Nations in crises must get easier access to global funds: RBI
NEW DELHI: "It is essential since even if a country was cautious and careful and had strong macro-economic fundamentals, it might still be affected by crisis because of events beyond its control," said Reserve Bank of India (RBI) Governor Bimal Jalan.
"This could be the result of contagion or an unexpected upsurge in oil prices or disruption of trade due to external events," Jalan told a meeting of the Group of 20 (G-20) nations here.
Top finance officials from the G-20 are discussing how to combat financial crises, alleviate poverty and cut off funding to terrorist groups at a two-day meeting that opened in the Indian capital Friday.
The G-20, which includes 19 countries and the European Union, was set up in 1999 as a forum for industrialised countries and emerging markets to encourage financial stability. The group's fourth meeting is its first in a developing country.
The G-20 represents more than 85 percent of the world's gross domestic product and over 60 percent of its population.
The meeting has brought together finance ministers, senior officials and central bank governors from 19 developed and developing nations, the International Monetary Fund (IMF) and the World Bank.
Jalan said it is important for all countries to build their "safety walls by providing for a stable macro-economic environment, more realistic policies to regulate capital flows and careful monitoring of foreign exchange markets.
"A stable macro-economic environment with low inflation, low current account deficit and reasonable growth is essential to prevent crises," he added.
The RBI governor said India met all parameters of a stable macro-economic environment with inflation around three percent, current account deficit below one percent and economic growth above five percent.
However, when a crisis does arise because of reasons outside the control of a country, global institutions and community "must resolve to play a supportive role through a higher and more automatic access to international funding," he said.
Jalan said adoption of best international practices in respect of accounting and related standard and codes would ensure that "there are no surprises about the financial health of a country or its financial policies".
He said short-term banking capital should be avoided for financing investments and growth, while foreign direct investment and portfolio investment needed to be encouraged in capital account management.
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