Sydney - Indonesia and South Africa on Friday stepped up pressure on US monetary policy, urging more clarity and better communication so emerging economies are not caught out by Federal Reserve action.
Countries including Indonesia, South Africa, Argentina, Turkey, and India have suffered sharp capital outflows and losses to their currencies as a by-product of the Fed's “taper” - the winding-back of its mammoth stimulus programme.
Indonesian Finance Minister Muhamad Chatib Basri said it was critical that this weekend's G20 meeting of finance ministers and central bankers in Sydney creates certainty about where the United States' policy is heading.
“I do understand the normal world is the world without QE (quantitative easing), so emerging markets should be ready for a world without QE,” he told the Australian Broadcasting Corporation.
“But I think when we move from one equilibrium into another equilibrium it is very important to continue to communicate to discuss about the roadmap so that we in the emerging markets can prepare.
“I think it is not just Indonesia,” he added.
“Other emerging markets including India, including South Africa, including Brazil also raised this same issue of the need for coordination.”
New Fed chief Janet Yellen is attending her first G20 as Ben Bernanke's successor, just weeks after her inaugural testimony to Congress painted a steady-as-she-goes course for Fed policy.
This includes the wind-down of the post-2008 policies that flooded capital markets with cheap cash, with the monthly stimulus reduced by $10 billion to $65 billion and further “measured” reductions at future meetings as long as economic conditions hold up.
Yellen said in the February 12 testimony that the Fed was keeping a close eye on market volatility, but offered little sympathy for the plight of emerging economies.
On Thursday, IMF chief Christine Lagarde cautioned the US to be “mindful” of the impact of its stimulus exit on major developing players, although she also said a “mind the shop at home” message applied to emerging economies.
South Africa's Finance Minister Pravin Gordhan is not attending the G20 as he prepares to table his country's 2014 budget, but in a note Friday ahead of the summit his delegation said more communication was essential.
“South Africa will use the meeting to encourage the global economic community to return to more cooperation and coordination through the G20,” it said.
“Our delegation will draw attention to the need for greater care in ensuring clear and consistent communication of policy actions by the very large economies.
“Recent events have demonstrated how financial markets, as one of the channels through which the interconnectivity of global economies takes place, can affect stability in emerging economies.”
On Thursday, British finance minister George Osborne demanded emerging economies get their own houses in order and refrain from “finger-pointing and distractions”, setting the scene for some testy exchanges in Sydney. - Sapa-AFP