The world's leading industrial democracies Saturday applauded the reversal of the dollar's decline and pressed ahead with plans to create a $50-billion emergency fund to bail out troubled economies of developing nations.
Top finance ministers of the Group of Seven, meeting in Washington, also saluted what Treasury Secretary Robert E. Rubin called "Russia's impressive compliance" with strict fiscal boundaries intended to bring down inflation and budget deficits. Those goals had been set by the International Monetary Fund as Russia's price for continued international financial assistance.
Rubin held out the possibility that Russia's economic performance could lead to a rescheduling of its medium-term debt, a move that would lift some of the economic pressure on President Boris N. Yeltsin's government.
At a meeting six months ago, the G-7 finance ministers initiated the policies that helped boost the falling dollar, making it clear that they were dissatisfied with the imbalance in exchange rates and setting a course that led to a 20% increase in the value of the dollar against the Japanese yen. Such a shift amounts to a roughly 20% price cut in the cost of Japanese goods here--if wholesalers and retailers pass it on to consumers.
In a statement Saturday, the finance ministers said they "welcomed the orderly reversal in the movements of the major currencies that began following our April meeting. We would welcome a continuation of these trends" as long as it is supported by economic conditions.
The officials signaled their intent to reinforce that policy through continued intervention by central banks in the exchange markets--a course that can drive up the value of the U.S. currency.
The emergency fund for faltering economies endorsed Saturday was initially backed at a June summit in Halifax, Nova Scotia, of leaders of the G-7 nations--the United States, Britain, Canada, France, Germany, Italy and Japan.
The renewed readiness to support the Clinton Administration's plan is a major first step toward building the financial foundation, which would be run by the IMF.
The Administration will seek wider support during the IMF's autumn meeting this week in Washington. But officials say it could take several months to work out details of the so-called Emergency Financing Mechanism.
One of the major obstacles remains the objections raised by wealthy Asian nations, which are said to want a greater voice in the fund's operation.
Officials hope the emergency fund would help prevent the sort of trauma that shook financial markets, the global monetary system and trade between the United States and Mexico when the Mexican peso crashed last winter. It would also keep a U.S. Administration out of the politically difficult position of being the lender to whom stumbling economies immediately turn.
With the economies of the United States and Japan increasingly tied to developing economies, U.S. officials stress that the United States can ill afford to ignore potential crises, even in faraway nations.