G7 call for exchange rate flexibility

Finance ministers and central bank governors from the Group of Seven industrial countries called today for more flexibility in international exchange rates and warned that excess volatility would hamper global growth.

“We emphasise 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,” the G7 said in its communique after meeting in London.

The statement from the G7 – the United States, Britain, Canada, Italy, France, Germany and Japan – said that exchange rates should reflect economic fundamentals.

“Excess volatility and disorderly movements in exchange rates are undesirable for economic growth.”

China came under pressure during the weekend talks, particularly from the United States, to unhook its currency from the US dollar. Chinese officials have repeatedly suggested that the nation needs more time to reform its economy.

The G7 said that the economic cycle had matured since the group last met in October and “global growth moderated, but is expected to remain robust for 2005.”

Ministers also announced they were willing to provide 100% debt relief to the world's poorest nations.

Britain’s Treasury chief Gordon Brown said at the close of the summit that debt relief would be “agreed on a case by case basis.”

He said discussions would continue on what financing mechanisms should be used to increase overseas development assistance.