Chapter

Interim Committee of the Board of Governors on the International Monetary System

Author(s):
International Monetary Fund. Secretary's Department
Published Date:
November 1993
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Press Communiqué September 26, 1993

1. The Interim Committee of the Board of Governors of the International Monetary Fund held its forty-first meeting in Washington, D.C. on September 26, 1993 under the chairmanship of Mr. Philippe Maystadt, Minister of Finance of Belgium. The Committee expresses its appreciation to its outgoing Chairman, Mr. Carlos Solchaga, former Minister of Economy and Finance of Spain, for his invaluable contribution to the Committee’s work.

2. The Committee expresses its concern about the continued weak growth performance in industrial countries and the high and rising rates of unemployment and persistent protectionist pressures. The recovery remains moderate in North America and has yet to emerge in Japan and in continental Europe. The Committee therefore reaffirms its commitment to the cooperative growth strategy adopted in April 1993. A number of developments consistent with this strategy are welcome and can be expected to contribute to an improved economic climate: the achievement of low inflation rates in many industrial countries; lower interest rates in Europe; the commitment to medium-term budget consolidation in North America and in several European countries; the measures taken in Japan to strengthen the recovery of domestic demand; and the favorable reaction of financial markets to these developments.

3. The Committee considers completion of the Uruguay Round by end-1993 crucial to the success of the cooperative strategy and to restoring confidence in global economic prospects. At this critical juncture of the Round, the Committee stresses the essential role of trade and competitive forces in the growth prospects of all countries and the job-creating effects of liberalizing trade. The Committee expects leadership and vision from all in order to resolve the remaining issues and conclude the Round by the end of the year. Failure to do so could reinforce protectionist pressures, erode business confidence, and weaken growth in all countries.

4. The Committee stresses the need for Fund members to continue action to promote a robust economic recovery and a sustained expansion. Continued progress toward price stability and fiscal deficit reduction would provide scope for further interest rate reductions. As the recovery gains momentum, additional fiscal consolidation in the industrial countries will be needed to increase savings and private investment. Structural reforms in the industrial countries will also have to be given a higher priority to enhance prospects for longer-term growth; these include labor market flexibility, social security and health care reform, and market-opening and deregulation policies. The Committee reiterates its support to the efforts of the Fund in implementing its strengthened surveillance over members’ policies.

5. The Committee welcomes the continued strong economic expansion in many developing countries, based on the maintenance of sound macroeconomic policies and a continued easing of structural rigidities. The Committee welcomes in particular the developing countries’ significant contribution to the growth of world output and of international trade through outward-oriented policies. The success of these policies should serve to encourage those developing countries where progress toward macroeconomic stability and structural reform has lagged.

6. The Committee expresses particular concern, however, about the plight of many of the poorest developing countries, especially in Africa. Improvement of their prospects will require strong adjustment programs, continued efforts to reduce further their excessive debt levels, and substantially increased external assistance on concessional terms. All members recognize the special role enhanced structural adjustment facility (ESAF) has played in fostering effective reform in these countries; the Committee welcomes the indication from a number of members, including in the developing world, of their readiness to contribute to the facility. It urges the broadest possible spectrum of contributors among the membership to step forward with early indications of participation and calls on the Executive Board to implement rapidly the agreed framework so as to ensure continuity of ESAF operations after November 30, 1993.

7. The Committee welcomes the progress made by a number of formerly centrally-planned economies toward economic stabilization and market-based systems and the role played by the Fund in catalyzing the support of the international financial community. In Central and Eastern Europe, output is expected to grow moderately in 1994 following several years of decline in a number of countries. However, some countries in the region continue to face high inflation and declining output; all are encouraged to persevere with macroeconomic discipline and structural reforms, especially in the areas of privatization and financial sector reform, accompanied by adequate and well-targeted social safety nets.

8. While privatization and other structural reforms are gaining momentum in several countries of the former Soviet Union, inflation remains high in most of them, and dangerously high in some large countries. To curb inflation and induce market behavior, it is essential for all these countries to tackle their budget deficits, pursue appropriate monetary policies, promote financial sector reform, and impose financial discipline on enterprises. The Committee recognizes that most countries in the area face severe balance of payments difficulties as a result of the move to world prices and the reduction in transfers within the area. The prospects for much-needed international financial support, including under the Fund’s systemic transformation facility, depend on the introduction and sustained pursuit of strong adjustment and reform programs, and on arrangements for effective financial cooperation within the area to improve current account positions and reduce the risk of capital flight and of trade disruptions. Global trade liberalization will be particularly important in promoting economic growth in the economies in transition.

9. Having discussed a report from the Executive Board on an allocation of SDRs and related matters, the Committee requests the Executive Board to continue its work on these issues—having particularly in mind the situation of the many new members that have not participated in previous SDR allocations—and to report to the Committee at its next meeting, to be held in Washington, D.C., on April 25, 1994.

Interim Committee Composition as of September 26, 1993

Philippe Maystadt, Chairman

Mohammad AbalkhailSaudi Arabia
Edmond AlphanderyFrance
Ahmed Humaid Al-TayerUnited Arab Emirates
Piero BarucciItaly
Lloyd M. BentsenUnited States
Fernando Henrique CardosoBrazil
Domingo Felipe Cavallo1Argentina
Chen YuanChina
Kenneth ClarkeUnited Kingdom
John Dawkins2Australia
J. Soedradjad DjiwandonoIndonesia
Hirohisa FujiiJapan
Abdelouahab KeramaneAlgeria
Wim KokNetherlands
Ruth de KrivoyVenezuela
Gilles LoiselleCanada
Jehoash Mayanja-NkangiUganda
Philippe Maystadt3, 4Belgium
Marcelino Nguema OngueneEquatorial Guinea
Aleksandr N. ShokhinRussian Federation
Jon SigurdssonIceland
Manmohan SinghIndia
Otto StichSwitzerland
Theo WaigelGermany

Alternate attending for member:

Carlos Sanchez

Ralph Willis

Ferdinand Lacina (a.m. session)

Ivan Kocarnik (p.m. session)

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