Russia backs a Group of Seven pledge to refrain from weakening currencies or targeting exchange rates through economic or fiscal policy, central bank First Deputy Chairman Alexey Ulyukayev said.
“Measures to revive domestic demand and to boost domestic competitiveness through weakening currencies can have a short-term effect,” he said. “In the medium and long term, it’s not productive and it also provokes retaliation.”
Russia, which joined the G-7 to form the Group of Eight in 1998, is hosting meetings of finance ministers and central bank chiefs from the Group of 20 in Moscow this week. Questions about how to avert competitive currency devaluations will be discussed, said Ulyukayev, who warned last month that the world was nearing the brink of a fresh “currency war.”
The G-7 raised confusion yesterday after its members issued statements offering contradictory interpretations of the group’s stance on the Japanese currency’s recent drop. The yen was overvalued and its recent depreciation shouldn’t be seen as distorting trade, Russian Deputy Finance Minister Sergei Storchak said today.
The G-7 is considering releasing a statement before the meeting in Moscow, which includes the G-7 and emerging markets such as Brazil, China and India, three officials from G-7 countries said Feb. 11. Any pledge not to target currencies when setting policy would mark a strengthening in stance from when the G-7’s finance chiefs last commented on currencies as a group in September 2011.
Russia will use the G-20 platform to reiterate its stance that only collective actions are effective for promoting international financial stability, according to Ulyukayev. Policy makers this week are facing the “massive, historic challenge” of accelerating global economic growth, he said.
“This is the growth needed by the billions of people inhabiting the Earth who aren’t getting enough, whose opportunities are limited,” Ulyukayev said.
Russia, the world’s largest energy exporter, is battling its own economic slowdown after growth slowed to 3.4 percent last year, the weakest pace since a 2009 contraction. The central bank has come under pressure from the government to offer monetary stimulus, a push resisted by policy makers including Ulyukayev.
“The temptation emerges to solve the problem of restoring growth through localized, individual actions,” Ulyukayev said today. “The temptation of trade protectionism, the temptation of currency wars and artificially weakening national currencies.”