Two themes dominated the discussions at the seminar. How do macroeconomic policies and the environment interact? How important is it that the Fund staff become aware of this interaction and take it into account in dealing with member countries?
Following a long uninterrupted period of strong global expansion, world economic growth has begun to moderate in response to the continuing financial market turbulence that started in August 2007. Although downside risks have increased, global growth prospects remain broadly positive, with world GDP growth in 2008 slowing to a projected 3.7 percent, from 4.9 percent in 2007. What makes this period of economic expansion different from previous periods is the broad-based character of the growth momentum: emerging market economies and other developing countries have rapidly increased their shares in global production and trade.1 The resulting convergence of income levels between advanced and developing economies helps in the fight against poverty, because poverty reduction will be elusive without strong, private sector-based economic growth. The increasing significance of developing countries as attractive places to invest, the international migration of labor, and the emergence of new donors have also changed the composition of international financial flows: private capital and workers’ remittances have grown in importance as main sources of financing in many developing countries. The benefits of the global expansion, however, have not reached all developing countries, especially the many fragile states where per capita growth rates remain negative. Also, income inequality has risen within many countries, mainly as a result of the effects of technological progress on relative wages of unskilled workers, confirming the importance of improving access by low-income workers to high-quality education.
To a remarkable extent, the work of the IMF is still guided by its original mandate, as spelled out in the Articles of Agreement. In 1944, the founding fathers charged the IMF with, among other things, facilitating “the expansion and balanced growth of international trade and to contribute thereby … to the development of productive resources” and helping member countries with temporary balance of payments problems so that they do not have to adjust by “resorting to measures destructive of national or international prosperity.” These goals are pursued primarily through balance of payments assistance and what has come to be called surveillance.
Vito Tanzi: This panel discussion is the most informal part of the seminar. Certain questions were given to individual speakers, in the hope that they would spend a few minutes and give answers. The four speakers are David Pearce, Cielito Habito, Andrew Steer, and Ved Gandhi, and we will go in that order.
Let me conclude the seminar with two observations that are highly relevant to our discussions of the past two days and then with a few remarks on the future direction of Fund work in the environment area.
The world has made steady progress toward meeting the numerical targets for the human development Millennium Development Goals (MDGs). Achievements have been impressive in some cases, and even in countries that are lagging, progress is measurable. The glass is, at the very least, half full. Nonetheless, significant challenges still exist as the global community approaches the halfway point of the MDG goals, and some countries and regions are seriously off track for successfully meeting the goals. This chapter provides an overview of the key issues and trends that underpin the human development indicators of the MDGs, with an explicit focus on inequity in spending and access, health care quality, and child malnutrition. The chapter also documents environmental problems that pose barriers to the achievement of the human development MDGs.
It is a great pleasure for me to welcome you to the IMF Seminar on Macroeconomics and the Environment. Most of you are from Washington, but some guests have come from as far away as Canada, England, India, Norway, and the Philippines. As we received your responses to the invitations, we also received a number of expressions of curiosity—even surprise—that the IMF would be holding an academic seminar on environmental issues. To some extent the curiosity is understandable. We are a monetary institution, not an environmental one. Our basic mandate, as spelled out in Article I of the IMF Articles of Agreement, is to promote international monetary cooperation and exchange rate stability and to help member countries solve their balance of payments problems. Moreover, the timeframe for our work—whether surveillance or programs—is typically short term, while environmental problems, unlike exchange-rate and balance of payments crises, tend to be long term.
The International Monetary Fund is a monetary institution charged with the responsibility of promoting international financial and exchange stability through the adoption of sound macroeconomic policies in its member countries (see Annex 1, and IMF, 1993). It is not an environmental institution and is not concerned with the environment per se. Fund work on the environment is therefore related to its primary mandate of helping member countries achieve economic stability through reform of macroeconomic policies.