WASHINGTON : Rodrigo Rato, managing director of the International Monetary Fund, rejects suggestions that the IMF has lost influence in Asia as governments in the region build up currency reserves to ensure they will never again need the fund's support. "We are playing a role," he said in a recent FT interview. "But we are just a part of the discussion. And I think the same can be applied to US budgetary policy or European structural reforms. " The IMF has highlighted concerns about global trade imbalances; part of the solution, it has argued, is broad currency appreciation in Asia. Asian countries have accumulated large foreign reserves, in part to protect themselves against swings in international financial markets that rocked the region in the 1990s. Some economists also see this as an attempt to build their own insurance against having to borrow from the fund, or accept its advice, in the future. "We are no longer talking about financial crises. We are talking about complicated and important issues in which I think our advice, our opinion, our technical assistance is valued," Rato said. "The fact that more countries are moving to a position in which they are more stable doesn't necessarily mean that they are not necessarily following the fund's advice. It may mean they are following the fund's advice in becoming more stable," he said. Yet it is clear that he does not see external advice as necessarily helpful when it comes to demands that China abandon its currency peg to the dollar. Rato, back from a recent visit to China, said Beijing faced domestic political difficulties in switching to the more flexible system that it agreed was needed. Asked whether pressure from the US and the Group of Seven (G7) leading industrialised countries, as well as the IMF, had been helpful, he said: "Certainly [the fund's] advice to China was helpful, I'm sure, because we have done it in a very co-operative atmosphere." As for the others, he said, referring to G7 countries, "well, I am not going to judge that, it is somebody else's job." The Chinese authorities have committed themselves to moving to a more flexible currency regime but have declined to set a timetable. Rato pointed out that the main sources of global imbalances were the low US savings rate and the inability of Japan and continental Europe to grow faster. Almost a year into the job, Rato said that one of the conclusions of his review of the IMF's strategy and operations was that surveillance of member countries' macroeconomic policies, national and regional risks, was the fund's most important job. Its other tasks, including loan programmes to member countries, were secondary, he said.
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