The G-20 on Friday announced that International Monetary Fund (IMF) would review policies of the world’s seven largest economies, including India and China , with the objective of rectifying flaws before they imperil growth. The US, Japan, Germany, France and Britain are the other five countries that influence the global economy.
The seven countries would be examined for economically destabilizing policies, such as large government budget deficits and debt, high personal saving rates and debt, or big trade surpluses or deficits, the G-20 club said after taking the decision at a meeting of member finance ministers and heads of their central banks.
Further, it said that the group also settled on approaches for evaluating the causes of the imbalances and barriers for reducing them.
“We’ve made huge progress in relation to the framework for growth,” said Christine Lagarde , Finance Minister, France, which holds the G-20 presidency this year.
“Seven countries, clearly large economies, were filtered through the process to go to the second stage of analysis, and possibly some policy adjustments will be recommended for them, ” Lagarde said.
The agreements reached Friday underscores the important role of the IMF in the G-20 evaluations, noted The Wall Street Journal. IMF will conduct its evaluations based on methods the G-20 members have developed.
“We did find an agreement on the indicative guidelines,” which was one of the objectives of the meetings, Lagarde said.
“While not policy targets, these guidelines establish reference values for each available indicator allowing for identification of countries for the second step in-depth assessment,” said the G-20 Communique.
It added, “Our aim is to promote external sustainability and ensure that G20 members pursue the full range of policies required to reduce excessive imbalances and maintain current account imbalances at sustainable levels.”