dubai, United Arab Emirates – On a day that included discussions ranging from terrorist financing to disclosures of questionable uses of public funds by the Palestinian leader, Yasser Arafat, representatives of the Group of Seven richest nations called for the resumption of world trade talks and a global commitment to market-based exchange rates for currencies.
In a communique released Saturday evening, the G-7 said it “reaffirms that exchange rates should reflect economic fundamentals,” a statement that was a barely disguised criticism of the currency policies of China and Japan. Central bankers around the globe have routinely criticized both countries for intervening in currency markets to keep their currencies artificially low, policies that also lower their export prices and thus boost their share of international trade.
China, which has long protected its currency to guard against the vicissitudes of global economic swings, successfully weathered the currency panics that beset many of its Asian neighbors during the late 1990s and is unlikely to change policy to appease the G-7. Japan, on the other hand, is something of a wild card. Although the yen rose to a two-and-a-half year high against the dollar on Friday in anticipation that the Bank of Japan would start buying yen to comply with the organization’s wishes, currency traders may be overestimating how collegial Japan truly is. In the past, Japan has voiced its commitment to G-7 directives, only to then turn around and do the exact opposite.
The G-7—which includes Britain, Canada, France, Germany, Italy, Japan, and the US—gathered during the annual World Bank and International Monetary Fund meeting in Dubai.
At a news conference during Saturday’s meeting, Karim Nash-ashibi, the IMF’s representative in the West Bank and Gaza, disclosed an audit of the Palestinian Authority’s finances that indicated that, since 1999, Arafat has channeled about $900 million in public funds into a bank account he controls. The funds were invested in nearly six dozen enterprises in the Palestinian territories and overseas. Nashashibi said he received the information about Arafat’s accounts from the Palestinian Authority. The authority’s finance minister, Salam Fayad, who has called for greater openness in his organization’s accounting, attended Saturday’s meeting in Dubai and won commitments of more than $1 billion in financial aid for the Palestinians from industrialized countries.
It is unclear if any of the funds diverted by Arafat were misused. Nashashibi said that a final determination on that point awaits the completion of the audits.
Hanan Ashwari, a Palestinian legislator and onetime Arafat spokeswoman, acknowledged there had been past incidents of misuse of funds but that the release of the information was an attempt to discredit Arafat. “This is a campaign against the president and the authority,” she said.
Mr. Snow convened a meeting tonight with finance ministers from most of the major Persian Gulf states—including Saudi Arabia, Kuwait and the U.A.E.—as well as Russia, Indonesia, Pakistan, India and the Philippines, in order to discuss greater global cooperation to counter terrorism and terrorist financing. Financial ministers said that countries are beginning to show a greater willingness to join hands in the effort, but that significant cultural and jurisdictional hurdles remain.
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