the role of macroeconomic and structural policies to achieve strong, sustainable and balanced growth.
Monetary policies will continue to support economic activity consistent with the central bank’s mandate but monetary policy alone cannot lead to balanced growth, it said.
The Finance Ministers said they would carefully calibrate and clearly communicate their actions, especially against the backdrop of major monetary and other policy decisions, to minimise negative spillovers, mitigate uncertainty and promote transparency.
After reviewing the global economy, growth prospects and the recent volatility in the financial markets, the G20 communique welcomed the strengthening economic activity in some economies but felt global growth fell short of expectations.
“We have pledged to take decisive action to keep the economic recovery on track and we are confident the global economic recovery will gain speed. We will continue to monitor developments, assess spillovers and address emerging risks as needed to foster confidence and financial ability,” it said.
Key challenges
The G20 nations noted that the need to boost actual and potential output growth was a key challenge for the global economy.
“We remain committed to timely and effective implementation of our growth strategies that include measures to support demand and lift potential growth. As we implement these strategies, we will take steps to promote greater inclusiveness, including to reduce income inequality,” it said.
The Ministers said that boosting investment was a top priority for them and to this end, they have prepared country specific investment strategies that present concrete actions to improve investment.
“We will implement fiscal policies flexibly to take into account near-term economic conditions, so as to support growth and job creation, while putting debt as a share of GDP on a sustainable path.
“To this end, we will also continue to consider the composition of our budget expenditures and revenues to support productivity, inclusiveness and growth,” the communique said.
As a fight continues against black money including in India, the group called for an urgent need to implement automatic exchange of information on tax matters and also resolved to enhance cooperation on fight against terrorism.
FIght against terrorism
“The fight against terrorism is a major priority for all of our countries and thus, we reiterate our resolve to tackle its financing channels.
“We reaffirm our commitment to deepen our cooperation concerning the exchange of information and freezing of terrorist assets, in particular to facilitate cross-border freezing requests, and we will work on modalities to promote further transparency of financial flows,” G20 said.
Criminalisation of terrorist financing and the existence of robust targeted financial sanctions regimes related to terrorism and terrorist financing are fundamental requirements to actively curb terrorist financial flows, it added.