Chapter

Appendix IV. Press communiqués of the International Monetary and Financial Committee and the Development Committee

Author(s):
International Monetary Fund
Published Date:
November 2005
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International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund

Tenth Meeting, Washington, D.C. October 2, 2004

1. The International Monetary and Financial Committee held its tenth meet ing in Washington, D.C., on October 2, 2004, under the Chairmanship of Mr. Gordon Brown, Chancellor of the Exchequer of the United Kingdom. The Com mittee welcomes Mr. Rodrigo de Rato as the new Managing Director and looks forward to working closely with him on furthering the goals of global stability and prosperity.

The global economy and financial markets—outlook, risks, and policy responses

2. The Committee welcomes the strengthening and broadening of global economic growth in 2004, supported by a strong upturn in global trade, supportive policies, and favorable financial market conditions. The global expansion is expected to continue at a solid pace provided all countries implement policies and reforms that will promote robust, balanced, and sustainable growth. The Committee notes that downside risks to the recovery have recently increased, stemming in part from the increase and volatility in oil prices. These reflect geopolitical tensions, strong global demand, and market dynamics. The IMF stands ready to assist members that may be adversely affected.

3. The Committee reiterates the desirability of stability in oil markets and prices that are consistent with lasting global prosperity. To this end, it welcomes the decisions by oil-producing countries to continue to expand production and urges further measures to increase capacity, and calls on oil-consuming countries to take measures to promote energy sustainability and efficiency. The Committee also stresses the importance of dialogue between consumers and producers, and of further progress to improve oil market information and transparency.

4. The strength of the global recovery has set the stage for a gradual return to more neutral monetary policies, with the desirable pace and timing of tightening varying across countries, depending on cyclical positions. Continued good communication of policy intentions will be essential to facilitate orderly adjustment in financial markets to higher interest rates, where needed. Inflation remains low and risks to price stability remain moderate. However, policymakers should be ready to contain any inflationary pressures, including from higher commodity prices, thereby ensuring noninflationary growth.

5. All countries should take advantage of the recovery to address medium-term vulnerabilities and challenges with renewed commitment. The Committee considers that bold reforms on a wide front are needed to strengthen fiscal positions, remove structural impediments to growth, support the correction of global imbalances, reduce financial and corporate vulnerabilities, and accelerate poverty reduction.

6. Fiscal consolidation remains a key priority in many countries. In the advanced economies, credible medium-term fiscal frameworks should be based on well-defined policies, and ensure progress on consolidation particularly in good times. Reforms of pension and health care systems will also be critical to address the fiscal pressures from population aging. Although many emerging market countries are making good progress in improving the structure of public debt and strengthening fiscal positions, further efforts are needed to bring public debt down to levels that will build adequate resilience to shocks. Broad tax bases, effective and transparent public expenditure management, and structural measures to boost growth will be important to improve debt sus-tainability and meet social and infrastructure spending priorities.

7. Structural reforms remain crucial to strengthen the foundations for sustained growth. Most advanced economies should step up their efforts to increase economic efficiency and flexibility to take full advantage of the opportunities from rapid technological change and global integration. Boosting sustainable growth and increasing economic resilience across emerging market countries, depending on country circumstances, will involve completing financial and corporate sector reforms; strengthening banking supervision and developing domestic capital markets; improving the investment climate; and promoting economic diversification. The Committee notes the importance of addressing the economic implications of demographic changes. Depending on country circumstances, policies will need to focus on boosting labor supply, increasing public and private savings, and lifting productivity.

8. Policies to support an orderly resolution of global imbalances are a shared responsibility, and key to reinforcing the basis for more balanced and sustainable growth. The Committee underscores the importance of progress on medium-term fiscal consolidation in the United States, continued structural reforms to boost growth in Europe and Japan, and, in emerging Asia, steps toward greater exchange rate flexibility, supported by continued financial sector reform, as appropriate. Also, improving information and transparency in markets, including the role of hedge funds, would help strengthen market surveillance. The Committee welcomes the recent improvement in Argentina’s fiscal position since 2002. The Committee supports that Argentina decisively addresses all the outstanding structural issues in its program, completes a comprehensive and sustainable debt restructuring, and ensures a sustainable medium-term fiscal framework. We welcome the efforts by Argentina toward completing a comprehensive and sustainable debt restructuring and hope for an expeditious conclusion to the process.

9. The Committee emphasizes that, in the coming months, IMF surveillance should focus on a number of key issues, including the impact of higher oil prices, especially on the most vulnerable; the sustainability of medium-term fiscal positions and debt in many members; and managing the policy response to potential inflationary pressures.

10. The Committee calls on all partners to strengthen their commitment to the global effort to reduce poverty. The recent strong growth in most low-income countries is welcome, but the Committee is concerned that in many cases, particularly in sub-Saharan Africa, growth remains inadequate for achieving the Millennium Development Goals (MDGs).1 The key challenge for these countries—as recognized in the New Partnership for Africa’s Development—is to press ahead with efforts to further strengthen institutions and governance, to build on the macroeconomic stabilization that has been achieved. The international community needs to support these efforts with more open markets for these countries’ exports, increased and better-coordinated aid and technical assistance, further debt relief, and sound policy advice.

11. An open and inclusive multilateral trading system is central to global growth and economic development, especially for developing countries. The Doha Round offers a unique opportunity for substantial progress toward this objective, and the Committee is encouraged by the recent decisions on negotiating frameworks. We endorse the “July Package” and urge all parties to work toward concrete advances in liberalizing trade, strengthening multilat eral trade rules, and reducing trade-distorting subsidies, notably in agricul ture. To achieve ambitious trade liberalization will require the full commitment of all parties, in particular strong leadership from the major trading nations and readiness of all countries to embrace the opportunities provided by more open trade. The Committee supports the IMF’s continued role in advo cating trade liberalization and assisting members, including through the Trade Integration Mechanism.

Making surveillance more effective and strengthening crisis prevention

12. Effective and evenhanded IMF surveillance across the whole membership is central to promoting high and sustainable growth in member countries and to crisis prevention. The increasing interdependence of the membership reinforces the importance of effective surveillance of systemically important countries and capital markets. The Committee welcomes the progress made in strengthening surveillance, and the steps identified during the recent biennial surveillance review to enhance its overall effectiveness. A focus on implementation is now needed. The Committee calls upon the IMF to continue its efforts to strengthen its economic analysis and policy advice; systematically evaluate the appropriateness of that advice; complement multilateral and bilateral surveillance with a focus on regional issues; improve the quality of the policy dialogue with members (including through increased cross-country analysis where relevant); strengthen communications to markets and the public of the IMF’s policy messages while preserving its role as a candid and confidential advisor; and develop a methodology for better assessing the effectiveness of surveillance.

13. Toward meeting these objectives, the achievement of which should be assessed in the next surveillance review, the Committee agrees that priority should be given to sharpening the focus of Article IV consultations, including a deepening of the discussion of exchange rate issues; enhancing financial sector surveillance; and better integrating debt sustainability analysis and regional and global spillovers into country surveillance. Further progress in reducing balance sheet vulnerabilities and further work on surveillance in low-income countries will also be monitored in the next review of surveillance.

14. Progress in bringing a fresh perspective to the surveillance of program countries should be kept under review, and lessons learned from ex post assessments of program performance should be carefully implemented. It is important to assess the extent to which earlier IMF advice was acted on by countries, taking account of the countries’ views. The Committee looks forward to the forthcoming reviews of the standards and codes initiative and the Financial Sector Assessment Program, reflecting the increasing importance of financial system stability. The Committee calls for a strengthening of efforts to ensure the objectivity of surveillance, including through enhanced debt sustainability analysis covering all member countries.

15. The Committee welcomes consideration of whether there are gaps in the IMF’s range of instruments and policies. It notes the preliminary discussions of possible new modalities for high-frequency policy monitoring and delivering signals on the strength of a member’s economic policies outside the context of an IMF financial arrangement. The Committee notes the role that existing precautionary IMF instruments are playing in signaling the strength of members’ policies, and the possible role for a precautionary PRGF and precautionary and other financing instruments designed to prevent the emergence or spread of capital account crises. It calls for further work on these proposals, including the usefulness and potential demand, in close consultation with potential users, donors, and creditors, and calls for a report at its next meeting.

16. The Committee welcomes the increased adoption of collective action clauses (CACs) in international sovereign bonds, and calls on the IMF to continue to promote progress in this area. It notes recent initiatives aimed at achieving a broad consensus between sovereign issuers and their creditors on voluntary principles for emerging markets’ crisis management and debt restructuring. The Committee looks forward to reviewing further work on general issues of relevance to the orderly resolution of financial crises, including implementation of the IMF’s lending into arrears policy.

Enhancing international support for low-income members

17. The Committee supports the ongoing work to clarify and strengthen the IMF’s role in low-income countries, which should be based on country ownership and close cooperation with other multilateral institutions and bilateral donors. The IMF has an important role in supporting—through policy advice, capacity building, and financial assistance, including debt relief—low-income countries’ efforts to achieve the macroeconomic stability and high growth needed to make progress toward the MDGs. The Committee looks forward to further work on the financing and modalities of the IMF’s engagement with low-income members, including the financing of the PRGF after 2006 to maintain adequate capacity to meet future needs, instruments to help members face shocks, and ways to improve monitoring and signaling. The Committee notes the joint report of the IMF and the World Bank on aid effectiveness and financing modalities. It encourages further analysis by the World Bank and IMF of aid effectiveness, absorptive capacity, results-based measurement mechanisms, and financing modalities and mechanisms to augment aid flows, such as the International Finance Facility, global taxes, and other innovative mechanisms, and looks forward to a further report.

18. The Committee supports continued efforts to strengthen the Poverty Reduction Strategy Papers (PRSP) approach and IMF support to low-income countries under the PRGF. It welcomes the report of the Independent Evaluation Office on the PRSP/PRGF, and the work under way to follow up on its recommendations. To support implementation of the Monterrey Consensus, the Poverty Reduction Strategy (PRS) process should be improved and become better integrated into each country’s domestic policymaking processes, and international assistance, including from the IMF, should become more fully coordinated with domestic economic priorities. The Committee looks forward to the work on improving the role of the IMF in the PRS process, and on the design of policy programs supported by the PRGF. It calls for increased incorporation of poverty and social impact analysis into PRGF-supported programs, and for more extensive analyses of the sources of and obstacles to growth, and the linkages between poverty reduction and economic growth.

19. The Committee welcomes the progress in providing debt relief under the HIPC Initiative, which has been extended for two more years, encourages eligi ble countries to take the necessary actions to benefit from the Initiative, and urges full creditor participation. The Committee supports the IMF’s and the World Bank’s work on a single framework to assist low-income countries’ efforts to achieve and maintain robust debt sustainability while pursuing their develop ment objectives. It looks forward to further consideration of outstanding issues in the proposed framework for debt sustainability, before it is made fully opera tional, and of further debt relief, including its financing.

Other issues

20. The IMF’s effectiveness and credibility as a cooperative institution depend on all members having appropriate voice and full participation in its processes. The Committee takes note of the IMF Executive Board’s status report regarding work on quotas, voice, and representation. It encourages the Board to consider further issues of voice, quotas, and participation, noting as the Board agreed, that progress will require broad consensus among the shareholders. The Committee recommends completion of the ratification of the Fourth Amendment.

21. The IMF’s liquidity is adequate to meet the near-term projected needs of its members, although continued monitoring will be important.

22. The Committee expresses its appreciation of the work of Mr. Montek Singh Ahluwalia as first Director of the Independent Evaluation Office (IEO). It looks forward to continued high-quality reports by the IEO.

23. The 60th anniversary of the IMF is a timely opportunity to reflect on the forces that will help shape the institution’s priorities going forward. The Committee welcomes the preliminary consideration by the Executive Board of the work on the IMF’s strategic direction initiated by the Managing Director, and looks forward to a discussion at its next meeting. It also welcomes the continuing progress in reforming the IMF’s budgetary framework.

24. The next meeting of the IMFC will be held in Washington, D.C., on April 16, 2005.

International Monetary and Financial Committee attendance

October 2, 2004

Chairman

Gordon Brown

Managing Director

Rodrigo de Rato

Members or Alternates

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

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

Palaniappan Chidambaram, Minister of Finance, India

Martin Parkinson, Executive Director, Macroeconomic Group, the Treasury, Commonwealth of Australia (Alternate for Peter Costello, Treasurer of the Commonwealth of Australia)

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

Hans Eichel, Minister of Finance, Germany

Per-Kristian Foss, Minister of Finance, Norway

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

Ralph Goodale, Minister of Finance, Canada

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

Aleksei Kudrin, Minister of Finance, Russian Federation

Mohammed Laksaci, Governor, Banque d’Algérie

Roberto Lavagna, Minister of Economy and Production, Argentina

Tito Titus Mboweni, Governor, South African Reserve Bank

Hans-Rudolf Merz, Minister of Finance, Switzerland

Antonio Palocci, Minister of Finance, Brazil

Didier Reynders, Minister of Finance, Belgium

Nicolas Sarkozy, Minister of State, Minister of Economy, Finance, and Industry, France

Domenico Siniscalco, Minister of Economy and Finance, Italy

John W. Snow, Secretary of the Treasury, United States

Sadakazu Tanigaki, Minister of Finance, Japan

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

Gerrit Zalm, Minister of Finance, the Netherlands

Zhou Xiaochuan, Governor, People’s Bank of China

Observers

Mohammad Alipour-Jeddi, Head, Petroleum Market Analysis Department, Organization of the Petroleum Exporting Countries (OPEC)

Joaquin Almunia Amann, Commissioner, European Commission

Roger W. Ferguson, Chairman, Financial Stability Forum (FSF)

Heiner Flassbeck, Officer-in-Charge, Division on Globalization and Development Strategies, United Nations Conference on Trade and Development (UNCTAD)

John William Hancock, Counsellor, World Trade Organization (WTO)

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

Malcolm D. Knight, General Manager, Bank for International Settlements (BIS)

Trevor Manuel, Chairman, Joint Development Committee

José Antonio Ocampo, Under Secretary-General, Department of Economic and Social Affairs, United Nations (UN)

Juan Somavia, Director-General, International Labor Organization (ILO)

Jean-Claude Trichet, President, European Central Bank (ECB)

James D. Wolfensohn, President, World Bank

Eleventh Meeting, Washington, D.C. April 16, 2005

1. The International Monetary and Financial Committee held its eleventh meeting in Washington, D.C., on April 16, 2005, under the Chairmanship of Mr. Gordon Brown, Chancellor of the Exchequer of the United Kingdom.

The global economy and financial markets—outlook, risks, and policy responses

2. The Committee welcomes the continuing global economic expansion, underpinned by supportive macroeconomic policies, improving corporate bal ance sheets, and benign financial market conditions. While returning to a more sustainable pace, global growth will likely remain robust in 2005. The Committee notes, however, that widening imbalances across regions and the continued rise in oil prices and oil market volatility have increased risks. The potential for a sharper-than-expected rise in long-term interest rates from their very low levels and for increased exchange rate volatility also calls for vigilance. The Committee emphasizes that in the coming months IMF surveillance should focus on promoting policies for reducing global imbalances over time; addressing the impact of higher oil prices, in particular on the most vulnerable countries; managing the policy response to potential inflationary pressures; and ensuring the sustainability of medium-term fiscal frameworks.

3. The Committee reiterates that all countries have a shared responsibility to take advantage of the current favorable economic conditions to address key risks and vulnerabilities. To ensure orderly adjustment of global imbalances and to help achieve more sustainable external positions and stronger medium-term growth, the Committee calls for concrete actions by all to implement the agreed policy response in a timely and effective manner. This includes fiscal consolidation to increase national savings in the United States; greater exchange rate flexibility as appropriate, supported by contin ued financial sector reform, in emerging Asia; further structural reforms to boost growth and domestic demand in Europe; and further structural reforms, including fiscal consolidation, in Japan.

4. The Committee notes that conditions in the oil market will remain tight in the medium term, reflecting strong global demand, low excess capacity, and supply concerns even after investments in some countries. It underscores the importance of stability in oil markets for global prosperity, and recognizes the impact of higher oil prices especially on poorer communities. In this context, the Committee calls for efforts to remove disincentives to investment in oil production and refining capacity, and to promote energy sustainability and efficiency, including through new technologies and removing barriers to the development of alternative fuels. It encourages closer dialogue between oil exporters and importers, and further efforts to improve oil market data and transparency.

5. Inflation remains relatively subdued in most countries, reflecting in part greater credibility of monetary policy. However, with inflationary pressures likely to increase as the expansion matures, a smooth transition to more neutral interest rates remains a priority in many countries, although the appropriate timing and pace will vary, depending on countries’ cyclical positions. In countries receiving strong capital inflows, exchange rate flexibility would facilitate monetary management.

6. Steps to strengthen fiscal positions within sound frameworks and address structural weaknesses will also be critical for supporting medium-term growth and macroeconomic stability, and meeting demographic challenges. Fiscal deficits remain high in many industrial countries and should be reduced. In emerging markets, fiscal indicators have generally improved, but in countries with high levels of public debt continued efforts will be needed to reduce them to more sustainable levels. In both industrial and developing economies, structural reforms need to be advanced to remove rigidities and ensure sustainable growth. The Committee welcomes Argentina’s rapid recovery. The recent debt exchange offer represents an important step toward the long-term goal of sustainable growth. Argentina will now need to formulate a forward-looking strategy to resolve the remaining arrears outstanding to private creditors consistent with the IMF’s lending into arrears policy, and to continue with necessary structural reforms.

7. Poverty reduction must remain at the top of the international agenda. The Committee welcomes the strong growth performance across developing countries, particularly in sub-Saharan Africa, but notes with concern that most of them are at risk of falling well short of the Millennium Development Goals (MDGs).2 With improved macroeconomic stability in most countries, the key challenge remains to press ahead with reforms to strengthen the investment environment and foster private sector-led growth. The global community, in turn, needs to support these reform efforts through meeting commitments to increased and better coordinated financial and technical assistance, further debt relief, policies to improve remittance flows, and improved market access for developing countries.

8. The Committee emphasizes that successful and ambitious multilateral trade liberalization is central to sustained global growth and economic devel opment. The immediate priority is for WTO members to translate the mid-2004 framework agreements into a viable policy package in time for the December 2005 WTO Ministerial Conference. The Committee encourages Doha partici pants to aim for ambitious and comprehensive results, notably in agriculture; substantial reductions in barriers to other trade, including liberalization in financial and other services; and strengthened multilateral trade rules. The Committee supports the IMF’s continued role in advocating trade liberalization and assisting members to benefit from it. It encourages the IMF to work with other partners in the Integrated Framework to explore further ways of easing adjustment to trade liberalization, including through the Trade Integration Mechanism, and building capacity in low-income countries. The Committee looks forward to consideration of proposals at its next meeting.

Shaping the IMF’s strategic direction

9. The Committee welcomes the discussions under way on the IMF’s medium-term strategy, and looks forward to reaching conclusions by the 2005 Annual Meetings and further reflection on longer-term issues. The Committee agrees that the central elements of the IMF’s mandate as set out in its Articles of Agreement remain as important as ever. The challenge is to enhance the IMF’s effectiveness in pursuing its core objectives, while con tinuing to adapt to changing global economic circumstances. This would ensure that the IMF remains relevant for all its members, which would further foster the coherence, credibility, and evenhandedness of the IMF.

10. The Committee calls for further work on the following emerging priorities that will help shape the institution’s strategic direction:

  • Surveillance is a central task of the IMF and determined efforts are required to enhance its effectiveness and impact, building on the conclusions of the Biennial Review of Surveillance. Surveillance should become more focused and selective in analyzing issues, in an even-handed way across the membership. Regional and global surveillance should play an increasingly important role, and be better integrated with bilateral surveillance.

  • Work on financial sector issues and international capital markets should be further strengthened to reduce vulnerabilities and promote financial stability. This, including the Financial Sector Assessment Program, should be integrated more fully into surveillance and other activities, and complemented by advice to members on ways to improve access to international capital markets and on orderly capital account liberalization.

  • The IMF’s lending function is a central pillar of its mandate. All lending should be selective and anchored in strong country ownership and institutional frameworks, putting members firmly on the road to external viability. The Committee looks forward to further reflection on how the needs of members could be met through IMF arrangements, and whether new instruments or revisions to existing facilities are required.

  • The IMF has a critical role to play in helping low-income countries in their efforts to reduce poverty and achieve strong, sustainable growth through sound policies and institutions for macroeconomic stability. Efforts should continue to adapt the IMF’s activities and instruments to the special circumstances and challenges of low-income countries, based on strong cooperation and clarity of responsibilities with the World Bank.

  • The IMF must meet the highest standards of internal management, control, auditing, and governance. This will require further deepening of budget reforms, further work on the IMF’s finances and financial structure, and efficient deployment of resources to reflect priorities. The Committee also looks forward to further work on risk management and control, and personnel management systems.

  • The IMF’s effectiveness and credibility as a cooperative institution must be safeguarded and further enhanced. Adequate voice and participation by all members should be assured, and the distribution of quotas should reflect developments in the world economy. The Committee emphasizes that the period of the Thirteenth General Review of Quotas provides an opportunity for the membership to make progress toward a consensus on the issues of quotas, voice, and participation.

IMF support for low-income members’ efforts toward poverty reduction and strong, sustainable growth

11. The Committee underscores the conclusion of this year’s Global Monitoring Report that bold actions are urgently needed by the developing countries and their partners to realize the MDGs. The U.N. Summit in September 2005 will mark an important milestone to review progress and lay out actions going forward. The IMF has a critical role in supporting—through policy advice, capacity building, and financial assistance, including debt relief—low-income countries’ efforts to achieve macroeconomic stability, debt sustainability, and strong, sustainable high growth needed to make progress toward the MDGs.

12. Work is under way to refine the operational aspects of the Poverty Reduction Strategy (PRS) approach, improve the design of PRGF-supported programs, and enhance PRGF-PRS alignment. This will be underpinned by more extensive analyses of the sources of and obstacles to growth, and of the linkages between growth and poverty reduction. The Committee looks forward to further work to ensure adequate financing of the PRGF to meet future demands as assessed by the IMF, and other IMF instruments to assist low-income countries, including to help members deal with shocks. It also looks forward to further work on a policy monitoring arrangement to enhance the IMF’s signaling role for countries that do not need or want IMF financing.

13. The Committee supports work by the IMF and World Bank on aid effectiveness and financing modalities. On innovative sources of development financing, such as the International Finance Facility (IFF) and its pilot—the IFF for immunization—global taxes which could also refinance the IFF, the Millennium Challenge Account, and other financing measures, it welcomes the joint IMF and World Bank note outlining progress that has been made. The Committee asks to be kept informed of the further work ahead of the U.N. Summit.

14. The Committee notes the recent progress in providing debt relief under the HIPC Initiative. It encourages countries to take the necessary actions to benefit from the Initiative, and urges full creditor participation. The Committee supports the joint IMF-World Bank framework to assist low-income countries’ efforts to achieve and maintain debt sustainability while pursuing their development objectives, and a review of experience under the framework.

15. The Committee welcomes the IMF’s work and the preliminary discussion of key issues regarding proposals for further multilateral debt relief and its financing options, and calls for further discussion with shareholders and examination of these issues, including the possible use of the IMF’s resources, by the time of its next meeting. It notes that any possible further debt relief from the IMF should be part of a wider international effort.

Other issues

16. The Committee welcomes progress toward meeting the objectives of IMF surveillance identified at its last meeting, including in the areas of exchange rate issues, financial sector surveillance, better integrating debt sustainability analysis and regional and global spillovers into country surveillance, and balance sheet vulnerabilities. It also welcomes the Sub-Saharan Africa Regional Economic Outlook. The Committee looks forward to the upcoming review of the Standards and Codes Initiative to assess its effectiveness in informing surveillance, enhancing crisis prevention, and strengthening countries’ institutions.

17. The Committee welcomes the increased adoption of collective action clauses in international sovereign bonds, and calls on the IMF to continue to promote progress in this area. It notes the “Principles for Stable Capital Flows and Fair Debt Restructuring in Emerging Markets” being developed by a number of sovereign issuers and the investor community, and encourages further efforts to improve the Principles aimed at achieving a broad consensus. The Committee looks forward to further work on the orderly resolution of financial crises, including the implementation of the IMF’s lending into arrears policy.

18. The Committee takes note of the recent review of IMF conditionality, including the design of IMF-supported programs. Progress has been made in streamlining conditionality and fostering national ownership. The Committee encourages the IMF to incorporate the findings of the review into its operational work, and to deepen further its analysis of key elements of program design.

19. The Committee recommends completion of the ratification of the Fourth Amendment.

20. The Committee wishes to thank James Wolfensohn for his great contribution as President of the World Bank. During his time at the helm of the Bank, great strides have been made in cooperation and partnership between the IMF and the World Bank, and in progress toward realizing our dream of a world free of poverty.

21. It is expected that the next meeting of the IMFC will be held in Washington, D.C., on September 23, 2005.

International Monetary and Financial Committee attendance

April 16, 2005

Chairman

Gordon Brown

Managing Director

Rodrigo de Rato

Members or Alternates

Burhanuddin Abdullah, Governor, Bank of Indonesia

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

Thierry Breton, Minister of Economy, Finance and Industry, France

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

Palaniappan Chidambaram, Minister of Finance, India

Hans Eichel, Minister of Finance, Germany

Nicolás Eyzaguirre, Minister of Finance, Chile

Per-Kristian Foss, Minister of Finance, Norway

Ralph Goodale, Minister of Finance, Canada

Dong-Soo Chin, Deputy Minister for International Affairs, Korea (Alternate for Duck-Soo Han, Deputy Prime Minister and Minister of Finance and Economy, Korea)

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

Aleksei Kudrin, Minister of Finance, Russian Federation

Mohammed Laksaci, Governor, Banque d’Algérie

Tito Titus Mboweni, Governor, South African Reserve Bank

Hans-Rudolf Merz, Minister of Finance, Switzerland

Antonio Palocci, Minister of Finance, Brazil

Armando León, Director, Board of Directors, Central Bank of Venezuela (Alternate for Gastón Parra Luzardo, President, Central Bank of Venezuela)

Didier Reynders, Minister of Finance, Belgium

Domenico Siniscalco, Minister of Economy and Finance, Italy

John W. Snow, Secretary of the Treasury, United States

Sadakazu Tanigaki, Minister of Finance, Japan

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

Gerrit Zalm, Minister of Finance, Netherlands

Li Ruogu, Deputy Governor, People’s Bank of China (Alternate for Zhou Xiaochuan, Governor, People’s Bank of China)

Observers

Joaquín Almunia, Commissioner, Economic and Monetary Affairs European Commission

Roger W. Ferguson, Jr., Chairman, Financial Stability Forum (FSF)

Heiner Flassbeck, Officer-in-Charge, Division on Globalization and Development Strategies, United Nations Conference on Trade and Development (UNCTAD)

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

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

Malcolm D. Knight, General Manager, Bank for International Settlements (BIS)

Trevor Manuel, Chairman, Joint Development Committee

José Antonio Ocampo, Under-Secretary-General, Department of Economic and Social Affairs, United Nations (UN)

Geoffrey Skipper, Senior Research Analyst, Organization of the Petroleum Exporting Countries (OPEC) (Alternate for Alipour-Jeddi, Head, Petroleum Market Analysis Department, Organization of the Petroleum Exporting Countries, (OPEC))

Juan Somavia, Director-General, International Labor Organization (ILO)

Jean-Claude Trichet, President, European Central Bank (ECB)

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)

Seventieth Meeting, Washington, D.C. October 2, 2004

1. As we celebrate the 60th anniversary of the Bretton Woods Institutions and approach the fifth anniversary of the UN Millennium Declaration, we recommit ourselves to supporting efforts by developing countries to pursue sustainable growth, sound macroeconomic policies, debt sustainability, open trade, job creation, poverty reduction, and good governance. These actions need to be reinforced by stronger international action and partnerships, including reforming trade; more, and more effective, aid; and stronger private flows in order to make progress on the Millennium Development Goals.3 We remain concerned that most MDGs will not be met by most developing countries.

2. Global economic growth is strong, supported by exceptionally robust growth in developing countries, as the world benefits from the significant reforms undertaken by many countries over recent years. Private sector– driven growth resulting in new jobs and higher tax revenues, which can be used to finance poverty-reducing public expenditures, is critical to the success of country-led efforts to reduce global poverty. Success in the Doha Development Agenda can only complement these developments, and we stress the importance of translating the recently agreed WTO frameworks into tangible results. We urge all countries, developing and developed, to participate fully in the negotiations and urge the IMF and World Bank to continue to support work to this end, and to help developing countries assess the impact and to provide additional support to address potential adjustment costs.

3. To help developing countries take advantage of the new opportunities that can arise from a better economic setting and to strengthen the foundations for economic growth, we welcome the renewed focus being given by the World Bank Group to private sector development, improving the investment climate, and strengthening financial sectors, and urge the Bank to continue to translate this into country operations. Complementing macroeconomic stability, capacity building and a greater results focus in public services and institutions and improving the quality of governance, successful private sector investment, social development as well as gender equality are key to accelerating pro-poor growth. We note the important role played by remittances in this context. We urge the Bank to intensify its analytical work on the potential sources of growth and ways to mobilize them and to help countries build the relevant analytical capacity.

4. Strengthening the foundations for growth will also critically depend on addressing large infrastructure needs in many countries. We welcome the Bank Group’s plans to scale up activities in implementing the Infrastructure Action Plan and urge accelerated support of country efforts in accordance with the Bank’s safeguards. We emphasized the importance of addressing maintenance and other costs to ensure the sustainability of infrastructure investments. We also stressed the need to pursue—together with the IMF—efforts to increase fiscal space for public infrastructure investments within limits of fiscal prudence and debt sustainability. We also endorse further Bank engagement to meet infrastructure needs at the regional and sub-sovereign levels, enhancing application of risk mitigation instruments, and continuing efforts to offer a more complete and seamless client product line across the World Bank Group; accordingly, we urge the Bank to present options to its Board to move this agenda forward concretely. These actions will be particularly important in enhancing the Bank’s support for development in middle-income countries, as well as in low-income countries.

5. These and other actions required to lay the basis for sustained stronger growth are critical to our ability to achieve the MDGs, as is progress in providing effective health systems (in particular tackling HIV/AIDS, malaria, and other communicable diseases), education for all, and other basic social services. We noted the special needs of low-income countries under stress (LICUS), where technical assistance is especially necessary to strengthen weak policies and institutions. We look forward to reviewing progress in all these areas in the second Global Monitoring Report at our next meeting.

6. We agree that reform efforts in developing countries must be supported by improved aid effectiveness, increased aid and other financial flows, and coherent policies to achieve development results. The international community has agreed to harmonize and align their support behind country-owned development strategies, streamline the use of conditionality, increase the focus on results, and use country systems where appropriate. We are committed to using the Second High-Level Forum on Harmonization in Paris next spring to translate these agreements into clear and specific commitments and timetables and call for the development of indicators and benchmarks to monitor the participation of all partners in this effort at the country level.

7. We must also enhance our efforts to help developing countries build capacity and address absorptive capacity constraints. We welcome the progress achieved to date in implementing the Poverty Reduction Strategy (PRS) process as indicated in recent independent evaluations. We note the important challenges that remain in implementing the approach fully and effectively both at the country level and in the Bank and Fund and among other development partners, and welcome the revisions to the PRS architecture to help achieve this. One area that deserves closer attention in next year’s PRS report is the continued efforts by the Bank and Fund to streamline their aggregate conditionality. We also call on the Bank to review its own policy and practice on conditionality and report at our meeting in Fall 2005.

8. The provision of additional, predictable, and timely financial assistance to countries committed to sound policies remains a critical issue, particularly for sub-Saharan Africa. We urge those donors who have not yet done so to make concrete efforts toward the target of 0.7 percent of GNP as ODA. We welcome the progress announced by some countries, including, in some cases, the setting of clear timetables to achieve this objective. We also reaffirm our commitment to a substantial and timely replenishment of IDA, recognizing the critical timetable to reach the MDGs.

9. To address the needs for additional stable and predictable financing to help developing countries undertake ambitious investment plans to meet the MDGs and to finance associated recurrent costs where appropriate, we reviewed proposals to complement increased aid flows and commitments with innovative mechanisms. We welcomed the World Bank and IMF analysis of these options, notably the International Finance Facility, global taxes and voluntary contributions, including the analysis of their technical feasibility. We also took note of the international meeting on Action Against Hunger and Poverty convened by President Lula on September 20, 2004, in New York. We ask the Bank and the Fund to continue their work and report at the next meeting on how to take such options forward. We also encourage the Bank to explore the potential for increasing leverage through blending aid with other flows, including MDB lending.

10. Debt sustainability is an essential underpinning for growth. We reviewed progress under the enhanced HIPC Initiative, welcomed the recent decision to extend the sunset clause, and urged full creditor participation. We welcome the development of a forward-looking debt sustainability framework that aims to help low-income countries manage their borrowings and avoid a buildup of unsustainable debt while pursuing the MDGs. We stressed the need to provide resources to low-income countries on appropriate terms, including the degree of concessionality and level of grant financing. We look forward to further work on the remaining issues by the Bank and the Fund to make the framework operational as soon as possible. We underscore the need for joint Bank/Fund Debt Sustainability Analyses (DSAs) (based on a clear division of labor) to provide countries, and their development partners, with clear and coherent analy sis and guidance. We also urge the Bank and the Fund to accelerate their work on means to help mitigate the impact of exogenous shocks on low-income countries and to report to their Boards at an early date.

11. We also reviewed reports from our Boards with respect to their work on enhancing the voice and participation of developing and transition countries in our institutions. This work takes place within a broader context of reflections on how best to address governance issues within the international community. We welcomed the progress to date in making Bank and Fund operations more responsive to borrowers’ needs. We urge the Boards to cooperate closely together in exploring all relevant options and to strive to achieve consensus among all members. We look forward to receiving a report regarding the feasibility of these options, to allow us to address the necessary political decisions at our next meeting.

12. The next meeting of the Committee will be held in Washington, D.C., on April 17, 2005.

Seventy-first Meeting, Washington, D.C. April 17, 2005

1. As we approach the fifth anniversary of the UN Millennium Declaration, we met to review progress toward the MDGs,4 based on an assessment in the second annual Global Monitoring Report. We reaffirmed our strong support for the strategies and decisions agreed in Doha, Monterrey, and Johannesburg, which set out a framework for fighting poverty and achieving the internationally agreed goals. We welcome the continued active involvement of the Bank and the Fund in the preparations for and the proceedings at the UNGA Special Session on Financing for Development, as well as the UN High-Level Millennium Review in New York in September.

2. We welcomed the progress achieved on actions by both developing and developed countries. These actions have contributed to the strongest global economic growth in over three decades. However, overall progress has been uneven and slower than envisaged. Without tangible action to accelerate efforts, the vision of the Millennium Declaration will not be realized. At stake are prospects not only for hundreds of millions of people to escape poverty, disease, illiteracy, and gender inequality but also for long-term global security and peace, which are intimately linked to development.

3. All regions face significant challenges, but we welcomed the Report’s focus on sub-Saharan Africa as the region farthest from achieving the MDGs. We also welcomed the recent Report of the Commission for Africa. We are encouraged that real growth in sub-Saharan Africa increased in 2004 to an eight-year high of 5 percent and inflation has fallen to a historical low. The challenge is to accelerate and sustain growth and development through sound policy frameworks. We welcomed the IFC’s Strategic Initiative for Africa, including the recently approved Private Enterprise Partnership Facility. We call upon the Bank to undertake further analytical and institutional work, together with partners, to develop an ambitious action plan for Africa for consideration by our next meeting.

4. Many developing countries are taking actions to strengthen policies and institutions that provide not only benefits but also valuable experience for others. We endorsed the emphasis on country-led and owned development strategies and urged that MDGs be operationalized in poverty reduction strategies, linked to medium-term budgetary frameworks. Macroeconomic stability remains critical, as is the need to strengthen public sector financial management, promote good governance including combating corruption and promoting the rule of law, improve business climate and regulation, and develop local financial markets, so as to enable private sector–led economic growth. Environmental sustainability remains critical and should also be addressed in domestic policies and programs, as well as through international action. We recognize the importance of all countries integrating climate concerns into their policy planning.

5. A major scaling up of education (in particular through the Education For All Fast Track Initiative), health and basic infrastructure services, including water and sanitation, is fundamental to meeting key development goals. We noted with concern the failure to meet the target date for achieving gender parity in primary and secondary education. We called upon bilateral donors and multilateral agencies to provide timely, predictable, and sustained financing to support these efforts. We reconfirmed the importance of efforts to help developing countries build capacity and address absorptive capacity constraints.

6. We have in the past highlighted the critical importance of scaling up infrastructure investment in developing countries as a means of promoting economic growth and achieving the MDGs, and have endorsed the Infrastructure Action Plan of the World Bank. With a view to removing such impediments as may exist in enabling the Bank to scale up the infrastructure work, we look forward to reviewing implementation of the Action Plan at our next meeting, including the results of the ongoing work of the IMF and Bank on how to increase fiscal space for growth.

7. To complement these actions, developed countries must meet their commitments to help accelerate progress. We underlined the vital importance of an ambitious outcome for the Doha Development Agenda and the successful completion of the negotiations in 2006. Improving trade opportunities and market access for agriculture, industrial products, and services will be critical. We stressed the need for “aid for trade” and we call on the Bank and Fund to work with others to develop proposals to help developing countries adjust to and take advantage of the Round, for consideration by our next meeting. We also recognized the benefits to developing countries from reducing developing country trade barriers and of strengthening south-south trade.

8. Financing the development agenda remains a significant challenge, requiring sustained action on domestic resource mobilization, private investment, and trade. We welcomed the Bank’s work program to improve analysis and statistics on remittances, labor mobility, and migration, and to address impediments to remittance flows. We emphasized that a significant increase in aid will also be needed for accelerated progress toward the MDGs. We welcomed the successful conclusion of the IDA-14 replenishment as an important step in mobilizing additional resources and called on donors to finalize their commitments. We noted the further work on the impact of exogenous shocks on low-income countries and small vulnerable states and we look forward to further proposals in the context of the IDA-14 mid-term review on what options are available to operationalize these proposals.

9. We also welcomed the agreement by the Bank and Fund on a joint forward-looking framework for assessing debt sustainability in low-income countries. We welcomed recent proposals for additional debt and debt service relief. We agreed that further debt relief beyond HIPC is needed in specific cases to secure long-term debt sustainability and support progress toward the MDGs. We ask the Bank and Fund to examine these proposals for the Annual Meetings.

10. We confirmed our commitment to deliver on the pledges made at and after Monterrey to raise levels of ODA. We urged those donors that have not done so to make concrete efforts toward the target of 0.7 percent of GNI as ODA.

11. We welcomed further work on innovative sources of development financing. We noted that negotiations among interested parties on the proposed pilot IFF for Immunization are well advanced; and the analysis of technical feasibility of the IFF has created the conditions for the necessary political decisions on participation. We encourage interested donors to proceed with these proposals. Potential participants believe that global tax mechanisms to finance development may be feasible and desirable, while other members do not. We noted the analysis of the economic rationale, technical feasibility, and moderate coalition size needed for some of the global tax proposals. Building upon the existing political momentum in some countries, we invite the Bank and the Fund to deepen their analysis of the most promising nationally applied and internationally coordinated taxes for development for the Annual Meetings, as an input into the consideration of a pilot case for interested countries.

12. We also underlined the importance of further action by multilateral development partners, including support for the PRS process in low-income countries, aligning assistance better with medium-term country strategies, streamlining conditionality, building institutional capacity, and strengthening the focus on development results. We called for further exploration of blending arrangements, for further action to enhance effectiveness, and for continued progress in providing innovative and flexible financial products and high-quality technical assistance and advisory services better matched to the evolving and diverse needs of middle-income countries; and to strengthen the Bank’s role in these countries, not least with regard to global public goods.

13. We welcomed the Paris Declaration on Aid Effectiveness, which responded to our earlier call to make firm commitments on the quality of aid. We note the agreement on quantitative indicators. We urged the establishment of targets, as agreed, for each of the indicators for 2010. Concerted collective actions will be required now to translate these into concrete actions at the country level and we called on the Bank to show leadership by example, in implementing the Paris framework. We welcomed the increasing use of country systems, where appropriate, as a means to enhance harmonization and reduce the cost of doing business.

14. Enhancing voice and participation of developing and transition countries in the Bank and the Fund remains a continuing concern. Progress can only be made through broad consensus at the political level. We noted the further efforts by the Boards in this regard and will return to this issue at our next meeting in the light of progress.

15. We appreciate the efforts of the global community to counter the effects of the deadly tsunami that wreaked havoc in the Indian Ocean region. The tragedy reminded us that the poorest people tend to be the most vulnerable to natural disasters. We called for a continued focus on the challenge of accelerating the reconstruction and recovery process in the region, and restoring livelihoods and on designing projects for disaster preparedness and risk mitigation.

16. A strong and effective multilateral system is essential in the fight against global poverty. We expressed our deep appreciation for the talented leadership of Jim Wolfensohn as he approaches the end of his term at the Bank and wish him success in his new role as Special Envoy for Gaza Disengagement. We also congratulate Paul Wolfowitz on his selection as President and look forward to working with him.

17. The next meeting of the Committee will be held in Washington, D.C., on September 24, 2005.

As endorsed by heads of state and government in the UN General Assembly on September 8, 2000.

As endorsed by heads of state and government in the UN General Assembly on September 8, 2000.

As endorsed by heads of state and government in the UN General Assembly on September 8, 2000.

As endorsed by heads of state and government in the UN General Assembly on September 8, 2000.

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