G20 meet: Emerging economies seek transparency in Fed tapering

Representatives of emerging economies attending the G20 meeting in Sydney, Australia began their two-day deliberations aimed at finding a "real and tangible framework" to push global growth amid clamour for a transparent tapering of the monetary expansion programme of the US Federal Reserve so as to reduce volatility in the global financial markets.

Most of the emerging economies, including India are pitching for greater transparency in the US Fed's tapering operations and expeditious reforms of IMF and automatic sharing of tax information – the three important prerequisites for global financial stability.

Australia, which is the chair of the G20, wants the G20 members to agree on a tangible plan to achieve collective goal of promoting growth and lifting economies which are still reeling under the impact of slowdown.

Speaking on the sidelines of the G20 ministerial meeting, Australian treasurer Joe Hockey hoped that the ministers would "lay down a real and tangible framework for increasing growth of the global economy in the next five years".

Hockey endorsed India's demand for a "forward guidance" on tapering by the US Federal Reserve when he made a case for a "no surprises policy" as far as monetary activities were concerned. "That is what the central bank governors are waiting for," he added.

Representatives of the G20 nations, which represent 85 per cent of the global economy, should come out with "real outcomes" to enhance cooperation to deal with volatility in global financial markets, he stressed.

The withdrawal of monetary stimulus by the US Federal Reserve is having major implications on the markets in developed and emerging economies. The tapering that started in January this year after the Fed first talked about it in May 2013, is sending markets the world over into turmoil and the Indian rupee had hit a record low in the wake of volatile capital flows ever since the Fed's announcement in May last year.

The US Fed has reduced its monthly bond purchases by $20 billion to $65 billion on signs of an improving US economy. The reduction is affecting capital flows to emerging markets and impact their currencies as the dollar becomes dearer.

At the meeting of the finance ministry officials and central bank governors yesterday, India's finance secretary Mayaram made a strong case for expediting International Monetary Fund (IMF) quota reform to give greater voting powers to emerging economies.

He described the inability of the IMF to move ahead with the quota reforms as "first visible failure of the G20" and asked the member nations to expeditiously ratify the 14th General Review which aimed at providing greater say to the developing world in the multilateral body.

"We strongly stated that it is unfortunate that despite agreement in G20, implementation of 2010 reforms, which is vital for credibility, legitimacy and effectiveness of the IMF, have not been completed and we have missed the deadline of January 2014," he had said.

Finance minister P Chidambaram is expected to pursue the matter further to get some concrete assurances from the G20 members with regard to expeditious reform of the multilateral body.