Press Esc to close
Friday 12 February 2016
News updated at 2:41 AM IST
Weather
Max: 33°C
Min : 20°C
In Bengaluru
Partially cloudy

IMF backs capital controls in Brazil, India

Last updated: 07 January, 2011
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
Relatives of Lance Naik Hanumanthappa Koppad mourn his death at his home in Betador in Hubli...

Relatives of Lance Naik Hanumanthappa Koppad mourn his death at his home in Betador in Hubli...

Vehicles stranded at Jawahar Tunnel, which connects the valley to the rest of the country during...

Vehicles stranded at Jawahar Tunnel, which connects the valley to the rest of the country during...

Girls taking selfie during the lok Mela at Punjabi University in Patiala...

Girls taking selfie during the lok Mela at Punjabi University in Patiala...

President Pranab Mukherjee walks at the Mughal Gardens at Rashtrapati Bhavan during its press...

President Pranab Mukherjee walks at the Mughal Gardens at Rashtrapati Bhavan during its press...

Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi inspects guard of honour during...

Sheikh Mohammed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi inspects guard of honour during...

Gold medal winners Prarthana Thombare and Sharrmadaa Baluu of India, pose during the presentation...

Gold medal winners Prarthana Thombare and Sharrmadaa Baluu of India, pose during the presentation...

Bangladesh Goalkeeper Md Rasel Mahmud in action against Nepal during the group matches of the...

Bangladesh Goalkeeper Md Rasel Mahmud in action against Nepal during the group matches of the...

Shooters of India and Pakistan take part in the individual 25m center fire pistol men's...

Shooters of India and Pakistan take part in the individual 25m center fire pistol men's...

Sri Lanka's Nalantha De Silva, right approaches as India's P.L.Thiamanna, tries to control the...

Sri Lanka's Nalantha De Silva, right approaches as India's P.L.Thiamanna, tries to control the...

T Gopi of India winner of gold medal (front ) and Suresh Kumar of India winner of silver medal...

T Gopi of India winner of gold medal (front ) and Suresh Kumar of India winner of silver medal...

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