Treasury Secretary Henry Paulson said Saturday that the International Monetary Fund must do a better job monitoring currency exchange rate policies around the world, a demand reflecting U.S. frustration with China's slow pace of financial reform. Paulson called for greater exchange rate flexibility in emerging Asian economies, especially in China, according to AP. Meanwhile, World Bank employees demonstrated to demand the resignation of President Paul Wolfowitz over his involvement in a huge pay increase awarded to a female friend when she transferred to a U.S. State Department job. Finance ministers from Latin America and Europe echoed Paulson's call for increased currency surveillance at a meeting of the IMF's policy-steering committee. They also called for changes in how the 62-year-old institution is governed. «Let us be clear: exercising firm surveillance over members' exchange rate policies is a core function of the institution,» Paulson said. He said the IMF is working on revising its guidelines on foreign exchange monitoring, which were established in 1977. He said the reforms should clarify the IMF's role but will not create new obligations for its members. «This should enable firmer surveillance in areas where market forces are not the prevailing paradigm, such as insufficiently flexible exchange rate regimes, or areas where macroeconomic policies and performance are poor even if the exchange rate freely floats,» Paulson said. He warned that if exchange rate issues are not debated critically and openly at the IMF alternative approaches and venues will emerge. The United States and other industrialized nations have called on China to do more to introduce flexibility into its currency system, which American manufacturers believe is necessary to curb China's huge trade surplus. However, the China, perhaps miffed at the G-7 pressure on reforming its currency system, did not send its finance minister and central bank governor to the weekend meetings, dispatching deputies instead. Paulson said prospects for the U.S. economy, the world's largest, are good although activity has slowed. Growth is projected to ease to just 2.2 percent this year but Paulson said it should rebound to 3 percent by the end of the year. Ministers from Argentina, the Netherlands and Russia supported changes in IMF currency surveillance provided they do not create new obligations. Argentina Finance Minister Felisa Miceli, speaking on behalf of a group of South American countries, said: «If surveillance rather than lending will turn out to be the most prominent role of the fund, then its governance structure should extend more to the logic of its regulatory role and less to that than a club of creditors.» She said changes in the governance structure so far _allowing a greater voice for South Korea, China, Turkey and Mexico _ amount to a «cosmetic change that could eventually be marketed as a milestone in improving the fund's 'legitimacy.»' Miceli said it would be self-defeating for the fund to give a few emerging economy countries who no longer need IMF loans some more votes «at the expense of other developing countries that remain to be potential borrowers. As members of the World Bank's executive board considered Wolfowitz's future, some African officials expressed support for him because they say he has made the continent a greater priority. «We have seen visionary leadership, steadfast progress under Mr. Wolfowitz said Liberia's finance minister, Antoinette Sayeh. «We can only say that we look forward to that continuing.» She said Wolfowitz's leadership on African issues should be considered by the bank's board as it decides on his future. «We think he has done a good job,» said Ramakrishna Sithanen, the finance minister of the island nation of Mauritius. He said he trusted the board to make a commensurate response to Wolfowitz's admitted mistake. Wolfowitz has apologized for his role in the promotion and generous pay package for Libyan-born Shaha Riza , which whom he has a relationship. The disclosures have led to demands that he resign. -- SPA
