Chapter

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

Author(s):
International Monetary Fund
Published Date:
September 2001
Share
  • ShareShare
Show Summary Details

International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund

PRESS COMMUNIQUÉS

Second Meeting, Prague, Czech Republic, September 24, 2000

1. The International Monetary and Financial Committee (IMFC) held its second meeting in Prague on September 24, 2000, under the Chairmanship of Mr. Gordon Brown, Chancellor of the Exchequer of the United Kingdom. It welcomes Mr. Horst Köhler as the new Managing Director and looks forward to working with him on the continuing reform of the Fund and the strengthening of the international financial architecture.

World Economic Outlook

2. The Committee welcomes the strengthening of global economic growth this year to the highest rate in 12 years. Economies in all major regions of the world have grown, and inflation remains generally under control.

3. While the overall outlook is positive, the Committee remains mindful of the significant remaining risks associated with the continuing economic and financial imbalances in the global economy. These potential challenges include imbalances in external accounts and the possible risk from misalignments in exchange rates and high levels of equity valuations in the major currency areas. The Committee considers that it will therefore be important to remain vigilant against inflationary pressures in the United States, and that national savings should increase; to pursue policies in Japan that arc strongly supportive of self sustained domestic demand-led recovery; and to intensify the momentum of growth-supporting structural reforms in the European Union and in other advanced countries. In almost all developing and emerging market countries, continued progress with structural reforms—in particular through strengthening their financial sectors—is required to strengthen prospects for sustained economic growth. The Committee also expresses concern that, despite the strength of the global recovery, poverty remains unacceptably high, and many poor countries continue to face serious economic problems.

4. The Committee welcomes the gradual improvement in the last year in the terms and conditions of market access for emerging market countries, reflecting the better fundamentals in these markets. However, flows remain below pre-crisis levels, at higher spreads, and continue to show significant volatility, and market access remains extremely limited for some emerging markets.

5. The Committee is concerned that current oil prices, if sustained, could hamper global growth, add to inflationary pressures, and adversely affect prospects for many countries. It notes in particular the effect on the poorest countries and those highly dependent on oil imports. The Committee agrees on the desirability of stability in oil markets around reasonable long-term prices. It notes the recent U.S. decision to mobilize reserves and notes that some other industrial countries may be in a position to examine the possibility of doing so to help achieve greater stability. The Committee welcomes the steps the oil-producing countries have taken this year to increase production and calls on them to take further steps to create conditions in oil markets conducive to healthy global growth. The Committee looks forward to improved dialogue between oil producers and consumers to promote greater oil market stability.

6. The Committee notes that, in the ten years since the launch of the transition to market economies in eastern Europe and the former Soviet Union, much has been achieved. But the process has been difficult and remains far from complete, and progress has varied across countries. The Committee underlines that a key lesson from this experience is that transition economies that have made the greatest progress in establishing macroeconomic stability and implementing structural and institutional reforms have also achieved the best economic performance.

The Future Role of the IMF

7. The Committee strongly supports the objective of making globalization work for the benefit of all. In this respect, it endorses the Managing Director’s vision of the future role of the IMF, and looks forward to working with him on continuing reform of the Fund and strengthening the international architecture. While each country’s own actions will inevitably be the most important determinant of its economic progress, all members of the international community have essential roles in supporting and facilitating these individual efforts. The international community must place renewed emphasis on promoting broadly shared prosperity, sustained growth, and poverty reduction. With its broad mandate and universal membership, the Fund, in partnership with the World Bank, is uniquely placed to serve its members, including the poorest countries, by contributing to this global effort.

8. The Committee notes the advances in applying the lessons of recent financial crises to the work of the IMF and the policies of its members. Many concrete steps have been taken or are under way to improve the functioning of the international financial system, and to strengthen its capacity for preventing and managing financial crises. As a result, the international community has made progress toward dealing with difficult situations and managing their external repercussions.

9. But continued efforts for change will be necessary. The Committee calls upon the IMF, in particular, and the international community, as a whole, to continue to strengthen their efforts to reduce vulnerability and to avoid crises, and when crises do occur, to reduce their spillover effects. These efforts will need to focus on:

  • broadening and strengthening the Fund’s surveillance of the domestic economic policies of all members and of the international financial system, including regional dimensions;

  • continued promotion, development, and voluntary implementation, in a fully participatory way, of internationally agreed codes and standards, in cooperation with other bodies, as appropriate, supported by enhanced technical assistance; and

  • constructive engagement of the private sector by the official sector.

10. The Committee reiterates that the Fund has a central role to play in bringing together the efforts of other global institutions to strengthen the international financial system in helping to ensure that all countries can benefit from globalization. It agrees that the Fund can best contribute to this global effort and strengthen its overall effectiveness by:

  • continuing to deepen its collaboration with other agencies and bodies. In that regard, it welcomes the initiatives of the Managing Director and the President of the World Bank to strengthen cooperation and complementarity between the two institutions;

  • promoting, within the context of the Fund’s mandate, international financial and macroeconomic stability and growth of member countries, the Fund must sharpen the focus of work in its core areas of responsibility: macroeconomic stabilization and adjustment; monetary, exchange rate, and fiscal policies and their associated institutional and structural aspects; and financial sector issues, especially systemic issues relating to the functioning of domestic and international financial markets.

11. The Committee stresses the importance of national ownership of Fund-supported programs for their sustained implementation. The Committee urges the Executive Board to take forward its review of all aspects of the policy conditionality associated with Fund financing in order to ensure that, while not weakening that conditionality, it focuses on the most essential issues; enhances the effectiveness of Fund-supported programs; and pays due respect to members’ specific circumstances and their implementation capacities.

The Poverty Reduction and Growth Facility (PRGF) and the Enhanced Initiative for Heavily Indebted Poor Countries (HIPC)

12. The Committee affirms the Fund’s enhanced role in poor countries. It considers that a lasting breakthrough in combating world poverty can only be achieved if the poorest countries are able, with the support of the international community, to build the fundamentals for sustained growth. Macroeconomic stability and structural reform will provide the conditions for private sector investment and growth and will, over time, allow countries to access international capital markets. The Committee also considers that international trade is critical for development and poverty reduction. To help ensure that the fruits of globalization are shared by all, it will be crucial that access of developing countries, particularly the poorest, to industrial country markets continues to improve. Industrial countries should increase their official development assistance. The Committee encourages developing countries, for their part, to follow policies consistent with domestic macroeconomic stability and competitiveness in international markets; continue to reduce trade barriers; and implement other appropriately sequenced outward-oriented reforms that promote poverty-reducing growth, investment in human capital, particularly health and education, and development.

13. The PRGF provides an essential framework, together with complementary assistance from the World Bank, for supporting countries’ own growth strategies and for enabling HIPC debt relief to be translated into poverty reduction.

14. The Committee endorses the Progress Reports on the HIPC Initiative and Poverty Reduction Strategy Papers (PRSPs). It welcomes the progress made in developing country-owned poverty reduction strategies, including through the preparation of PRSPs, which now underpin the work of the Fund and World Bank in low-income countries. It also welcomes the progress in implementing the enhanced HIPC Initiative, and the commitment of the Fund and the Bank to do everything possible to bring 20 countries to their Decision Point by the end of 2000 to ensure that debt relief is provided in the context of a strong commitment to growth and poverty reduction. Recent shocks in terms of trade must not jeopardize this objective. The Fund, through its facilities, may need to respond flexibly to the needs of members that arise from a sustained period of high oil prices. Our efforts should be supported by increased technical assistance. The Committee urges members to work together and meet their commitments to full financing of the HIPC Initiative and the PRGF as soon as possible. It also urges all creditors to participate in the HIPC framework, while recognizing the special needs of particular creditors. The Committee looks forward to a productive discussion of the enhanced HIPC Initiative and the PRSP process at its joint meeting with the Development Committee.

Strengthening the International Financial Architecture and Reform of the Fund Review of Fund Facilities

15. Following the Executive Board’s wide-ranging review of the IMF’s nonconcessional financial facilities, the Committee welcomes the agreement reached on modifications that arc intended to enhance the precautionary nature of the Contingent Credit Line (CCL) and to preserve the revolving nature of the Fund’s resources.

  • The CCL has been modified, within its existing eligibility criteria, to make it a more effective instrument for preventing crises and resisting contagion for countries pursuing sound policies.

  • The terms of stand-by arrangements and the Extended Fund Facility (EFF) have been adapted to encourage countries to avoid reliance on Fund resources for unduly long periods or in unduly large amounts.

  • It has been reaffirmed that the EFF should be confined to cases where longer-term financing is clearly required.

  • It has been agreed that enhanced post-program monitoring could be useful, especially when credit outstanding exceeds a certain threshold level.

Enhancing Fund Surveillance, and Promoting Stability and Transparency in the Financial Sector

16. The Committee considers that Fund surveillance should be strengthened further and welcomes the recent initiatives in a range of areas. It reaffirms the role of the Article IV process as the appropriate framework within which to organize and discuss with members the results of work in these areas. Strengthened surveillance will help the Fund and its members to identify vulnerabilities and to anticipate threats to the financial stability of member countries. In this respect, it welcomes the continuing efforts to improve the Fund’s understanding of its members’ economies; the quality and availability of economic and financial data; Financial System Stability Assessments (FSSAs) derived from the joint Fund-World Bank Financial Sector Assessment Program (FSAP); Reports on Observance of Standards and Codes (ROSCs); and vulnerability indicators and early warning systems. It welcomes the joint Bank-Fund work on debt management guidelines, as well as the Fund’s work on sound reserves management practices, and its role in assessing off-shore financial centers.

17. The Committee recognizes that the Fund has to play its role as part of the international efforts to protect the integrity of the international financial system against abuse, including through its efforts to promote sound financial sectors and good governance. It asks that the Fund explore incorporating work on financial abuse, particularly with respect to international efforts to fight against money laundering, into its various activities, as relevant and appropriate. It calls on the Fund to prepare a joint paper with the World Bank on their respective roles in combating money laundering and financial crime, and in protecting the international financial system, for discussion by their Boards before the Spring meetings and asks them to report to the Spring IMFC/Development Committee meetings on the status of their efforts.

18. The Committee is encouraged by the experience so far in preparing ROSCs and looks forward to the review later this year of the experience with assessing the implementation of standards. It notes their crucial role in helping countries to improve economic policies, identifying priorities for institutional and structural reform, and in promoting the flow of important information to markets. The Committee looks forward to the next review of the FSAP. It encourages members to participate in these initiatives.

19. The Committee notes that three issues at the core of the Fund’s mandate also require further consideration: exchange rate arrangements; the sequencing of financial sector development and capital account liberalization; and the monitoring and analysis of developments in international capital markets. The Committee encourages the Fund to deepen its work on international financial markets, including by improving its understanding of market dynamics and crossborder capital flows. It also urges the Fund to continue exploring ways of engaging more constructively the private sector on these matters, and welcomes the formation of the Capital Markets Consultative Group.

20. In the context of ongoing efforts to enhance the transparency and openness of the Fund, the Committee welcomes the Executive Board’s agreement to adopt a general policy of voluntary publication of Article IV and use of Fund resources staff reports and other country papers. It encourages members to move in principle toward publication of these documents.

Private Sector Involvement

21. The Committee endorses the report by the Managing Director on the involvement of the private sector in crisis prevention and management. It welcomes the progress on developing a framework for involving private creditors in the resolution of crises. The Committee notes that this approach strikes a balance between the clarity needed to guide market expectations and the operational flexibility, anchored in clear principles, needed to allow the most effective response in each case. The Committee notes that Fund resources arc limited and that extraordinary access should be exceptional; further, neither creditors nor debtors should expect to be protected from adverse outcomes by official action.

22. The Committee agrees that the operational framework for private sector involvement must rely as much as possible on market-oriented solutions and voluntary approaches. The approach adopted by the international community should be based on the IMF’s assessment of a country’s underlying payment capacity and prospects of regaining market access. In some cases, the combination of catalytic official financing and policy adjustment should allow the country to regain full market access quickly. The Committee agrees that reliance on the catalytic approach at high levels of access presumes substantial justification, both in terms of its likely effectiveness and of the risks of alternative approaches. In other cases, emphasis should be placed on encouraging voluntary approaches, as needed, to overcome creditor coordination problems. In yet other cases, the early restoration of full market access on terms consistent with medium-term external sustainability may be judged to be unrealistic, and a broader spectrum of actions by private creditors, including comprehensive debt restructuring, may be warranted to provide for an adequately financed program and a viable medium-term payments profile. This includes the possibility that, in certain extreme cases, a temporary payments suspension or standstill may be unavoidable. The Fund should continue to be prepared to provide financial support to a member’s adjustment program despite arrears to private creditors, provided the country is seeking to work cooperatively and in good faith with its private creditors and is meeting other program requirements. The Committee urges progress in the application of the framework agreed in April 2000, and in further work to refine the analytical basis for the required judgments, and it looks forward to a progress report by its next meeting.

Good Governance and the Fund

23. The Committee views with concern a number of recent cases of misreporting to the Fund and stresses the importance of the steps being taken to improve the reliability of the information the Fund uses. It welcomes the application of the new safeguards assessment procedure to all new Fund arrangements, which will provide assurances of adequate control, reporting, and auditing procedures in borrowing countries.

24. The Committee strongly welcomes the Executive Board’s decision to establish an independent evaluation office (EVO), including the agreement to publish promptly its work program, and the strong presumption that its reports would be published promptly. The creation of this office will help the Fund to improve its future operations, and will enhance its accountability. It urges that the EVO become operational before the Spring 2001 meeting of the IMFC, and looks forward to receiving regular reports on the EVO’s work.

25. Quotas should reflect developments in the international economy. The Committee takes note of the Executive Board discussion of the work of the quota formulae group, and looks forward to the Board’s continued work on this issue.

26. The Committee takes note of the work of the Working Group to Review the Process of Selection of the Managing Director, which is being carried out in tandem with similar work in the World Bank on the Process of Selection of the President, and notes that the two groups will report together.

27. The Committee considers that the most valuable asset of the IMF is its outstanding staff, and the Committee highly values the staff’s professionalism and dedication in executing the responsibilities of the Fund effectively and efficiently.

28. The Committee expresses its sincere appreciation for the excellent hospitality and support provided by the Czech authorities and the people of the Czech Republic.

Next Meeting of the Committee

29. The next meeting of the IMFC will be held in Washington, D.C., on April 29, 2001.

Annex: International Monetary and Financial Committee Attendance

September 24, 2000

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)

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

Rod Kemp, Assistant Treasurer, Australia (Alternate for Peter Costello, Treasurer, Australia)

Dai Xianglong, Governor, People’s Bank of China

Dato’ Shafie Mohd. Salleh, Deputy Minister of Finance, Malaysia (Alternate for Tun Daim Zainuddin, Minister of Finance, Malaysia)

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

Makhtar Diop, Minister of Economy and Finance, Senegal (Alternate for Emile Doumba, Minister of Finance, Economy, Budget, and Privatization, Gabon)

Hans Eichel, Federal Minister of Finance, Germany

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

Abdelouahab Keramane, Governor, Banque d’Algérie

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

Jose Luis Machinea, Minister of Economy, Argentina

Pedro Sampaio Malan, Minister of Finance, Brazil

Paul Martin, Minister of Finance, Canada

Masaru Hayami, Governor, Bank of Japan (Alternate for Kiichi Miyazawa, Minister of Finance, Japan)

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

Sauli Niinistö, Minister of Finance, Finland

Didier Reynders, Minister of Finance, Belgium

Yashwant Sinha, Minister of Finance, India

Lawrence H. Summers, Secretary of the Treasury, United States

Kaspar Villiger, Minister of Finance, Switzerland

Vincenzo Visco, Minister of the Treasury, Budget and Economic Planning, Italy

Gerrit Zalm, Minister of Finance, Netherlands

Observers

Yilmaz Akyuz, Chief, Macro-Economies and Development Policies, United Nations Conference on Trade and Development (UNCTAD)

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

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

André lcard, Assistant General Manager, Bank for International Settlements (BIS)

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

lan 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)

Michael Moore, Director-General, World Trade Organization (WTO)

Yashwant Sinha, Chairman, Joint Development Committee

Pedro Solbes Mira, Commissioner in charge of Economic and Monetary Affairs, European Commission

James D. Wolfensohn, President, World Bank

Third Meeting, Washington, D.C., April 29, 2001

1. The International Monetary and Financial Committee held its third meeting in Washington, D.C., on April 29, 2001, under the Chairmanship of Mr. Gordon Brown, Chancellor of the Exchequer of the United Kingdom.

The World Economy

2. In the increasingly interconnected global economy, we will continue to promote international economic cooperation and work together, adopting a forward looking approach to meeting our common objective of open trade for greater global prosperity, maintaining the momentum for reform in the international financial system, strengthening our economies through structural reform, maintaining sound macroeconomic conditions for strong non-inflationary growth, and encouraging poverty reduction and growth in the poorest countries.

3. The Committee agrees that short-term prospects for global growth have weakened significantly since its September 2000 meeting in Prague. The Committee considers it likely that the slowdown in global growth will be shortlived, though it notes that the downside risks have increased. Underlying inflationary pressures generally remain subdued.

4. Against this background, the Committee stresses the need for policymakers in the advanced economies to remain vigilant and forward looking:

  • In the United States—which has provided important support for the growth of the world economy in recent years—there has been a marked deceleration of activity. The significant easing of monetary policy in recent months is timely and welcome, and monetary policy should remain directed at restoring growth potential while maintaining price stability. The Committee considers that timely fiscal policy measures would also provide support to economic growth.

  • In view of the persistence of slow growth in Japan, the Committee welcomes the recent introduction of a new monetary policy framework, and underscores the importance of the authorities’ commitment to an expansionary policy stance until the risk of deflation is eliminated. Given the high level of public debt, the gradual fiscal consolidation currently under way remains appropriate. Prospects for a return to sustained growth depend most critically on determined action to address structural weaknesses, especially in the financial and corporate sectors.

  • In this context, growth in the euro area remains relatively well sustained, although a slowing in activity is under way. The Committee agrees that policies should continue to support confidence and strengthen growth potential. Fiscal policy needs to continue to be geared toward fiscal consolidation in the medium term. Tax reforms should contribute to enhanced economic efficiency. The Committee underscores the importance of a further deepening and acceleration of structural reforms, especially in labor and product markets and in strengthening pension systems, for boosting longer-term growth potential.

5. The Committee notes that other countries are being adversely affected by both the slowdown in growth in the advanced economies and the deterioration of conditions in international financial markets. The Committee, however, notes that growth is expected to be relatively well maintained in India and China. The Committee welcomes the steps taken by many emerging market economies in recent years to reduce external and financial sector vulnerabilities, including by adopting sustainable exchange rate regimes and prudent debt and reserve management policies. In view of the present fragility of external financing conditions, the prospects for emerging market economies depend critically on maintaining investor confidence, which, the Committee agrees, will require pursuing prudent macroeconomic policies and pressing ahead with corporate, financial, and institutional reforms. The Committee welcomes the recent comprehensive set of measures being implemented by the Argentine government to improve the underlying fiscal position and provide a strong basis for the sustained recovery of the economy, in line with the objectives of the IMF-supported program that is in place. It considers that these measures are an important and decisive step to boost confidence. The Committee also welcomes the comprehensive strategy of bank restructuring, fiscal consolidation, and structural reform initiated by the Turkish authorities. The Committee considers these policies, together with the provision of the needed external financing by the Fund and the Bank, provide the basis for the reestablishment of financial stability and sustained disinflation with growth, and merit the support of the international community and the private sector. The Committee looks forward to a rigorous implementation of all the necessary measures. The Committee welcomes the additional financing proposed by the Managing Director to support those policies, and looks forward to the forthcoming Executive Board discussions of these topics.

6. The Committee expresses particular concern that the slowdown in global growth risks adversely affecting the Fund’s poorest member countries. The Committee stresses that developing countries need to pursue sound and stable policies and to build strong institutions as part of a commitment to poverty reduction and growth, and to create a favorable environment for domestic and foreign investment and private sector activity. The Committee emphasizes that the advanced economies have a special responsibility to assist poor countries’ own efforts as they work to achieve the International Development Goals. This includes adequate flows of official development assistance, and carrying forward the HIPC Initiative to deliver sustainable debt levels, as well as more rapidly and decisively opening their markets to developing countries’ exports. The Committee welcomes recent market-opening actions, and urges all countries to remove remaining barriers to the exports of the poorest countries. The Committee looks forward to the joint meeting with the Development Committee later today. The Committee welcomes the cooperation of the Fund and Bank on the International Development Goals, addressing the importance of delivering on the commitments made at Dakar on education and the need for global action on health to address diseases such as the HIV/AIDS pandemic.

7. The Committee underscores more broadly the importance of open markets for strengthening the global economy and for enhancing the growth prospects of developing countries. It urges all countries—developed and developing—to find common ground for the launch of new multilateral trade negotiations this year. The Committee is unanimous in its view that recourse to protectionism would be the wrong response to the global economic slowdown and the attendant difficulties in particular sectors. The Committee calls upon all countries to resist protectionist pressures and to reduce or eliminate trade barriers and trade-distorting subsidies. Looking forward, it requests the Fund to pay attention to the effects of trade policy developments and to continue to encourage trade liberalization in the context of all its activities with its members, both developed and developing. The Committee welcomes and encourages greater cooperation between the Fund, the Bank, and the WTO.

The IMF in the Process of Change

A. Progress Report by the Managing Director

8. The Committee welcomes the work program outlined in the Managing Director’s progress report. It welcomes the recent moves to refocus the Fund in order to maximize its effectiveness in reducing members’ vulnerability to currency or balance of payments crises, and in supporting their policies toward promoting sustainable growth and poverty reduction. It considers that the Fund is appropriately focusing on:

  • promoting macroeconomic and financial stability, as a precondition for sustained economic growth;

  • promoting the stability and integrity of the international monetary and financial system, as a global public good; and

  • helping member countries to develop sound financial sectors in order to protect against vulnerability, to mobilize financing for productive investment, and to take advantage of the opportunities of global financial markets.

9. The Committee endorses the further steps that are being taken to increase complementarity and strengthen cooperation with other organizations, especially the joint work with the World Bank in strengthening financial sectors, fighting poverty, and making progress toward the achievement of the International Development Goals. It stresses the need to maintain and deepen this collaboration and extend it into other areas. The Committee also welcomes the steps under way to align more closely the Fund’s technical assistance with its key policy priorities, and to better coordinate this assistance with that of the Bank and other providers.

10. The Committee strongly supports the redoubling of the Fund’s efforts to put crisis prevention at the heart of its activities, and especially of its bilateral and multilateral surveillance (as described below). The Committee encourages countries to pursue strong policies and, to minimize contagion, reemphasizes the precautionary nature of the CCL for those purposes. At the same time, it welcomes the steps being taken—including the recent reforms of the Fund’s financing facilities—to strengthen the Fund’s capacity to respond to financial crises in member countries and to minimize their adverse impact.

11. The Committee notes the recent experience in applying the agreed framework for private sector involvement in crisis prevention and management, which relies as much as possible on voluntary, market-oriented approaches. The Committee welcomes the Executive Board discussion and the consultations with other international institutions, member governments, and the private sector on the possible use of collective action clauses, investor relations programs, corporate workouts, and techniques for bond restructuring. Looking forward, the Committee reaffirms the exceptional character of financing beyond normal access limits, and repeats that reliance on the catalytic approach at high levels of access must presume substantial justification. Within the framework of private sector involvement, there may be cases requiring more concerted approaches, and the Committee asks the Fund to continue its work on articulating the circumstances in which such approaches would be applied and the specific role of the IMF. The implementation of this framework should be subject to a well-defined monitoring and assessment procedure. The Committee also looks forward to progress by the Annual Meetings on practical issues involved in applying the framework, including: an improved basis for assessing debt sustainability; prospects for regaining market access; the risk of contagion; and the comparability of treatment between official and private creditors. The Committee stresses the importance in the future of taking decisions in a way that is consistent with the framework.

B. Strengthening the IMF’s Focus on Financial Markets and Crisis Prevention

12. The Committee stresses that strong and effective crisis prevention is a top priority. It welcomes the Managing Director’s decision to establish an International Capital Markets Department, as part of the effort to deepen the Fund’s understanding of and judgment on international capital market issues; to improve its early warning capabilities; and to strengthen crisis prevention. This will complement the earlier establishment of the Capital Markets Consultative Group as a channel for regular, informal, and constructive dialogue with private sector representatives. The Committee calls on the Fund to make progress with its work on early warning indicators of potential crises in individual countries and in international financial markets, taking full account of the need to avoid instability. The Fund should stand ready to help countries that wish to proceed with an orderly liberalization of their capital accounts.

13. The Committee is pleased to observe continued progress since its last meeting in implementing previous Fund initiatives on crisis prevention and financial sector surveillance. In particular, it notes:

  • the agreement by the Executive Board on a list of international standards and codes relevant for the Article IV surveillance process and on the modalities by which staff assessments of members’ implementation of these standards and codes will be brought into surveillance and made public, while paying due regard to the voluntary nature of these standards and codes. It agrees that ROSCs should be established as the principal tool for assessing the implementation of standards and codes. It also takes note of the revised version of the Code of Good Practices on Fiscal Transparency and the accompanying Manual on Fiscal Transparency;

  • the recent steps to adapt the Fund’s analytical framework to better assess external vulnerability, as well as its development of guidelines for reserves management and, with the World Bank, of guidelines for public debt management;

  • the Fund’s work with countries to strengthen data underpinning external vulnerability analyses, in particular the wider use of the Fund’s Special Data Dissemination Standard (SDDS) and General Data Dissemination System (GDDS), and the expanded coverage of the Coordinated Portfolio Investment Survey to include more instruments and additional jurisdictions, including offshore financial centers;

  • the implementation of initiatives on the Fund’s transparency policy that has progressed significantly over the last year, including the decision to allow voluntary publication of all country staff reports and other country documents; and

  • the progress in strengthening financial sector surveillance both at the national and international levels. The Committee particularly welcomes the progress made in assessing member countries’ financial sectors through the joint Bank-Fund Financial Sector Assessment Program (FSAP), which provides a coherent and comprehensive framework for identifying financial system vulnerabilities, assessing development needs and priorities, and helping to develop appropriate policy responses. The Committee agrees that the Fund’s Financial System Stability Assessments (FSSAs), which are derived from the discussion of FSAP findings in the context of the Article IV process, are the preferred instrument for strengthened monitoring of financial systems as part of Fund surveillance. It welcomes the agreement by the Executive Board to permit publication by national authorities of the detailed assessment of observance of standards and codes that are included in FSAP reports and to enable publication of FSSAs on a voluntary basis. The Committee welcomes the extension of the Fund’s financial sector work to include voluntary assessments of offshore financial centers.

C. Combating Financial Abuse/Money Laundering

14. The Committee underscores that money laundering is an issue of global concern requiring strengthened policies and concerted action on the part of governments and a range of institutions. Effective anti-money laundering measures at the national level are important for all Fund members, especially those with large financial markets. In this regard, the Committee generally agrees with the recognition of the FATF 40 Recommendations as the appropriate international standard for combating money laundering, and that work should go forward to determine how the Recommendations can be adapted and made operational in the Fund’s work. It endorses the proposed closer collaboration by the Fund and the World Bank with the FATF and other anti-money laundering groups in reviewing standards and procedures in this area. In this regard, the Committee notes that, to be consistent with the ROSC process, assessments should be undertaken on a uniform, cooperative, and voluntary basis. Action by the Fund on combating money laundering should aim to promote a more effective regulatory and supervisory environment and thus help prevent financial crime and money laundering. The Fund, in collaboration with the World Bank, should, if requested, also provide more technical assistance in this area to member countries to strengthen their economic, financial, and legal systems.

D. Streamlining Conditionality and Strengthening Ownership

15. The Committee welcomes the ongoing review of Fund conditionality and underscores that conditionality remains indispensable, together with financing, as an integrated response by the Fund to support its members’ policy programs. While the expansion of conditionality in the structural area over the past several years reflects in part the critical importance of structural reforms for macroeconomic stability and sustained growth, its increasing scope and detailed nature warrant a review of recent practice. The Committee endorses the principles that Fund conditionality should focus on those measures, including structural, that are critical to a program’s macroeconomic objectives. While this principle needs to be interpreted carefully on a case-by-case basis, the Committee notes that it shifts the presumption of coverage from one of comprehensiveness to one of parsimony. Enhanced collaboration and clearer division of labor between the Fund and other international agencies, in particular the World Bank, is an important element of streamlining. The Committee reaffirms that the overarching objective of streamlining is to make conditionality more efficient, effective, and focused, without weakening it, and welcomes the progress being made in this respect. The Committee considers it particularly important that Fund-supported programs take adequate account of national decision-making processes and the administrative capacity to implement reforms, and be founded on strong country ownership. The objective should be to provide maximum scope for countries to make their own policy choices, while ensuring that the Fund’s financing supports needed policy adjustments, and while safeguarding the Fund’s resources. The Committee notes that greater efforts to help countries strengthen institutional capacity for sustained implementation of structural reforms are an essential complement to this approach. The Committee urges the Executive Board to continue its review of Fund conditionality, in the light of experience and feedback from the broad public consultation now under way on these issues, and including the important question of how to deal with structural issues that are relevant but not critical to the success of macroeconomic objectives. It looks forward to a report on further progress at its next meeting, with a view to drawing firm conclusions on the streamlining of conditionality.

E. Governance

16. The Committee agrees that the Fund should address governance issues that have a significant macroeconomic impact, both through initiatives that apply across the membership and through specific measures to address particular instances of poor governance and corruption. The Committee requests the Executive Board to keep under close review the use of specific remedial measures, which should be applied with careful judgment and flexibility. The Board should also address the two-sided nature of corruption, by following up on the implementation of OECD-led initiatives to combat bribery of foreign public officials, and similar initiatives, in the context of surveillance.

F. Other Issues

17. Quotas should reflect developments in the international economy. The Committee looks forward to further work on this issue.

18. The Committee welcomes ongoing measures to improve transparency, governance, and accountability in the Fund. The Committee particularly welcomes the appointment by the Executive Board of Mr. Montek Singh Ahluwalia as Director of the Fund’s Independent Evaluation Office (EVO). Noting that the EVO will become operational in August 2001, the Committee reiterates its expectation that the work of the EVO will help the Fund to improve its future operations and enhance its accountability. It looks forward to receiving regular reports on the EVO’s work and hopes that a first report, on the forward work plan, will be available in time for the Committee’s next meeting.

19. The Committee notes the joint draft report of the Fund’s Working Group to Review the Process of Selection of the Managing Director and the World Bank Working Group to Review the Process of Selection of the President.

20. The Committee takes this opportunity to thank Michael Mussa for his outstanding contribution to the institution. It notes that under his intellectual stewardship, the World Economic Outlook has become a flagship product of the Fund.

Next Meeting of the Committee

21. The next meeting of the IMFC will be held in Washington, D.C., on September 30, 2001.

Annex: International Monetary and Financial Committee Attendance

April 29, 2001

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)

Domingo Cavallo, Minister of Economy, Argentina

Peter Costello, Treasurer, Australia

Li Ruogu, Assistant Governor and Director-General, People’s Bank of China (Alternate for Dai Xianglong, Governor, People’s Bank of China)

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

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

Abdelouahab Keramane, Governor, Banque d’Algérie

Sultan 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

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

Chatu Mongol Sonakul, Governor, Bank of Thailand

Kaspar Villiger, Minister of Finance, Switzerland

Vincenzo Visco, Minister of the Treasury, Budget and Economic Planning, Italy

A.H.E.M. Wellink, President, De Nederlandsche Bank N.V., Netherlands

(Alternate for Gerrit Zalm, Minister of Finance, Netherlands)

Observers

Yilmaz Akyuz, Chief, Macro-Economies and Development Policies Branch, United Nations Conference on Trade and Development (UNCTAD)

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

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

Richard Eglin, Director, Trade and Finance Division, World Trade Organization (WTO)

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

Donald J. Johnston, Secretary-General, Organisation 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 Labour Organisation (ILO)

Yashwant Sinha, Chairman, Joint Development Committee

Pedro Solbes Mira, Commissioner in charge of 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-Second Meeting, Prague, Czech Republic, September 25, 2000

1. The 62nd meeting of the Development Committee was held in Prague, Czech Republic, on September 25, 2000, under its new Chairman, Mr. Yashwant Sinha, Finance Minister of India. The Committee expressed its great appreciation to Mr. Tarrin Nimmanahaeminda, Minister of Finance of Thailand, for his valuable leadership and guidance to the Committee as its Chairman during the past two years.1

2. The Ministers’ discussions took place against the background of continuing public debate about the benefits and risks of globalization. Ministers stressed that the more integrated global economy and technological gains brought about by globalization should be a great source for economic and social progress, equity, and stability, but that these results are not inevitable. Ministers recognized their important responsibility to help ensure that globalization works for the benefit of all, and not just the few, and reemphasized their commitment to strengthening the Bank, the Fund, and other multilateral institutions as valuable allies in this effort whose ultimate objective is global poverty reduction, in particular halving the proportion in extreme poverty by the year 2015.

3. Poverty Reduction and Global Public Goods: In considering the role the Bank might play in global public goods in areas within its mandate. Ministers noted four key criteria for Bank involvement: clear value-added to the Bank’s development objectives; Bank action is needed to catalyze other resources and partnerships; a significant comparative advantage for the Bank; and an emerging international consensus that global action is required. They endorsed four areas for Bank involvement, in cooperation with relevant international organizations: facilitating international movement of goods, services, and factors of production; fostering broad inclusion in the benefits of globalization and mitigating major economic and social problems, such as the transmission of disease and the consequences of conflict; preserving and protecting the environment; and creating and sharing knowledge relevant to development.

4. Ministers warmly endorsed the greatly expanded efforts being made by the Bank, the United Nations, and other international, national, and private partners, to combat communicable diseases, such as HIV/AIDS, malaria, and tuberculosis. Ministers noted the progress made since the April meeting of the Committee, and were encouraged that the international consensus that AIDS and other widespread diseases created severe development problems was being turned into strengthened action. They also welcomed the commitment of International Development Association (IDA) donors to expand and make more flexible the concessional resources available for these activities, without compromising fundamental IDA allocation policies. They encouraged the Bank to press further ahead on its commitment to help turn back the global HIV/AIDS epidemic, and welcomed the recently approved $500 million IDA program for this purpose in Africa.

5. Ministers noted the Bank’s valuable role, in partnership with the Fund and other international agencies, in strengthening international financial architecture. This includes helping to develop appropriate standards and codes, taking account of the developing country perspective, in areas that are important to financial resilience and integration into the global financial system, and assisting countries to strengthen their related institutions and policies. Ministers also pointed to the importance for all nations of increased national and international efforts to combat cross-border financial abuse, such as money-laundering and other forms of abuse. They urged the Bank to expand its program of technical and advisory support as a significant contribution to greater participation by developing countries in a more open and equitable world trading system. They reiterated both the promise and the challenge of communications technology to promote equitable growth, and welcomed initiatives by the Bank to help provide greater access, in partnership with others, for poor countries and communities to the knowledge and information opportunities of the digital age.

6. Ministers recognized the need to explore further opportunities for securing appropriate financing for carefully selected priority global and regional programs with substantial impact on poverty reduction. This would require innovative use of World Bank lending and, in some cases, grant facilities, taking into account alternative sources of such funds and financial implications for the Bank, as well as of new forms of collaboration with international, bilateral, philanthropic, and private partners. They stressed that global public goods investments that benefited all countries should attract new resources.

7. The Committee looked forward to receiving at its next meeting a report on progress made in further delineating priority global public goods investment areas for the Bank, as well as on division of labor between development partners and the development of appropriate financing arrangements.

8. Bank Support for Country Development: Recognizing that working with individual countries remains the backbone of the Bank’s business. Ministers welcomed this initial opportunity for a broad review of the World Bank Group’s role and instruments in support of member countries’ development, taking into account the role of the IMF and other institutions.

9. Ministers emphasized that the Bank must tailor its support to reflect widely differing country situations. To help ensure that country programs are well grounded. Ministers urged the Bank to continue to strengthen its country diagnostic and other economic and sector work. They stressed the need to focus on relevance to the country concerned, and on opportunities for greater synergy with the work of the country and other development partners. Ministers noted that this analytic work, along with capacity building, took on added importance in light of the use of programmatic adjustment lending in support of borrowers’ social and structural reforms, and the vision for Bank and Fund roles and partnership set out in the September 5, 2000, Joint Statement by the President and the Managing Director.

10. Ministers emphasized the urgent need for the World Bank Group to clarify its agenda for institutional selectivity (based in part on its upcoming review of sector strategy papers), to manage carefully total demands made on Bank staff and other resources, and to work closely and systematically with other multilateral development banks and international organizations on a better coordination of responsibilities. Ministers stressed that multilateral and bilateral donors could contribute greatly to country ownership, more efficient use of resources, and achievement of the agreed International Development Goals, by making greater progress on the harmonization of their operational policies and procedures to reduce the burden on developing countries. Ministers asked the Bank to work closely with its partners and prepare a report for the Committee’s next meeting on progress with harmonization.

11. Ministers welcomed the Bank’s overall approach for low-income countries and its proposals for achieving greater coherence among various program documents and instruments, including basing Country Assistance Strategies on Poverty Reduction Strategy Papers. Ministers welcomed the discussion of a poverty reduction support credit that would support poverty reduction strategies of governments and complement the Fund’s poverty reduction and growth facility. They suggested that in its further definition of the instrument, the Bank should also address the nature of the analytic work needed to underpin it, such as public expenditure reviews and poverty and fiduciary assessments. They also requested the Bank and the Fund to review the modalities for their cooperation in implementing both the Bank’s support credit and the Fund’s growth facility. Ministers stressed the importance of effective Bank/Fund coordination given the significant role the institutions play in support of poverty reduction in low-income countries.

12. Ministers reaffirmed the very important continuing role of the Bank Group in helping to reduce poverty in middle income countries, home to so many of the world’s poor. They stressed that the Group’s focus must be on providing support that the private sector cannot or will not provide and on fostering private-sector-led economic growth. They welcomed the creation of a task force to address how the Group can best respond to the evolving development needs of this diverse group of economies. Ministers agreed that the task force should consider, inter alia, the modalities of conditionality and instruments to maximize the effectiveness of Bank assistance for countries at different stages of development and reform; the scope and conditions for providing borrowers more financial support for social and structural programs at times of market dislocation; the coverage of economic and sector work; and the costs of doing business with the Bank, including the implications for pricing of Bank products. Ministers looked forward to a progress report at their next meeting.

13. Heavily Indebted Poor Countries Initiative (HIPC): Ministers welcomed the progress achieved in implementing the Initiative and urged that all appropriate steps be taken to further strengthen the process. They noted that the enhancements endorsed at their meeting last year arc resulting in “deeper, broader, and faster” debt relief to eligible countries undertaking the economic and social reforms needed to reduce poverty. They noted in particular that to date, ten countries have reached their decision point under the enhanced framework, and work is being accelerated within that framework to try to reach the goal of bringing 20 countries to this point by the end of the year. This is expected to result in combined debt service relief (including original and enhanced HIPC assistance) amounting to well over $30 billion. Taken together with traditional debt relief mechanisms, a total of about $50 billion will be provided to these countries.

14. Ministers also welcomed the increased efforts to improve implementation of the Initiative. They asked that the Bank and the Fund continue to work with other creditors and eligible countries to ensure that the modifications to the original HIPC framework (reflected in the enhanced Initiative endorsed a year ago), such as the provision of interim assistance beginning at the decision point and adoption of a floating completion point, provide the much needed support to qualifying countries on a timely basis. Ministers expressed support for the strengthened partnership between the two institutions in implementing the Initiative, and for their commitment to move forward as expeditiously as possible. It was recognized, however, that the pace of implementation would also be determined by country factors. Ministers supported maintaining a flexible approach with respect to track record requirements. They endorsed the extension of the “sunset clause” until end-2002 to allow additional countries, particularly those emerging from conflict, to participate in the Initiative. Ministers also reiterated that within the existing HIPC framework the option exists, at the completion point, to reconsider the amount of debt relief for countries seriously affected by exceptional adverse shocks.

15. Ministers stressed the importance of fully financing the enhanced HIPC Initiative, without compromising concessional facilities such as IDA. They urged all donors to meet their commitments of financial support, and welcomed the arrangements in place to accomplish this objective. While recognizing the special needs of particular developing and low-income transition country creditors. Ministers also urged all creditors to participate in the debt relief framework.

16. Poverty Reduction Strategy Papers: Ministers reviewed progress with respect to the Poverty Reduction Strategy approach, endorsed at their September 1999 meeting as a way to strengthen the link between poverty reduction, HIPC debt relief, and Bank and Fund concessional lending. They noted the growing momentum in the adoption of the approach and the positive response to it on the pan of countries and development partners. Ministers recognized the challenges countries faced due, inter alia, to limited data and institutional capacity, but urged movement from interim to full poverty reduction strategy papers on a timely basis. While strongly reiterating the core principle of country ownership. Ministers called on the Bank, the Fund, and other agencies to provide appropriate technical support for countries’ strategy preparation efforts.

17. Comprehensive Development Framework: Ministers expressed support for the comprehensive approach to development reflected in the framework and welcomed the progress being made, and the lessons learned, in implementing it in pilot countries. They recognized that implementation is still at an early stage and many country-specific challenges remain, but noted that a wider application of the framework is already taking place in the preparation of Poverty Reduction Strategy Papers that arc based on the framework’s principles, particularly that of achieving strong country ownership. They looked forward to reports of further progress in implementing the comprehensive development framework.

18. IBRD Financial Capacity: Ministers reviewed the World Bank’s updated report on this subject and confirmed that the Bank’s finances remained sound. At the same time. Ministers recognized that the Bank’s financial capacity may, in the case of significantly increased demand, limit its ability to respond. Ministers requested management and the Executive Board to keep this subject under review, including the level of Bank reserves.

19. Bank/Fund Staff: Ministers took this opportunity to express, on behalf of all member governments, their appreciation to Fund and Bank staff for their continued hard work and high level of dedicated service for the goals of the Bretton Woods Institutions.

20. Note of Appreciation: Ministers expressed their deep gratitude for the warm hospitality and support provided by the Czech authorities and the people of the Czech Republic.

21. Next Meeting: The Committee’s next meeting is scheduled for April 30, 2001, in Washington, D.C.

Sixty-Third Meeting, Washington, D.C., April 30, 2001

1. The 63rd meeting of the Development Committee was held in Washington, D.C., on April 30, 2001, under the chairmanship of Mr. Yashwant Sinha, Minister of Finance of India. The Committee also met on April 29, 2001, in joint session with the International Monetary and Financial Committee to focus on strengthened cooperation to foster growth and fight poverty in the world’s poorest countries.2

2. Strengthening the World Bank Group’s Support for Middle-Income Countries: Ministers broadly welcomed the proposals put forward by the Bank following the work of the World Bank Group Task Force on Middle-Income Countries. They noted that combating poverty in this group of countries was essential for meeting the International Development Goals, and reemphasized the Bank Group’s important role in supporting these countries’ growth and poverty reduction efforts. The Committee noted that good policies, and the institutions to implement them, were at the core of successful development programs, and welcomed that an increasing number of countries were adopting this approach; that external resources were most effective when supporting such policies and institutions; and that even countries with access to international financial markets may benefit from Bank financial support since their access is often limited, volatile, and restricted to short maturities. Ministers recognized that such volatility can lead to disruptions and cause substantial adverse effects on poverty levels. Ministers stressed that since in most cases the Bank Group’s share of a country’s overall external financing is small, its role must be selective and strategic—as a catalyst for policy and institutional change, including capacity building as well as pro-poor policies, for stable and sustainable private investment flows, and for policy and financial support from development partners in promoting sustainable and equitable growth and poverty reduction.

3. Following on their discussion of this topic at the Committee’s previous meeting. Ministers reiterated the need to tailor Bank Group support to the widely differing circumstances found among this diverse set of countries. The Committee stressed that to ensure country ownership, this support must be grounded in the country’s own vision of development. This should serve as the starting point for the Bank Group Country Assistance Strategy (CAS), backed by strong diagnostic and other economic and sector work. The Bank should systematize and strengthen its analysis of the country situation, including through expanding, in concert with its partners, support for local capacity building. Ministers noted the particular importance of stronger analysis on structural, social, and sectoral issues and priorities, as well as on public expenditure, procurement, and financial management systems.

4. Ministers noted the importance of a menu of lending instruments, reflecting borrowers’ different needs, objectives, and track records and Bank Group comparative advantage. They stressed that lending must be based on country commitment to poverty reduction. The Committee reemphasized the continued importance of Bank investment lending, set within a sound CAS framework, as a powerful vehicle for transferring knowledge, testing and demonstrating new approaches, building government capacity, and supporting the provision of needed social services and infrastructure. Ministers welcomed the improving quality and developmental focus of adjustment lending. They stressed that its envisaged more systematic use must be matched by commitment to policy and institutional reforms or a proven track record. It must also be underpinned by adequate country policies and fiduciary systems and, where needed, action to strengthen them. In this regard they stressed the importance of strong capacity for managing and accounting for public expenditures. They called for a more transparent and systematic approach to the monitoring and forecasting of the mix of overall IBRD lending—as between investment and adjustment lending—to complement the CAS process. They also discussed the proposed deferred drawdown option and its potential value for a group of reforming countries that is likely to be small in number, and encouraged the Bank to complete the work needed to finalize the proposal for consideration by Executive Directors.

5. Ministers urged the Bank to translate its proposals into specific actions for strengthening the Group’s analytic and financial support for middle-income countries. They emphasized that the Bank must be highly selective in what it does, drawing increasingly on analyses by other development partners and by the countries themselves, and looking to development partners to take the lead in supporting reforms in particular sectors where they have a comparative advantage. They attached particular importance to the Bank and Fund using these proposals as an element in enhanced cooperation at the country level.

6. Harmonization of Operational Policies and Procedures: Ministers stressed the importance of harmonizing operational policies and procedures by the Bank, other MDBs and bilateral aid donors, with the objective of enhancing development effectiveness, increasing efficiency, and reducing administrative burdens and costs on recipient governments. The Committee stressed the need to move more rapidly, while maintaining appropriate standards, to harmonize aid management arrangements, in particular to help low-income countries implement their PRSPs. Ministers noted that harmonization in individual country programs provides a pragmatic approach that can lead to early action, and encouraged all development partners to rely increasingly on the borrower government’s own planning and budgetary processes, helping to strengthen these systems and processes where needed. Ministers urged them to work with developing countries to develop common good-practice approaches for procurement, financial management, and environmental assessments. They stressed that such approaches would provide a good basis for fostering capacity-building by guiding action plans designed to help countries address country priorities. They encouraged the World Bank and its partners—including other MDBs and the OECD/DAC Working Group on Harmonization—to work together to develop an overall framework (including time-bound action plans) to help guide and coordinate future work in this area. The Committee looked forward to receiving a report from the Bank on progress against an action plan of specific changes to its own procedures to facilitate harmonization.

7. Global Public Goods: The Committee welcomed the Bank’s progress in supporting global public goods in the areas endorsed by the Committee at its last meeting—i.e., communicable disease, trade integration, financial stability, knowledge and environmental commons. The Committee welcomed the Bank’s commitment to anchor its global public goods activities in its core business and country work, to remain selective and focused in each of these areas, to consolidate its cooperation and division of labor with other international partners, and to carry out further analytical work with its development partners on the financing arrangements and governance required for support of global public goods, including cautiously exploring a possible role for IDA grants.

8. Leveraging Trade for Development—World Bank Role: Ministers reemphasized the critical importance of trade for economic growth and poverty reduction and the important role the Bank, in collaboration with its partners, can play in helping developing countries to increase their ability to access global markets. In this context, they welcomed recent initiatives taken by a number of countries. The Committee broadly endorsed the global, regional, and national level work program set forth in the Bank’s paper prepared for this meeting, including, most importantly, expanded activities at the country level that would increasingly be highlighted in the Bank Country Assistance Strategies. This would include support for countries to address trade issues in their PRSPs. The Committee agreed on the particular significance of focusing on “behind the border” issues—such as investment regulations, obstacles to efficient transport of goods and materials, standards and technical regulations, telecommunications, and business services—to ensure that countries arc able to take full advantage of the opportunities presented by globalization. In response to the need to increase the capacity of the poorest nations to participate more effectively in the international trading system, the Committee urged the Bank to work together with its partners to achieve maximum benefits from the recently strengthened Integrated Framework for Trade Related Assistance for the Least Developed Countries. In this context the Committee welcomed efforts to untie aid, including the recent ad referendum decision by OECD donors to untie their aid to the Least Developed Countries.

9. HIV/AIDS: Ministers welcomed the rapid growth of global attention to HIV/AIDS in the year since the Committee had described the epidemic as a grave threat to development progress in many areas of the world, especially in Africa. They noted with great concern, however, the still unchecked spread of HIV/AIDS, the growing evidence of its devastating toll, and the continuing need for greater government leadership. Ministers urged that the new commitment reflected by many leaders of developing and developed countries be converted quickly into coordinated and focused international action for prevention, education and comprehensive care, including broader access to treatment. The Committee urged that the epidemic be addressed on a multi-sector basis, including a focus on HIV/AIDS in development policies and assistance to governments in health and other sectors. In particular. Ministers suggested that World Bank Country Assistance Strategies analyze the impact of HIV/AIDS and indicate appropriate responses, working with partners in the context of each country’s national HIV/AIDS strategy. The Committee expressed its appreciation for the actions taken thus far by the Bank to implement the strategy that Ministers had reviewed a year ago, and encouraged the Bank to work with its partners to continue expanding efforts in all geographic regions. The Committee also urged the Bank and the United Nations to play an active role as facilitators of the improved links between the pharmaceutical industry and developing countries in support of AIDS-related programs. The Committee also recognized the need for a substantial increase in global resources for HIV/AIDS-related analysis, research, and action programs; a portion of such increased funding might be channeled through a possible new multilateral trust fund for AIDS, malaria, and TB. The Committee also called on participants in the June 2001 UN General Assembly Special Session on HIV/AIDS to make concrete commitments that would produce a rapid intensification of global action on HIV/AIDS.

10. International Financial Architecture: Ministers welcomed the continuing contributions of the Bank and the Fund, in partnership with other groups, in strengthening the international financial architecture and helping countries build the capacity required to participate in, and benefit from, the global financial system. The joint Bank-Fund Financial Sector Assessment Program and Bank-Fund collaboration on the Reports on Observance of Standards and Codes have established a valuable framework for helping countries strengthen their financial and economic systems. The Committee welcomed the Bank-Fund Guidelines for Public Debt Management, which would help governments build capacity to manage their debt, thereby reducing vulnerability to potential financial instability. Ministers also welcomed the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems and encouraged their further development based on close consultation with borrowing countries, additional comments received, continuing work with partner institutions, and experimentation with country assessments.

11. Ministers agreed that money laundering is an issue of global concern, affecting both large and small economies. The Committee generally agreed with the recognition of the FATF 40 recommendations as the appropriate standard for combating money laundering, and that work should go forward to determine how the Recommendations could be adapted and made operational in the work of the Fund and the Bank. In this regard, the Committee noted that, to be consistent with the ROSC process, assessments should be undertaken on a uniform, cooperative, and voluntary basis. The Committee urged closer collaboration by the Fund and the World Bank with the FATF and other anti-money laundering groups in reviewing standards and procedures in this area. Ministers also noted that the Bank and the Fund arc already making valuable contributions through their ongoing programs to help countries strengthen their economic, financial and legal systems. They agreed that the primary responsibility for actions against money laundering rests with the countries themselves and with specialized institutions that have a mandate and expertise in this area. The Committee observed that the main focus of the Bank, consistent with its development mandate and comparative strengths, would be on enhanced support for capacity building and to help countries identify and put in place the policy and institutional foundations needed to reduce the risks of financial abuse.

12. Next Meeting: The Committee’s next meeting is scheduled for October 1, 2001, in Washington, D.C. Ministers considered it might be timely at this meeting to discuss issues arising in connection with the U.N. Financing for Development event scheduled for early 2002, based in part on a continued exchange of views between their representatives at the United Nations and the Bank and the Fund. Ministers also agreed to consider, at a future meeting, the subject of education, including implementation of the Dakar commitments on Education for All.

International Monetary and Financial Committee and the Development Committee

PRESS COMMUNIQUÉS

Joint Session—Prague, Czech Republic, September 24, 2000

1. Ministers of the Development Committee and the International Monetary and Financial Committee met jointly on September 24, 2000, to review progress on the enhanced Initiative for the Heavily Indebted Poor Countries (HIPC) and the Poverty Reduction Strategy Paper (PRSP) process. The joint meeting symbolizes the close cooperation and high political commitment of all countries and institutions to achieving a virtuous circle of debt relief, poverty reduction, and economic growth for the poorest countries of the world.

2. Ministers believed that solid foundations have been laid for further progress in turning last year’s blueprints into this year’s reality. They agreed that since last year good momentum has developed in both the HIPC and PRSP programs and that real progress has been made toward broader, deeper, and faster debt relief.

3. Ministers noted that ten countries have already reached their decision points under the enhanced HIPC Initiative and have begun to receive relief. They welcomed the determination of the President of the World Bank and the Managing Director of the Fund to do everything possible to bring 20 countries to their decision points by the end of 2000. This is expected to result in combined debt service relief (including original and enhanced HIPC assistance) amounting to well over $30 billion. Taken together with traditional debt relief mechanisms, a total of about $50 billion will be provided to these countries. They noted that interim assistance beginning at the decision point had accelerated the provision of relief, and that the incorporation of the floating completion point offers qualifying countries the opportunity to reduce significantly the period between decision and completion point. In addition. Ministers reaffirmed the objective of the enhanced HIPC Initiative to deliver debt sustainability and noted that, within the existing HIPC framework, the option exists at the completion point to reconsider the amount of debt relief for countries seriously affected by exceptional adverse shocks.

4. While it was recognized that implementation would ultimately be determined by country-specific factors. Ministers welcomed recent steps to accelerate progress. These include, in particular, closer working partnership between the Bank and Fund through active work of the Joint Implementation Committee (JIC); flexibility in assessing countries’ track records, which should help to bring forward countries originally expected next year; and greater focus on key reforms to accelerate growth and poverty reduction. Consistent with the goal of broadening the initiative. Ministers supported the extension of the sunset clause for two more years to allow countries, particularly those emerging from conflict, time to enter the process. Ministers looked forward to consideration of Bank and Fund postconflict work at the time of the Spring Meetings.

5. Ministers reiterated the importance of fully financing the enhanced HIPC Initiative, and urged all donors and creditors to meet their commitments of financial support.

6. Ministers recalled that a central component of the enhanced HIPC initiative is the strengthened link between debt relief and poverty reduction, to be made operational through country-owned PRSPs. They were encouraged that as many as 13 countries had already completed Interim PRSPs, and that two had already completed full PRSPs. They also noted that countries and their development partners had responded positively to both the promise and the challenge of the PRSP process, and were moving purposefully to put poverty at the center of nationally owned strategies. While reaffirming the principle of country ownership. Ministers urged all development partners to increase their efforts to provide additional technical assistance to support countries’ preparation of PRSPs, which should provide the context for IMF and IDA concessional assistance as well as that of donors and other multilateral institutions. In this context they welcomed the Bank’s proposal to develop a Poverty Reduction Support Credit and the key changes in the Fund’s Poverty Reduction and Growth Facility—for example, the enhanced link to PRSPs, ensuring appropriate flexibility in fiscal targets and making budgets more pro-poor and pro-growth.

7. Ministers emphasized that the early progress achieved with the enhanced HIPC Initiative and PRSPs needed to be supported by a sustained global effort from eligible countries, development partners, bilateral donors, multilateral agencies, and international civil society in order to make best use of these new opportunities.

Joint Session—Washington, D.C., April 29, 2001

1. The Members of the Development Committee and the International Monetary and Financial Committee (IMFC) met jointly on April 29, 2001, to review ongoing efforts by the World Bank and the International Monetary Fund (IMF) to strengthen growth and fight poverty. We renew our commitment to address these issues and to assist countries in their efforts to achieve the International Development Goals. This special meeting symbolizes our full support for the strengthened cooperation between the Bank and the IMF, which is reflected as well by many other items on the separate agendas of the IMFC and Development Committee. In this meeting we focused our attention on progress in strengthening this partnership in fighting poverty and strengthening growth in the world’s poorest countries.

2. Many of the issues we discussed apply with special force to the problems of Africa. Following the joint visit to the region by the heads of our two institutions last February, they reported on the strong commitment among African leaders to make changes that will allow the continent to attack the roots of poverty and to improve the lives of their people on a lasting basis. The African leaders stressed the importance of tackling major problems that are addressed in our Committees’ agendas: conflict and weak governance; building a strong human resource base, including education and the attack on HIV/AIDS and other communicable diseases; and the need to position Africa to benefit from globalization. We recognize that strong action by African leaders to face their own responsibilities needs to be complemented by strong support from the international community to achieve the international development goals and we are prepared to work to provide that support.

3. A great deal of progress has been made since the Prague Annual Meetings to implement the Poverty Reduction Strategy Paper (PRSP) approach and the enhanced Heavily Indebted Poor Countries (HIPC) Initiative. We are encouraged by the seriousness of purpose and ownership with which countries have engaged in the process and by the willingness of development partners to support the approach. While we are also encouraged by the prospect that many countries will complete their first full PRSP in 2001, we urge the Bank and the Fund, other multilateral institutions and bilateral donors, to help these countries to fully develop, implement and monitor their poverty reduction strategies. We appreciate that the process will evolve in light of experience, and that success can only be measured in terms of poverty reduction achieved over time.

4. We welcome the substantial progress made in implementing the enhanced HIPC Initiative, with 22 countries having reached their decision points. This is expected to result in debt service relief (including original and enhanced HIPC assistance) amounting to $34 billion. Taken together with traditional debt relief mechanisms and additional bilateral debt forgiveness, a total of $53 billion will be provided to these countries. The combined debt relief is expected to reduce the external indebtedness of these countries by almost two-thirds (in NPV terms), bringing it to levels below the average for all developing countries. These countries have started to receive cash-flow debt relief, helping them to increase expenditures for poverty reduction. We encourage these HIPCs to continue their efforts to reach their completion points and, for those countries that have not yet qualified for assistance, to undertake the policies required to reach their decision points and begin to benefit from HIPC relief. We emphasized the importance for countries to demonstrate strong commitment to reform programs and reaffirmed the possibility, on a case by case basis, for flexibility on track record requirements where such conditions are in place. While recognizing the special needs of particular developing and low-income transition country creditors, we also urge that all donors and creditors participate in HIPC relief and meet their commitments of financial support.

5. Putting effective public expenditure management systems in place is a major objective to ensure that budgetary savings from HIPC relief, as well as from domestic resources and external assistance, are used effectively for poverty-reduction purposes. We support the ongoing efforts by the Bank, the IMF and donors to help countries strengthen these systems and see Poverty Reduction and Growth Facility (PRGF) reviews and PRSP progress reports as opportunities to report on country-specific progress. We urge countries preparing PRSPs to increase their efforts to improve expenditure management and monitoring; we encourage donors and creditors to support these efforts and to increasingly harmonize their delivery of aid in ways that strengthen countries’ planning and budgetary systems.

6. We arc encouraged that the World Bank is developing improved methods to help countries assess the social impact of policies, as well as its own policy recommendations, and that the IMF will contribute to this exercise in its areas of expertise and draw on and integrate the social impact analyses of others into its macroeconomic policy advice. We urge the Bank and the Fund to implement these steps at the country level as soon as possible. We welcome ongoing efforts by the Bank and Fund to streamline, focus, and prioritize conditionality on the basis of country-owned strategies to promote poverty reduction and growth. We also welcome the work underway to distinguish the relative roles of the IMF’s PRGF and the Bank’s Poverty Reduction Support Credit (PRSC).

7. We reiterate our commitment to the enhanced HIPC Initiative as a means for achieving a lasting exit from unsustainable debt for eligible countries. The enhanced HIPC framework recognized the ongoing vulnerabilities of HIPCs and thus set the amount of debt relief at the Decision Point at a significantly deeper level than under the original framework. This is further supported by a number of bilateral creditors having agreed to one hundred percent ODA debt reduction. We stressed that debt management needs to be strengthened. We agreed that at the completion point there should be a thorough analysis and discussion of the prospects for long-term debt sustainability. More broadly, we agreed on the importance of regular monitoring by HIPCs of their debt situation, with the support of the Bank and IMF, including beyond the completion point, In exceptional circumstances, when exogenous factors cause fundamental changes in a country’s circumstances, we reaffirm that within the HIPC framework the option exists, at the completion point, to consider additional debt relief.

8. Debt sustainability can only be achieved and maintained if the underlying causes of the debt problem are addressed. As with the broader fight against poverty, this requires a twopillar strategy. First, poor countries must take charge of their own future and create opportunities for equitable and sustainable growth and poverty reduction by improving their performance with respect to macroeconomic management (including prudent borrowing), outward-oriented reforms supportive of private sector development, governance, and social policies (especially education and health). Second, the international community needs to provide strong support, not only through existing commitments for debt relief but through increased aid and expanded opportunities for trade. We reiterated that HIPC debt relief should be additional to official development assistance, which should be provided on appropriately concessional or grant terms.

9. We strongly reaffirm the importance of greater access for developing countries to world markets, and particularly call upon countries to open their markets further to the exports of the poorest countries. In this context, we welcome the recent initiatives taken by a number of countries. Furthermore, the industrial countries have a major role to play by following policies that ensure sustainable, non-inflationary growth for the world economy. Such concerted actions by both rich and poor countries are needed to achieve the International Development Goals.

10. Conflict remains a major obstacle to improving the lives of millions, especially in Africa. Helping countries resolve conflicts and reestablish the basis for economic and social progress is a critical priority for the international community. Large protracted arrears pose special challenges for several conflict-affected countries. As many of these countries are poor and heavily indebted, we welcome the work done by the Bank and Fund to further enhance their capacity to assist them, including through debt relief. We welcome the IMF’s efforts to put its emergency post-conflict assistance on concessional terms. We agree on the importance of maintaining a strong focus on performance, including transparency in military spending to ensure that debt relief is used to reduce poverty and is not diverted to military spending. We agree that the enhanced HIPC Initiative framework has sufficient flexibility to accommodate the special circumstances of postconflict HIPCs, including with regard to the length of the track record if significant progress has been made toward macroeconomic stability, governance, capacity building, and monitoring. More broadly, postconflict countries in the process of recovery will also require substantial technical and capacity-building assistance. We agree there is scope for such increased Bank and Fund assistance to support rebuilding in these countries, and we call on both institutions to work in close collaboration with the United Nations System in these efforts so as to ensure full use of the specialized skills that these agencies possess.

Mr. James Wolfensohn, President of the World Bank; Mr. Horst Kohler, Managing Director of the International Monetary-Fund; and Mr. Carlos Saito, Chairman of the Group of Twenty-four, addressed the plenary session. Observers from a number of international and regional organizations also attended.

    Other Resources Citing This Publication