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Appendix VI. Press Communiqués of the International Monetary and Financial Committee and the Development Committee

Author(s):
International Monetary Fund
Published Date:
October 2002
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International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund

PRESS COMMUNIQUÉS

Fourth Meeting, Ottawa, Canada, November 17, 2001

1. Recognizing the need for a determined and cooperative policy response to the challenges facing the world economy, the International Monetary and Financial Committee held its fourth meeting in Ottawa on November 17, 2001, under the Chairmanship of Mr. Gordon Brown, Chancellor of the Exchequer of the United Kingdom. The Committee expresses its gratitude to Finance Minister Paul Martin and the Canadian government for hosting this meeting and for the excellent arrangements.

2. The Committee notes that the September 11 terrorist attacks have prolonged the slowdown in the world economy. Bold policy action has already been taken to support a robust recovery during 2002, but the outlook remains subject to considerable uncertainty. Continuing vigilance is needed, and it is essential that the international community stands ready to take timely action to maintain stability and invigorate growth. The Committee welcomes the Managing Director’s October 5 statement on the situation of the world economy and the IMF response, which outlines a collaborative approach to give a new momentum to the world economy. The IMF has a central role to play, including through a strengthened focus on surveillance, in ensuring global macroeconomic and financial stability and in ensuring that globalization works for the benefit of all.

3. The advanced economies have a key responsibility to promote early recovery in global growth. The recent easing of monetary policy in the United States, the euro area, and other advanced economies is welcome, and the authorities stand ready to take further action if appropriate. While the scope for discretionary fiscal policy action varies across countries, the advanced economies should allow automatic stabilizers to operate. The Committee stresses that determined implementation of structural reforms to take advantage of the promise of technology for increased productivity is important to restore confidence and growth. Japan, in particular, needs to move ahead with vigorous reforms of its banking and corporate sectors, and Europe should give priority to accelerating labor and product market reforms. The United States stands ready to take further action to support growth, consistent with maintaining sound public finances in the medium term.

4. Increased trade opportunities will play a vital role in the recovery, and the Committee strongly welcomes the outcome of the Doha meeting of the World Trade Organization and the Doha Development Agenda. All countries should stand firm against protectionist pressures, and the advanced economies, in particular, should improve access to their markets and reduce trade-distorting subsidies both for the benefit of their own citizens and to provide critical support for developing countries. The IMF should strengthen its surveillance of these issues and help promote international efforts to open markets. The Committee is vigilant on stability in the oil market at prices reasonable for consumers and producers.

5. Emerging markets and developing countries are facing a weakening of global demand, reduced capital flows, higher risk aversion in financial markets, reduced income from tourism, and lower and more volatile commodity prices. Sound and proactive policies in these countries will be critical. The IMF stands ready to provide additional financial assistance, where needed, to those countries pursuing sound policies. The IMF has a range of instruments available and its current financial position is strong. The IMF should be ready to adjust its policies if necessary. The Contingent Credit Line (CCL) is an important signal of the strength of countries’ policies and a safeguard against contagion in financial markets, and the Committee encourages eligible countries to consider applying for it. The Committee also underscores the critical importance of involving the private sector in the prevention and resolution of financial crises. The Committee recommends an early implementation of the Fourth Amendment.

6. The Committee expresses particular concern at the adverse impact of the global slowdown on low-income countries and heavily indebted poor countries (HIPCs). It calls on the IMF, in close collaboration with the World Bank, to respond flexibly and proactively to the needs of these countries, including through additional concessional financing and debt relief where appropriate. The Committee welcomes the additional contributions to the Poverty Reduction and Growth Facility (PRGF), and encourages further contribu-tions. The IMF, working closely with the World Bank, should intensify its efforts within the Poverty Reduction Strategy Paper (PRSP) framework to assess the poverty and social impacts of reforms on the poor. The Committee looks forward to discussing the findings of the PRGF and the PRSP Reviews at the Spring Meetings next year. The enhanced HIPC Initiative framework provides for the consideration of additional assistance at the completion point if there has been a fundamental change in a country’s economic circumstances due to exceptional exogenous shocks. The Committee recognizes the need to take into account worsening global growth prospects and declines in terms of trade when updating HIPC Initiative debt sustainability analyses at completion point. It encourages the heavily indebted poor countries to continue to work expeditiously toward meeting the conditions that will secure access to debt relief and ensure its effective use, including through the maintenance of sound economic policies. Advanced economies must also be prepared to meet their special responsibility in providing increased development assistance and debt relief to tackle the increased challenges of poverty reduction, and to achieve the Millennium Development Goals. The Committee reiterates the importance of folly financing the enhanced HIPC Initiative, and it urges bilateral donors to fulfill this commitment.

7. Recognizing the importance of close collaboration and effective partnership among the community of international institutions in this endeavor, Committee members look forward, with their colleagues in the Development Committee, to their joint discussion with the U N Secretary-General, Mr. Kofi Annan, on how best to work together to meet the challenges ahead, including in the context of the upcoming Conference on Financing for Development.

8. The Committee expresses grave concern at the use of the international financial system to finance terrorist acts and to launder the proceeds of illegal activities. It therefore calls on all member countries to ratify and implement folly the U N instruments to counter terrorism, particularly United Nations Security Council Resolution 1373, and welcomes and supports the Special Recommendations of the Financial Action Task Force (FATF) to combat terrorist financing. Each member should freeze, within its jurisdiction, the assets of terrorists and their associates, close their access to the international financial system, and, consistent with its laws, make public the list of terrorists whose assets are subject to freezing and the amount of assets frozen, if any, with monthly reports. The fight against money laundering and the financing of terrorism requires the active participation of both financial intermediaries and the public sector. The Committee endorses the IMF’s action plan to intensify, where consistent with its mandate and expertise, its contribution to this global effort, namely by:

  • extending the IMF’s involvement beyond anti-money laundering to efforts aimed at countering terrorism financing;

  • expanding its anti-money-laundering work, including through Financial Sector Assessment Programs (FSAPs), to cover legal and institutional frameworks;

  • accelerating its program of Offshore Financial Center assessments, and undertaking onshore assessments in the context of the FSAP;

  • helping countries identify gaps in their anti-moneylaundering and anti-terrorist-financing regimes in the context of Article IV voluntary questionnaires;

  • enhancing its collaboration with the FATF on developing a global standard covering the FATF recommendations, and working to apply the standard on a uniform, cooperative, and voluntary basis; and

  • increasing technical assistance to enable members to implement effectively the agreed international standards.

In addition, the Committee urges further international action to combat the financing of terrorism, and calls for:

  • all countries to establish financial intelligence units to receive and process reports of suspicious transactions from the country’s financial sector, and to monitor and analyze suspected terrorist funds;

  • provisions to ensure the sharing of information and cooperation between national financial intelligence units, building on the work of the Egmont Group; and

  • the deployment of technical assistance to ensure that every country can play its part, based on support either bilaterally or through an international trust fond.

Countries are urged to take these measures as soon as possible, preferably by February 1, 2002.

The IMF should report on progress at its Spring 2002 Meeting, with a full report at its Annual Meeting.

9. The Committee encourages the IMF to continue to strengthen its surveillance and crisis prevention, including through the implementation of standards and codes (and related technical assistance), and emphasizes that these remain key priorities. It calls on the IMF to implement the agreed framework for private sector involvement, and to intensify the ongoing analysis of outstanding issues. It welcomes the progress on improving the effectiveness of conditionality through streamlining and enhancing the country ownership of IMF-supported programs, and looks forward to reviewing progress in this area at its next meeting. Quotas should reflect developments in the international economy. The Committee looks forward to further work on this issue. The Committee looks forward to the Independent Evaluation Office (IEO) finalizing its work program and to receiving a progress report on its activities at the next meeting.

10. The Committee expresses its heartfelt appreciation to Stanley Fischer and Jack Boorman for their eminent records of service to the IMF and deep commitment to the wellbeing of all its member countries. Both have been pivotal in shaping the role of the IMF in the globalized economy and the evolving international financial architecture.

11. The next meeting of the IMFC will be held in Washington, D.C. on April 21, 2002.

Annex: International Monetary and Financial Committee Attendance

November 17, 2001

Chairman

Gordon Brown

Managing Director

Horst Köhler

Members or Alternates

Hamad Al-Sayari, Governor, Saudi Arabian Monetary Agency (Alternate for Ibrahim A. Al-Assaf, Minister of Finance and National Economy, Saudi Arabia)

Sir Edward George, Governor, Bank of England (Alternate for Gordon Brown, Chancellor of the Exchequer, United Kingdom)

Domingo Cavallo, Minister of Economy, Argentina

Peter Costello, Treasurer, Australia

Dai Xianglong, Governor, People’s Bank of China

M.R. Pridiyathorn Devakula, Governor, Bank of Thailand

Emile Doumba, Minister of Finance, Economy, Budget and Privatization, Gabon

Ernst Welteke, President, Deutsche Bundesbank (Alternate for Hans Eichel, Federal Minister of Finance, Germany)

Laurent Fabius, Minister of Economy, Finance and Industry, France

Francisco Gil Diaz, Secretary of Finance and Public Credit, Mexico

Sultan Bin Nasser Al-Suwaidi, Governor, Central Bank of the United Arab Emirates (Alternate for Mohammed K. Khirbash, Minister of State for Finance and Industry, United Arab Emirates)

Aleksei Kudrin, Deputy Chairman of the Government and Minister of Finance, Russian Federation

Mohammed Laksaci, Governor, Banque d’Algérie

Pedro Sampaio Malan, Minister of Finance, Brazil

Paul Martin, Minister of Finance, Canada

Mrs. Linah K. Mohohlo, Governor, Bank of Botswana

Sauli Niinistö, Minister of Finance, Finland

Paul H. O’Neill, Secretary of the Treasury, United States

Didier Reynders, Minister of Finance, Belgium

Masaru Hayami, Governor, Bank of Japan (Alternate for Masajuro Shiokawa, Minister of Finance, Japan)

Yashwant Sinha, Minister of Finance, India

Giulio Tremonti, Minister of Economy and Finance, Italy

Jean-Pierre Roth, Chairman of the Governing Board, Swiss National Bank (Alternate for Kaspar Villiger, Minister of Finance, Switzerland)

Gerrit Zalm, Minister of Finance, Netherlands

Observers

Mary W. Covington, Associate Director of the Washington Branch, International Labor Organization (ILO)

Andrew D. Crockett, Chairman, Financial Stability Forum (FSF)

Nitin Desai, Under-Secretary-General for Economic and Social Affairs, United Nations (UN)

Willem F. Duisenberg, President, European Central Bank (ECB)

John William Hancock, Counsellor, Trade and Finance Division, World Trade Organization (WTO)

Andre Icard, Assistant General Manager, Bank for International Settlements (BIS)

Jan Allen Kregel, High Level Expert in International Finance, United Nations Conference on Trade and Development (UNCTAD)

Klaus Regling, Director-General, European Commission

Yashwant Sinha, Chairman, Joint Development Committee

Ignazio Visco, Head, Economics Department, Organization for Economic Cooperation and Development (OECD)

James D. Wolfensohn, President, World Bank

Fifth Meeting, Washington, D.C., April 20, 2002

1. The International Monetary and Financial Committee held its fifth meeting in Washington, D.C. on April 20, 2002, under the Chairmanship of Mr. Gordon Brown, Chancellor of the Exchequer of the United Kingdom. The Committee welcomes the international community’s decisive policy actions, especially following the tragic events of September 11, 2001, to maintain financial stability, restore the momentum of world economic growth, and reinvigorate the fight against poverty. We will also sustain our global action to combat money laundering and the financing of terrorism. Our meeting in Ottawa last November emphasized the importance of a collaborative approach for the IMF and its members. Going forward, we will continue to work together for sustained, broad-based growth, creating opportunities for productive employment, reducing vulnerabilities, opening up our economies for trade, and providing resources for durable poverty reduction.

The Global Economy

2. Since the Committee’s last meeting, the prospects for the world economy have improved markedly. The challenge now is for governments to help foster the global recovery that is under way. This will require continued vigilance and a further strengthening of medium-term policy frameworks—both to improve prospects for sustainable growth and stability, and to reduce vulnerabilities. The Committee notes the uncertainties associated with the international security issues around the world. The Committee notes also the deteriorating situation in the Middle East. The Committee underscores the importance of stability in oil markets at prices reasonable for consumers and producers.

3. The advanced economies have a responsibility to promote a strong and sustained world economic recovery. While keeping inflation under control, monetary policies should remain broadly supportive of growth. In countries where the recovery is more advanced, consideration may need to be given in the months ahead to reversing earlier policy easing. Reforms should be pursued vigorously, with the aim of improving economic flexibility and resilience, contributing to high and sustainable world growth, and supporting the orderly reduction of persistent imbalances in the global economy. This process will be helped, in Japan, by decisive action to reform the banking and corporate sectors, along with monetary easing to help end deflation; in Europe, by continued progress with wide-ranging reforms to enhance its growth potential; and in the United States, by focusing on the efforts needed over the medium term to preserve fiscal balance.

4. The recovery in industrial countries will contribute to supporting activity in emerging market and developing countries. The Committee is encouraged that many emerging market economies have become more resilient by the adoption of sound economic policies—including more sustainable exchange rate regimes. It will nevertheless remain crucial to further strengthen fiscal positions, and to press ahead with corporate, financial, and institutional reforms to support the emerging recovery and attract foreign direct investment. Improved differentiation and risk assessments by markets have served to limit so far the contagion effects of the Argentine crisis. The Committee acknowledges the steps being taken by Argentina to address its difficult economic situation, and urges the authorities, in cooperation with the Fund, to move quickly to reach agreement on a sustainable economic program that could receive the support of the international financial institutions and provide the basis for the reestablishment of stability and growth.

5. The Committee strongly welcomes the commitment by the international community, at the U N Conference in Monterrey, to improve living standards and reduce poverty through sound policies and higher and more effective aid. It fully supports the New Partnership for Africa’s Development and its call for strong domestic ownership, sound policies, strengthened institutions, and improved governance. The Committee welcomes recent announcements of increased and more effective aid, and urges further progress. The Monterrey Consensus will constitute an important input to the World Summit on Sustainable Development in Johannesburg. The Committee also welcomes the new initiative to enhance growth and reduce poverty in low-income CIS countries.

6. The Committee stresses the vital importance of more open trade for a durable economic recovery, and for sustained, broad-based growth in the developing countries in particular. It urges all countries to resist protectionist pressures and to continue to lower trade barriers, concluding the Doha trade round successfully and in a timely manner. Enlarging market access for developing countries and phasing out trade - distorting subsidies will benefit both developed and developing countries. The Committee welcomes the commitment, reiterated at Monterrey, to work toward the objective of duty- and quota-free market access to the exports of least-developed countries. It also notes the potential for increased opportunities from lowering trade barriers among developing countries.

Strengthening Crisis Prevention and Resolution

7. Surveillance remains central to the IMF’s mandate to promote sound economic growth and financial stability, and to help prevent crises. The Committee is encouraged by the substantial progress in recent years to adapt and broaden the coverage of surveillance in response to a changing global environment, while focusing on issues central to economic and financial stability.

8. The Committee calls on the IMF to spare no effort in enhancing the high quality of its policy advice, and on members to implement this advice. Surveillance will be further enhanced by:

  • strengthened assessments of vulnerabilities, with particular attention to debt sustainability and the private sector’s balance sheet exposure;

  • focusing on the global impact of the policies, including trade policies, of the largest economies;

  • more candid and comprehensive assessments of exchange arrangements and exchange rates;

  • expansion of substantive financial sector surveillance to the entire membership, including to offshore financial centers;

  • strengthened coverage of relevant structural and institutional issues;

  • on issues outside the IMF’s core expertise, more effective use of the expertise of appropriate outside institutions, in particular the World Bank;

  • further integration of multilateral, regional, and country surveillance; and

  • deeper coverage of international capital markets.

The Committee notes that the process of surveillance should cover effective and timely reassessments of economic conditions and policies. In program countries, this may require a fresh perspective and appropriate distance from day-to-day program implementation issues.

9. The Committee encourages the IMF to press ahead with the range of recent initiatives designed to enhance the effectiveness of surveillance and crisis prevention. These include the Financial Sector Assessment Program (FSAP) and policies on transparency, including encouraging publication of Article IV and other IMF reports. Further work on standards and codes is a crucial item in the forward agenda to strengthen their relevance and contribution to IMF surveillance, and to ensure that countries have adequate access to technical assistance. The Committee encourages eligible countries to consider applying for the Contingent Credit Line (CCL), and looks forward to a review.

10. The Committee endorses the IMF’s work program to strengthen the existing Prague framework for crisis resolution, in particular to provide members and markets with greater clarity and predictability about the decisions the IMF will take in a crisis. This will involve:

  • improving debt sustainability assessments;

  • clarifying the policy on access to IMF resources for members facing financial crises—with access beyond normal limits requiring more substantial justification, and recognizing that some of these members’ quotas do not adequately reflect their potential financing needs;

  • strengthening the tools for securing private sector involvement; and

  • examining a more orderly and transparent framework for addressing the exceptional cases in which a sovereign needs to restructure an unsustainable debt, as well as clarifying the conditions under which the IMF would be prepared to lend into arrears.

The Committee welcomes the consideration of innovative proposals to improve the process of sovereign debt restructuring to help close a gap in the current framework. It encourages the Fund to continue to examine the legal, institutional, and procedural aspects of two approaches, which could be complementary and self-reinforcing: a statutory approach, which would enable a sovereign debtor and a super-majority of its creditors to reach an agreement binding all creditors; and an approach, based on contract, which would incorporate comprehensive restructuring clauses in debt instruments. The Committee looks forward to reviewing progress in this area at its next meeting.

The IMF’s Role in Low-Income Countries

11. The Committee fully endorses the Monterrey Consensus, which has reaffirmed that sound economic policies and institutions, together with strong, broad-ranging international support, are the twin pillars on which to build enduring poverty reduction. It encourages the IMF to work closely with the UN, the World Bank, the regional development banks, and bilateral donors in developing a comprehensive and transparent system to monitor progress toward the Millennium Development Goals.

12. The Committee welcomes the outcome of the recent reviews of the IMF’s Poverty Reduction and Growth Facility (PRGF) and of the Poverty Reduction Strategy Paper (PRSP) approach. The PRSP process should continue to be nurtured as the suitable framework for fostering the efforts of low-income countries and their international partners to achieve poverty reduction and higher growth. The substantial progress under PRGF-supported programs in implementing the PRSP approach will be further enhanced by better identifying the sources of sustained growth, strengthening public expenditure management, and using poverty and social impact analysis more systematically. The Committee encourages the IMF and the Bank to continue their collaboration on each of these issues and looks forward to reviewing progress at its next meeting. Capacity building will remain a potent vehicle for ensuring ownership and enhancing the implementation of effective poverty reduction strategies, and the Committee looks forward to the review of technical assistance leading to its increased effectiveness. The Committee welcomes, in particular, the African Regional Technical Assistance Centers (AFRITACs), whose establishment will support the New Partnership for Africa’s Development, and looks forward to the timely financing of this initiative.

13. The recovery of low-income countries that have been affected by the recent economic slowdown and commodity price shocks will continue to require particular attention. The Committee supports the IMF’s continued readiness to respond flexibly and proactively to the financing needs of low-income countries, including by augmenting PRGF financing where necessary. It recognizes that there may be a need to consider mobilizing new PRGF resources if the high demand for PRGF financing continues. While the Committee is encouraged by the progress with the implementation of the HIPC Initiative, it notes that, in a number of cases, debt sustainability remains an issue and calls on the IMF and World Bank to review the situation. It urges eligible countries to step up their reform efforts to reach their decision and completion points, noting, in this context, the flexibility embedded in the HIPC Initiative framework to accommodate the special circumstances of countries emerging from conflict. The Committee notes the application within the current guidelines of the topping-up feature designed to help countries cope with exceptional exogenous shocks. It calls for further efforts to enhance debt management in HIPCs and continued close monitoring of their debt sustainability as they move toward, and beyond, their completion points.

Streamlining Conditionality and Enhancinq Ownership

14. The Committee welcomes the initial progress made toward enhancing the effectiveness of IMF-supported programs through streamlined and focused conditionality and strong national ownership of economic reforms. It urges further progress, in cooperation with the Bank, and looks forward to a report on these issues, including on the IMF’s consideration of new conditionality guidelines, at its next meeting.

Combating Money Laundering and the Financing of Terrorism

15. The Committee underscores that international efforts to counter abuse of the international financial system to finance terrorism and launder the proceeds of illegal activities remain a priority. It is encouraged by the response by many countries to its call last November for all countries to ratify and implement fully the U N instruments to counter terrorism financing, to freeze terrorist assets, and to establish financial intelligence units and ensure the sharing of information. The Committee urges countries that have not as yet done so to fully implement and comply with these instruments. It also welcomes the substantial progress made by the IMF, in close collaboration with the World Bank, in implementing all elements of its action plan to intensify the work on anti-money laundering and combating the financing of terrorism (AML/CFT). The Committee notes in particular the good start made in assessing gaps in national AML/CFT regimes, and fully supports the provision of technical assistance to help countries identify and address such gaps.

16. While reiterating the responsibility of national authorities for combating money laundering and the financing of terrorism, the Committee stresses that success will critically depend on continued vigilance and timely action at the global level. It calls on the IMF to make further progress on all elements of its work program, consistent with its mandate and expertise. In particular, efforts should now be focused on completing the comprehensive AML/CFT methodology, based on a global standard covering the Financial Action Task Force (FATF) recommendations, and the development of assessment procedures compatible with the uniform, voluntary, and cooperative nature of the ROSC1 process. Enhancing the delivery of technical assistance on AML/CFT will also be crucial. The Committee urges the Fund, in cooperating with other international organizations and donor countries, to identify and respond to needs for technical assistance. It looks forward to receiving a full report on progress in this area at its next meeting. The Committee calls on members to share information on their own actions in this field.

Other Issues

17. The Committee notes that the Twelfth General Review of IMF Quotas has commenced. Quotas should reflect developments in the international economy. The Committee recommends an early implementation of the Fourth Amendment.

18. The Committee welcomes the progress report on the Independent Evaluation Office, and looks forward to receiving regular updates on its activities.

Next Meeting

19. The next meeting of the IMFC will be held in Washington, D.C. on September 28, 2002.

Annex: International Monetary and Financial Committee Attendance

April 20, 2002

Chairman

Gordon Brown

Managing Director

Horst Köhler

Members or Alternates

Ibrahim A. Al-Assaf, Minister of Finance and National Economy, Saudi Arabia

Sir Edward George, Governor, Bank of England (Alternate for Gordon Brown, Chancellor of the Exchequer, United Kingdom)

Ian Campbell, Parliamentary Secretary to the Treasurer, Australia (Alternate for Peter Costello, Treasurer, Australia)

Dai Xianglong, Governor, People’s Bank of China)

Rodrigo de Rato y Figaredo, Second Vice President and Minister of Economy, Spain

Hans Eichel, Federal Minister of Finance, Germany

Nicolas Eyzaguirre, Minister of Finance, Chile

Laurent Fabius, Minister of Economy, Finance and Industry, France

Geir H. Haarde, Minister of Finance, Iceland

Sultan Bin Nasser Al-Suwaidi, Governor, United Arab Emirates Central Bank (Alternate for Mohammed K. Khirbash, Minister of State for Finance and Industry, United Arab Emirates)

Aleksei Kudrin, Deputy Chairman of the Government and Minister of Finance, Russian Federation

Mohammed Laksaci, Governor, Banque d’Algérie

Pedro Sampaio Malan, Minister of Finance, Brazil

Paul Martin, Minister of Finance, Canada

Ms. Linah K. Mohohlo, Governor, Bank of Botswana

Paul H. O’Neill, Secretary of the Treasury, United States

Didier Reynders, Minister of Finance, Belgium

Agus Haryanto, Secretary General, Ministry of Finance (Alternate for Syahril Sabirin, Governor, Bank of Indonesia)

Masajuro Shiokawa, Minister of Finance, Japan

Yashwant Sinha, Minister of Finance, India

Paul Toungui, Minister of State, Minister of Finance, Economy, Budget and Privatization, Gabon

Giulio Tremonti, Minister of the Economy and Finance, Italy Kaspar Villiger, President of the Swiss Confederation and Minister of Finance, Switzerland

A.H.E.M. Wellink, President, De Nederlandsche Bank N.V. (Alternate for Gerrit Zalm, Minister of Finance, Netherlands)

Observers

Yilmaz Akyuz, Director, Division on Globalization and Development Strategies, United Nations Conference on Trade and Development (UNCTAD)

Andrew D. Crockett, Chairman, Financial Stability Forum (FSF)

Willem F. Duisenberg, President, European Central Bank (ECB)

Donald J. Johnston, Secretary-General, Organization for Economic Cooperation and Development (OECD)

Ian Kinniburgh, Director, Development Policy Analysis

Division, Department of Economic and Social Affairs, United Nations (UN)

Eddy Lee, Director, International Policy Group, International Labor Organization (ILO)

Trevor A. Manuel, Chairman, Joint Development Committee

Ms. Karen McCusker, Counsellor, World Trade Organization (WTO)

Pedro Solbes Mira, Commissioner for Economic and Monetary Affairs, European Commission

James D. Wolfensohn, President, World Bank

Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries (Development Committee)

PRESS COMMUNIQUÉS

Sixty-Fourth Meeting, Ottawa, Canada, November 18, 2001

1. The 64th meeting of the Development Committee was held in Ottawa, Canada, on November 18, 2001 under the chairmanship of Mr. Yashwant Sinha, Minister of Finance of India. Ministers expressed their great appreciation to the Canadian Government for facilitating the holding of this meeting under unusual circumstances.

2. Impact of Recent Events in Low- and Middle- Income Countries: Response of the World Bank Group. Ministers reviewed the impact of the September 11 terrorist attacks and their aftermath on developing countries. They recognized that poverty in many developing countries was likely to worsen as these events have deepened the preexisting global economic slowdown, which had already led to weaker exports and commodity prices, and have other more specific impacts: e.g., increased refugee movements within countries and across borders; reduced private investment flows due to increased risk aversion in financial markets; reduced tourism revenues; and increased trade transaction costs. Ministers called for further enhancing the collaboration among the Bank Group, the IMF, the regional development banks, and U N agencies, in their actions to help member countries address these additional challenges and to strengthen social safety nets. Ministers underlined the importance of renewed growth in industrialized countries to the improvement of prospects for poverty reduction in developing countries.

3. Ministers reviewed the response of the World Bank Group. They stressed the importance of the Group using its financial capacity and the flexibility in its available instruments to respond effectively and promptly to current circumstances and emerging needs. They emphasized that financial support should continue to be linked to strong country performance and reform programs in support of poverty reduction. Ministers agreed that, from a financial standpoint, the magnitude of likely incremental demands on the Bank Group currently appears manageable, but they urged that the Board and Management keep under close review the Bank Group’s capacity to respond in more challenging circumstances. Ministers agreed that IDA had a particularly critical role in helping the poorest countries manage the adverse impact of recent events on their economies and people, and emphasized that timely agreement on a substantial IDA 13 replenishment was essential. They encouraged all member governments to complete their subscription to MIGA’s general capital increase.

4. Ministers considered improved governance to be an important element in generating the conditions for investment, private-sector-led growth, improved productivity, job creation, and trade, and, as a result, for poverty reduction. Thus, they highlighted the need for the Bank and the Fund, in accordance with their respective mandates and comparative advantage, to pay more attention to governance-related issues, including public expenditure management, diagnostic (e.g., through the Financial Sector Assessment Program) and capacity -building work to help countries identify and address abuses such as money laundering and terrorist financing. In light of this, they also stressed the importance of working to strengthen further country procurement and financial management systems. They also recognized the need to allocate increased resources to address capacity-building concerns in many countries to help them meet new internationally agreed commitments and standards.

5. United Nations Financing for Development Conference. Ministers expressed appreciation to United Nations Secretary-General Kofi Annan for the opportunity to discuss with him, at the joint IMFC/Development Committee dinner on November 17, issues related to the March 2002 International Conference on Financing for Development (FfD). They expressed strong interest in contributing to the Conference’s success, which they saw as an important milestone in the effort to halve the incidence of poverty by 2015 and to reach the other Millennium Development Goals (MDGs) (endorsed by Heads of State and Government in die UN General Assembly on September 8, 2000), and other agreed targets. They urged governments to involve all relevant ministries in preparing for the Conference to enhance coherence of policies with impact on development. (The Committee’s views on Conference issues are attached.)

6. Poverty Reduction Strategies. Ministers welcomed the significant progress made in implementing the PRSP approach, noting that 38 countries had completed interim PRSPs and eight countries their first full PRSPs. They appreciated the extent to which poverty reduction strategies build on existing national strategies and processes, with a focus on broadening participation and sharpening poverty diagnosis and monitoring, as well as on prioritizing and costing policies and programs for poverty reduction. Ministers welcomed the Bank and Fund’s efforts to work with countries to analyze the poverty and social impact of programs and to help them to build their own capacity. Ministers noted that the joint Bank/Fund staff review of the PRSP approach was under way. They called for a broad-based inclusive process that would draw upon the experience of other stakeholders and development partners, and looked forward to considering the report at their next meeting.

7. HIPC. Ministers welcome the continued progress made in implementing the HIPC Initiative, noting that twenty-four countries have now reached their decision points under the enhanced HIPC framework, qualifying for debt service relief amounting to some $36 billion; three countries have now reached their completion points and are receiving their full relief under the enhanced Initiative, There has also been a significant reduction in debt stock and debt service in these countries, and the commitment of qualifying HIPCs to increased poverty reduction spending has been encouraging. Ministers urged the Bank and the Fund to work with remaining eligible countries to bring them to their decision and completion points, as quickly as circumstances permit.

8. Ministers reiterated their commitment to the enhanced HIPC Initiative as a means for achieving a lasting exit from unsustainable debt for eligible countries. They stressed that long-term debt sustainability will depend upon the maintenance of sound economic policies, strengthened debt management, and the provision of appropriate financing. With regard to recent events, they noted that the enhanced HIPC Initiative framework provides for the consideration of additional assistance at the completion point if there has been a fundamental change in a country’s economic circumstances due to exceptional exogenous shocks. The Committee recognized the need to take into account worsening global growth prospects and declines in terms of trade, when updating HIPC Initiative debt sustainability analysis at completion point. Ministers noted that the relevant operational procedures for exercising such an option were recently approved by the Bank and IMF Boards. Ministers also reiterated the importance of fully financing the enhanced HIPC Initiative and urged bilateral donors to fulfill this commitment. They welcomed the agreement among donors to continue their regular consultations on the financial requirements of HIPC. They also urged those creditors that had yet to confirm their participation in the Initiative to do so as soon as possible.

9. Education for All (EFA). Ministers consider education as one of the most powerful instruments for reducing poverty and laying the basis for sustained growth. They welcomed the World Bank’s background paper on this subject and noted the efforts of the Bank and its partners to help ensure that quality primary education is available to all children worldwide as a necessary first step towards strengthening overall education systems. Ministers looked forward to full consideration of this subject at their next meeting, based on an action plan that will address, inter alia, the policy and resource requirements needed to ensure that EFA goals are reached by 2015 through the development of sustainable and high-quality EFA programs at the country level,

10. The Committee expressed its great appreciation to Mr. Yashwant Sinha for his valuable leadership and guidance to the Committee as its Chairman during the last fifteen months, and welcomed his successor, Mr. Trevor Manuel, Finance Minister of South Africa. The Ministers also expressed their warm thanks to Mr. Alexander Shakow upon his retirement as the Committee’s Executive Secretary, and welcomed his successor, Mr. Thomas A. Bernes.

11. The Committee’s next meeting is scheduled for April 22, 2002 in Washington, D.C.

Attachment to the Development Committee Communique

(64th Meeting—Ottawa, Canada, November 18, 2001)

Financing for Development Conference (Ffd)

1. Building Development Partnerships on a Foundation of Sound Polities and Good Governance. Ministers reaffirmed the critical importance of sound national policies and good governance as prerequisites for poverty reduction and sustained growth. They noted that the Millennium Development Goals (endorsed by Heads of State and Government in the UN General Assembly on September 8, 2000) and other internationally agreed development targets can help guide country-owned short- and medium-term national priorities on which external partnerships of support could be based. They noted that the Comprehensive Development Framework principles and Poverty Reduction Strategy Papers provide a vehicle for structuring partnerships with donors; they also provide a framework for the interventions of donors and other partners—such as through country assistance strategies and UN Development Assistance Frameworks—to ensure that external support is well integrated into national programs. An important contribution by the international community would be the strengthened provision of technical assistance to help developing countries—particularly low-income countries and those emerging from conflict—improve their capacity for sound economic management and efficient use of resources.

2. Strengthening the Conditions for Investment and Growth. Ministers stressed that, in addition to a stable and conducive international framework, a sound national policy environment, essential infrastructure, and good governance are needed to allow the private sector to invest efficiently and create employment. They recognized that in many countries major reforms of the policy and regulatory framework will be required to encourage domestic investment and job creation. Such reforms can also help to promote foreign investment and contribute to productivity growth and the additional resources needed for sustainable development. Ministers underlined the need for coherent and comprehensive support to private sector development. They emphasized the important role that IFC, MIGA, and other agencies working directly with the private sector can play in this regard.

3. Promoting Integration into the International Trading System. Trade is an important source of growth and poverty reduction, and developing countries need to be able to take greater advantage of the opportunities it offers. In this connection, the Committee warmly welcomed the decision reached by the WTO last week in Doha to launch a new round of trade negotiations. They endorsed the WTO Ministerial Declaration’s aim to place the needs and interests of developing countries at the heart of their Work Programme. Ministers emphasized the importance of countries integrating trade into their development strategies and improving their investment regulations, standards and technical regulations, removing obstacles to efficient transport of goods and materials, and strengthening telecommunications and business services. Ministers noted that greater access to markets would provide a major boost to development. They also stressed the priority they attach to helping developing countries strengthen their capacity to respond to market opportunities and to implement trade-related agreements.

4. Importance of Enhancing ODA Flows. Ministers recognized that for most low-income countries the availability of Official Development Assistance (ODA) remains an essential supplement to domestic resource mobilization and foreign investment if growth and poverty reduction goals are to be achieved. Ministers agreed that special emphasis should be placed on ensuring that adequate resources are directed to countries implementing sound policies and exercising good governance. They recognized that a substantial increase in current ODA levels would be required if the opportunities emerging from policy improvements in low-income countries are to be realized and the MDGs to be met. In this context, a number of Ministers referred to the need to reach the 0.7 percent ODA/GNP target. It would also require that, among countries with sound policies and governance, ODA be allocated with greater emphasis on countries with the greatest need (in part based on the difficulties they face in the achievement of their MDGs) and with capacity to make the most effective and efficient use of the resources. Ministers also emphasized the importance of appropriate concessionality in ODA flows.

5. Harmonization—Reducing the Transaction Costs of Aid. Ministers noted that major improvements in development effectiveness and efficiency, as well as reduced administrative burdens and costs on recipient governments, would be gained from eliminating rigidities in aid delivery mechanisms. In this regard, they highlighted the critical importance of harmonization of operational policies and procedures by the Bank, other multilateral agencies, and bilateral aid donors. Ministers welcomed the World Bank’s report on progress achieved to date in this area and commended the action programs set forth in this report. The Committee urged that the Bank and its partners continue vigorously to pursue these programs, and that the FfD Conference be encouraged to recognize the importance of, and provide broad-based support for, further progress in such harmonization and its implementation at the country level.

6. Debt and Other Instruments. Ministers underscored the need to deploy a flexible mix of instruments so as to respond appropriately to the needs of developing countries in a manner consistent with their economic circumstances and public expenditure management capacities. While urging that the HIPC Initiative continue to be implemented expeditiously to achieve debt sustainability for the poorest countries, they noted that debt relief is only one of many possible actions and instruments to support country poverty reduction strategies.

7. Global Public Goods. Ministers noted that FfD provides an opportunity for enhancing a common approach to global public goods and accelerating progress on the coordination of priority global public goods areas, such as those addressing HIV/AIDS and other major infectious diseases. They agreed on the importance of focusing on specific priority activities, while consolidating initiatives to achieve efficient use of resources. They stressed the need to ensure that activities are anchored in national as well as global strategies. In some cases this would require ensuring additionality in funding, while in others flexibility and reinforcement of existing mechanisms would be needed to help countries own and implement global public-goods -related national programs.

8. Making the Most of Existing Institutions. Ministers noted that FfD offers an opportunity to establish a broad international consensus—among governments, institutions, the private sector, and civil society—for action on the basis of common objectives and for the identification of specific gaps that may require enhanced international action. This would provide a platform for individual institutions to use their respective mandates, governance structures, and strengths to undertake high-priority initiatives as well as to promote more focused and coherent action among bilateral and multilateral agencies. Ministers strongly believe in making the most of existing institutions.

9. Integration into the Global System. Ministers agreed on the importance of promoting the greater integration of developing countries into the global financial system. They noted that progress is being achieved through the efforts of, inter alia, the international financial institutions, including in areas of crisis prevention, standards and codes, legal and regulatory frameworks, transparency, financial sector strengthening, combating terrorist financing and other abuses, debt management, and private sector participation in the resolution of financial crises. Ministers also agreed that it is important to find pragmatic and innovative ways to continue to enhance the effective participation of developing countries in international dialogues and decision-making processes.

10. Staying Engaged. Ministers noted that the FfD Conference should be seen as part of ongoing efforts to intensify concerted international action for development and poverty reduction, to expand growth opportunities for developing countries, and to improve the effectiveness and responsiveness of development cooperation. They urged that the follow-up to the Conference be seen in this context. They believe that the dialogue among the ECOSOC and the Bretton Woods Institutions offers unrealized potential, as does further progress within the framework of the coordinating committee of the heads of United Nations agencies (ACC). Greater cooperation among existing institutions is needed, based on a clear understanding and respect for their respective responsibilities and governance structures. For example, a combined effort by the Bretton Woods institutions and the United Nations, along with the OECD, to check periodically on progress towards the MDGs, would provide an efficient and practical approach for improved cooperation.

11. Ministers requested their Chairman to convey these conclusions to the President of the United Nations General Assembly.

Sixty-Fifth Meeting, Washington, D.C., April 21, 2002

1. We met today to discuss future challenges for development and an action plan for universal primary education.

2. We welcomed the very important progress achieved in the Monterrey Consensus laying out a new partnership compact between developed and developing countries, based on mutual responsibility and accountability, to achieve measurable improvements in sustainable growth and poverty reduction. We recognized the efforts of the World Bank and the IMF, working together with the UN, in contributing to this result. We look forward to their continuing collaboration and to strengthening this new partnership as we work towards a successful World Summit on Sustainable Development.

3. This new partnership for development recognizes that country-owned and driven development strategies embodying sound policies and good governance have to be the starting point. Such strategies need to be supported by increased and more effective development assistance and by greater efforts to integrate developing countries into the global economy. We are committed to the implementation of these strategies and partnerships, such as NEPAD, as part of the scaling up of activities that is necessary for implementing the Monterrey Consensus and to meet the Millennium Development Goals1; we will regularly review progress at future meetings. We welcomed the pledges made at Monterrey by a number of donors to increase their official development assistance.

4. The CDF/PRSP approach is increasingly providing a common foundation for implementing the new partnership at the country level. While recognizing that scope for improvement exists, we shared the positive assessment of implementation Co date, particularly in enhancing ownership. We look forward to continued progress in extending the participatory processes for the elaboration and monitoring of PRSPs, implementing pro-poor growth policies, enhancing collaboration to strengthen public expenditure management and to improve poverty and social impact analysis; and, among multilateral and bilateral development agencies, in better aligning their programs with country strategies.

5. We reaffirmed our strong support for the current work program to harmonize operational policies and procedures of bilateral and multilateral agencies so as to enhance aid effectiveness and efficiency. We committed to further action in streamlining such procedures and requirements over the period leading to the high-level forum scheduled for early 2003.

6. Evidence demonstrates that effective assistance in support of good policies and institutions can bring important development benefits. More attention should be given to the building of institutions and capacities as well as the timing and sequencing of the reform process. We underlined the importance of an enhanced focus on results that can be used by countries in designing and implementing their strategies, and by donors and development agencies in scaling up and allocating their support. We asked the World Bank to report to us at our next meeting on its efforts in this respect. We would also welcome a report on efforts under way to engage more effectively with weak-performing low-income countries.

7. Economic growth requires a strong and vibrant private sector and an enabling climate that encourages investment, entrepreneurship, and job creation. However, it is not enough to strengthen the private sector in developing countries without further progress in integrating them into the global trading system. We thus strongly endorsed the call at Monterrey for coherence between development assistance and trade policies. We urged an acceleration of efforts to lower trade barriers (including trade-distorting subsidies) and we called upon the World Bank and others to provide more support in helping developing countries address policy, institutional, social, and infrastructure impediments limiting their ability to share in the benefits of trade.

8. Education is one of the most powerful instruments for reducing poverty. We strongly endorsed the action plan presented by the Bank as a basis for reaching international consensus to help make primary education a reality for all children by 2015. We appreciated in particular that the action plan is consistent with the new partnership for development based on mutual responsibility and accountability. We called on the Bank to continue to work in partnership with UNESCO and other relevant agencies. We encourage all countries to place education at the heart of their poverty reduction strategies, reform their education policies to achieve Universal Primary Completion, and monitor progress towards the 2015 education goals in line with an enhanced focus on results. We committed ourselves to work together in a much more coherent way to help bring this about and to provide the necessary additional domestic and external resources. The Bank and ah other stakeholders should strengthen their efforts to achieve the MDG on gender equality in primary and secondary education by 200S. We will review progress at our next meeting.

9. We reviewed and welcomed the steady progress that has been made on the HIPC Initiative. We remain committed to its vigorous implementation and full financing. Our objective remains an early and enduring exit from unsustainable debt for HIPC countries. We noted that within existing guidelines, additional relief can be provided at the completion point, on a case-by-case basis. Success will require a sustained commitment by HIPC countries to improvements in policies and debt management and by the donor community to continue to provide adequate and appropriate concessional financing. We will discuss the issue of debt sustainability and, consequently, financing and policy implications, at the next meeting.

10. Finally, we reviewed a progress report on anti-money laundering and combating terrorist financing. Recognizing the serious risks posed by these activities, we welcomed the action plans agreed by the World Bank and the IMF and the enhanced collaboration with other institutions. We encouraged the World Bank and the IMF to continue to integrate these issues into their diagnostic work in line with their respective mandates, and urged that capacity-building assistance be increased so that countries could better address these issues.

11. The Committee’s next meeting is scheduled for September in Washington.

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