G20 members pledge to refrain from competitive devaluation

Finance ministers and central bank governors from the Group of 20 (G20) major economies in the world on Friday reaffirmed their pledge to avoid the competitive devaluation of respective currencies.

"We will refrain from competitive devaluation and will not target our exchange rates for competitive purposes, and we will resist all forms of protectionism and keep our markets open," said a communique issued after the G20 officials wrapped up two days of discussions on the sidelines of the International Monetary Fund ( IMF) and the World Bank Spring Meetings.

The pledge is similar to the one they made at a previous gathering in Moscow in February.

The G20 policymakers also reiterated that "excess volatility of financial flows and disorderly movements in exchange rates have adverse implications for economic and financial stability," adding that monetary policy should be directed toward domestic objectives.

"We will be mindful of unintended negative side effects stemming from extended periods of monetary easing," the communique added.

In the communique, the G20 members said that although the global economy had avoided major tail risks and financial market conditions had continued to improve, the growth was too weak and unemployment remained too high in many countries. So further actions are required to make growth "strong, sustainable and balanced."

Playing down public concerns over a global "currency war," the G20 officials said that recent monetary easing measures from the Bank of Japan, which have led to a sharp devaluation of the yen, were intended to stop deflation and support domestic demand.

Without setting a hard debt-reduction target, policymakers of the world's biggest economies highlighted the importance of maintaining fiscal sustainability, and called for medium-term fiscal strategies from the advanced economies by the time of the St. Petersburg G20 Summit in September.

The communique also stressed the urgent need for ratification of the 2010 IMF Quota and Governance Reform, a package which included a shift in quotas to dynamic emerging markets and under- represented countries, and a proposed amendment to reform the executive board. The legislatures of some key IMF members, including the United States, have not yet given the green light to the reform package.

Meanwhile, the G20 members agreed to finalize a new quota formula and complete the 15th General Quota Review by January 2014.

"We reaffirm our previous commitment that the distribution of quotas based on the formula should better reflect the relative weights of IMF members in the world economy, which have changed substantially in view of strong GDP growth in dynamic emerging market and developing countries," said the document.