IMF Rato: Developing Countries Near Limit On Forex Reserves
“It may no longer be sensible for developing countries to build up their foreign-exchange reserves, the head of the International Monetary Fund (IMF) said Tuesday.
With some Asian countries having run current account surpluses for a number of years, developing countries have been adding hundreds of millions of US dollars to their foreign-exchange reserves. China is now the largest holder of reserves in the world, with more than $1 trillion tucked away for a rainy day. But China has recently set up an agency to invest some of its reserves in the real economy, rather than leave those funds invested in US Treasury bonds or other low-risk assets.
Speaking before a committee of UK lawmakers, IMF Managing Director Rodrigo de Rato said he believes that emerging countries were beginning to diversify their holdings. He said the question was whether a limit was being reached to the accumulation of reserves. …” [Dow Jones/Factiva]
In news related to Rato’s speech to the UK Parliament, Reuters reports that “The IMF is still considering whether to sell 400 tons of its gold stocks to help plug a widening income shortfall…Rato, said on Monday.
The IMF announced on January 31 that it was considering recommendations by an independent panel, including the sale of gold, after demand for IMF financial assistance has almost dried up, prompting an income shortfall of $165 million for fiscal 2007. The IMF forecast that income gap would widen further to about $224 million in the next fiscal year. …” [Reuters/Factiva]
In a separate piece, Reuters adds that “The world's richest countries have failed to keep their promises to increase aid to poor countries, the head of the IMF said on Monday, before a weekend meeting of finance ministers from the G8 industrial nations in Germany.
‘So far, we have not seen much of this promised higher aid especially in sub-Saharan Africa,’ Rato said in text prepared for a speech to members of the UK Parliament. ‘Moreover, this higher aid needs to be disbursed in a more predictable way and harmonized across different donors,’ he added. …
The G8 has so far kept its promise on delivering debt relief, last year writing off the debts of 19 of the world's most impoverished countries. It also has increased funding for the global fight against HIV/AIDS and better education, but has lagged on promises of increased aid and trade, with countries haggling over details of a trade agreement. …” [Reuters/Factiva]
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