Global account imbalances may disrupt markets: IMF official

TOKYO: The way a few large countries run big current account deficits and others have large surpluses poses a risk to the global economy and could disrupt financial markets, a senior International Monetary Fund (IMF) official said yesterday.

Cooperation among countries with such deficits and those with surpluses is required to address such imbalances, IMF deputy managing director Mitsuhiro Furusawa said.

“We have witnessed sustained periods of imbalances. While they have narrowed since the (global financial) crisis, they remain above desirable levels,” he told an IMF-hosted seminar in Tokyo on the international monetary system in Asia.

Global imbalances have re-emerged as a contentious topic in the international community as US President Donald Trump has criticised countries such as China, Germany and Japan for accumulating big trade surpluses against the United States.

The IMF will facilitate global efforts to reduce imbalances by strengthening safety nets that countries can rely on in case they face disruptive capital outflows, so that they do not need to accumulate excessive foreign reserves.

“We need to recognise that a central element of the safety net is reserve accumulation,” Furusawa said.

“But reserve accumulation can be a costly defence” as it leads to inefficient resource allocation, he added, calling on the international community to keep working to upgrade safety nets.

The US trade deficit jumped to a near five-year high in January as rising oil prices helped to push up the import bill, suggesting trade will again weigh on US economic growth in the first quarter. – Reuters