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INTERVIEW-G8 failing on change in IMF power balance-IMF official

Published 06/13/2009, 07:23 AM
Updated 06/13/2009, 07:32 AM

* Boutros-Ghali fears commitment fading on IMF quota reform

* Says replacing dlr as global reserve currency "appealing"

* FDI in Egypt stabilising, Q2 GDP growth slightly stronger

By Gavin Jones

LECCE, Italy, June 13 (Reuters) - The world's rich nations must show urgency and "political vision" to give more influence to emerging countries in the International Monetary Fund, the head of the Fund's steering committee said on Saturday.

In an interview at a meeting of G8 finance ministers in southern Italy, Egypt Finance Minister Youssef Boutros-Ghali said he was concerned that the sense of urgency for IMF reforms was waning as the economy showed signs of improvement.

"The urgency to change, with the crisis bottoming out, is waning," Boutros Ghali, who heads the IMF's steering committee, told Reuters. "I would not like to see us get past this crisis without having invested in fundamental change to keep it from starting again."

"We need political vision, in the same way as there was significant movement in the economic crisis only when the leaders met in London, there will be significant movement only when the leaders get together on IMF quota reform."

Giving more votes to countries like China and Russia, who have said they are ready to contribute more funds to the IMF, was "part of the reform", he said.

Boutros Ghali gave support to a proposal from China for a new global currency to replace the dollar as the world's main reserve currency, though he stressed this was a long-term project with many potential hurdles.

"The idea is appealing, but it's a big undertaking, it will take a long time. To have a substitute reserve currency you need to create it, you need to have an issuer for it, and a market for it."

He said the IMF's internal unit of exchange -- SDRs -- was an accounting currency and would not be a suitable unit for the project, as China and Russia have suggested.

Boutros Ghali said it was still too soon to pay much attention to withdrawing the monetary and fiscal stimulus poured into the world's economies to counter the recession.

"Let's concentrate on the here and now, we are at the end part of putting out the fire, let's put it out and check there are no smouldering embers here and there, and then focus on withdrawing the stimulus," he said.

EGYPT FDI, GROWTH FIRMING

He said African nations still needed to stimulate their economies and for this they needed more help from international financial institutions like the IMF and the World Bank.

"Our responsibility is to impress on institutions that these countries need balance of payments support at concessional terms, they are not getting enough and those that are getting it are not getting it fast enough," he said.

Looking at his own country, Boutros Ghali said he expected growth to accelerate slightly in the second quarter to an annualised rate of between 4.3 percent and 4.5 percent, after a 4.3 percent expansion in the first three months of the year.

He said there were signs that foreign direct investment had stabilised after dropping sharply earlier in the global recession, but had still not returned to growth.

He also estimated Egypt's budget deficit would rise to 8.5 percent of gross domestic product in the 2009-10 fiscal year from 6.8 percent in 2008-9.

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