Ottawa - This week’s Group of 20 (G20) summit would discuss the volatility in emerging markets that erupted after the US Federal Reserve started to talk about scaling back its massive bond-buying programme, Canadian officials said on Friday, but they suggested the Fed’s move was not the only reason for the turbulence.
A senior official, briefing reporters on condition of anonymity, said the summit in Russia of the G20 leading economies would take time to examine the reasons for the market volatility in India and other countries.
He said there were several factors involved, among them improving private sector demand in the US that was encouraging the Fed’s pullback, which he said was a good news story that created challenges in other parts of the world. “But some of these challenges also reflected the state of their own economies,” he said.
India is so concerned about the market tumult that it is seeking support from other emerging countries for co-ordinated intervention in foreign exchange markets. India’s currency has fallen by 20 percent against the dollar since May.
Andrew MacDougall, the spokesman for Canada’s Prime Minister Stephen Harper, noted an irony in the criticism of the Fed’s move to reduce its bond-buying programme. “We’ve kind of heard the opposite complaint when quantitative easing was happening, that that was disrupting flows as well, and now that they’re moving in the other direction, that causes a different set of challenges,” he said.
MacDougall also said Canada would continue to press at the G20 for progress on reducing government deficits and debt, a policy push that had received less emphasis of late in light of high unemployment in Europe and elsewhere. “We want to see that fiscal consolidation continued,” he said, saying that Harper felt it was important for the G20’s credibility that it follow up on previous commitments to cut government debt.
“If you don’t have your books in order, it limits your ability to manoeuvre, so the longer you put that decision off, the harder your choices become.”
The official who spoke on condition of anonymity said that countries at the St Petersburg summit, which begins on Thursday, would present individual fiscal strategies rather than the G20 agreeing on some across-the-board reduction in the debt burden. – Reuters