Press Esc to close
Tuesday 02 September 2014
News updated at 2:32 AM IST
Weather
Max: 27.4°C
Min : 19.4°C
In Bangalore
Sunny day

IMF backs capital controls in Brazil, India

Washington, Jan 6, AFP:

The International Monetary Fund today said that capital controls can be a valuable tool for countries to curb large capital inflows, citing emerging powers Brazil and India.

"A number of emerging markets are facing substantial inflows of capital at the moment as their economies are recovering and growing rapidly," IMF spokeswoman Caroline Atkinson said at a news briefing.

Cross-border capital flows have flooded some fast-growing countries as investors seek a high yield on investment.

In the two-speed recovery from the global recession, many advanced economies are posting only modest growth and have slashed interest rates to spur recovery.
Asked about Brazil's latest step to curb its rising currency, Atkinson said the actions could be appropriate.


"We see those measures as macroprudential measures aimed to strengthen the banking system in Brazil in the face of big capital inflows and those can be an appropriate part of the toolkit."

Brazil's central bank said commercial banks must deposit -- in cash -- 60 per cent of their foreign-exchange bets above three billion dollars, or when the transaction is bigger than the bank's assets.

The new order aims to put the brakes on banks taking speculative short positions that the national currency, the real, will continue to rise against the weaker dollar.

Atkinson said the IMF was looking at a range of measures to gauge what would be the appropriate response for countries, including capital controls, currency appreciation, reserves accumulation and fiscal contraction.

"The point is to see what the purpose of the measures are. Are they going to strengthen the economies, are they going to lead to good use of the capital and stronger and sustainable growth?"

The IMF said in an India report Wednesday that strong capital inflows posed a key challenge to the country's growth prospects.

"Directors observed that low yields in advanced economies and India's favorable growth differentials could raise capital inflows above its absorptive capacity," the IMF said following a review of India's economy in consultation with Indian authorities.

"While exchange rate flexibility would remain the first line of defense, reserve accumulation and macroprudential measures could be employed if strong inflows continue," the Washington-based institution said.

Atkinson noted that capital inflows can help to promote investment and growth in those economies, "but when they are very sudden, or countries fear that they might be temporary, there's also a concern in some countries about what that might do to the macroeconomy."

Go to Top

Photo Gallery
President Pranab Mukherjee grants degree to a student at the 14th convocation of the University...

President Pranab Mukherjee grants degree to a student at the 14th convocation of the University...

Fireworks on the occasion of 410th installation anniversary of Sri Guru Granth Sahib, the holy...

Fireworks on the occasion of 410th installation anniversary of Sri Guru Granth Sahib, the holy...

Left Front activists take part in a rally to observe anti-imperialist day in Kolkata on...

Left Front activists take part in a rally to observe anti-imperialist day in Kolkata on...

Flood water flows through Srisailam dam after its four crest gates were opened in Kurnool on...

Flood water flows through Srisailam dam after its four crest gates were opened in Kurnool on...

BJP president Amit Shah during a visit to Sree Padmanabhaswamy temple in Thiruvananthapuram on...

BJP president Amit Shah during a visit to Sree Padmanabhaswamy temple in Thiruvananthapuram on...

Prime Minister Narendra Modi shakes hands with Japanese Minister of Foreign Affairs Fumio...

Prime Minister Narendra Modi shakes hands with Japanese Minister of Foreign Affairs Fumio...

Actress & BJP MP from Chandigarh Kirron Kher speaks during a seminar on...

Actress & BJP MP from Chandigarh Kirron Kher speaks during a seminar on...

Prime Minister Narendra Modi and Japan's Prime Minister Shinzo Abe makes a toast during a banquet...

Prime Minister Narendra Modi and Japan's Prime Minister Shinzo Abe makes a toast during a banquet...

Congress president Sonia Gandhi prays in a temple during a visit to her constituency Rae Bareli...

Congress president Sonia Gandhi prays in a temple during a visit to her constituency Rae Bareli...

Congress president Sonia Gandhi in a village hut during a visit to her constituency Rae Bareli on...

Congress president Sonia Gandhi in a village hut during a visit to her constituency Rae Bareli on...

Copyright 2014, The Printers (Mysore) Private Ltd., 75, M.G Road, Post Box 5331, Bangalore - 560001
Tel: +91 (80) 25880000 Fax No. +91 (80) 25880523