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World Finance Leaders Meet for Talks on Global Economy


Finance ministers and central bankers from developing and advanced economies are gathering for meetings Friday through Sunday of the World Bank and International Monetary Fund.

During the next few days, the International Monetary Fund and the World Bank will host meetings in Washington that bring together officials from industrialized nations and the Group of 20 nations that includes the world's rich and emerging economies.

International Monetary Fund managing director Dominique Strauss-Kahn says one of the key goals of the meetings will be to discuss ways to sustain the world's rebound from the global financial crisis.

"The world is still a dangerous place. And I would not like too many people [to] have in mind that the crisis is over and that everything is fine and that we can go back to business as usual," said Strauss-Kahn.

Officials are facing tough discussions, including a proposed tax on banks that seeks to cover the cost of possible bailouts in the future.

Following the global financial crisis, governments around the world spent trillions of dollars to prop up markets after risky investments turned sour. Those bailout initiatives sent many countries into further debt.

The new measures for banks seek to impose a levy as well as a further tax on lenders and other financial institutions profits and pay.

G-20 leaders asked the IMF to look into how a tax on financial institutions could be applied globally when they met late last year in the United States.

"Multilaterialism and political policy cooperation is obviously the great legacy of this crisis. And our point is that it has to be maintained in the post-crisis world," he said.

Strauss-Kahn says that during the next few days officials will be working on a draft version of a paper on tax systems that will be presented at a G-20 meeting of heads of state this June in Toronto, Canada.

Ministers will also discuss rebalancing the global economy. The task is particularly challenging because of the growing differences between the recovery in emerging and advanced economies. While Brazil, China and India have emerged from the downturn in good shape, their European, U.S. and Japanese counterparts have not fared as well.

Currency valuation is likely to be another topic of discussion, in particular, the value of China's currency.

Strauss-Kahn says it is the IMF's view that it is in the interest of the Chinese economy to contemplate allowing the value of its currency, the yuan, to rise.

"I would advise the Chinese authorities to follow [this advice] not because I am advising it, but because it is in their own interest," he said.

He says that he is optimistic that things will change regarding China's currency, albeit slowly. He also says that the Chinese currency is an issue that should be handled multilaterally and not just in discussions between China and the United States.

During the past few days, India and Brazil have added their voices to a growing chorus of countries urging China to let its yuan appreciate.

In addition to trumpeting the need for countries to reform and work together, World Bank President Robert Zoellick says his organization is looking at ways to help it become more responsive and faster at coping with the unexpected problems.

"Who would of thought that a volcano in Iceland would cause havoc for airlines?" He asked. "Who would've thought that this would've hurt countries like Kenya, Uganda, Ethiopia and Senegal whose perishable exports plummeted when they could no longer fly produce to Europe," said Zoellick.

Earlier this week, the World Bank outlined reforms to modernize its products and services. Zoellick says that starting from July of this year, the World Bank will begin disclosing more documents - country assistance strategies and project appraisals - before they go to the board for approval.

The World Bank is promoting reform as it seeks to get its members to contribute more funds to the institution, its first capital increase in more than 20 years.

Zoellick says that by Sunday he hopes to reach agreement on an exceptional $5-billion capital increase for his institution.

Emerging economies are playing an increasingly important role in the World Bank and IMF including investments. Both the IMF and World Bank will be looking at the possibility of increasing voting rights for emerging economies during meetings during the next few days.

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