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Asian central banks not financing US deficit, says IMF: msg#00558
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Asian central banks not financing US deficit, says IMF |
http://www.financialexpress.com/fe_full_story.php?content_id=107305
Asian central banks not financing US
deficit, says IMF
Posted online: Monday, October 31, 2005
WASHINGTON, OCT 30: Asian central banks, including those of India, are
among the top holders of US treasury securities but the widely held
view that they are effectively financing the massive US current account
deficit is flawed, the IMF says.
India, Japan, China, Taiwan, South Korea, Hong Kong, Singapore and
Thailand are among the major foreign holders of treasury securities,
according to the latest figures released by the treasury department.
Another perception the International Monetary Fund (IMF) wants to
debunk is that Asian central banks scramble to buy US dollars because
they desperately want to keep their currencies low and exports more
competitive.
The theory goes that by purchasing huge amounts of dollar-denominated
us government securities, the region’s cash-flush central banks are not
only pushing up the value of the greenback to keep their exports
competitive but also financing the current account deficit of the
world’s richest economy.
The US current account deficit in 2004 was a record $666 billion and
the IMF expects the gap to rise to $759 billion this year and $805
billion in 2006 — 6.1% of the US gross domestic product.
Overall, the bulk of US assets sold to foreigners are still to the
private sector, said IMF’s chief economist Raghuram Rajan.
“Some of you may be surprised because it is often said in the financial
press that the US current account deficit is being financed by foreign
central banks,” he said.
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