In what seems to be a foretaste of things to come, there were more signs of discord than accord at the meeting of finance ministers and central bank governors from the G20 countries. In the run-up to the Seoul summit, the meeting at the South Korean city of Gyeongju was expected to yield a reasonable formulation for the political leaders of the world's leading economies to build upon. The imbroglio over currency rates has become the most pressing issue of the day but there have been related issues such as reform of the IMF. It was agreed to evolve a broad framework to contain current account deficits and surpluses but a proposal to set specific targets ran into opposition. The proposal, mooted by the U.S. Treasury Secretary, seeks to shift the focus away from exchange rates, which after all are only a manifestation of the much larger problem of global imbalances. Besides, adjusting exchange rates is just one method — and, in the present circumstances, not even the preferred method — of tackling the underlying problem. It will be politically more appealing especially for the two principal protagonists, the U.S. and China, to seek remedies through current accounts rather than through exchange rates. The big advantage is neither side need appear to concede too much. On the flip side, there is the problem of setting caps on deficits and surpluses and, more importantly, working out a mechanism to monitor individual countries. Previous attempts to impose tougher IMF surveillance of current account imbalances achieved very little.
On a more positive note, the meet resulted in what is seen as a landmark reform of the IMF. Developing countries such as China and India are to get a bigger voice reflecting their rise in the global economic hierarchy. European countries will cede two of their eight seats on the IMF board in favour of the emerging powers and over 6 per cent of the IMF voting power will be transferred to the currently under-represented countries. It was also decided to double the IMF's $340 billion quota, considerably augmenting its resources to cope with future financial crises. India along with Russia, China and Brazil will be included in the IMF's top ten shareholders. The IMF and several countries have hailed this agreement as historic, one which will overhaul the Fund's outdated governance structure. The agreement on IMF reform is a shot in the arm for the G20, which, on the eve of the Seoul meet, seems less cohesive than it was at the height of the global economic crisis.