APPENDIX V: Press Communiqués of the Interim Committee and the Development Committee
- International Monetary Fund
- Published Date:
- January 1991
Interim Committee of the Board of Governors on the International Monetary System PRESS Communiqués
Thirty-Fifth Meeting, Washington, September 23-24, 1990
1. The Interim Committee of the Board of Governors of the International Monetary Fund held its thirty-fifth meeting in Washington, D.C. on September 23-24, 1990 under the chairmanship of Mr. Michael H. Wilson, Minister of Finance of Canada. Mr. Michel Camdessus, Managing Director of the International Monetary Fund, participated in the meeting, which was also attended by observers from a number of international and regional organizations and from Switzerland.
2. The Committee noted that, after several years of rapid expansion, growth is continuing, albeit at a slower pace. The recent rise in the world price of oil, were it to continue, may contribute to cost-price pressures and moderate growth, especially in oil importing countries.
It is therefore important that fiscal and monetary policies continue to focus on improving the conditions for strong, sustainable non-inflationary growth over the medium term. Attempts to insulate domestic energy prices through subsidies or price controls, or to compensate for higher oil prices by increasing nominal wages, would only serve to fuel inflationary expectations and require, at a later stage, tighter fiscal and monetary policies. While the consequences of recent developments in the Middle East are likely to complicate the task of fiscal consolidation in a number of countries, the need for credible actions to lower fiscal deficits remains urgent. Stability-oriented monetary policy has a crucial role to play in preventing a wage-price spiral. It is also essential that both industrial and developing countries continue to implement structural reforms aimed at fostering energy conservation, boosting saving and capital formation and increasing efficiency through enhanced competition and liberalization of trade and domestic markets.
Such a policy stance in the face of recent events would contribute to strengthening the medium-and long-term outlook for the world economy and would help to maximize the gains expected from the accelerated integration of the European Community, the German unification, and the far-reaching changes now taking place in Central and Eastern Europe.
3. The Committee stressed that the resilience of the world economy and the success of market-oriented reforms and adjustment efforts in Central and Eastern Europe and in developing countries all depend importantly on an open, transparent, and competitive trading system. In this context, it strongly emphasized the vital importance of a successful Uruguay Round in reducing further the barriers to trade, in establishing trading rules and disciplines for the future, and in bringing into the multilateral trading system areas that have largely remained outside its framework. While welcoming the progress that has been made in certain areas of the Round, the Committee expressed deep concern over delays and noted that differences have yet to be resolved on several issues that are crucial to an overall agreement. The Committee urged all participants in the negotiations to make every effort to ensure a timely and successful conclusion of the Round and thereby create the conditions for higher rates of economic growth world wide.
4. The Committee welcomed the continuing examination by the Executive Board of major issues in the evolving international monetary system, including the implications of policies of major countries, the progress toward European Monetary Union, and the prospects for further moves toward convertibility in Eastern Europe, as well as work on exchange rate systems and on the determinants and systemic consequences of capital flows. The Committee emphasized the central responsibility of the Fund for evaluating continuously the functioning of the international monetary system and identifying improvements that could be implemented, especially through its bilateral and multilateral surveillance activities, support for the process of policy coordination, technical assistance, and its readiness to alleviate global liquidity shortages should they arise.
5. The Committee noted that once again unexpected events have adversely affected the world economy. The Committee welcomed the international efforts of individual countries to provide immediate and medium-term economic assistance to those countries seriously affected by the Persian Gulf crisis. It encouraged the Executive Board to continue to explore how the Fund can best support members’ efforts to deal with recent developments, including the increase in oil prices. Committee members noted that the Fund is well equipped to help members formulate appropriate and strong adjustment policies and catalyze support from other sources. The Committee agreed that the Fund should respond on an expedited basis to present difficulties through use and, as appropriate, adaptations of its existing instruments, including access to stand-by and extended arrangements, the Compensatory and Contingency Financing Facility, and the Enhanced Structural Adjustment Facility. The Committee invited the Executive Board expeditiously to develop the modalities of these adaptations and to take account of the requirements of current circumstances in tailoring members’ access to Fund resources, including ways to address the problems of certain members in servicing such new debt. The Committee hoped that all members that are in a position to do so will collaborate in these efforts to assist members that are severely affected by current developments in the Middle East.
6. The Committee welcomed the progress made by a number of heavily indebted countries in undertaking measures designed to restore macroeconomic balance and re-establish the conditions for sustained growth. The successful experience of these countries illustrates the central importance for members with debt difficulties of adopting policies to improve efficiency and to foster saving, investment, and private capital inflows, including a return of flight capital. It underscores also the crucial role of prompt and adequate external financing in support of such policies. The early and successful conclusion of financing arrangements in the context of the strengthened debt strategy has been a key element in fostering an improved economic performance in heavily indebted countries. The timely assistance of the Fund and the World Bank to these members in support of growth-oriented adjustment programs is of critical importance in their efforts to normalize relations with all external creditors and mobilize the necessary additional financial resources.
In this light, the Committee noted with concern the difficult prospects facing many low-income and lower middle-income countries indebted mainly to official creditors, and the likely worsening of payments imbalances in many countries on account of the recent developments in the Middle East, the Committee urged those countries to adopt and sustain the necessary corrective policies. The Committee also noted with concern the slow progress of some negotiations between commercial banks and members. With respect to commercial bank financing packages, it called on all parties concerned to expedite negotiations and resolve outstanding arrears problems. As regards official bilateral debts, the Committee welcomed the continuing support of creditors for members’ efforts to pursue adjustment and regain external viability. It noted in that connection the helpful actions taken by some creditor countries to provide new money or to reduce debt and debt service burdens, including through cancellation of official development assistance obligations. It also welcomed the recent decisions of the Paris Club to permit debt/equity and other debt conversion in reschedulings and to extend longer repayment periods on a case-by-case basis to lower middle-income countries, as well as the continuing review of additional options. It invited the Paris Club to consider recent initiatives and proposals to enlarge the scope of official debt relief. The Committee welcomed the U.S. effort to implement the “Enterprise for the Americas Initiative” designed to promote investment, growth, and debt reduction in Latin America.
7. The Committee welcomed the progress achieved in some Central and Eastern European countries in reducing imbalances and observed that the process of structural change on which the region is embarking will require action in many fields—particularly in light of recent oil market developments—and over an extended period. Safety nets will be necessary to protect the vulnerable segments of society. It will be important for these economies to be opened to foreign trade and investment as rapidly as possible. While remaining mindful of the need to continue to address the needs of other countries facing similar difficulties, the international community should support the programs of stabilization and reform of these countries by improving the access of their exports to world markets and increasing its financial and technical assistance. In this connection, the support provided by national governments and regional and multilateral institutions, and its effective coordination, were welcomed.
The Committee welcomed the entry of the Czech and Slovak Federal Republic and the prospective entry of Bulgaria and Namibia into the Bretton Woods institutions. Together with the membership applications of Mongolia and Switzerland, these developments enhance the universal character of the Fund and the Bank.
8. The Committee welcomed the role of the Fund in convening work, undertaken jointly with the World Bank, the OECD and the designated President of the EBRD, and in close consultation with the Commission of the European Communities, on a detailed study of the economy of the Soviet Union.
9. The Committee stressed the importance of bringing into effect the quota increases under the Ninth General Review at the earliest possible date, particularly in view of recent events and uncertainties in the world economy. The Committee called upon all members to consent to the quota increase and accept the associated Third Amendment of the Articles of Agreement as soon as possible.
10. The Committee agreed to hold its next meeting in Washington, D.C. on April 29, 1991.
Annex: Interim Committee Attendance
September 23-24, 1990
Michael H. Wilson, Minister of Finance, Canada
Managing Director Michel Camdessus
Members or Alternates
Mohammad Abalkhail, Minister of Finance and National Economy, Saudi Arabia
Abubakar Alhaji, Minister of Finance and Economic Development, Nigeria
Pierre Bérégovoy, Minister of State for Economy, Finance, and the Budget, France
Nicholas F. Brady, Secretary of the Treasury, United States Zelia Maria Cardoso de Mello, Minister of Economy, Finance and
Planning, Brazil Guido Carli, Minister of the Treasury, Italy Madhu Dandavate, Minister of Finance, India Antonio Erman Gonzalez, Minister of Economy, Argentina Abderrahmane Hadj-Nacer, Governor, Banque Centrale d’Algerie Ryutaro Hashimoto, Minister of Finance, Japan Simon Crean, Minister of Science and Technology and Minister Assisting the Treasurer, Australia (Alternate for Paul J. Keating, Deputy Prime Minister and Treasurer, Australia) Wim Kok, Deputy Prime Minister and Minister of Finance,
Netherlands Rolf Kullberg, Governor, Bank of Finland CHEN Yuan, Deputy Governor, People’s Bank of China (Alternate for LI Guixian, State Councillor and Governor of the People’s Bank of China) John Major, Chancellor of the Exchequer, United Kingdom Philippe Maystadt, Minister of Finance, Belgium Adrianus Mooy, Governor, Bank of Indonesia PAY PAY wa Syakassighe, Governor, Banque du Zaïre Abdul Malik A1 Hamar, Governor, United Arab Emirates Central Bank (Alternate for Mohammed Mehdi Saleh, Acting Minister of Finance, Iraq) Pedro R. Tinoco, Jr., President, Banco Central de Venezuela Theo Waigel, Federal Minister of Finance, Germany John W. Crow, Governor, Bank of Canada (Alternate for Michael H. Wilson, Minister of Finance, Canada)
Rafeeuddin Ahmed, Under-Secretary-General for International
Economic and Social Affairs, UN Horst Bockelmann, Economic Adviser and Head of the Monetary and Economic Department, BIS
B.T.G. Chidzero, Chairman, Development Committee Henning Christophersen, Vice President, CEC Barber B. Conable, President, World Bank Kenneth K.S. Dadzie, Secretary-General, UNCTAD Arthur Dunkel, Director General, GATT
Markus Lusser, Chairman of the Governing Board, Swiss National Bank
Izevbuwa Osayimwese, Head, Economics and Finance Department, OPEC
Jean-Claude Paye, Secretary-General, OECD
Thirty-Sixth Meeting, Washington, April 29-30, 1991
1. The Interim Committee of the Board of Governors of the International Monetary Fund held its thirty-sixth meeting in Washington, D.C. on April 29-30, 1991 under the chairmanship of Mr. Michael H. Wilson, Minister of Industry, Science and Technology and Minister for International Trade of Canada. Mr. Michel Camdessus, Managing Director of the International Monetary Fund, participated in the meeting, which was also attended by observers from a number of international and regional organizations and from Switzerland. The Committee accepted with regret the resignation of Mr. Wilson as Chairman. It expressed its warmest thanks for his contribution to the work of the Committee and wished him well in his new responsibilities.
2. The Committee observed that the spike in oil prices in the second half of last year and the uncertainty triggered by the Middle East crisis had added to the weakening of world economic activity that had become manifest during the course of 1990. There was a general view that growth would be slow in 1991 but that it would be stronger in 1992 and be accompanied by a moderation of inflation.
The Committee agreed that monetary and fiscal policies should be directed toward providing a basis for lower real interest rates and sustained global economic recovery with price stability. The Committee also agreed on the importance of increasing global savings. To help further these objectives, the Committee welcomed recent budgetary actions in several countries and urged other countries to increase efforts to strengthen their fiscal positions. These policy actions would need to be complemented by structural reforms aimed at increasing economic efficiency, particularly those designed to foster greater competition and remove distortions affecting private saving, investment, and the allocation of capital. Such a medium-term strategy was crucial to raising investment and growth in both industrial and developing countries and to addressing the new challenges of reform and reconstruction.
3. The Committee commended the prompt action of the Fund to assist countries seriously affected by the crisis in the Middle East. As for some countries in the region itself, the effects of the crisis had compounded imbalances and structural maladjustments that predated recent events. The Fund needed to play its traditional key role through its policy advice, balance of payments support, and mobilization of financial and technical assistance in helping those countries adopt appropriate macroeconomic and structural adjustment policies.
4. The Committee welcomed the comprehensive efforts of Eastern European countries at introducing market based systems. Despite the initial output and employment losses the Committee was of the view that strong and all-encompassing reforms in these countries were the best way to achieve sustainable growth and full integration into the world economy. The Committee regarded the financial and technical support provided by national governments and international institutions as essential at this stage. Foreign private capital nevertheless would be expected to play an increasingly important, and eventually decisive, role in meeting the financing and technical assistance requirements of these countries, provided tangible progress was made toward a stable economic environment hospitable to private enterprise.
5. The Committee was encouraged by the perseverance of a number of developing countries in pursuing comprehensive policy and structural reforms. The Committee emphasized the indispensable role of adequate and timely external financing in support of such policies, including in countries that had avoided debt servicing difficulties. It welcomed the progress achieved by several heavily indebted members in putting in place bank financing arrangements. At the same time, the Committee noted that difficult cases remained and urged all parties to expedite negotiations. The Committee also underscored the importance of sustained support by official bilateral creditors. Concerning the poorest countries, the Committee welcomed the ongoing review in the Paris Club of recently suggested adaptations to debt restructuring and reduction practices designed to assure appropriate support for members embarked on comprehensive reforms.
6. The Committee viewed with concern the slow progress in the Uruguay Round and urged all members to work with determination toward its prompt and successful conclusion, noting the threats that failure would pose to the global economy. It stressed the importance of a favorable international trading environment and of transparent rules for the trade liberalization and reform efforts of developing and Eastern European countries. It emphasized the responsibility of the industrial countries for opening their own markets, in order to ensure the success of these efforts.
7. The Committee noted the significant increase in the number of member countries seeking Fund support for their adjustmet efforts and the attendant sharp rise in demand for Fund resources. These developments underlined the need for bringing into effect the quota increases under the Ninth General Review of Quotas as soon as possible. The Committee noted with satisfaction that a number of members had already consented to the quota increase and accepted the associated Third Amendment of the Articles of Agreement It urged other members to move speedily toward consent and acceptance.
8. The Committee encouraged the Executive Board to continue its analysis of developments and of key issues in the functioning of the international monetary system. The Committee emphasized the positive contribution that policy coordination is making to the evolution of the system. It urged the Executive Board to study further improvements that could be implemented and to keep the role of the SDR under review.
9. The Committee agreed to hold its next meeting in Bangkok, Thailand, on October 13, 1991.
Annex: Interim Committee Attendance
April 29-30, 1991
Michael H. Wilson, Minister of Industry, Science and Technology, and of International Trade, Canada
Managing Director Michel Camdessus
Members or Alternates
Mohammad Abalkhail, Minister of Finance and National Economy, Saudi Arabia
Abubakar Alhaji, Minister of Finance and Economic Development, Nigeria
Abdul Malik A1 Hamar, Governor, United Arab Emirates Central Bank
Pierre Bérégovoy, Minister of State for Economy, Finance and the Budget, France
Nicholas F. Brady, Secretary of the Treasury, United States Zelia Maria Cardoso de Mello, Minister of Economy, Finance and Planning, Brazil
Guido Carli, Minister of the Treasury, Italy Domingo Felipe Cavallo, Minister of Economy, Argentina Abderrahmane Hadj-Nacer, Governor, Banque Centrale d’Algerie Ryutaro Hashimoto, Minister of Finance, Japan Anwar Ibrahim, Minister of Finance, Malaysia R.F. McMullan, Parliamentary Secretary to the Treasurer, Australia (Alternate for Paul J. Keating, Deputy Prime Minister and Treasurer, Australia)
W. Kok, Deputy Prime Minister and Minister of Finance, Netherlands
Rolf Kullberg, Governor, Bank of Finland Norman Lamont, Chancellor of the Exchequer, United Kingdom TONG Zengyin, Deputy Governor, People’s Bank of China (Alternate for LI Guixian, State Councillor and Governor of the People’s Bank of China) Philippe Maystadt, Minister of Finance, Belgium Donald Mazankowski, Deputy Prime Minister and Minister of Finance, Canada
NYEMBO Shabani, Governor, Banque du Zaïre Yashwant Sinha, Minister of Finance, India Carlos Solchaga, Minister of Economy and Finance, Spain Theo Waigel, Federal Minister of Finance, Germany
Rafeeuddin Ahmed, Under-Secretary-General for International Economic and Social Affairs, UN
S. Balabanoff, Head, Economics Section, Economics and Finance Department, OPEC
Horst Bockelmann, Economic Adviser and Head of the Monetary and Economic Department, BIS
Henning Christophersen, Vice President, CEC
Barber B. Conable, President, World Bank
Kenneth K. S. Dadzie, Secretary-General, UNCTAD
Arthur Dunkel, Director General, GATT
Alejandro Foxley, Chairman, Development Committee
Markus Lusser, Chairman of the Governing Board, Swiss National Bank
Jean-Claude Paye, Secretary-General, OECD
Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries (Development Committee)
PRESS Communiqués Thirty-Ninth Meeting, Washington, September 24, 1990
1. The Development Committee met in Washington, D.C. on September 24, 1990 under the chairmanship of the Hon. B.T.G. Chidzero, Senior Minister of Finance, Economic Planning and Development of Zimbabwe.1
2. The Committee met at a time when the economic prospects of many developing countries were being affected adversely, particularly by the disruption of trade and workers’ remittances and the increase in the price of oil resulting from the events in the Middle East as well as by the economic slowdown in some industrial countries, higher interest rates, and the weakening in non-oil commodity prices. It welcomed the efforts currently underway to coordinate the distribution of financial resources for those developing countries affected by the Middle East crisis. Members welcomed the recent suggestions made by the managements of the Bank and the Fund on the response of their respective institutions. They recommended that the Boards of Executive Directors at the Bank and the Fund commence, on an expedited basis, a comprehensive review of measures that would enable them to respond promptly, flexibly and with expanded resources to the current situation. They agreed that experience shows that strong and rapid adjustment measures by affected countries are essential for maintaining internal and external balances. They also stressed that the impact of the Middle East crisis underlines the need to address development issues even more vigorously, including those considered at this meeting.
3. Noting the continuing severity of poverty problems in developing countries, the Committee agreed that the objective of a sizable reduction in the incidence of poverty is the highest priority for the international development community. Members also agreed that a broad consensus is emerging on strategies to be pursued toward the achievement of this goal. They welcomed the contribution of the 1990 World Development Report and the work of the Bank and the Fund in support of this process.
4. The Committee agreed that governments of developing countries have the primary responsibility for achieving the objective of poverty reduction. Members stressed that this objective would be most effectively achieved through the adoption of national development strategies, including sound macroeconomic and structural policies, which:
(a) encourage sustainable growth that increases income earning opportunities for the poor; and
(b) develop the human resources of the poor, particularly through broad access to education, health, and family planning services.
Members also stressed that the above strategies should be supplemented by social safety net programs, selectively targeted to those in need and consistent with growth-oriented adjustment and development policies. The Committee encouraged all parties concerned to discuss their poverty reduction approaches, programs, and goals in the framework of their policy dialogue. Members also agreed that good governance and involvement of the poor in the design and execution of development projects and programs are key elements for the effectiveness of poverty reduction efforts.
5. The Committee emphasized that the poverty reduction efforts of developing countries should be supported and complemented by developed countries in a consistent manner, through increased official flows, as well as through sound macroeconomic, structural, and open trade policies. Members agreed that aid donors and multilateral development agencies should examine their operational policies to ensure that their external assistance more fully supports the implementation of recipient countries’ national development strategies aimed at lasting poverty reduction, thus improving the quality of aid. In this connection, members welcomed the commitment of the President of the World Bank to submit to the Bank’s Board of Executive Directors, for its early consideration, proposals for fully translating the conclusions of the 1990 World Development Report into the Bank’s operational practice.
6. The Committee reaffirmed its support for the strengthened debt strategy and welcomed the number of debt and debt service reduction packages already concluded, or in the course of negotiation, between debtor countries and commercial banks. Members expressed concern, however, about the slow pace of negotiations on commercial bank financing packages in some cases. They called on the Bank and the Fund to continue to provide support for debt and debt service reduction packages, with the necessary flexibility, under their established guidelines. The Committee emphasized the crucial importance for debtor countries to adopt appropriate growth-oriented adjustment programs as a basis for debt and debt service reduction, thus creating the conditions favorable to domestic and foreign investment and the repatriation of flight capital. Members welcomed U.S. efforts to implement the “Enterprise for the Americas Initiative” designed to promote investment, growth, and debt reduction in Latin America.
7. The Committee expressed its concern that the prospects for external viability with sustainable growth remain difficult for some of the severely indebted lower middle-income countries, largely indebted to bilateral official creditors, even if a significant strengthening of domestic policies is assumed. Members welcomed the recent consensus by Paris Club creditor countries to lengthen repayment periods and to permit debt/equity and other debt conversion in reschedulings. The review of additional options should take into account the need for debtor countries to benefit from increased new financial flows. The Committee welcomed the recent bilateral decisions by a number of creditor countries which would contribute to alleviating the burden of bilateral debt of some severely indebted lower middle-income countries. Members invited all creditor countries to consider taking further measures on a coordinated and case-by-case basis in favor of those countries implementing adjustment programs.
8. The Committee welcomed the debt relief that creditor countries have provided, in particular through concessional official debt rescheduling and official development assistance debt cancellation, to an increasing number of severely indebted low-income countries implementing Bank and Fund supported adjustment programs. Members also welcomed the utilization of International Development Association (IDA) reflows for the benefit of IDA-only countries with outstanding IBRD debt. They encouraged the early use of the resources of the Bank’s facility, financed from the Bank’s net income, to assist eligible IDA-only countries to reduce their debt to commercial banks. Members noted that even with these arrangements and continued adjustment efforts, many of these countries have uncertain prospects for an early return to external viability with sustained growth. The Committee welcomed the request made to the Paris Club in the Houston Declaration to review the implementation of the existing options that apply to the poorest countries and encouraged the concerned creditors to complete this review in a timely manner. The Committee called for early consideration, through the Paris Club, of the proposals made at this meeting by some creditor countries, such as France, the Netherlands, and the United Kingdom, for further bilateral official debt relief to low-income countries implementing adjustment programs. It invited creditor countries to ensure that debt relief measures and official development assistance flows are designed on a case-by-case basis to assist a timely return to external viability with sustainable growth. Members also reiterated that their new commitments of assistance to the severely indebted low-income countries should be provided on highly concessional terms.
9. Members reiterated that it was also important to recognize the needs of a number of indebted countries which have not restructured their external debt obligations and which have been implementing sound macroeconomic policies. The Committee urged that efforts be made to maintain adequate financial flows to these countries, including multilateral flows, to support adjustment, development, and poverty reduction.
10. The Committee welcomed the increasing recognition in both developed and developing countries of the critical contribution of women to economic growth and development. Members agreed, however, that there was a need for a major effort and a strong commitment to concrete action to strengthen the economic role of women in development.
11. The Committee stressed that governments have the primary responsibility to promote women’s economic potential within their own specific sociocultural context. It encouraged them to design women in development policies and strategies in consultation with relevant groups. Members noted that enabling women to raise their own productivity and income is the best way to help them and thereby to contribute effectively to other national development objectives, including poverty reduction. They emphasized that the priorities are education, family planning, and maternal health care, agricultural services, provision of credit facilities, and access to labor markets. The Committee urged governments to remove constraints affecting women by adopting or revising legal codes and regulations, as may be required, in order to guarantee women equal rights including ownership and use of productive assets, and opportunities to take part in all sectors of the economy.
12. The Committee welcomed the initiatives taken so far to give women in development issues a higher priority. It encouraged governments and bilateral and multilateral development institutions to further integrate women in development objectives in their activities. While noting the encouraging progress made by the Bank, members urged it to increase further the resources it devotes to women in development activities and to strengthen its institutional capacity to integrate these issues more effectively into its country strategies, economic and sector work, policy dialogue, and actual lending operations. The Bank’s action plan in this area should include guidelines for monitoring implementation and evaluating its results. The Committee requested the Bank to prepare a progress report on its women in development activities for the 1991 fall meeting.
13. The Committee welcomed the World Summit for Children initiative that will focus international attention on the survival, protection, and development of children. Noting the strong emphasis placed by the Bank on poverty reduction in its lending program and operations, members urged the Bank to play a central role in helping realize the objectives of this Summit, including through the further expansion of its programs in the areas of primary education and health care.
14. The Committee reviewed progress made in the implementation of the World Bank Group’s private sector development action program in light of the need to promote growth, employment opportunities, and poverty reduction. It welcomed the growing emphasis given to market systems and the role of private initiative by member countries in their development strategies. It noted the need to stimulate private foreign and domestic investment and the return of flight capital so as to encourage non-debt creating private flows in the 1990s. Members welcomed the progress made to date under the Bank Group’s action program to support the promotion of an enabling environment for private sector development, public sector restructuring including privatization, and the acceleration of the pace of financial sector reforms. They noted with satisfaction the important role of the International Finance Corporation (IFC) in providing financing and advice for new investment and the work of IFC and the Multilateral Investment Guarantee Agency (MIGA) in supporting the continued growth in the flow of resources to the private sector in developing countries. The Committee also stressed the role that the Bank Group can play in reaching small urban and rural private sector enterprises and encouraged it to increase its efforts to assist the development of indigenous entrepreneurship and a locally based private sector.
15. The Committee reiterated its call on the Bank Group to give a very high priority to private sector development in its operations and continue to expand the scope of its activities in this area, including new approaches and instruments as may be needed, as well as to assist developing countries’ efforts to implement long-term institutional, regulatory, and legal reforms consistent with their socioeconomic situation. As the Bank Group implements and adapts its action program and strives to enhance further its catalytic impact, members emphasized the need to keep under review the roles, policies, and lending programs of the Bank and its affiliates, the balance between their advisory and operational functions, and the need for systematic coordination within the Bank Group. The Committee requested the Bank to prepare a report on these issues and its efforts to strengthen further its activities in support of private sector development for consideration by its Board of Executive Directors.
16. Members recognized the important catalytic role of IFC in promoting sound private sector development. They underscored the need for the Corporation to have adequate resources to meet the growing demand for its services in a regionally balanced and financially prudent manner during the 1990s. In this context, the Committee urged the IFC Board of Executive Directors to complete by the end of the year its review of the operational policies and adequacy of the capital of the Corporation, including the modalities of subscription and payment.
17. Taking note of the recent events, the Committee urged all IMF member countries to take the necessary actions to ensure that the Fund quota increase and the associated third amendment of the Articles become effective without delay.
18. The Committee welcomed the Bank’s first Annual Report on the Environment which it had requested at its Berlin meeting in September 1988. Members stressed that this comprehensive report clearly shows that the Bank is moving forward on a growing number of Bank-related environmental issues while improving the flow of information on these issues. They reiterated the importance of integrating environmental concerns into the Bank’s operations, particularly environmental impact assessments and environmental action plans. They emphasized the importance of new initiatives to provide greater protection for tropical forests and promote energy efficiency and conservation in developed and developing countries. Members asked the Bank to increase its cooperation with governments making efforts in these two areas and to include an assessment of progress achieved in its second Annual Report on the Environment. The Committee also welcomed the creation of an Interim Multilateral Fund in support of the Montreal Protocol on the elimination of chlorofluorocarbons. The Committee welcomed the progress made toward the establishment of a program, including a funding mechanism, to address global environmental problems and urged the donors and the Bank, working in collaboration with UNEP and UNDP, to complete their work before the next Development Committee meeting.
19. The Committee emphasized that current developments and their economic impact make the strengthening of the international trading system more necessary than ever. Members heard from the Director General of the GATT that multilateral trade negotiations under the Uruguay Round were in their final phase and that the time had come for participants in the Round to reach basic agreements across the board, and in particular in such areas as agriculture, textiles, and clothing, and tropical products which are of particular importance to developing countries. They urged all countries to roll back protectionist measures and to refrain from introducing new ones. The Committee reiterated its call on all parties concerned to agree on a global package by December 1990 in a way that would foster trade liberalization on the basis of uniform multilateral rules. The Committee further noted that successful completion of the negotiations was essential in order to support the reform programs in progress in a number of countries.
20. Despite an encouraging trend in the flow of foreign direct investment and nongovernmental organization grants, the Committee noted with concern that net resource flows, particularly to low-income Asian countries and the severely indebted middle-income countries, had declined in 1989. Members agreed on the need to continue to mobilize adequate financing in support of developing countries’ reforms and development efforts. The Committee called on donor countries to indicate their levels of assistance to ensure the full financing of the second phase of the Special Program of Assistance for Sub-Saharan Africa. Members welcomed the outcome of the Maastricht Conference last July and the wide support expressed for measures which could stimulate external assistance for Sub-Saharan Africa’s development efforts. They also welcomed the main conclusions of the Paris conference on the least developed countries.
21. The Committee agreed to focus at its spring 1991 meeting on two aspects of the broad issue of transfer of resources to developing countries: first, the financial implications of development policies aimed at poverty reduction in the light of an issues paper to be prepared by the Bank in consultation with the Fund; and second, the role of foreign direct investment in development with the assistance of a joint Bank-Fund issues paper. The Committee will also discuss the impact of industrial countries’ trade, agricultural and industrial policies on developing countries on the basis of the joint Bank-Fund full report requested at its May 8, 1990 meeting. In addition, members requested a report on progress in the discussion of IFC’s capital adequacy as well as a detailed progress report from the two institutions on the implementation of the debt strategy and its impact on the development prospects of all severely indebted countries.
22. Members expressed their deep appreciation for the dedicated services of its Chairman, the Honorable B.T.G. Chidzero, Senior Minister of Finance, Economic Planning and Development of Zimbabwe, over the last four years. They underlined the special contribution he has made to the strengthening of the Committee as it gears itself to meet the challenges of the 1990s and, in particular, the dignity, distinction, and judgment with which he had presided over the meetings of the Committee. They offered him their warmest good wishes for the future.
23. The Committee agreed to meet again in Washington, D.C. on April 30, 1991.
Fortieth Meeting, Washington, September 27, 1990
At its fortieth meeting on September 27, 1990; in Washington, D.C., the Development Committee selected His Excellency Alejandro Foxley, Minister of Finance of Chile, as Chairman.
Forty-First Meeting, Washington, April 30, 1991
1. The Development Committee met in Washington, D.C. on April 30, 1991 under the chairmanship of Mr. Alejandro Foxley, Minister of Finance of Chile.1
2. In the context of its broad mandate for the transfer of resources to developing countries, the Committee discussed: (a) the financial implications of development policies aimed at poverty reduction; (b) the role of foreign direct investment in development; and (c) the impact of industrial countries’ trade, agricultural and industrial policies on developing countries. The Committee also considered progress reports on the response of the World Bank and the International Monetary Fund to the Middle East crisis, the debt strategy and its impact on the development prospects of all severely indebted countries, the International Finance Corporation’s capital adequacy, and the establishment of a Global Environment Facility.
The Middle East Crisis
3. The Committee welcomed the prompt response and ongoing efforts of the Bank and the Fund to assist the countries seriously affected by the Middle East crisis. The Committee urged the Bank and the Fund to continue analyzing the financial requirements of the countries in the region directly affected by the crisis and other affected developing countries. It also urged the two institutions to assist in the mobilization of resources from both the region and external sources. Members stressed that financial assistance to the affected developing countries in and outside the middle eastern region should seek to facilitate, rather than substitute for, the sustained implementation of sound economic policies and adjustment programs. The Committee underscored the importance of an appropriate and effective coordination arrangement to deal with reconstruction and the adjustment and longer-term development needs of the countries of the region.
4. The Committee reiterated that the reduction of poverty in developing countries is the highest priority for the world development community. It reaffirmed its support for the strategy for reducing poverty presented in the 1990 World Development Report. The Committee noted that the achievement of the objective of poverty reduction would be facilitated by good governance in all countries, recognizing that their sovereignty must be respected. Members emphasized the special need for countries with a high level of poverty to maximize efficiency in the use of existing resources and to mobilize additional domestic savings and public revenues for poverty reduction purposes while increasing the access of the poor to such resources. They also emphasized the need to reexamine the possible reallocation of public expenditures, including excessive military expenditures, to increase their impact on poverty reduction. Members also noted the important role of private sector investment in generating income-earning opportunities for the poor.
While mobilizing additional domestic resources to combat poverty is of prime importance, members recognized that this task is difficult particularly in low-income countries where the poor are concentrated and in some of the severely indebted countries. The Committee stressed, therefore, that adequate external resources, mainly of a concessional nature, are necessary to complement the efforts at poverty reduction in these low-income countries. It emphasized, however, that efforts to meet the external financial requirements of potential new claimants on concessional resources should not be at the expense of current recipients pursuing appropriate development policies including poverty reduction. In this connection, the Committee invited donor countries, particularly those with assistance levels below the 0.7 percent ODA/GDP target, to make further efforts to increase the transfer of resources to developing countries.
5. The Committee was of the view that any additional aid volume should be accompanied by a number of improvements in aid delivery. In this regard it stressed the importance of further efforts at meaningful untying of bilateral aid; recurrent-cost financing, especially in the social sectors and infrastructure, for countries undertaking sound policies and over a defined transitional time period for progressively transferring responsibility to host governments; initiatives to enhance the effectiveness of technical assistance to meet the needs of those countries; and means to improve the coordination of concessional resources. The Committee also called upon the providers of concessional resources to examine the scope for reallocating their assistance toward poor countries implementing sound development policies and poverty alleviation strategies.
6. Members welcomed the policy paper on poverty, recently endorsed by the World Bank’s Board of Executive Directors, which calls for reliance on rapid, broadly based economic growth and investments in human capital targeted at the poor. They also welcomed the intention of the Bank to implement a plan of action designed to translate the conclusions of the 1990 World Development Report into its operational practices and budgetary priorities. They expressed support for the Bank’s objective of placing special emphasis on poverty considerations in the design of its country assistance strategies and in the allocation and composition of its lending resources in a manner consistent with the development strategies of the borrowing countries. They urged the Bank management, in consultation with the Board of Executive Directors, to complete rapidly its handbook and operational directive on poverty, which are now under preparation. The Committee requested a progress report for its spring 1992 meeting on the implementation of the Bank’s plan of action for the reduction of poverty. Members noted the Fund’s continued efforts to assist member countries in the pursuit of sound economic policies, while protecting the poor through appropriate measures, including the use of social safety nets. The Committee also urged the Bank, together with the relevant United Nations agencies, to strengthen further their cooperation in improving the data base on poverty, poverty monitoring, and the division of labor among their operational activities of a povertyoriented nature. Members also underscored the need for the Fund to rely on this improved data base in its work on poverty issues.
Foreign Direct Investment and Development
7. The Committee reiterated its view that foreign direct investment (FDI) can make an important contribution to development through the creation of employment, the development of skills, the transfer of technology, the improvement in competitiveness, and the expansion of markets. Members welcomed the recent increase in real terms in FDI flows to developing countries. They agreed that the prime responsibility for creating a climate of confidence and attracting FDI rested with the host countries. Members emphasized that adequate macroeconomic stability and growth in the context of adjustment efforts and the promotion of an efficient private sector, as well as adequate infrastructure and manpower skills, were crucial factors in this respect. The Committee noted that the policies of the industrial countries, particularly in the areas of macroeconomic policies, and the promotion of savings and tax policies, can impact on FDI flows, including those to developing countries given the increasing openness of the latter’s economies. Members stressed that all countries should make further efforts to remove trade and investment barriers so as to allow freer flow of goods and capital. Recognizing that FDI would normally tend to flow to the more advanced and creditworthy developing countries, members stressed the need to explore ways to mobilize and increase FDI flows to low-income countries and lower middle-income countries, particularly in Sub-Saharan Africa. In view of the constraints on FDI flows to low-income countries, the Committee recognized that concessional flows would remain of critical importance to them. Moreover, in the case of low-and lower middle-income countries, members underscored that high priority should be given to the development of local entrepreneurial skills and an indigenous business sector.
8. Given the close relationship between a strong domestic private sector and FDI, the Committee stressed that both the Bank and the Fund should continue to strengthen their efforts to promote an environment favorable to a higher contribution by the private sector to development and increase the flows of FDI to developing countries. Multilateral institutions were also encouraged to assist the efforts of developing countries in maximizing the developmental impact and the most efficient use of FDI by promoting market-oriented policies and, as appropriate, a stronger legal and regulatory framework. The Committee recognized the need of an overall legal framework which would embody the essential legal principles so as to promote FDI; in this regard, it took note of some proposals, notably by France, and urged the MIGA to consult with other competent institutions and report to the next spring’s Development Committee. Recalling their request to the World Bank Group at their September 1990 meeting to give a very high priority to the contribution of the private sector to development and to expand the scope of its activities in this area, members welcomed the recent steps undertaken in the Bank Group, particularly the working party set up by the President, to improve coordination within the Group. The Committee noted that the President of the Bank intends to put forward to the Board of Executive Directors for its consideration a comprehensive plan of action for the World Bank Group to strengthen its role in private sector development. The Committee called on the Bank Group to adopt, in the near future, such a plan of action involving a rigorous and integrated approach to the promotion of the private sector, including an even stronger role for IFC in the development of the Bank Group’s policies.
9. The Committee reiterated its view that the work of IFC is of special relevance to the development of the private sector in the developing countries. The Committee emphasized that as part of a strengthened World Bank Group private sector focus, IFC should have adequate resources to meet the growing demand for its services during the 1990s in a financially prudent and regionally balanced manner. In this connection, members agreed that there should be continued negotiations on an IFC capital increase and that a recommendation on its amount and modalities of subscription and payment should be made by the IFC Board of Directors for early consideration by the Board of Governors so that the Corporation could step up significantly its activities.
Impact of Industrial Countries’ Policies on Development
10. The Committee took note of the findings of the joint Bank-Fund staff paper which underlines the adverse effects of some of the developed countries’ trade, industrial, and agricultural policies on the economies of the developing countries. The Committee stressed that all countries, and in particular the developed countries, have a special responsibility to pursue sound macroeconomic, industrial, trade, and agricultural policies in order to promote a more open multilateral trade and payments system and to remove trade and investment barriers. The Committee encouraged developed countries to take steps to ensure greater transparency and awareness in their countries of the costs and distorting effects of trade restrictive measures. The Committee welcomed the market-oriented reforms and the trade liberalization measures implemented in recent years by an increasing number of developing countries and encouraged them to continue and broaden this progress and to increasingly integrate themselves into the multilateral trading system.
11. Members heard from the Director General of the General Agreement on Tariffs and Trade (GATT) on the prospects of the Uruguay Round of multilateral trade negotiations. The Committee reiterated the crucial importance it attaches to the trade liberalization and global trade expansion that would follow the successful outcome of these trade negotiations. Members expressed deep concern about the potentially serious negative impact that a failure would have for the global economy. They urged all participants, particularly the major developed countries, to increase their efforts to avoid further delay in reaching a successful conclusion of the Uruguay Round in areas such as agriculture, textiles and clothing, and tropical products which are of particular importance to developing countries and in strengthening GATT rules and in developing disciplines in new areas. Noting the emergence of an increasing number of regional trading arrangements, the Committee emphasized that such arrangements should be part of, rather than an alternative to, wider efforts at promoting multilateral trade liberalization based on the GATT’s nondiscriminatory principles.
12. The Committee urged the Bank and the Fund to follow up and continue to evaluate closely developments in respect of trade, industrial, and agricultural policies and their impact on the development prospects of developing countries. The two institutions were encouraged to coordinate closely their work on these issues with the GATT. Members noted that the findings of the GATT’s Trade Policy Reviews can provide valuable inputs for the reports prepared from time to time for the Committee on the impact of the industrial countries’ trade policies on developing countries. The Committee agreed to keep international trade development issues under consideration at its forthcoming meetings.
The Debt Strategy and Its Impact on Development Prospects
13. The Committee reaffirmed its support for the strengthened debt strategy and welcomed the progress achieved so far. Members stressed that the situation of a number of debtors required further attention given the constraint that their debt burden, and in some cases current policies, continued to have on their budgetary positions and ability to attract FDI and the return of flight capital. They urged debtor countries and commercial banks to accelerate their negotiations and to reach agreements that will facilitate the return to normal debtor/creditor financial relations. The Committee encouraged the Bank and the Fund to continue to provide support with the necessary flexibility, under their established guidelines, for debt and debt service reduction packages negotiated between debtors and the commercial banks.
14. Members welcomed the adaptation of debt restructuring terms introduced recently by the Paris Club bilateral official creditors—including the lengthening of repayment terms and the option of debt swaps in reschedulings—to assist several severely indebted lower middle-income countries. The Committee noted that the debt problems of many of these countries remained very difficult and there was a need to monitor closely their progress toward resumption of normal financial relations with their creditors and economic growth.
15. Members expressed their concern that, notwithstanding the application of the Toronto terms, the prospects for external viability in many of the severely indebted low-income countries remained highly uncertain. The Committee therefore encouraged the Paris Club creditors to complete by mid-1991 their review of the implementation of the existing options and their consideration of additional debt relief measures which could be taken for the low-income countries in the light of proposals made by a number of creditor countries.
16. Members reiterated that it was also important to recognize the needs of a number of debtor countries which have been pursuing appropriate policies and which have not restructured their external debt obligations even under difficult circumstances. They were of the view that the efforts of those countries to maintain normal debtor/creditor financial relations should be encouraged and supported. The Committee urged that in response to the needs of those countries, special efforts be made to provide them with sufficient financial flows, including multilateral flows, to support adjustment programs, development, and poverty reduction.
Global Environmental Issues
17. Recalling its support for the establishment of a facility to address environmental problems which transcend national borders, the Committee welcomed the establishment of the joint World Bank, UNEP, and UNDP Global Environment Facility. The Committee underlined the role that this facility could play as the mechanism to provide additional assistance to developing countries in the framework of ongoing negotiations on the global environment. Members underscored the importance of this pilot facility and urged that relevant experience derived from its operations in dealing with global environmental challenges be taken into consideration in the World Bank’s regular operations. The Committee stressed the importance of open and transparent approaches to addressing environmental challenges. The Committee urged that these and other organizational issues be addressed early on to ensure that the facility achieves the objectives envisioned by participants.
18. Members noted the recent initiatives taken in the IMF toward greater awareness of environmental concerns in its work.
IMF Quota Increase
19. Taking account of the significant increase in the number of countries seeking Fund assistance, the Committee noted with satisfaction that a number of Fund member countries had already consented to the Fund quota increase and the associated Third Amendment of the Articles of Agreement. The Committee urged other members to move without delay toward consent and acceptance.
Future Work Program of the Committee
20. The Committee agreed to discuss at its next meeting: (a) the development priorities of the 1990s and their implications for the World Bank Group; and (b) the development of human resources in developing countries. It requested the Bank to prepare issues papers on these topics, in consultation with the Fund, drawing as appropriate on the 1991 World Development Report. In addition, members requested progress reports on the Bank’s women in development activities and on the Bank Group’s progress in expanding its private sector activities. They also called on the Bank and the Fund to prepare jointly, for their consideration at their next meeting, a detailed progress report on the implementation of the debt strategy and its impact on the development prospects of all severely indebted countries.
21. The Committee appointed Mr. Peter Mountfield (United Kingdom) to succeed the Executive Secretary, Mr. Yves L. Fortin (Canada) for a three-year term with effect from July 1, 1991. Members placed on record their deep appreciation for Mr. Fortin’s dedication and for the major contribution he has made in improving the functioning of the Committee and its policy orientation. Members also thanked the Government of Canada for making Mr. Fortin available to the Committee.
22. The Committee expressed its profound appreciation to the retiring President of the World Bank, Mr. Barber Conable, for the distinguished contribution he has made during his five-year term in office to the cause of development and the reduction of poverty in the developing world and for his support for the work of the Development Committee. Members wished him the very best in his future endeavors.
23. The Committee agreed to meet again in Bangkok, Thailand, on October 14, 1991.
Mr. Barber B. Conable, President of the World Bank, Mr. Michel Camdessus, Managing Director of the International Monetary Fund, Mr. Yves L. Fortin, Executive Secretary of the Development Committee, and Mr. S.M.H. Adeli, Chairman of the Group of Twenty-Four, participated in the meeting. Observers from Switzerland and a number of international and regional organizations also attended.