Shanghai: Financial policymakers of the world’s 20 major economies pledged to use “all tools”, including monetary, fiscal and structural ones, to strengthen global recovery amid growing concerns of further downward risks.
“The global recovery continues, but it remains uneven and falls short of our ambition for strong, sustainable and balance growth,” noted a communique issued after the two-day G20 Finance Ministers and Central Bank Governors meeting here.
RBI Governor Raghuram Rajan along with Additional Finance Secretary Dinesh Sharma attended the meeting.
The policymakers cited volatile capital flows, slumping commodity prices, escalated geopolitical tensions, a potential UK exit from the European Union and increasing refugees as major vulnerabilities of the global economy.
The gathering came amid weak economic growth worldwide and increasing financial volatility that saw frequent and drastic falls in the stock markets across the world.
Japan’s surprising adoption of negative interest rates, uncertainties over the prospect of rate hikes in the US, plunging oil prices and concerns over the financial strength of leading banks in Europe have combined to add uncertainties to the global financial landscape.
Despite the challenges, the group judges that the magnitude of recent market volatility has not reflected the underlying fundamentals of the global economy, state-run Xinhua news agency reported. “We expect activity to continue to expand at a moderate pace in most advanced economies, and growth in key emerging market economies remains strong,” the group said.
To foster confidence, monetary policies will continue to support economic activity and ensure price stability, but monetary tools alone cannot lead to balanced growth, said the communique. “We will use fiscal policy flexibly to strengthen growth, job creation and confidence,” it added.
Among the focus of the meeting is the exchange rate mechanism. For China, its currency yuan has been heading south since the government revamped the foreign exchange mechanism last year, and concerns about capital outflows have been on the rise.