Of DOW JONES NEWSWIRES
SINGAPORE (Dow Jones)--Pacific Rim finance ministers will call for flexible foreign exchange while trying to map out ways to unwind massive economic-support measures as recovery from the global downturn takes hold, according to a draft statement being prepared for a regional summit.
"We agreed that flexible prices, including exchange rates and interest rates, play a critical role in allocating resources efficiently and can facilitate the adjustments needed to support balanced and sustainable global growth," ministers of the Asia-Pacific Economic Cooperation forum say in the draft, seen Wednesday by Dow Jones Newswires.
A previous draft statement this week didn't refer to exchange or interest rates. The new comments in the third draft appear to reflect an attempt at compromise among the varied views of APEC members on a controversial subject.
An APEC delegate told Dow Jones Tuesday that other government leaders will tell U.S. President Barack Obama of their concerns over the falling dollar and burgeoning U.S. debt. The U.S., meanwhile, has long pushed China to let the yuan rise against the dollar. Many Asian central bank have recently intervened in the currency markets to prop up the dollar and curb their own currencies.
The new draft statement retains the APEC ministers' promise to continue with economic-stimulus policies "until a durable recovery is secured" without rushing to tighten policy, but it adds detail on the thorny issue of stimulus exit strategies.
"We recognized the need to reduce and stabilize public-sector debt burdens at a low and prudent level," the new draft says. "In many economies, this will require, beyond the mere phasing out of stimulus measures, a comprehensive strategy of sustained budget consolidation, growth-enhancing reforms and measures to address long-term demographic challenges."
APEC governments, notably the U.S. and Japan, are walking a policy tightrope as their recoveries remain fragile but bond and other markets begin to doubt whether they can rein in their huge budget deficits over time.
Apparently seeking to address such concerns, the APEC ministers say in the draft, "While we agreed that actual withdrawal of fiscal stimulus should await evidence of a sustainable, private sector-led recovery, actions that would strengthen fiscal credibility without negatively affecting demand--such as measures to strengthen fiscal frameworks and some pension and health sector reforms, including those that will be phased in gradually--should start to be implemented as soon as possible."
The draft also says measures to remove economic stimulus "should take into account different stages in the economic recovery of member economies and the type of policy measures to be phased out."
Heads of government from the 21 APEC countries meet Saturday in Singapore for their annual summit, following meetings of their trade, foreign and finance ministers.
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