IMF's Boutros-Ghali says FX problems symptom not cause

By David Milliken

ST ANDREWS (Reuters) - A meeting of Group of 20 finance leaders should not be fixated on exchange rate levels as they are a symptom of underlying economic problems rather than a cause, the head of the International Monetary Fund's policy-steering committee told Reuters on Saturday.

Egyptian Finance Minister Youssef Boutros-Ghali, who chairs the International Monetary and Financial Committee, also said Brazil's plannned tax on capital inflows was unlikely to work.

"We should not be fixated on currencies. Although they are important and they do impact very significantly and very quickly on various financial flows, they should be seen as the symptom of a deeper disagreement," he said on the sidelines of the meeting of G20 finance ministers and central bankers in St Andrews, Scotland.

"It is like when you have someone with a fever. The currency is the fever and we need to know the source of that fever, what the imbalances are," Boutros-Ghali said when asked whether certain currencies were undervalued.

Some Western governments believe China's yuan is undervalued compared to their own currencies and helped cause the global financial crisis by distorting trade and capital flows.

Boutros-Ghali said he did not expect major breakthroughs at the summit, which gathers the world's major developed and developing countries in one forum and among other topics aims to discuss financing measures to combat climate change before a United Nations summit on the topic in Copenhagen in December.

"The climate issue is on the table, though it was not discussed yesterday night. But I don't think anyone expects a major breakthrough. This is not a breakthrough meeting," said Boutros-Ghali, the first minister from a developing country to chair the IMFC.

"It is a day-to-day running of the system meeting -- how do we exit together, how do we set principles that guarantee consistency in policy. This is actually a meeting where you are putting in march the machinery that you have established in London and Pittsburgh," he said, referring to earlier summits.