Use excess forex reserves for aid: Summers

 Summers said global reserves of emerging markets are far in excess of any
previously enunciated criterion of reserves need for financial protection.
The so-called Guidotti-Greenspan rule that reserves should equal one year's short-term debt demonstrates the spectacular increase in what might be thought of as excess reserves in emerging markets. These reserves have grown from half a trillion dollars in 1999 to over two trillion dollars today and are distributed quite broadly around the world.

Countries with excess reserves could invest in this facility, managed by the
IMF and the World Bank, without assuming political responsibility for the
process of investment decision and the ultimate outcome.

The net surplus of emerging Asia, led by China, exceeds the combined surplus of Europe and Japan. Given the magnitude and attractiveness of
investment opportunities in emerging Asia, it would only be natural for it
to encounter a current account deficit. This implies that the primary source of global demand to offset increases in United States savings should come from the Asian consumer.

India is a positive example where consumption represents close to two-thirds of the gross domestic product (GDP) and is significantly under one-half in China. There is potential for shifting to a more domestic demand-led growth strategy in emerging markets.

He also mooted the formation of a new multilateral forum that would
structurally enjoy political clout over international institutions and at
least have some ability to influence domestic policy decisions of individual
countries.

Many frequent and intense discussions on a multilateral basis that have
taken place to date will raise the prospects for a successful adjustment
process and reduce the risks of either a hard landing or of dangerous
unilateralist responses to current account imbalances.

The forum should look at the role and governance of the existing
international financial institutions in the current environment.

Clearly, the influence and governance of the major reserve accumulators need to be increased, he added.