G20 Finance Chiefs Agree to Curb Currency War

      October 25, 2010 11:02

      The finance ministers and central bank governors of the G20 member countries met over the weekend in Gyeongju, North Gyeongsang Province and agreed to desist from competitive currency devaluations. The agreement came ahead of the G20 Summit in Seoul next month.

      It allows the U.S. to keep export rivals such as China in check. China in turn succeeded in expanding its stake in the International Monetary Fund from the present sixth position (3.99 percent) to third, gaining international recognition for its economic clout. In contrast, the stakes in the IMF held by European countries battered by the global financial crisis will shrink, and their voice in global economic affairs grow smaller.

      As the head of the host country of the G20 Summit, President Lee Myung-bak also attended the Gyeongju meeting and spearheaded efforts to curb the global currency war. Finance Minister Yoon Jeung-hyun announced a joint communiqué at the end of the meeting on Saturday and said they agreed to "implement market-based currency measures and refrain from competitive currency devaluations.'" Yoon said that will put the currency issue "to rest."

      Emerging Asian economies like Korea and China are to hold more than a 6 percent stake in the IMF under the terms agreed at the G20 Finance Ministers and Central Bank Governors Meeting. The stakes held by the so-called BRICs -- Brazil, Russia, India and China -- are now all within the top 10. Previously, only Russia and China fell in that bracket.

      With a 1.413 percent stake in the IMF, Korea ranked 18th but will rise to 16th with about 1.8 percent. Exact stakes will be confirmed at the IMF board meeting, to be implemented before the fund's general meeting in 2012.

      The IMF allots stakes to 187 member countries according to their economic size, openness of markets, current account surplus and foreign currency reserves. An increased stake boosts the number of votes that can be exercised and offers the chance to join the fund's board. At present, only 24 out of the fund's 187 member countries are on the board. Seven countries -- the U.S., Japan, Germany, France, China and Russia -- can be independent board members, while other countries elect members to represent them based on their stakes.

      In a group with 12 other countries, Korea takes turns with Australia to serve on the board every two years. Board membership allows a country to participate in the decision-making process and present opinions in reports and other documents.

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