Focus on euro at IMF-World Bank meet

By C. Rammanohar Reddy

PRAGUE, SEPT. 23. The 2000 Annual Meetings of the International Monetary Fund and the World Bank are being besieged by one problem after another, none of which could have been even remotely foreseen when the conference was planned to showcase the east European transition to a market economy.

First, there were the worries about the street protests planned for September 26, then the rising price of oil cast its shadow on the conference and now there is the falling euro and the central bank action to prop it up which is occupying Ministers and central bankers who have arrived for the IMF-WB meeting.

The Finance Ministers of the Group of Seven (G-7) countries are meeting later this evening in Prague to decide on what action they should take to supplement Friday's joint intervention, the first ever, by European central banks and the U.S. Federal Reserve to halt the slide in the euro which has lost more than 25 per cent of its value against the U.S. dollar since its launch in January 1999.

The $1.5 billion that the central banks spent on yesterday imparted a marginal upward movement on the common currency.

Coincidence or not, the central bank intervention followed just a couple of days after Mr. Horst Kohler, the Managing Director of the IMF, broke an unwritten taboo by talking of the need for European central banks to intervene in the market to reverse the slide which he said had left the euro ``grossly undervalued.''

While the U.S. Treasury Secretary, Mr. Lawrence Summers, said a strong dollar was in the interests of the U.S., the presence of the Federal Reserve (along with the Bank of Japan and the Bank of England) in Friday's action was to signal to the market that all the advanced economies viewed the fall of the euro with concern since, as they put it in a joint statement, ``the decline could jeopardise the economy.''

The euro is also sure to be on top of the agenda - alongside debt-relief, redefining the IMF and how to give globalisation a human face - when the International Monetary and Financial Committee, the main policy making body of the IMF, meets in Prague tomorrow.

What all the statements from Prague and the market intervention will do to the euro and equity prices (which went through some turmoil on Friday) will be known only when the currency and stock markets open on Monday.

G-24 communique

At the end of the first Ministerial gathering associated with the 2000 Annual Meetings of the International Monetary Fund (IMF) and the World Bank, the Ministers from the G-24 Grouping of developing countries today issued a communique in which the Ministers ``expressed concern about the ever-mounting political pressures and non-economic considerations'' influencing lending by the two institutions.

In a mild language that reflects the fact that oil- producers too are present among the G-24, the communique also calls for ``mutually supportive measures''that would stabilise the oil market.

The statement said that if the present level of oil prices continued, the IMF should show greater flexibility in the terms for access to the Compensatory Financing Facility and the Poverty Reduction and Growth Facility, two loan windows for emergency lending to affected developing countries.

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Section  : International
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