US Treasury secretary Timothy Geithner last night supported calls for a reform of global governance as part of an “effective co-ordinated global response” to the economic crisis.
He urged changes including an increase in “the voting shares and financial roles of the dynamic emerging market economies” in the international financial institutions”.
The US would support such “substantial reforms, to make these institutions more representative of the changes in the balance of economic strength in the global economy”, Geithner told the inaugural session of the IDB’s 50th annual meeting in Medellin.
The speech was a key part of the US administration’s preparation for this week’s key G20 meeting in London, where it will try to regain the initiative in tackling the worst world recession since the Great Depression.
Geithner also stressed the US’s commitment to “help emerging and developing countries adjust to the sharp fall in global growth and the dramatic reversal in private capital flows”. The outflow is in progress “around the world, even in this region, and even in countries with strong external positions and strong records of prudent financial management”.
The IMF will be a key part of the global strategy favoured by the US. Geithner defended the enlargement of the Fund’s New Arrangements to Borrow by $500 billion, “along with the expansion of its membership”. The US is “open to other steps to expand liquidity by the IMF in this moment of exceptional global needs”, he said.
Geithner’s remarks echoed calls yesterday by the Chinese central bank governor, Zhou Xiaochuan, for moves towards a “multi-polar financial system.”
Geithner and Zhou were expected to hold bilateral talks in Medellin yesterday, a week after the Chinese central banker defended the use of an alternative international reserve currency, which would eventually undermine the role of the dollar in the international monetary system.
Geithner said he wanted to see the IDB “move further”. He called on the IDB to “expand its existing resources”, although he sounded non-committal towards the capitalization plan being considered by the Latin American development bank.
“We are prepared to begin a formal review of the capital needs of the bank to assess the merit of an increase in the bank permanent capital base,” said Geithner, reflecting divisions in the US Congress on this issue.