IMF Official Urges Currency Flexibility to Absorb Economic Shocks

Krishna Srinivasan, director of the International Monetary Fund's Asia and Pacific Department, urged countries to adopt currency flexibility to better absorb global economic shocks. Speaking at a press conference in Mumbai on Wednesday, Srinivasan argued that exchange rates should serve as the first line of defense against volatility.

Srinivasan stated that countries which allow exchange rates to move have benefited more than those relying on foreign-exchange intervention. He characterized such interventions as offering limited benefits beyond the near term.

While Srinivasan did not explicitly name the Reserve Bank of India, his remarks follow efforts by the central bank to defend the rupee against market pressure.