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IPFS News Link • Economy - Economics USA

IMF says major currencies may need to weaken

Heavily indebted rich countries may need to weaken their currencies to promote exports because reducing government debt will probably slow domestic growth, an IMF official said on Wednesday. The comments from Olivier Blanchard, the International Monetary Fund's chief economist, reflected a subtle twist on a well-worn theme of rebalancing global growth. The IMF has warned for years that huge reserves in surplus countries such as China and massive debt piles in the United States and elsewhere posed a threat to economic stability. Most of the attention has focused on the need for China to allow its yuan currency to appreciate to help drive domestic demand. But Blanchard stressed that rich countries also have a big incentive to allow their own currencies to depreciate as they wrestle with huge sovereign debt burdens.