Seoul: Prime Minister Manmohan Singh will tell Group of 20 leaders on Friday that advanced deficit economies must pursue policies of fiscal consolidation that ensure debt sustainability in the medium term, a draft speech showed.
Rancorous debate over global economic imbalances and currency strains have dogged the G-20 world leaders gathered for a summit in Seoul, raising doubts if action will go beyond expected avowals of cooperation.
The G-20 club of rich and emerging economies had hoped to use the summit to soothe tensions over foreign exchange rates generated by imbalances between cash-rich exporting nations and debt-burdened importers.
Efforts by several nations to hold down their currencies to prop up exports and growth and the US Federal Reserve’s bond-buying spree blamed for the dollar’s weakening have spurred fresh calls for coordination of national policies.
Singh will tell an opening plenary session to “at all costs avoid competitive devaluations and a resurgence of protectionism”, according to the draft speech.
“Advanced deficit countries must follow policies of fiscal consolidation consistent with their individual circumstances so as to ensure debt sustainability over the medium term,” the speech says.
“Credible fiscal sustainability over the medium term is probably more important than front-loaded fiscal correction.”
Singh will also call for such fiscal correction to be accompanied by “credible reforms in products and the labour market which would increase efficiency and competitiveness”.
Germany and several other nations have hit out at a US plan to consider limiting current account imbalances, while some countries, notably China, have come in for criticism for intervening in currency markets to get a trade advantage.
Singh is expected to speak out against competitive devaluation.
“Exchanged rate flexibility is an important instrument for advancing a sustainable current account position and our policies must reflect this consideration,” the draft speech says.