[Mb-civic] CBC News - OIL PRICES COULD HINDER GROWTH: G-7

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OIL PRICES COULD HINDER GROWTH: G-7
WebPosted Sat Apr 16 13:44:11 2005

Washington---Financial officials from the world's seven richest countries
say "vigorous action" is needed to face the challenges of rising oil
prices and volatility in exchange rates that threaten economic growth.

However, Group of Seven officials ended a day of meetings in Washington
Saturday without reaching any agreement about how to provide debt relief
for the world's poorest countries – a failure that activists warned
would result in the deaths of millions more children.

Finance ministers and bank governors from the G-7 – made up of the
United States, Japan, Germany, France, Britain, Italy and Canada –
were optimistic that solid economic growth would continue this year.

They said favorable interest rate policies and subdued inflationary
pressures supported the outlook. But they called the recent jump in oil
prices a "headwind" to growth.

The G-7 statement also called for major economies to adopt "flexibility
in exchange rates." That phrase is seen as a reference to China, which
has been linking its currency to the U.S. dollar and not allowing market
forces to set the yuan's value.

"We emphasize that more flexibility in exchange rates is desirable for
major countries or economic areas that lack such flexibility to promote
smooth and widespread adjustments in the international financial system,
based on market mechanisms," the statement said.



IMF chief criticizes G-7 countries

However, the head of the International Monetary Fund later levelled
unusually pointed criticism toward the world's most powerful economies,
warning that that their policies could disrupt world markets.

Rodrigo Rato, the managing director of the IMF, pointed the finger at the
huge U.S. current account deficit, weak growth in Europe and Japan, the
low savings rate of Americans and inflexible currency regimes in Asia.

"I take this chance to insist once more that important economies in the
world face a special responsibility regarding world imbalances," he told
reporters.



 Canada urges 100-per-cent debt relief

The G-7 ministers claimed progress toward their goal of erasing an $99-
billion Cdn debt burden that sees more money go on interest repayments
than on health or education in the developing world.

"It's now recognized, I think for the first time from these meetings,
that more money has to be made available," British finance minister
Gordon Brown, the G-7's current chairman, told a news conference.

"What we must now do is get the international agreement on sums of money
and we believe that that will come at Gleneagles," he said in reference
to a Group of Eight – the G7 plus Russia – summit in
Scotland in July.

Britain has been pushing several proposals, including one that would see
the IMF sell a portion of its massive gold reserves to cancel the debt
owed it by poor countries.

The United States opposes the plan, which it says it fears would
destabilize markets.

Canada challenged the other G-7 countries on Saturday to provide 100-per-
cent debt relief without tying it to sales of gold.

The Canadian proposal, the most generous on the table, would provide
total relief from all debt-servicing charges for a decade.

"We put our money where our mouth is and we're prepared to move and we
call on all other countries to be prepared to do the same," Canadian
Finance Minister Ralph Goodale told reporters after the meeting.

 Failure to help poor countries condemned

Anti-poverty activists condemned the G-7's failure on debt relief,
estimating that another two million children under age 5 would die from
disease and malnutrition brought about by extreme poverty before the
Gleneagles summit.

"They say they have the will, … but once more the G-7 have chosen
delay," said Jonathan Hepburn, policy adviser for Oxfam International.

"How many children have to die before these seven men in suits develop a
sense of urgency?"

With files from Agence France-Presse

Copyright (C) 2005 CBC. All rights reserved.