- Nations need to avoid competitive devaluation, Rotich says
- G20 finance chiefs to meet in Shanghai later in February
Kenyan Treasury Secretary Henry Rotich called on Group of 20 nations to coordinate exchange-rate policies to help reduce volatility that’s buffeted small, emerging markets.
“It’s important for countries to coordinate their policies,” Rotich said in an interview on Thursday in the capital, Nairobi. That’s to prevent countries from engaging in “competitive devaluation,” he said.
African currencies in nations from South Africa to Ghana have been among the worst hit by a rout in global financial markets since last year, forcing central banks to tighten monetary policy in the face of slowing economies. Kenya’s shilling slumped 11 percent against the dollar last year.
Global coordination of monetary and fiscal policy should include advising countries that are running current-account surpluses “to make adjustments in their currencies,” Rotich said.
“If the U.S is running a current-account deficit, somebody else is running a surplus,” he said. “So if somebody’s currency is overvalued or undervalued, another one will retaliate because they mirror one another.”
Finance ministers and central bank governors from the world’s biggest developed and emerging markets will meet in Shanghai on Feb. 26 and 27 as China takes the reins of the group for the first time. A surprise devaluation of the yuan in August added to turmoil in global financial markets and increased concern about slowing growth in the world’s second-largest economy.
Coordination will only work if nations “commit to multi-lateralism,” Rotich said. “But if you go on your own way, other countries will retaliate.”