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Appendix III Press Communiqués and Announcement of the Interim Committee and the Development Committee

Author(s):
International Monetary Fund
Published Date:
September 1983
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Interim Committee of the Board of Governors on the International Monetary System

Press Communiqués

Nineteenth Meeting, Toronto, September 4–5, 1982

1. The Interim Committee of the Board of Governors of the International Monetary Fund held its nineteenth meeting in Toronto, Ontario, on September 4, 1982 under the chairmanship of the Honorable Allan J. MacEachen, Deputy Prime Minister and Minister of Finance of Canada. Mr. Jacques de Larosiere, Managing Director of the International Monetary Fund, participated in the meeting. The meeting was also attended by observers from a number of international and regional organizations and from Switzerland.

2. The Committee discussed the world economic outlook and the policies needed to deal with the difficult problems faced by most of the Fund’s member countries. It was agreed that the deep-rooted character of the problems calls for sustained efforts to carry out adjustment of both internal and external imbalances.

The Committee expressed deep concern about the lack of growth in output and world trade, the high and rising rates of unemployment, and the increasing domestic pressure for protectionist trade measures. It noted that significant progress in reducing inflation has been made by several of the major industrial countries but that prevailing rates of inflation remain unacceptably high in most countries. The Committee recognized that the goals of steady expansion of output and reduction of unemployment could only be achieved if there were a sustained reduction in inflation and inflationary expectations, in nominal and real interest rates, and in other impediments. The Committee also recognized the importance of structural policies and special programs designed to encourage production and employment. The Committee welcomed the recent declines in interest rates, which reflect in part the lower rates of increase in prices that have occurred. However, it believed that further decisive progress toward price stability—especially in countries with relatively high rates of price increase—is essential for lower rates of interest, for revival of economic growth, and for the closer convergence of inflation rates that would permit greater stability in the exchange markets for major currencies.

With these objectives in mind, the Committee stressed the need to make fiscal policies more supportive of monetary policies so as to allow appropriate moderation of growth in monetary aggregates with a less pronounced impact on output and employment. More specifically, the Committee called for a sustained reduction of fiscal deficits in order to build public confidence in the authorities’ determination to maintain their anti-inflation stance, to ease pressures in credit markets and bring down interest rates, and to avoid impairing the medium-term availability of resources for the financing of private investment.

Efforts to reduce rigidities in prevailing practices with respect to wage bargaining and price determination were also urged by the Committee. It was recognized that, depending on the individual circumstances, a useful adjunct to appropriate fiscal and monetary policies might be provided by efforts of the authorities to promote consensus among the social partners on the need, as a means of promoting employment, for moderation of wage and salary increases. In this context, the Committee stressed the need to increase savings and to restore profit margins and incentives to investment.

The Committee deplored the unfortunate situation in which so many non-oil developing countries now find themselves. It noted that the marked slowing of economic growth in those countries, as well as the enlargement of their current account deficits, can be attributed, to a considerable extent, to external factors, including the international recession, severe deterioration of the terms of trade, and the unprecedented upsurge of interest rates in international credit markets. The Committee pointed out, however, that the current difficulties in many countries have also stemmed from unduly expansionary financial policies, which have generated domestic inflation and misallocation of resources, as well as external imbalances. The Committee observed that many non-oil developing countries are endeavoring to adjust the imbalances in their economies but that further progress is needed.

In this connection, the Committee voiced grave concern about two particular aspects of the external finances of non-oil developing countries. One of these related to the need for an enlarged flow of aid and concessional loans to developing countries, especially the low-income ones with limited access to international financial markets. The other aspect of concern related to the recent rates of increase in external debt, which has reached historically high levels in many countries. The Committee stressed the importance for these countries, at a time when private financial flows are less readily available, to be taking steps toward realistic adjustment to prevailing circumstances.

The Committee’s discussions pointed up the high degree of interdependence in the world economy and reaffirmed its conviction regarding the urgent need for closer international cooperation. At a time of unsettled conditions in financial markets arising from external payments imbalances and the continuing problems of adjustment, the Committee again urged all member countries to seek solutions of their difficulties by means that give due consideration to the interests of their trading partners and of the world economy as a whole. In this connection, it warned that protectionist trade measures are shortsighted, since they are inimical to productivity gains and progress against inflation, and also destructive of opportunities for expansion of world trade and increased participation of all countries in its benefits. The Committee further noted that nondiscriminatory access to financial markets is essential and should be maintained.

3. The Committee agreed that in the unusually difficult conditions prevailing in the world economy the role of the Fund in the promotion of balance of payments adjustment is of critical importance and stressed the need for effective and evenhanded implementation by the Fund of its surveillance function. In the view of the Committee, full cooperation by all members was essential for the success of the Fund’s efforts to promote increased international stability. In this connection, the Committee was pleased to note the policy declaration relating to the Fund’s surveillance responsibilities and its efforts to foster stability that was included in the statement on international monetary undertakings issued at the Versailles summit meeting of last June.

4. The Committee considered various issues relating to the Eighth General Review of Quotas. It noted the considerable progress toward an increase in the size of the Fund that was reported by the Executive Board and welcomed the agreement reached in the Board on the method for calculating quotas for the purposes of the Eighth General Review. The Committee’s attention was focused on the main issues of the overall increase in the size of the Fund and the distribution of the overall increase among individual members.

There was widespread support in the Committee on the urgent need for a substantial increase in quotas under the Eighth General Review. The Committee reiterated its view that quotas must remain the primary source of financial resources for the Fund’s operations and that, therefore, the Review should result in an increase in quotas that would be large enough to enable the Fund to perform its functions in an effective manner in the 1980s. The Committee also reiterated its view that the occasion of an enlargement of the Fund under the Eighth General Review should be used to bring the quotas of members more in line with their relative positions in the world economy, taking account of the case for maintaining a proper balance between the different groups of countries. The Committee also asked the Executive Board to assess the adequacy of existing arrangements to deal with major strains in the international financial system.

The Committee urged the Executive Board to pursue its work on the issues of the Review as a matter of high priority, so that the remaining issues on the size and distribution of the quota increase could be resolved by the time of the Committee’s next meeting in April 1983.

5. The Committee discussed various SDR matters, in particular the question of allocations of SDRs in the fourth basic period, which began on January 1, 1982. The Managing Director reported that he had not been able to make a proposal for such allocations because the broad support required by the Articles was lacking. The Committee asked the Executive Board to continue its efforts to bring about a convergence of views that would permit the Managing Director to submit, as soon as possible, a proposal concerning SDR allocations in the current basic period, in accordance with the provisions of the Fund’s Articles.

The Committee noted the wide-ranging examination undertaken by the Executive Board of various aspects of the use and role of the SDR and SDR-denominated assets in the international monetary system, and endorsed the active pursuit by the Executive Board of this examination.

6. The Committee expressed deep appreciation to the Government of Canada, to the authorities of Ontario, and to the city and the people of Toronto for their warm hospitality and for the excellent arrangements provided for the meeting.

7. The Committee agreed to hold its next meeting in Washington, D.C., on April 27–28, 1983.

Annex: Interim Committee Attendance, September 4, 1982

Chairman

  • Allan J. MacEachen, Deputy Prime Minister and Minister of Finance of Canada

Managing Director

  • J. de Larosiere

Members or Alternates

  • Mohammad Abal-Khail, Minister of Finance and National Economy of Saudi Arabia
  • Hassan Al-Najafi, Governor of the Central Bank of Iraq
  • Beniamino Andreatta, Minister of the Treasury of Italy
  • Mahfoud Aoufi, Governor of the Banque Centrale d’Algérie
  • Willy De Clercq, Vice Prime Minister, Minister of Finance, and Minister of Foreign Trade of Belgium
  • Jacques Delors, Minister of Economy and Finance of France
  • Ernane Galvêas, Minister of Finance of Brazil
  • José Ramón Alvarez Rendueles, Governor of the Banco de España (Alternate for Juan Antonio García Diez, Minister of Economy and Commerce of Spain)
  • John Howard, Treasurer of the Commonwealth of Australia
  • Sir Geoffrey Howe, Chancellor of the Exchequer of the United Kingdom
  • Ahti Karjalainen, Governor of the Bank of Finland
  • Manfred Lahnstein, Federal Minister of Finance of Germany
  • Ray MacSharry, Deputy Prime Minister and Minister for Finance of Ireland
  • Arthur K. Magugu, Minister for Finance of Kenya
  • Pranab Kumar Mukherjee, Minister of Finance of India
  • Tengku RAZALEIGH Hamzah, Minister of Finance of Malaysia
  • Donald T. Regan, Secretary of the Treasury of the United States
  • SAMBWA Pida Nbagui, Governor of the Banque du Zaïre
  • SHANG Ming, Advisor at Vice President level of the People’s Bank of China
  • A.P.J.M.M. van der Stee, Minister of Finance of the Netherlands
  • Michio Watanabe, Minister of Finance of Japan
  • Jorge Wehbe, Minister of Economy of Argentina

Observers

  • A.W. Clausen, President, IBRD
  • Abderrezzak Ferroukhi, Head, Economics and Finance Department, OPEC
  • William B. Kelly, Deputy Director-General, GATT
  • Alexandre Lamfalussy, Assistant General Manager, BIS
  • Roger Lawrence, Director, Money, Finance and Development Division, UNCTAD
  • Emile van Lennep, Secretary-General, OECD
  • F. Leutwiler, Chairman of the Governing Board, Swiss National Bank
  • François-Xavier Ortoli, Vice-President, CEC
  • Jean Ripert, Director-General for Development and International Economic Cooperation, UN
  • Manuel Ulloa Elías, Chairman, Development Committee

Twentieth Meeting, Washington, February 10–11, 1983

1. The Interim Committee of the Board of Governors of the International Monetary Fund held its twentieth meeting in Washington, D.C., on February 10 and 11, 1983, under the chairmanship of Sir Geoffrey Howe, Chancellor of the Exchequer of the United Kingdom. Mr. Jacques de Larosiere, Managing Director of the International Monetary Fund, participated in the meeting. The meeting was also attended by observers from a number of international and regional organizations and from Switzerland.

2. The Committee discussed the world economic outlook and the policies needed to cope with the difficult problems faced by most members of the Fund.

The Committee noted that estimated rates of both growth of output and inflation had been revised downward since its previous meeting in September 1982. Anxiety was expressed at the high level of unemployment and the weakness of investment and world trade, against the background of only limited indications of economic recovery. At the same time, the Committee welcomed the further progress made by some of the larger industrial countries in their fight against inflation, as well as the reduction in interest rates that had been facilitated by this progress—developments that were providing the basis for a sustainable recovery in economic activity.

Believing that successful handling of the inflation problem is a necessary—albeit not sufficient—condition for sustained growth over the medium term, the Committee urged national authorities, in their efforts to promote sustained recovery, to avoid measures that might generate harmful expectations with regard to inflation. The importance of reducing fiscal deficits in a number of countries was also emphasized. Otherwise, the Committee noted, high real interest rates detrimental to the process of recovery could be generated by market expectations regarding government borrowing requirements.

It was the Committee’s view that, in several major industrial countries where inflation remained relatively high, present circumstances called for continued restraint in monetary and fiscal policies, along with effective implementation of the incomes policies now in place. It was felt, however, that conditions for economic recovery had improved in those large industrial countries that have been able to achieve the greatest measure of success in reducing and controlling inflation. This success—and the reduction in interest rates that it has permitted—provided the basis, within the pursuit of counterinflationary monetary and fiscal policies, for greater real growth of activity. The transition to a more stable path of real growth would be further facilitated by determined efforts to reduce market rigidities and structural imbalances.

The Committee deplored the upsurge of protectionist pressures in the past year or two. It stressed the paramount importance of resisting these pressures and, indeed, rolling them back.

The unsatisfactory situation facing non-oil developing countries was a source of particular concern to the Committee, which noted that growth rates in these countries, after averaging about 6 per cent in the 1960s and early 1970s, had averaged only 2½ per cent during the past two years and were not expected to show much improvement in 1983. The Committee also observed that the modest recent increases in output, which were barely sufficient to keep pace with rapid population growth, had been achieved against a background of deteriorating terms of trade, sluggish markets for exports, high interest rates in international financial markets, and strains in the financing of current account deficits. These conditions had necessitated a sharp compression of imports by the non-oil developing countries—which, in turn, had been achieved at the cost of lower investment and growth.

Noting the extent of the external adjustment already achieved by many non-oil developing countries and the uncertainties that most such countries face in financing their current account deficits, the Committee attached great importance to the continuing provision of both official development assistance and private banking flows on an adequate scale, and it welcomed the special role recently played by the Fund in this connection.

More generally, the Committee stressed the enhanced importance, in current circumstances, of the Fund’s role in providing its balance of payments assistance to member countries that engage in adjustment programs and in exercising firm surveillance over policies, and also the need to equip the Fund with adequate resources to perform this role.

3. The Committee, noting the progress made by the Executive Board on the various issues of the Eighth General Review of Quotas, focused its attention on the remaining issues, and took satisfaction in being able to reach the following agreement on the subject of quotas:

(a) The total of Fund quotas should be increased under the Eighth General Review from approximately SDR 61.03 billion to SDR 90 billion (equivalent to about US$98.5 billion).

(b) Forty per cent of the overall increase should be distributed to all members in proportion to their present individual quotas, and the balance of 60 per cent should be distributed in the form of selective adjustments in proportion to each member’s share in the total of the calculated quotas, i.e., the quotas that broadly reflect members’ relative positions in the world economy.

(c) Twenty-five per cent of the increase in each member’s quota should be paid in SDRs or in usable currencies of other members.

The Committee considered the possibility of a special adjustment of very small quotas, i.e., those quotas that are currently less than SDR 10 million. It was agreed to refer this matter to the Executive Board for urgent consideration in connection with the implementation of the main decision.

4. The question of the limits on access to the Fund’s resources was raised in the Committee. It was noted that the Executive Board will review this matter before June 30, 1983. The Committee invited the Executive Board to take note of the views expressed in the Committee by those favoring maintenance of the present enlarged limits in terms of multiples of quotas and also by those stressing the need to have regard to developments in the Fund’s liquidity. It also invited the Managing Director to report on this matter at the next meeting of the Committee.

5. The Committee noted the recent decision of the finance ministers and central bank governors of the participants in the General Arrangements to Borrow (GAB) to support an increase in the total amount of the commitments under these Arrangements to SDR 17 billion (equivalent to about US$19 billion) and to make the resources of these Arrangements available to the Fund to finance also purchases by nonparticipants when the Fund faces an inadequacy of resources arising from an exceptional situation involving a threat to the stability of the international monetary system. In this connection, the Committee welcomed the intention of Switzerland to become a full participant in the Arrangements, through the Swiss National Bank, with a credit commitment of SDR 1,020 million.

The Committee also welcomed the willingness of Saudi Arabia to provide resources to the Fund, in association with the GAB, and for the same purposes as those of the GAB. They noted with satisfaction the progress that is being made in setting out the detailed features of this association.

6. The members of the Committee requested the Executive Board to adopt, before the end of February 1983, the necessary decisions and other actions to implement the consensus reached in the Committee. They also agreed to urge the governments of their constituencies to act promptly so that the proposals for the increase in the Fund’s resources could be made effective by the end of 1983.

7. The Committee considered again the question of allocations of SDRs in the current, i.e., the fourth, basic period, which began on January 1, 1982. Noting the developments since its Toronto meeting, the Committee agreed that the matter should be re-examined as soon as possible. It, therefore, requested the Executive Board to review the latest trends in growth, inflation, and international liquidity, with a view to enabling the Managing Director to determine, not later than the next meeting of the Interim Committee, whether a proposal for a new SDR allocation could be made that would command broad support among members of the Fund.

8. The Committee agreed to hold its next meeting in Washington, D.C., on September 25, 1983.

Annex: Interim Committee Attendance, February 10–11, 1983

Chairman

  • Sir Geoffrey Howe, Chancellor of the Exchequer of the United Kingdom

Managing Director

  • J. de Larosière

Members or Alternates

  • Mohammad Abal-Khail, Minister of Finance and National Economy of Saudi Arabia
  • Mohamed Finaish, Executive Director of the Fund (Alternate for Hassan Al-Najafi, Governor of the Central Bank of Iraq)
  • Rachid Bouraoui, Governor of the Banque Centrale d’Algérie
  • B.T. Chidzero, Minister of Finance of Zimbabwe
  • Willy De Clercq, Vice Prime Minister, Minister of Finance, and Minister of Foreign Trade of Belgium
  • Jacques Delors, Minister of Economy and Finance of France
  • Ernane Galvêas, Minister of Finance of Brazil
  • Giovanni Goria, Minister of the Treasury of Italy
  • Cesar E.A. Virata, Prime Minister and Minister of Finance of the Philippines (Alternate for John W. Howard, Treasurer, Australia)
  • Marc Lalonde, Minister of Finance of Canada
  • J.G. Littler, Second Permanent Secretary of H. M. Treasury of the United Kingdom
  • SHANG Ming, Adviser at Vice President level of the People’s Bank of China (Alternate for LU Peijian, President of the People’s Bank of China)
  • Manmohan Singh, Governor of the Reserve Bank of India (Alternate for Pranab Kumar Mukherjee, Minister of Finance of India)
  • Jóhannes Nordal, Governor of the Central Bank of Iceland
  • Nukul Prachuabmoh, Governor of the Bank of Thailand
  • Donald T. Regan, Secretary of the Treasury of the United States
  • H.O.C.R. Ruding, Minister of Finance of the Netherlands
  • SAMBWA Pida Nbagui, Governor of the Banque du Zaïre
  • Jesús Silva-Herzog, Secretary of Finance and Public Credit of Mexico
  • Gerhard Stoltenberg, Federal Minister of Finance of Germany
  • Haruo Mayekawa, Governor of the Bank of Japan (Alternate for Noboru Takeshita, Minister of Finance of Japan) Jorge Wehbe, Minister of Economy of Argentina

Observers

  • A.W. Clausen, President, IBRD
  • Arthur Dunkel, Director-General, GATT
  • A. Ferroukhi, Head, Economics and Finance Department, OPEC
  • Ghulam Ishaq Khan, Chairman, Development Committee
  • Roger Lawrence, Director, Money, Finance, and Development Division, UNCTAD
  • Emile van Lennep, Secretary-General, OECD
  • F. Leutwiler, Chairman of the Governing Board, Swiss National Bank
  • François-Xavier Ortoli, Vice-President, CEC
  • Jean Ripert, Director General for Development and International Economic Cooperation, UN
  • Günther Schleiminger, General Manager, BIS

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 Communiqué

Nineteenth Meeting, Toronto, September 5, 1982

1. The Development Committee held its nineteenth meeting in Toronto, Canada, on September 5, 1982, under the chairmanship of H.E. Manuel Ulloa Elias, Prime Minister and Minister of Economy, Finance and Commerce of Peru. Mr. J. de Larosiere, Managing Director of the International Monetary Fund, Mr. A.W. Clausen, President of the World Bank, and Mr. Hans E. Kastoft, Executive Secretary, participated in the meeting. Representatives from a number of international and regional organizations and Switzerland also attended the meeting.

2. The Committee was provided with a review of the world development situation and prospects by the World Development Report, 1982, which constituted an important background document for its deliberations.

3. The Committee expressed its deep concern that the state of the world economy remained critical and that the development prospects for the international community had worsened over the past year. In the present unfavorable economic outlook, the developing countries are facing the serious challenge of reduced aid, continued weakness in commodity prices, deteriorating terms of trade, increasing protectionist tendencies, and concern over prospects for commercial borrowings in the context of the high interest rates and uncertainties in international financial markets. At the same time, the Committee took note of the recent welcome trend toward lower interest rates. The growth rates of non-oil developing countries in 1981 and 1982 are the lowest in several decades and will be only about half the average growth rate of the 1970s, signifying an exceptional situation of decline in real per capita income for many developing countries. This disturbing situation calls for intensified adjustment efforts on the part of both developed and developing countries in order to restore the health and vigor of the world economy. For the industrial countries, priorities would be the restoration of their own economic health and sustained growth, maintenance of a liberal environment for trade and capital flows, and continuing and hopefully increasing the flow of aid to the poorest developing countries. For the developing countries the priorities would include increasing levels of domestic savings and investments, greater efficiency in the use of capital, strengthening of general economic management, greater emphasis on agriculture, and special attention to the poverty alleviation programs.

4. It was against this background that the Committee addressed itself primarily to the issue of transfer of real resources to the developing countries.

5. The Committee noted IDA’s solid achievements since its establishment in 1960. IDA has become a very important and effective multilateral instrument for promoting development in low-income countries as is evident from the Bank/IDA staff study, IDA in Retrospect. The Committee noted that while substantial progress has been made, the poorest countries remain in desperate need of further assistance and IDA continues to merit full support of both traditional and new donors.

6. The Committee noted with satisfaction that in an effort to address the resource crisis presently faced by IDA, donors had acted to avoid the possibility of a precipitate decline in the annual volume of IDA’s lending activity in fiscal years 1983 and 1984. It welcomed the response of most donor countries to the call for release of the remainder of their IDA-6 contributions in full in 1983. In this regard, the Committee noted with satisfaction that since its last meeting in Helsinki in May this year, the seven major donors at their summit meeting in Versailles stressed the need for special temporary arrangements to overcome funding problems of IDA-6 and an early start to IDA-7. It welcomed the recent hopeful developments which indicated that 22 donor countries had agreed to release the remainder of their IDA-6 contributions in full. It urged the few remaining donors who had not yet done so to join others in taking similar action. In addition to meeting their IDA-6 obligations on the original three-year schedule without insisting on pro rata contributions by all donors, most of them are prepared in principle to provide additional resources, amounting to up to one third of their original IDA-6 contribution, for fiscal year 1984, either through a Parallel Fund or through an Account of IDA to be established for fiscal year 1984. The Committee noted the importance these donors placed on providing IDA with additional commitment authority in fiscal year 1984. In view of the special action taken by other donors to maintain IDA’s annual resource flows at levels not lower than what is required by the IDA program, it was hoped that the U.S. Congress would act to appropriate the third U.S. installment at the level requested by the Administration and ensure that its contribution under IDA-6 could be completed within four years.

7. The Committee welcomed the donors’ agreement to commence formal discussions on IDA-7 before the end of calendar year 1982 and encouraged donor governments if possible to complete negotiations by the Bank/Fund Annual Meetings in 1983 so that legislative approvals can be obtained in time for IDA-7 to become effective promptly. While recognizing the budgetary constraints of the industrialized countries, the Committee strongly hoped that it would be possible to agree on a level of replenishment appropriate to the difficult situation facing the poorest countries and their expanding needs for concessional assistance.

8. In the area of nonconcessional flows to the developing countries, the Committee noted with satisfaction that cofinancing operations of the Bank from various sources have expanded considerably in recent years. In 1982 its cofinancing operations amounted to $7.4 billion, of which $3.2 billion was from private sources compared to an annual average of about $200 million from private sources in the second half of the 1970s.

9. The World Bank is now exploring the possibilities of introducing new mechanisms to make cofinancing a more effective vehicle to attract additional capital flows in the present difficult situation in the capital markets and to attract such capital on longer maturities. The Committee endorsed the efforts of the World Bank and the regional banks where appropriate to secure additional flows of resources to developing countries through cofinancing from all sources on terms suitable for and acceptable to borrowing countries. These efforts should in no way alter the development character of the banks. The Committee emphasized that cofinancing with private institutions should be regarded as a supplement to, and not as a substitute for, increased lending by the Bank and that instrumentalities for increased cofinancing with private sources should be subject to continuing review. The Committee also urged the World Bank to continue its examination of various proposals and to report their decision to the Development Committee at its next meeting.

10. The Committee noted that the Executive Directors of the Bank have adopted changes in the Bank’s borrowing practices and its lending rate policy. A lending program of $11.2 billion for fiscal year 1983 has been agreed to by the Board. The Bank, while continuing to give priority to its traditional medium- and long-term borrowings, has now been authorized to make a cautious and carefully monitored start with borrowing up to $1.5 billion in short-term instruments in fiscal year 1983 and to adopt a variable pool-based lending rate. This action would permit the Bank to exercise more flexibility in tapping a much larger pool of funds and would thus remove a constraint to the planned expansion of its lending program. The Committee endorsed the decision of the Executive Board that the new practice would be subject to a major review before the end of the current fiscal year. The Committee invited the Executive Board of IBRD and those of other multilateral development banks to continue their study of the scope for expansion, in real terms, of future lending to developing countries in the near term and thereafter.

11. The important subject of lending for energy development was discussed by the Committee at its Helsinki meeting. In the short time available, it has not been possible to identify new approaches or financing mechanisms which attract broad support from those members expected to contribute the bulk of the capital. The Committee reiterated the importance of energy investment in developing countries, noted the limited resources for energy lending within the Bank, and urged the Executive Directors to complete their consideration of matters referred to them at Helsinki and to report on them to the next meeting of the Committee.

12. In continuation of reports presented to the Committee at its earlier meetings, the Committee considered two separate reports prepared by the Bank and the Fund staffs reviewing actions taken by the two institutions in pursuing those measures to enhance the flow of resources to developing countries raised by the Group of Twenty-Four’s Program of Immediate Action and the Brandt Commission Report which are within the area of their competence. The Committee noted that both the Bank and the Fund had already implemented some of the recommendations applicable to them and are continuing their consideration of other issues relevant to the Committee’s work.

13. The Committee noted the problems of small island and landlocked states, and recognized the urgent need to review mechanisms and adjustment prescriptions appropriate to the particular circumstances of such states.

14. The Committee also considered and approved the Annual Report on the work undertaken by it during the period July 1981 to June 1982 and authorized its submission to the Boards of Governors.

15. The Committee expressed its great appreciation to the Government of Canada for its warm hospitality and for the excellent arrangements provided for the meeting.

16. The Committee agreed to hold its next meeting in Washington, D.C. on April 29, 1983.

Press Announcement

Twentieth Meeting, Toronto, September 8, 1982

At its twentieth meeting in Toronto, Canada, on September 8, 1982, the Development Committee selected His Excellency Ghulam Ishaq Khan, Minister of Finance, Commerce, Planning and Coordination of Pakistan as Chairman.

Press Communiqué

Twenty-First Meeting, Washington, April 28–29, 1983

1. The Development Committee held its twenty-first meeting in Washington, D.C. on April 28–29, 1983, under the chairmanship of H.E. Ghulam Ishaq Khan, Minister for Finance, Commerce, and Economic Coordination of Pakistan. Mr. A.W. Clausen, President of the World Bank, Mr. J. de Larosiere, Managing Director of the International Monetary Fund, and Mr. Hans E. Kastoft, Executive Secretary, participated in the meeting. Representatives from a number of international and regional organizations and Switzerland also attended the meeting.

2. The Committee was provided with a brief updated version of the world economic outlook circulated at the February meeting of the Interim Committee; this updated version constituted a general background document for its deliberations.

3. The Committee noted with deep concern that the world economic situation had remained very difficult since it had last met in September in Toronto, Canada. The protracted world recession now in its fourth consecutive year has exacted its toll from both rich and poor countries, but its impact has been particularly harsh on non-oil developing countries whose short- and medium-term prospects remain uncertain. World trade declined dramatically in 1982; in this decline the developing countries accounted for a disproportionate share; in 1982 non-oil commodity prices reached their lowest levels in 30 years; and export earnings of developing countries are not yet showing much sign of growth. The situation is further aggravated by declining ODA (official development assistance) in real terms, a slowdown in private capital flows, and the mounting burden of debt. The level of unemployment is unacceptably high and, apart from its social and political impacts, tends to strengthen trends and pressures in favor of protectionist policies and practices. The growth rates have declined in both industrial and non-oil developing countries and in the latter group are now the lowest on record in several decades, with declining real per capita income in many of them.

4. The economic problems of the developing countries were noted in the economic declaration of the nonaligned summit held in New Delhi and the fifth ministerial meeting of the Group of 77 held in Buenos Aires, and will receive further attention at the OECD (Organization for Economic Cooperation and Development) meeting in Paris, at the forthcoming Williamsburg summit, and at the sixth session of the United Nations Conference on Trade and Development.

5. There have, however, in the recent past been some welcome trends: inflation rates have come down, particularly in some of the larger industrial economies; interest rates have been on the decline, although they remain high in real terms; also, oil prices have fallen; at the same time, some commodity prices have started to rise. All these factors play an important role in the economies of all countries. Furthermore, the beginning of economic recovery in some of the industrial countries will, if sustained and strengthened, be of great significance. The Committee emphasized the need for industrial countries to pursue policies to promote sustainable and noninflationary growth.

6. It was against this background that the Committee deliberated at some length on a few selected topics and measures which, if adopted, will help contribute to a resolution of the difficulties which economies of the industrial and developing countries face at present.

7. In this context, the Committee, taking into account changes in the global demand and supply for external capital, first addressed itself to the need for reviewing the lending programs of multilateral development institutions (MDIs) in the period ahead and examining the consequent implications for their capital requirements. This review was in pursuance of the Committee’s earlier exhortations at the two previous meetings urging the World Bank and other MDIs to continue their study of the scope for expansion in real terms of their lending to developing countries. Taking into account the great importance of maintaining and increasing external financial flows to the developing countries, the Committee noted with satisfaction the recent approval by the Bank’s Board of Executive Directors of a special assistance program designed to be responsive to the current financial requirements of these countries. The Committee invited the Bank to put forward proposals which would, with due regard to financial prudence, allow an expansion of the Bank’s lending program. The Committee noted the Bank management’s intention to propose an expansion by 5 per cent per annum in real terms beginning in 1985. In accordance with past policy and practice of the Bank, the Committee also urged the management of the Bank to present a specific proposal to the Board of Executive Directors for a selective capital increase following and in line with the Eighth General Review of Quotas in the Fund by the time of the next Committee meeting.

8. On the basis of material provided by the regional banks and IFAD (International Fund for Agricultural Development), the Committee took note of their resource needs and urged member governments to take steps to meet the pledges already made. The Committee felt that member governments should seek means of financing the requirements of both ordinary capital and the replenishment of concessional funds for these institutions in order to enable them to continue to play their important role in the development efforts of their member countries.

9. Recognizing that the poorest countries had been most affected by the global recession, the Committee reiterated its concerns about the crucial importance of IDA (International Development Association) in financing the development programs of low-income developing countries. Delays in the availability of IDA-6 commitment authority, its subsequent stretching out to four years, and the resultant reduction in intended annual IDA commitments, particularly during the present prolonged global recession, have already had a serious impact on the low-income developing countries, especially in the poorest nations in sub-Saharan Africa and other regions; coupled with reductions in overall ODA flows in real terms, this requires the maintenance of concessional assistance at reasonable levels in the face of expanded needs. The Committee therefore urged the United States to provide its full third payment of $945 million in fiscal year 1983 and to complete its IDA-6 contribution in fiscal year 1984, recognizing that failure to do so would have serious consequences for safeguarding future levels of concessional assistance.

10. In a related view, the Committee noted that the extremely serious economic predicament of the poorest developing countries required a major effort on the part of donor governments to ensure that the Seventh Replenishment of the Association’s resources (IDA-7) takes account of the need to accommodate an expanded recipient community and the desirability of reversing negative growth rates in IDA’s most distressed borrowing countries. The Committee urged, therefore, that IDA-7 negotiations be completed as early as possible to ensure that the Seventh Replenishment became effective no later than July 1, 1984, and thus avoid another funding gap from arising.

11. The Committee reviewed the growth of developing country debt and expressed its concern about the severity of the debt-servicing problem faced by many of them. While noting the substantial contribution of commercial banks in meeting the severe debt problems faced by some medium-income developing countries over the past several months, the Committee stressed the importance of avoiding an abrupt reduction in the level of international bank lending to developing countries. It welcomed the efforts of the Fund and institutions in the main creditor countries to ensure that a reduction in availability of private bank credit does not impede a smooth and orderly adjustment of the domestic economies of the debtor countries. While noting with satisfaction the prompt response by bilateral and multilateral sources to recent critical situations, the Committee emphasized the necessity of maintaining and increasing financial flows to developing countries from official sources. It also noted the importance for borrowing countries of monitoring their external indebtedness carefully and maintaining sound economic and debt management policies and also welcomed the joint efforts of the Bank and the Fund to increase their assistance provided to member countries in the areas of external debt statistics and debt management. The Committee encouraged the Bank and the Fund to keep the important matter of the net capital flows to developing countries under review.

12. A subject of increasing importance which attracted the Committee’s attention related to the linkages between trade and development. The Committee recognized the interdependence of the world economies and found that global economic recovery was critically important for increasing the foreign exchange earnings of developing countries. The expansion of world trade has made and can continue to make an important contribution to the economic growth and development of both industrial and developing countries. In this connection, the Committee welcomed the intensified efforts of the Bank and the Fund to encourage an expanding and open world trading system while remaining sensitive to the special needs of the developing countries. The Committee urged both institutions to collaborate with the GATT (General Agreement on Tariffs and Trade) in keeping under careful review, in the areas of their competence, the progress made, including inter alia the dismantling of barriers. It also called upon governments to resist protectionist pressures and to step up their efforts, both at the national level and in the relevant international fora, to liberalize trade, urging in particular that governments of industrial countries refrain from introducing restrictions or negotiating agreements which would limit their imports from developing countries. The Committee urged the Bank and the Fund, in continued collaboration with other agencies, to pursue their examination further in the areas of their competence on the linkages between capital flows, trade, and development, and to keep the Committee informed of the results of these examinations.

13. The Committee noted that since its Toronto meeting the Bank has introduced a set of new cofinancing instruments designed to increase the participation of commercial banks in World Bank projects. The new pattern of participation is intended to provide developing country borrowers with new benefits like longer maturities and increased financial flows. The Committee also noted with satisfaction cofinancing arrangements entered into by the Bank with official lenders. This will be of special significance to low-income borrowing members of the Bank.

14. The Committee briefly discussed the subject of lending for energy development. A full consideration of the subject was, however, deferred until receipt of a comprehensive study under preparation by the Bank which will take into account the recent developments and future prospects in this area. A report on this subject will be submitted to the next meeting of the Committee.

15. The Committee agreed to hold its next meeting in Washington, D.C., on September 26, 1983, at the time of the Annual Meetings of the Bank and the Fund.

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