Statement by the Governor of the Fund for Costa Rica

Eduardo Lizano Fait

On behalf of the countries of Latin America and my own country, Costa Rica, I wish to express my sincere gratitude having been honored with the appointment as a Chairman of the Boards of Governors of the World Bank Group and the International Monetary Fund for the coming year. I would also like to express my gratitude to the Honorable Trevor Andrew Manuel, Minister of Finance of the Republic of South Africa, for the notable contributions he has made as Chairman of the Boards of Governors. His interest in so many issues has been remarkable, and his commitment to allow the voice of all members to be heard is an example I plan to follow.

On behalf of the Latin American region I would like to greet Mr. Horst Köhler, Managing Director of the Fund, and express our support and wishes for his success. We welcome the attention he has given to the participation of developing countries in the shaping of the new financial architecture. In this respect, his decision to visit our region almost immediately after taking office was especially important to us.

During the past year, Latin America has continued to consolidate its rebound from the crisis that affected emerging markets in 1997, 1998, and 1999. After applying strong adjustment programs, economic performance in the region has improved, supported mainly by a positive export performance. Inflation has remained in the single digits in most countries, and the current account deficit for the region, relative to GDP, is expected to narrow somewhat in 2000.

Over the past few years, the region has made considerable efforts to reduce its external sector vulnerabilities. Even though the dependence on external capital flows has been reduced, mainly by strengthening the fiscal stance and improving debt management, the region will continue to demand foreign resources on a net basis. The region’s governments are aware of the volatility of such flows, which explains in part their concerted effort to rapidly improve the economic fundamentals, relying mostly on fiscal consolidation, monetary prudence, better supervision, and regulation of the financial sector, and trade liberalization.

Notwithstanding the general improvement of the region, economic development in Latin America has been uneven. Some countries have been particularly affected by a substantial worsening of the terms of trade, by the fluctuations of the exchange rates among the three main currencies of the world, and by natural disasters. These events have in many cases affected adversely the external positions, put pressures on the foreign exchange markets, and aggravated poverty conditions. These developments have forced countries to undertake restrictive policy measures, as they sought to maintain stable macroeconomic conditions, but the net cost has been high in terms of undermining possibilities for achieving faster growth and improving the living conditions of the poor. The incidence of these problems has been concentrated among the low and very low-income countries, including the HIPC countries of the region.

For these reasons, among others, we are concerned with the slow progress in the financing of the HIPC Initiative, a situation that could imply delays in providing debt relief to countries that have already qualified for such assistance. It is also worrisome that a solution has not been found to a structural problem that the HIPC Initiative has, namely, that it calls upon poor countries, including in some cases HIPC countries, to provide substantial debt relief to the poorest countries. These issues deserve in our view major attention from the international financial community.

Developing countries—not only from my region—could benefit greatly from a further opening to trade by the industrial countries. Both Mr. Köhler and Mr. Wolfensohn have emphasized this issue in their opening statements of this Annual Meeting. In this respect, it is essential to move from words to deeds, as Mr. Manuel demanded in his statement at the plenary session two days ago. The efforts by the poor countries to bring their economies to a path of sustainable growth with low inflation will not be completely possible if the size of the markets for their products is not enlarged. At the same time, the opening of the markets of the industrial countries would allow poor countries to benefit from goods, investments, and technology transfers from abroad, entering into a virtuous circle that would represent a tangible example that globalization can benefit everybody, not just a privileged group of countries or individuals.

The cooperative spirit that should prevail in the world would also be enhanced if industrialized countries would consider more seriously the consequences on developing countries of their actions, in particular in respect to exchange and monetary policy actions.

As I assume the responsibility as Chairman of the Boards of the Governors of the Bretton Woods institutions for the coming year, I am conscious of the need to broaden the agenda in order to strengthen global cooperation. While the overall outlook of the world economy is encouraging, we have to remind ourselves constantly that risks and uncertainties remain, and that there is no room for complacency. I share the view that the Fund and the Bank have an important role to play in ensuring an effective functioning of the international financial system, and to improve the quality of life of the world population through better serving the needs of the poor countries. The strategy for moving forward that Mr. Köhler and Mr. Wolfensohn presented to us during these days in Prague is aggressive, but at the same time consistent and well thought out, a factor that allows us to envisage some light at the end of the tunnel. I am confident that the joint commitment of our two institutions, coupled with the valuable personal commitment of both Mr. Köhler and Mr. Wolfensohn, will ensure that the benefits of globalization not only will be enlarged, but more important, that it will reach everybody in the globe, especially the poorest among us.

There is still much that needs to be done. Let me invite all of you to continue working as partners in forging a better world for tomorrow. I look forward to working for you and with you as we move toward next year’s Annual Meeting in Washington D.C.

Statement by the Chairman of the Executive Board and Managing Director of the International Monetary Fund

Horst Köhler

Mr. Chairman, Governors, ladies and gentlemen, I would like to express again my thanks on behalf of the IMF to President Havel; the government of the Czech Republic; Mr. Hrubý; Mr. Vodička; and the whole Planning Team; the Police President, Mr. Kolář; and the Mayor and citizens of Prague. Thank you for the extraordinary efficiency and hospitality you have demonstrated, in spite of the sad events outside, as hosts for these millennium Annual Meetings. I deplore the injuries, particularly of policemen, and plan with Jim Wolfensohn to visit a number of them this evening.

For me, these have been very productive meetings—not just in the formal sessions, but also in many personal encounters and discussions with constituencies within the IMF. The theme that has resonated in these meeting is clearly the need to make globalization work for the benefit of all. In this context, I would like to thank President Havel for reminding us, in his opening address, of the broader context of international economic policy and the need for ethical and spiritual dimensions. The President stressed that it is a dangerous mistake to view humanity as permanently divided into rich and poor. We need to act together in partnership and solidarity, mindful of our common humanity.

This principle is at the heart of my Vision of the future role of the IMF. If I may use your words, Mr. Chairman, the institutions that provide the anchor to the global economic system have a responsibility to ensure that globalization translates into a better life for all. We must help our member countries take advantage of the opportunities of the global economy while finding better ways to contain the risks, so that they can achieve sustained growth and reduce poverty. Jim Wolfensohn and I have emphasized that these are objectives toward which the IMF and World Bank will work together, as partners to our members and to one another.

I have been heartened by Governors’ overwhelming support for the vision of the future of the IMF outlined in my opening statement. I felt that you shared the view:

• that the IMF should strive to promote noninflationary economic growth that benefits all people of the world;

• that it should play a central role in safeguarding the stability of the international financial system;

• that it should further focus its activities on macroeconomic stability, working in a complementary fashion with other international institutions; and

• that it should be an open institution, learning from experience and dialogue, and adapting continuously to changing circumstances.

Mr. Chairman, Governors, ladies and gentlemen, we all came to Prague for wide-ranging deliberations on crucial problems facing the global economy. Unfortunately, these days were marred by the violent and destructive behavior of a few, who are not interested in dialogue and democratic processes. I am deeply saddened that the people of this beautiful city have suffered damage and even injury. The authorities have shown admirable composure and restraint under the circumstances. And thanks to their efforts, our meetings have continued. They demonstrated the strongest support of the membership for the mandate and work of the IMF.

In the multilateral surveillance discussion at the International Monetary and Financial Committee last weekend, we examined the risks to the sustainability of the current global economic expansion, particularly the imbalances among the economies and currencies of the largest industrial countries and the situation in world oil markets. There was a common understanding that the current level of world oil prices is not in the interest of either oil-consuming countries or of oil producers. High oil prices are particularly harmful for the poorest countries. There was also broad interest in a producer-consumer dialogue aimed at promoting greater stability in oil markets. I would agree with Gordon Brown, the Chairman of the IMFC, who described this as the IMF at its best—a cooperative institution bringing together oil producers and consumers, developed and developing countries, rich and poor. On the whole, Governors expressed confidence in a further positive outlook for the world economy.

Governors also agreed on the need for more ambitious reform in the industrial countries. In that context, they welcomed the recent commitment to deepen structural reform in Europe, as well as the actions by the ECB and other major central banks to support the euro.

I think we can all agree that the mandate of the IMF demands that the Fund speak up not only on exchange rate issues, but on trade issues as well. These are of importance for the global economy. The discussions at these meetings have underscored the urgency of providing developing countries with greater access to markets in developed countries, as a key element in the fight against poverty. Jim Wolfensohn and I have asked our staffs to explore ways in which our two institutions can help to move this forward.

It was the clear sense of these meetings that our architecture initiatives have already helped to make the international financial system stronger. But it is also clear that we cannot stop here. We must do more to put crisis prevention at the heart of Fund surveillance. You have noted that the IMF must help its members to build up data systems, identify sources of vulnerability, and strengthen their domestic financial systems. Many Governors have stressed the important role of regional surveillance initiatives. You have called for further efforts to safeguard the stability of the international financial system, which requires a deeper understanding of the dynamics of international capital markets and constructive engagement of private capital market participants. In this context, Governors have welcomed my initiative to establish a Capital Markets Consultative Group.

But many of you also noted the importance of tailoring the implementation of these initiatives to the particular circumstances of individual member countries and the stage of development of their financial markets, as well as the need for expanded and better-coordinated technical assistance. And you have also underscored the importance of widespread consultation in the design of these initiatives.

The recently concluded review of the IMF’s financing facilities has helped to sharpen our tools for temporary assistance to members, crisis prevention, and crisis resolution. It is clear that members recognize the need to preserve the revolving character of Fund resources and thus, the need for conditionality. Governors, I am gratified that you have also encouraged our efforts to streamline and focus the conditionality of the IMF, in order to enhance program ownership. I trust that ownership is promoted when the Fund’s conditionality focuses predominantly on the measures that really matter most for the achievement of macroeconomic stability and growth. In applying this approach, the IMF will need to work closely with other institutions, particularly the World Bank. Finally, you have welcomed the progress that the IMF has made in developing a framework for involvement of the private sector in crisis prevention and resolution, and encouraged us to continue refining that framework and making it operational.

The membership wants the IMF to stay strongly engaged with its poorest member countries. We will do so, and we will continue working closely with the World Bank to implement the participatory Poverty Reduction Strategy approach. I took note of the importance that you attach to this approach as a way to ensure broad input in the design of poverty reduction strategies—including by those who know the most about poverty, the poor themselves—but also of the burdens that this approach is placing on administrative capacities. It is clear that the Fund, the Bank, and donors need to mobilize additional technical assistance to build institutional capacities for this purpose. And it is clear that the industrial countries must provide a much more appropriate level of official development assistance.

Governors, in reviewing the progress in implementing the enhanced HIPC Initiative, you have grappled with the complexity of balancing our desire for maximum speed with the need to ensure that debt relief contributes effectively to poverty reduction. I can assure you that—consistent with this goal—Jim Wolfensohn and I will be doing our utmost to ensure that debt relief is provided to as many countries as possible, as rapidly as possible under the HIPC Initiative. I took note of the statements of many Governors, calling for deeper debt relief. But it is also clear that difficulties remain with the financing of the existing enhanced HIPC Initiative, and that we need to focus on securing additional contributions so that no deserving country is refused assistance as a result of lack of funding for the multilateral institutions, including the IMF. And we must continue our efforts to ensure the appropriate participation of all creditors in the initiative.

My overall sense of these discussions is that there is agreement that now, more than ever, globalization requires cooperation, and it requires institutions that organize this cooperation. Its 182 members make the IMF a truly global institution, and the cooperative nature of the IMF is built deeply into the work of its Governors, Executive Board, management, and staff. Your comments during these meetings underscored the value that you attach to the cooperative nature of the IMF and your desire to strengthen it. This has been reflected in many aspects of your remarks, including those on representation and quotas.

Finally, as these meetings draw to a close, I would like to thank Governor Trevor Manuel for his effective chairmanship of these meetings. I wish you, Governors, a safe journey home, and look forward to our meetings next year under the chairmanship of the Governor for Costa Rica, Mr. Eduardo Lizano Fait. And I look forward to working with you to make our shared vision of the future role of the IMF a reality.

Concluding Remarks by the President of the World Bank Group

James D. Wolfensohn

Mr. Chairman, Governors, ladies and gentlemen, let me start by adding my personal thanks also to the government of the Czech Republic, the authorities of Prague, Mr. Hrubý, Mr. Vodička, Police President Kolář, and all those that have done so much to make these meetings such a great success.

I share with my colleagues the feeling of distress as to the problems that have arisen in the streets. But try to take some comfort from the fact that there were many among them who really cared, and how much they regret, and we regret, that there were those whose sole purpose was destruction, which colored the occurrence outside these buildings.

For us, these meetings have been extraordinarily valuable. The interchange that we have had with you bilaterally and in this room have enriched our deliberations at the Bank and have given us confidence that we are moving on the right track. What I took from this meeting was that there is a consensus that is shared between the Fund and ourselves but also with all of you that poverty is central to our mission, that globalization presents both opportunities and challenges, and that our task is to maximize the advantages of globalization and help those who are challenged by it.

But through it, we must never forget that the benefits must accrue to an ever-broadening number of people, those that are in poverty and those that are disadvantaged, because the issue of poverty is, I believe, the issue of our future peace.

I was also very encouraged by your support of the approach that Horst Köhler has referred to, and which has come through in the meetings so well, the Poverty Reduction Strategy Papers and the Comprehensive Framework, which contain some very important elements.

The first is that the programs themselves should be country owned and country led, that the notion of imposition of conditions or of preset plans is not acceptable, although the issue of appropriate conditions seemed to be accepted by all. We have a task to ensure that the necessary conditions are understood by, accepted by, and indeed embraced by our client countries, and that the programs that we develop are owned in a cooperative way and country led.

I was also much encouraged by your recognition of the need for cooperation, not only between the Bank and the Fund—and I share with Horst a feeling of gratitude to all of you for your recognition of our joint statement—but that that feeling of cooperation should expand further and should include bilateral and multilateral institutions of the United Nations system and all those involved at the official level in the issue of development, but going beyond that to embrace the private sector and many facets of civil society.

I think there was significant support for the belief that development is not an easy issue, that, as Horst has said, the stability of the financial system and growth are fundamental, but beyond that, the issue of equity must be protected, and the way in which we can be effective must include participation by all. Surely we in our institution—working with the Fund—will be looking for further outreach and further participation under the leadership of the governments of the countries with whom we deal, seeking to weld a consensus and to address development not as an overnight issue but as a long-term consistent process in which continued support is required in good times and in bad.

I was also grateful for the many references to the work that needs to be done in the field of information technology as a means of reaching out and enfranchising people in poverty—but more than that, as a means for accelerating development throughout the world. Certainly we are committed to pressing forward in the area of information technology and to making it a true tool for enhancing the effectiveness of the development programs that we put together. In this context, of course, building capacity among our client governments becomes an issue that has a broader possibility, and one in which we and our institution will be seeking to take advantage of it.

Another thing that became clear in these meetings is the recognition that the development contract has two sides, the side of the governments of the countries that are developing, and that this responsibility and accountability to the peoples of those countries is widely recognized. We also commented, I believe, on the many advances that have been made in the developing countries through these recent years.

But focus has also been placed on the responsibility of developed countries to not only provide assistance in the form of increased official development assistance, but also to provide other forms of assistance and support beyond money, and particularly in the areas of trade and the opening of markets.

We have also commented on the type of problems that come forth when there are commodity price fluctuations, notably in oil, but also in export prices, to which special attention needs to be given by the global community.

Indeed, these meetings were very rich. Horst Köhler has already commented on our joint efforts on HIPC and our joint commitment for the end of this year to advance as many countries to the decision point as possible within the framework of appropriate understandings as to their poverty reduction strategy and to the direction and use of funds.

And finally, I was pleased that so many Governors referred to the challenge of HIV/AIDS, as well as other communicable diseases. On the issue of HIV/AIDS, there was a general recognition that, in many parts of the world and notably Africa, the issue of HIV/AIDS is not just another health problem. It is at the core of the development problem and an issue of enormous human proportions. We should recall the President Havel’s introduction, an introduction that I shall long remember, since he lifted the debate to the level of humanity and ethical values. And in that context, we must surely think in terms of the challenge of HIV/AIDS.

This now gives me a chance, Mr. Chairman, to commend you on your chairmanship. The fact that you were able to encourage people to speak so eloquently and in such a focused manner, that you got through 47 speeches in record time is surely a record, but one that I know the incoming Chairman of the Board of Governors may be counted on for next year. I want to welcome you, Mr. Governor, and Costa Rica, and indeed your whole constituency, to the chairmanship of the Bretton Woods institutions. I look forward to working with you in this coming year. May I finally wish you all a safe trip home. I appreciate very much the friendship and the support that you have offered to me and to my colleagues while you have been here, and I look forward to seeing you at coming meetings.

Concluding Remarks by the Chairman Governor of the Fund and the Bank for South Africa

Trevor Andrew Manuel

Fellow Governors, ladies and gentlemen, we concluded these meetings—the first of the new millennium—in record time. Three weeks ago our heads of state and government convened at the United Nations in New York for the Millennium Summit. Key among the issues under discussion were issues relating to global governance, and one of the important themes was, indeed, the financing of development. Also, very strong appeal was made for us to do things differently in the millennium, and I think it is important to reflect on our current meetings within that context also.

These Annual Meetings opened with four addresses that resonated very strongly and contained very strong threads throughout. As both Mr. Wolfensohn and Mr. Köhler just reminded us, President Havel in his contributions yesterday lifted the debate. Importantly, those four speeches focused largely on people and on elaborating a grander vision for our endeavors. There are six broad areas that we need to constantly remind ourselves of: first, values; second, the benefits of globalization; third, the reality of inequality and poverty that obtains; fourth, our mutual responsibility to deal with these issues as they exist; fifth, the need for institutional support in dealing with this challenge; and, sixth, that this is a moment in world and economic history that we need to understand in order to act appropriately.

From the addresses by Governors, I have noted that eight broad themes emerged. First, on the role of the Bank and the Fund, there was commendation for the joint statement of the Managing Director at the Fund and the President of the Bank. Issues were also raised about matters relating development financing and, as one Governor put it, the cost of doing business with the institutions. Governors also discussed issues that are outstanding in efforts to address global governance, such as the matter of money laundering.

Second, there was much discussion on the need for reform of the institutions. A number of Governors mentioned the need for a stronger voice for developing countries. A variety of views were expressed on matters relating to the important work on the review of the calculation and distribution of quotas. Also, many Governors addressed matters relating to the programs and products delivered by the Bretton Woods Institutions to its members.

Third, matters of domestic governance were raised, and it is interesting to note that we, as Finance Ministers and Central Bank Governors, share with our colleagues the progress we are making toward democratization of our own countries. The degree of similarity that now obtains in respect to governance is remarkable and welcome. Related to this was the theme of regional governance, and in this context, I commend the Governors who spoke on behalf of regions. The disconcernible similarities and economic convergence that takes place when different countries work closely together is clear.

Fourth, issues concerning stability were raised. Just two years ago, there had been much focus on issues relating to financial stability, and this year the issue of stability was addressed through matters relating to the oil price. It received a fair amount of attention certainly in the report by the Chairman of the IMFC, but it was also raised by a number of Governors from both oil-producing and oil-importing countries. The similarities between the issues we discussed two years ago on financial flows and now on the oil price certainly stand out as something that we need to take account of going forward. But very importantly, there was a salutary message from some Governors that, on financial flows, we should not forget about the associated risks, despite their apparent remission over the past two years. In this regard, Governors stressed that there was no room for complacency, and that we should take advantage of the current, positive economic conjuncture to implement much-needed reforms. Part of the objectives of both the Bank and Fund is to provide greater stability, and the commitment that Mr. Köhler made yesterday to strengthen crisis prevention is important in this context.

Fifth, Governors have shared with us developments in their own countries, and it is striking to see the similarities in macroeconomic development and change within countries. However, there was a very timely warning from the Governor of New Zealand this morning, that we must guard against the notion that “one size fits all” when providing advice on economic reforms. And here, we come back to one of the other themes raised in the four opening speeches—that of the benefits of globalization. In this regard, an important question to address is who is inside and who is outside. Let us recall that we also had Governors talk about the ongoing challenges of being commodity producers, often of individual agricultural commodities. CARICOM’s statement in this regard was exceedingly important. In this context, where countries start out poor, where they are commodity suppliers to large markets, where access to trade opportunities is a problem, where the level of poverty has meant that human capacity development has not been adequately attended to, I think we arrive back to this issue of who is benefiting fully from globalization and who is not. As countries try to implement macroeconomic change and understand that macroeconomic sustainability is a necessary but not sufficient condition, we come back to the role of the Bank and the Fund.

The sixth broad theme that emerged dealt with the importance of immediate and substantial debt relief. In this regard, it is important not just to deal with the past, but also to deal with the future, and here I would like to welcome the calls across the board for faster and deeper debt relief and also welcome the new commitments made by a number of countries to speed up the provision of bilateral debt relief.

The seventh theme dealt with equity, especially in respect to interdependence, but also dealing with the issues relating to oil, foreign direct investment, trade and official development assistance.

The last of the themes that emerged very strongly related to the importance of effective communications. What is wrong with what we do? What distinguishes us here from those on the streets? I would like to add my voice to the distinction made between, on the one hand, peaceful activists and non-governmental organizations, some of whom have been present through these meetings, and on the other hand, those who were bent on destruction. That distinction was made by a number of speakers today, but echoed very strongly by both Mr. Köhler and Mr. Wolfensohn.

Issues regarding communications are exceedingly important. The commitment from Mr. Wolfensohn and Mr. Köhler to turn these Bretton Woods institutions into listening organizations is one that we must welcome. We have all said that these institutions need to be responsive to our needs, and they need to develop strong threads so that we take the development challenge forward very strongly. What was also very encouraging was the degree of support from all Governors for the vision raised by both Mr. Köhler, in describing the IMF that he would like to construct under his tenure, and the new set of commitments made by Mr. Wolfensohn. But effective communication must also carry through to a series of difficult issues. We must recognize that some of those tough issues were raised as disagreements between Governors, so these meetings were not just about consensus.

The approach to the oil price was raised. Debt relief was raised. Globalization and its benefits, who is in and who is out, and what the causalities are were raised. Also, comments about how true we remain to the Articles of Agreements of the Bank and the Fund were raised.

The philosopher, Richard Rorty, who has argued that we no longer live in a world of certainties, but one in which the truth that we seek and follow are truths that we arrive at through dialogue, debate, and discussion. Truth is a point of view for which we can make the most convincing argument, Rorty says. I believe that the Fund and the Bank have an important role to play in ensuring that we arrive at a more equitable set of outcomes so that we improve the quality of life for all. Yet, to do this, we need to hear the voices of those who sometimes have been silenced in the quest for truth. The voice of developing and emerging countries must now be heard. We will look to the continued strong and very capable leadership of Horst Köhler and Jim Wolfensohn to deliver that truth to this and the next generation.

Let me conclude by firstly thanking all of the Governors for the collaboration that has made the task of chairing these meetings as easy as it has been. I would like to thank the staff of the Joint Secretariat, and especially Ms. Patricia Davies, for their role, in conjunction with the Czech authorities, in ensuring such excellent arrangements for our meetings.

I would also like to thank the staff who were assigned to me in the Office of the Chair, who were very capable, pleasant, and efficient. I would like to again thank the government and the people of the Czech Republic, in particular those from Prague. I would like to congratulate the Governor from Costa Rica, who succeeds me as incoming Chairman of the Boards of Governors. In closing, I would like to remind all of us of what we said yesterday, that our task is to turn words into deeds, and in this, we cannot and must not fail. Before adjourning, I would like to wish all the Governors and Delegates a safe journey home, and I hereby adjourn the 2000 Annual Meetings of the Boards of Governors of the International Monetary Fund and the World Bank Group.