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

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International Monetary Fund
Published Date:
September 1984
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Interim Committee of the Board of Governors on the International Monetary System

Press Communiques

Twenty-First Meeting, Washington, September 25, 1983

1. The Interim Committee of the Board of Governors of the International Monetary Fund held its twenty-first meeting in Washington, D.C., on September 25, 1983, under the chairmanship of Mr. Willy De Clercq, Vice Prime Minister, Minister of Finance, and Minister of Foreign Trade of Belgium. Mr. Jacques de Larosière, 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. In its discussion of the world economic outlook the Committee noted with satisfaction that economic recovery had begun in the United States and Canada and appeared to be getting under way in a number of other industrial countries. The Committee also noted with satisfaction the abatement of inflation and considered that it had been an important factor in supporting the renewed growth of demand.

In present circumstances, therefore, the aim of policy should be to strengthen the recovery through policies that consolidated the progress made toward a more stable economic and financial environment. A crucial element of this strategy was the need to reassert adequate control over fiscal and monetary policies. It was the view of the Committee that excessive monetary growth should be avoided and that structural budget deficits remained too high in a number of countries. Bringing structural fiscal deficits under control would contribute to a more stable and sustainable path of real growth, as would the continuation of determined efforts to reduce market rigidities and structural imbalances.

The Committee discussed the difficult situation facing developing countries, noting that external financial difficulties had required significant restraint over domestic demand. Particular concern was expressed at the prospect that economic growth in these countries in 1983 was once again expected to be lower than the rate of population increase—a downward revision from the figures considered by the Committee at its meeting in February.

The Committee noted that a considerable reduction had already taken place in the current account deficits of non-oil developing countries. Nonetheless, many of these countries still faced an acute debt service problem and further progress would have to be made before their external position could be considered viable. Attention therefore had to be given to encouraging the continued pursuit of realistic adjustment policies and to ensuring adequate flows both of official development assistance and of private bank credit. In this latter connection, coordinated financial arrangements would be required, involving mutually supportive credits from private banks, multilateral organizations, and official lenders.

3. The Committee expressed deep concern about the increasing tendencies toward protectionism. It called on all members to resist, and as soon as possible to rescind, protectionist measures, and stressed the need for the adoption of policies aimed at promoting an open multilateral trade and payments system, which is in the interest of both developed and developing members. In this connection, it called particular attention to the need for all countries, especially heavily indebted developing countries, to have adequate market access, in order to facilitate service of their external debt and at the same time support a reasonable volume of imports.

The Committee was pleased to note that the Fund had intensified its collaboration with the GATT and had placed increased emphasis on the subject of protectionism in the exercise of its surveillance responsibilities. More generally, the Committee reiterated its view that the surveillance activities of the Fund should be maintained and strengthened.

4. The Committee stressed the great importance, in current circumstances, of the Fund’s role in providing balance of payments assistance to the members that engage in adjustment programs—a role that the Fund can perform effectively only if it has sufficient financial resources. In this connection, the Committee noted with concern the increasing strain on the liquidity position of the Fund and the prospect of a reduction in the availability of Fund assistance if additional resources are not assured at an early date. In the light of these developments, the Committee strongly endorsed the Managing Director’s efforts to arrange additional borrowing from official sources to cover the growing gap between the amounts of borrowed resources that the Fund had committed and those available to it under existing credit lines, and expressed the hope that this borrowing can be successfully concluded without delay.

Given the continued serious balance of payments problems of many members, providing the Fund with adequate resources is a key element in ensuring further progress toward adjustment and hence soundly based growth. The Committee emphasized, therefore, the critical importance of bringing into effect before the end of this year, in accordance with the timetable prescribed by the Board of Governors, the quota increases under the Eighth General Review and the revised and enlarged General Arrangements to Borrow that were approved last March. Reaffirming its view that subscriptions under members’ quotas should be the primary source of Fund financing, and recalling that the new quotas could not become effective until increases had been accepted by members having at least 70 percent of total quotas, the Committee expressed concern at the fact that members accounting for only 29.2 percent of total quotas had consented so far. The Committee called on all members that had not yet communicated their consent to complete the steps necessary for this purpose as a matter of urgency.

5. The Committee considered the subject of the access to the Fund’s resources after the quota increase under the Eighth General Review becomes effective, taking note of the temporary and revolving nature of the Fund’s balance of payments support. The conclusions reached by the Committee are set forth in the following paragraphs. A few members of the Committee stated that they did not agree with all the conclusions on the access limits.

  • (a) While noting that adjustment appeared to be under way, the Committee recognized that the needs of many members for the type of temporary balance of payments financing that the Fund provides are and may remain large in relation to their quotas. It concluded, therefore, that the policy on enlarged access, which is of a temporary character, should continue for 1984, in accordance with (b), (c), and (d) below.

  • (b) The access limits and the enlarged access policy will be reviewed yearly to consider the future of the policy, including its termination, its gradual phase-down, or its extension, in light of all relevant factors, including the magnitude of members’ payments problems and developments in the Fund’s liquidity position.

  • (c) Access to the Fund’s resources under the policy during the period of extension specified in (a) will be subject to annual limits of 102 or 125 percent of quota, three-year limits of 306 or 375 percent of quota, and cumulative limits of 408 or 500 percent of quota, depending on the seriousness of the balance of payments needs and the strength of the adjustment effort. These limits would be examined periodically in conjunction with the reviews of the enlarged access policy itself. As at present, the Executive Board should retain the flexibility to approve stand-by or extended arrangements for amounts above the access limits in exceptional circumstances.

  • (d) As at present, the annual and triennial access limits should not be regarded as targets; within these limits, the amount of access in individual cases should vary with the circumstances of the member, in accordance with criteria established for this purpose by the Executive Board.

  • (e) On the question of access to the Fund’s resources under the special facilities after the Eighth General Review becomes effective, some of the members of the Committee would prefer the retention of the present limits. Other members would prefer a lesser amount ranging from 68 to 85 percent. Accordingly, the Committee asked the Executive Board to consider the matter and to reach a conclusion at the earliest possible date. These limits should be reviewed at the time of each review of the enlarged access policy.

  • (f) In implementing its policies on access to its resources, the Fund should be particularly mindful of the very difficult circumstances of the small-quota, low-income member countries.

  • (g) The Committee requested the Executive Board to take, as soon as possible, the necessary action in order to implement the conclusions reached in the Committee.

6. The Committee considered again the question of allocation of SDRs in the current, i.e., the fourth, basic period which began on January 1, 1982. Most members of the Committee were of the view that the recent trends in the state of international liquidity and the conditions of the world economy strengthened the case for an allocation during the current period, while other members were of the view that the case had not yet been made. The Committee agreed that discussions of the issue, which could lead to a proposal by the Managing Director commanding broad support among members of the Fund, should be pursued as a matter of priority.

7. The Committee agreed to hold its next meeting in Washington, D.C., in the spring of 1984.

Annex: Interim Committee Attendance, September 25, 1983

Chairman

Willy De Clercq, Vice Prime Minister, Minister of Finance, and Minister of Foreign Trade for Belgium

Managing Director

  • J. de Larosière

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

  • Rachid Bouraoui, Governor of the Banque Centrale d’Algérie

  • B.T. Chidzero, Minister of Finance, Economic Planning and Development of Zimbabwe

  • Pierre Werner, President of the Government of Luxembourg (Alternate for Willy De Clercq, Vice Prime Minister, Minister of Finance, and Minister of Foreign Trade for Belgium)

  • Jacques Delors, Minister of Economy, Finance and Budget of France

  • Ernane Galvêas, Minister of Finance of Brazil

  • Giovanni Goria, Minister of the Treasury of Italy

  • Paul J. Keating, Treasurer of the Commonwealth of Australia

  • Marc Lalonde, Minister of Finance of Canada

  • Nigel Lawson, Chancellor of the Exchequer of the United Kingdom

  • LU Peijian, Governor of the People’s Bank of China

  • Manmohan Singh, Governor of the Reserve Bank of India (Alternate for Pranab Kumar Mukheijee, 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. 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

  • Gamani Corea, Secretary General, UNCTAD

  • Arthur Dunkel, Director-General, GATT

  • Salah Hamed, Chairman, Intergovernmental Group of Twenty-Four

  • Ghulam Ishaq Khan, Chairman, Development Committee

  • Emile van Lennep, Secretary-General, OECD

  • F. Leutwiler, Chairman of the Governing Board, Swiss National Bank

  • François-Xavier Ortoli, Vice-President for Economic and Financial Affairs, CEC

  • Jean Ripert, Director General for Development and International Economic Cooperation, UN

  • M.V. Samii, Head, International Money and Finance Unit, OPEC

  • Günther Schleiminger, General Manager, BIS

Twenty-Second Meeting, Washington, April 12, 1984

1. The Interim Committee of the Board of Governors of the International Monetary Fund held its twenty-second meeting in Washington, D.C., on April 12, 1984, under the chairmanship of Mr. Willy De Clercq, Vice Prime Minister, Minister of Finance, and Minister of Foreign Trade of Belgium. Mr. Jacques de Larosière, 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 policies required in present circumstances to improve the economic prospects of all members.

The Committee welcomed the recovery of economic activity that is currently under way in industrial countries at a pace faster than was foreseen. It noted, however, that the effects of this recovery on employment had so far been limited outside the United States and Canada. The reductions in inflation rates which had been substantial in many countries were welcomed. The Committee expressed great concern, however, at the possible consequences of recent increases of key interest rates rising from an already high level.

In reviewing economic conditions in the developing countries, the Committee commented favorably on the fact that the rate of growth appears to be picking up in these countries on average, but regarded the continuing low level of that rate, especially in per capita terms, as a danger and a challenge to policy. It was a matter of regret that, in general, little improvement in inflation rates had yet taken place.

During the course of the last year, the volume of international trade increased significantly, and some improvement in the terms of trade of the non-oil developing countries also took place. These changes were welcomed, although they have not compensated for the deterioration in trade conditions suffered by these countries in recent years.

Balance of payments developments and associated exchange rate movements were examined in the context of the linkages between fiscal deficits, levels of public expenditure, current account positions, interest rates, monetary policies, and the distribution of savings in the global economy.

For the industrial world, the Committee felt that prudent monetary and fiscal policies needed to be set in a medium-term framework so as to preserve and improve upon the better price performance of the recent past, while providing scope and incentive for the recovery of capital investment and continuing strength of total demand. In a number of countries a reduction of fiscal deficits in relation to GNP would be helpful in this respect, and this was regarded as a matter of urgency. It was recognized that in most of the industrial countries substantial structural adaptations were needed to improve the conditions of supply, including discipline in government spending and fewer rigidities in labor and capital markets.

The Committee felt that the immediate policy challenge to developing countries was to maintain and strengthen, where necessary, the adjustment efforts that in many of them are already bearing fruit, as manifested by the reduction of the current account deficits of the non-oil developing countries in 1982-83. It was also noted, however, that a significant part of this reduction was due to a compression of imports. The Committee recognized that adjustment programs, if they are not to lead to continued import compression, which would limit the growth potential of debtor countries and could lead to social and political instability, require more open trade and capital markets as well as continued financial cooperation from governments and the international banking community. The Committee also recognized that low-income developing countries depend heavily on grants and concessional loans to support economic adjustment, and these should, along with improved economic policies, be playing a larger role. In this regard, the Committee noted, in particular, the plight of sub-Saharan Africa whose problems have been exacerbated by natural disasters and require concerted action on the part of the international community.

The Committee stressed that the economies of the developed and developing countries were closely linked and that the policies of each group vitally influenced the economies of the other.

The Committee expressed its profound concern over the growth of protectionist practices, recognizing that they inhibit the expansion of trade, the adjustment efforts of both developed and developing countries, the control of inflation, and the improvement of living standards worldwide. It was also noted that protectionist pressures in major industrial countries were of particular concern in this regard, in view of the large weight of these countries in world trade. The Committee welcomed the increased attention given to the problem of protectionism in the Fund’s surveillance activities, which can help to support the efforts of the GATT and other competent institutions to promote an open trading system. The improvement of trade opportunities, particularly for the heavily indebted countries, will help to lay the foundation for a more broad-based economic recovery and strengthen the international financial system. The Committee urged members to take action that would contribute to global trade liberalization, and to examine within their respective governments how they could move toward enunciation of a clear, practical policy commitment that would effectively halt the present trend and pave the way for a rollback in protectionism. The Committee expressed the view that in this way a concrete meaning could be given to the recent antipro-tectionist pledges made by governments in several international forums, thereby instilling confidence in the shared objective of promoting an open multilateral trading system.

3. The Committee, while recognizing the progress made in the cooperative efforts to deal with the problems of international indebtedness, drew attention to the serious difficulties that continue to beset many member countries. In this respect, the Committee stressed that the debt problems of many developing countries remained serious. High interest rates continue to strain debt-servicing capacity, jeopardizing adjustment efforts. The Committee agreed that a satisfactory resolution of these difficulties would continue to require close cooperation among all parties concerned. Above all, many member countries would need to direct their efforts toward achieving a viable external position. Their success would depend upon the pursuit by all member countries of policies that would contribute to an environment of sustained noninflationary economic growth and would help to promote an open trading system and the efficient movement of capital, keeping in view the special needs of developing countries. In this connection, the Committee stressed the vital role that the Fund has played, and should continue to play, in these endeavors.

4. The Committee welcomed the considerable strengthening of the Fund’s liquidity as a result of the implementation of the quota increases under the Eighth General Review and the augmentation of the GAB, including the full participation by the Swiss National Bank and the conclusion of a borrowing arrangement with Saudi Arabia in association with the GAB. It noted with satisfaction that further borrowing agreements for SDR 6 billion in support of the Fund’s policy on enlarged access were in the process of being concluded by the Fund.

5. The Committee also reiterated the concerns it had expressed last September about the special needs of small-quota, low-income countries as regards access to the Fund’s resources.

6. The Committee considered again the question of an allocation of SDRs in the current, i.e., the fourth, basic period against the background of the state of international liquidity and the conditions of the world economy.

Most members of the Committee were convinced that there was increased evidence for an SDR allocation, pointing out that, in their view, an allocation in present circumstances would be in full conformity with the requirements of the Fund’s Articles, and would strengthen the world economy and the international monetary system. Some other members of the Committee, however, continued to feel that a global liquidity shortage had not been demonstrated.

No conclusion was reached at this meeting, but it was agreed that the Executive Board should continue, before the next meeting of the Interim Committee, its urgent examination of the issues involved, and that the Managing Director should present a further report at the next meeting of the Committee on the outcome of the Executive Board’s discussions.

7. The Committee agreed to hold its next meeting in Washington, D.C., on September 22, 1984.

Annex: Interim Committee Attendance, April 12, 1984

Chairman

Willy De Clercq, Vice Prime Minister, Minister of Finance, and Minister of Foreign Trade for Belgium

Managing Director

  • J. de Larosière

Members or Alternates

  • Hamad Al-Sayari, Acting Governor, Saudi Arabian Monetary Agency (Alternate for Mohammad Abal-Khail, Minister of Finance and National Economy, Saudi Arabia)

  • Hassan Al-Najafi, Governor, Central Bank of Iraq

  • Rachid Bouraoui, Governor, Banque Centrale d’Algérie

  • B.T. Chidzero, Minister of Finance, Economic Planning and Development, Zimbabwe

  • Holger Bauer, State Secretary, Ministry of Finance, Austria (Alternate for Willy De Clercq, Vice Prime Minister, Minister of Finance, and Minister of Foreign Trade for Belgium)

  • Michel Camdessus, Director of the Treasury, Ministry of Economy, Finance and Budget, France

  • Ernane Galvêas, Minister of Finance, Brazil

  • Giovanni Goria, Minister of the Treasury, Italy

  • Bernardo Grinspun, Minister of Economy, Argentina

  • C.J. Hurford, Minister for Housing and Construction and Minister assisting the Treasurer, Australia (Alternate for Paul J. Keating, Treasurer, Australia)

  • Marc Lalonde, Minister of Finance, Canada

  • Nigel Lawson, Chancellor of the Exchequer, United Kingdom

  • Benito Raul Losada, President, Banco Central de Venezuela

  • QIU Qing (Mrs.), Vice President, People’s Bank of China (Alternate for LU Peijian, President, People’s Bank of China)

  • Pranab Kumar Mukherjee, Minister of Finance, India

  • Radius Prawiro, Minister of Finance, Indonesia

  • Kjell Storvik, Under Secretary, Ministry of Finance, Norway (Alternate for Rolf Presthus, Minister of Finance, Norway)

  • Donald T. Regan, Secretary of the Treasury, United States

  • H.O. Ruding, Minister of Finance of the Netherlands

  • SAMBWA Pida Nbagui, Governor, Banque du Zaïre

  • Gerhard Stoltenberg, Federal Minister of Finance, Germany

  • Haruo Mayekawa, Governor, Bank of Japan (Alternate for Noboru Takeshita, Minister of Finance, Japan)

Observers

  • A.W. Clausen, President, IBRD

  • Ali K. Hussain, International Money and Finance Analyst, Economics and Finance Department, OPEC

  • Ghulam Ishaq Khan, Chairman, Development Committee

  • Alexandre Lamfalussy, Assistant General Manager, BIS

  • Emile van Lennep, Secretary-General, OECD

  • F. Leutwiler, Chairman of the Governing Board, Swiss National Bank

  • M.G. Mathur, Deputy Director-General, GATT

  • François-Xavier Ortoli, Vice-President for Economic and Financial Affairs, CEC

  • Jan Pronk, Deputy Secretary General, UNCTAD

  • Jean Ripert, Director-General, Development and International Economic Cooperation, UN

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 Communiques

Twenty-Second Meeting, Washington, September 26, 1983

1. The Development Committee held its twenty-second meeting in Washington, D.C., on September 26, 1983, under the chairmanship of His Excellency Ghulam Ishaq Khan, Minister of Finance, Commerce and Economic Coordination of Pakistan. Mr. A.W. Clausen, President of the World Bank, Mr. J. de Larosière, 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’s discussions took place against the background provided by the World Development Report, 1983 of the World Bank and the World Economic Outlook of the IMF. A report by the President of the World Bank highlights some specific development issues. The Committee took note of the discussion in the Interim Committee on the global economic situation and agreed that though economic recovery had begun in the United States and appeared to be getting under way in a number of other industrialized countries, the situation facing developing countries remained difficult and that external financial difficulties had required significant restraint on domestic demand in these countries. Particular concern was expressed at the prospect that economic growth in the developing countries in general in 1983 was once again expected to be lower than the rate of population increase.

3. The challenge in the period ahead is how recovery can be sustained, strengthened, and extended in a noninflationary environment. The recovery in the industrialized countries is a necessary but not a sufficient condition for restoring growth momentum in the developing world. In that context, the subject of capital flows to the developing countries, both nonconcessional and concessional, and both public and private, was discussed. In particular, members agreed on the need, in accordance with past policy and practice, to take early action on a selective capital increase for the World Bank following and in line with the Eighth General Review of Quotas in the Fund. A range of $3 billion to $20 billion was discussed. Most members agreed to a selective capital increase of about $8 billion and requested that Executive Directors work out the specifics with the aim of submission to the Board of Governors by the end of this calendar year.

4. The Committee also welcomed the intention of the World Bank management to prepare proposals concerning the future role of the Bank and the implications for longer-term capital requirements, including the need for a general capital increase. These subjects will be considered by the Bank’s Executive Board in the months ahead. The Committee invited the Executive Board to report on these discussions to the Development Committee meeting in September 1984.

5. The needs of low-income developing countries, dependent on official development assistance (ODA) were discussed, including the status of the negotiations of IDA 7. No progress was made in the recent negotiations on IDA 7 which were held on September 24, 1983. This was regrettable since the urgency of concluding IDA 7 negotiations by the end of this year was unanimously accepted. Ministers recognized that the size of IDA 7 should be agreed at a realistic level which recognizes the needs of an expanded IDA recipient community faced with an extremely serious economic predicament and the budgetary constraints of donor countries.

6. The difficult economic circumstances and prospects of sub-Saharan Africa were considered, based on a review of recent World Bank reports. It was noted that a number of countries in this region had adjustment programs under way. Considering the severe decline in the income per capita experienced by these countries, and in order to help sustain and extend the process of domestic economic policy reform, Ministers agreed on the priority attached to an increase of the share these countries receive in external assistance on concessional terms. The Committee urged the World Bank to continue to give particular attention to the problems of sub-Saharan Africa.

7. The Committee agreed on the importance of encouraging direct private investment, especially in the poorer countries, and noted the intention of the Bank management to propose expanding the investment program of the International Finance Corporation (IFC) during fiscal years 1984-1988 with a capital increase of $750 million. This would expand capital flows from the World Bank Group to the private sector in the developing countries. The proposal will be considered by the Executive Directors in the next several months.

8. The Committee reviewed a progress report on energy development and the role of the World Bank in helping mobilize additional funds for this purpose. The Committee took note of the growing heed for these additional funds by developing countries for energy development.

9. The Committee also considered brief progress reports from the Bank and the Fund on the subject of trade and promotion of development, first taken up at its last meeting in April 1983. The Committee agreed to discuss this subject further at its next meeting. In the meantime the Committee urged all trading nations to reduce their reliance on protectionism.

10. The draft of the Annual Report on the work of the Committee during the year July 1982 to June 1983 was approved by the Committee for submission to the Boards of Governors.

11. An oral progress report from the Chairman of the Task Force on Concessional Flows set up in 1982 by the Committee to study problems affecting the volume, quality, and effective use of concessional flows was also received.

12. The Committee agreed to meet again in the spring of 1984.

Twenty-Third Meeting, Washington, April 13, 1984

1. The twenty-third meeting of the Development Committee was held in Washington, D.C., on April 13, 1984 under the chairmanship of His Excellency Ghulam Ishaq Khan, Minister of Finance, Commerce and Economic Coordination of Pakistan. Mr. A. W. Clausen, President of the World Bank, Mr. J. de Larosière, 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.

2. The Committee discussed the status of IDA and the linkages between trade and development against the background of the world economic outlook as projected in the Fund document and the report by the President of the World Bank. It was noted that while the world economic situation is more promising than a year ago, the achievement of sustained growth and its extension to developing countries require improved policy performance by both the developed and developing countries, an increase of private and official capital flows, and improved trade prospects.

3. Ministers recalled that at their last meeting most members had agreed on a Selective Capital Increase (SCI) for the World Bank of about $8 billion. In the process of negotiating the SCI, agreement was reached on the relative contributions of major donors to IDA 7. The Committee noted the agreement reached among most of the major shareholders on share ranking in the IBRD which had facilitated the agreement on the IDA 7 replenishment. While concern was expressed by members that action on IDA 7 and the SCI had not yet been taken, they were encouraged by the willingness of major shareholders to work toward resolving as quickly as possible the outstanding issues. Ministers urged that shareholders exert maximum effort to obtain the necessary approvals so that the implementing resolutions for the Seventh Replenishment and the Selective Capital Increase could be considered by the Executive Boards and approved by the Governors in time to permit the legislative action needed if IDA 7 is to become effective on July 1, 1984.

4. All donors but one expressed concern at the implications of a $9 billion replenishment, an amount well below the $12 billion level supported by most. All members except one pointed to the inadequacy of the $9 billion replenishment, which represents a sharp decline in real terms in relation to IDA 6. Most members asked for accelerated action by IDA management and donors to mobilize up to $3 billion in a Supplementary Funding Arrangement to be available by July 1, 1984. All donors were urged to participate in this fund on the basis of fair burden sharing.

5. The Committee looks forward at its next meeting to suggestions from World Bank management concerning the future role of the Bank and the implications for longer-term capital requirements, keeping in mind the need for a general capital increase. The Committee welcomed progress in the preparation of an expanded investment program for the International Finance Corporation (IFC) through a management proposal of a $750 million capital increase and called for early action by the IFC Executive Board.

6. In reviewing the world economic outlook, the Committee took note of the difficulties developing countries continued to experience despite recovery in many industrialized countries. The Committee welcomed the recovery of economic activity that is currently under way in industrial countries at a pace faster than was foreseen. It noted, however, that the effects of this recovery on employment had so far been limited outside the United States and Canada. The reductions in inflation rates which had been substantial in many countries were welcomed. The Committee expressed great concern, however, at the possible consequences of recent increases of key interest rates rising from an already high level. In reviewing economic conditions in the developing countries, the Committee commented favorably on the fact that the rate of growth appears to be picking up in these countries on average, but regarded the continuing low level of that rate, especially in per capita terms, as a danger and a challenge to policy. It was a matter of regret that, in general, little improvement in inflation rates had yet taken place.

7. The Committee paid special attention to the critical situation faced by the sub-Saharan African countries. The Committee expressed concern at the grim prospects for the region, reflected in a continued decline in per capita incomes for many African countries, a weakening in external payments positions, depressed commodity prices, a burdensome debt situation, and, against rapidly rising population growth, a crisis in food production, bordering on famine. These negative features had been exacerbated by continuing severe drought conditions which had now extended to southern Africa, creating human and economic problems of major proportions. It was agreed that increased concessional assistance was urgently needed from both bilateral and multilateral sources to address the immediate problem of food availability and its distribution and to support domestic policies aimed at improving sub-Saharan Africa’s long-term development prospects.

8. The Development Committee reiterated its earlier view that Africa should continue to receive high priority in the allocation of IDA resources. It was noted, however, that with a replenishment level of $9 billion, it would be difficult to provide adequate IDA resources to sub-Saharan Africa, taking into account the needs of other low-income countries. The Committee welcomed an undertaking by the Bank/IDA management to prepare a program for Africa for the September 1984 meeting of the Development Committee to guide the Bank and the international community in helping sub-Saharan Africa deal with its severe human, social, and economic problems.

9. The Committee held an extensive discussion on the linkages between trade, finance, and development, on the basis of background papers prepared by the Bank and Fund staffs. While the Committee noted with satisfaction that exports had begun to revive, it expressed serious concern regarding the continuing rise in protectionism which is making more difficult the orderly implementation of the adjustment process in all countries, developing and developed. Moreover, for some heavily indebted developing countries relying on the openness of markets, protectionism has aggravated their serious balance of payments problems, making it more difficult for them to service their debt in an orderly fashion. The increase in trade barriers is also retarding the much needed structural adjustment in both developed and developing countries. The Committee emphasized that expanded trade opportunities, including more remunerative prices for primary commodities, would provide a critical impetus to the extension of world economic recovery and contribute to restoring the long-term growth and development prospects of developing countries. Trade liberalization and improved domestic economic policies in all countries, together with enlarged flows of external finance to developing countries, are mutually reinforcing actions which would help accelerate growth momentum of developing countries.

10. The Committee invited all governments to step up their efforts to seek effective solutions to the current problems in international trade relations, bearing in mind the special needs of the developing countries. The Committee welcomed the indications of a growing interest among governments in launching a new round of multilateral trade negotiations under the aegis of the GATT, which should continue to play the central role in efforts to bring about a more open trading system. These negotiations should consider dismantling nontariff barriers and other measures affecting the trade of developing countries. The Committee considered that it could usefully supplement these efforts by playing a more active part in strengthening governments’ resistance to protectionist pressures and encouraging trade liberalization. Accordingly, it invited members to discuss in future meetings progress reached on improvements in trade opportunities, particularly for the developing countries. It also invited the Director-General of the GATT, at the Committee’s future meetings, to present his appraisal of progress in measures to strengthen the multilateral trading system and to liberalize trade affecting developing countries. The Committee urged the Bank and the Fund to continue their efforts to encourage an expanding and open world trading system. The Committee considered that, by keeping under review the linkages between trade and the promotion of development, it could provide continuing support to the work of the GATT and the UNCTAD, and thereby help ensure the coherence and consistency of actions in the international financial and trade fields.

11. The Committee expressed its satisfaction with the progress achieved so far by the international community in addressing the debt problem of developing countries. The Committee requested that the Fund and the Bank continue to examine the debt problem of developing countries.

12. The Committee also took note of a study on investment incentives and performance requirements undertaken by the World Bank on the recommendation of the Task Force on Private Foreign Investment. The study will facilitate a better understanding of the impact and choice of policies pertaining to international direct private investment.

13. The Committee appointed Mr. Fritz Fischer to succeed the present Executive Secretary, Mr. Kastoft, with effect from July 1, 1984, and placed on record its appreciation of the services rendered by him.

14. The Committee agreed to meet again on September 23, 1984 in Washington, D.C.

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