Summary Proceedings of the Forty Fourth Annual Meeting of the Board of Governors 1989
Chapter

Concluding Remarks1

Author(s):
International Monetary Fund. Secretary's Department
Published Date:
November 1989
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Statement by the Governor of the Fund and the Bank for Kenya—George Saitoti

Kenya is honored to have been selected to chair the Forty-Fifth Annual Meetings of the Boards of Governors of the Fund and the Bank, especially as we enter a new decade of challenge and opportunity. I consider this not only an honor to myself and my country, but also to the entire continent of Africa.

In carrying out the responsibilities of this office, we will strive to match the standards of excellence and the cordiality that have characterized these meetings under the chairmanship of Kyu Sung Lee, Minister of Finance and Governor for Korea.

The Bank and the Fund continue to play a crucial role in promoting world stability and growth. We all appreciate the fact that they have taken a leading part in assisting the world to maintain noninflationary growth throughout the 1980s. At the same time, however, we are seriously worried by the fact that some regions have not benefited from this prosperity. In the case of sub-Saharan Africa, for example, it has been a virtually lost decade. A major challenge that lies ahead, therefore, is to strengthen the integration of these regions in the mainstream of the global economy. To move forward from here we seek enhanced resources from the Bank and the Fund to meet the global challenges of an interdependent world in the 1990s. To this end, I am confident of your full support and cooperation.

I would like to commend the dedicated work and leadership of the President of the Bank, Mr. Conable, and the Managing Director of the Fund, Mr. Camdessus. From our part of the world, we appreciate their tireless efforts to alleviate poverty, preserve the world’s environment, and assist in our tremendous task of designing and implementing growth-oriented programs. I look forward to working closely with them and their staffs as well as with the Executive Directors over the coming year and to meeting with Governors of the Bank and the Fund at the 1990 Annual Meetings in Washington, D.C. Once again I thank you all for the privilege you have bestowed upon my country.

Statement by the Chairman of the Executive Board and Managing Director of the International Monetary Fund—M. Camdessus

Mr. Chairman, Governors, you have given us much to think about, and your remarks will be studied carefully. I appreciate your guidance.

I have been struck particularly by two themes, two leitmotivs that recurred in the speeches of many Governors and in our private talks.

The first is that many speakers have confirmed that the “silent revolution” in economic strategies that I mentioned at our opening session is indeed widespread. One of the Governors put it succinctly, in noting that there is increasingly a shared diagnosis of the policies that are needed to strengthen economic performance. The successful cases, in my view, are characterized by realism, by a willingness to adopt imaginative approaches, and by strong political backing—in the sense that governments are taking full responsibility for their actions and are not hiding behind scapegoats. Realism is seen in acceptance of the need for sound fiscal and monetary policies, firmly and consistently applied, which are the essential foundation for price stability and prosperity over the medium term. Imagination is also a vital component of economic policies: in designing the structural measures that transform economies and make them more productive; in giving greater scope to market forces; in fundamentally reforming a machinery of state that is often too heavy and inefficient; and in reducing the role of government so that policies increasingly set the framework within which private sector decisions can produce the optimal results for society. This approach is conducive to greater efficiency in investment decisions, and hence a better long-term economic performance. The spread of this silent revolution is most encouraging. It offers the best prospects for high-quality growth in the 1990s.

Now a question. Why are more countries adopting this approach? Because it has worked, and because the alternatives have not worked. The countries, in different parts of the world, that have shown the strongest economic performance over the past forty years—all of them suffered setbacks and occasional policy mistakes, no country is exempt from that—but their successes have been largely due to a sensible and medium-term orientation of policies. Their economic gains have been earned by persistence with sound policies, and by exercising discipline.

We must be impressed by the growing extent to which these ideas on how to improve economic performance are increasingly accepted elsewhere. We see in Africa a continent that has suffered severe setbacks over the past decade: fortunately, in recent years there has been a fundamental shift in economic policymaking; so much so, that the Fund and the Bank are now actively supporting, with advice and financing, as far as the Fund is concerned, some thirty countries that are implementing courageous and far-reaching structural programs that promise to transform their economies. In Latin America—where there has been much experimentation with different economic approaches—I see also a growing acceptance of these ideas, and several countries are preparing and implementing major reforms. You are familiar by now with the economic program of Mexico, which the Fund is happy to be supporting; and I wish to draw attention today to the important changes in policies that have just been announced by the new Government in Argentina, which I believe fully deserve Fund support. Equally remarkable has been the fundamental shift in Poland and some other Eastern European countries with centrally planned economies, which Governors have been quick to commit themselves to support.

The second theme of our meetings has been a clear and strong message from Governors about the roles the Bank and the Fund must play. As sister institutions, with complementary responsibilities, it is only appropriate that the Bank and Fund cooperate actively with each other. Concerning the Fund’s own role, I welcome the firm renewal of our mandate from the membership. Governors wish us to be even more active and effective, especially in the following areas:

  • —in fostering policy coordination among the industrial countries through analysis, consultation, and surveillance; and here I am delighted that several Governors have endorsed our insistence on the key imperative of improving national savings and investment everywhere; several of you dwelt on this important issue in your remarks.

  • —in the strengthened debt strategy, and in supporting the developing countries with advice and financial resources;

  • —as regards the systemic role of the Fund—the central monetary institution that exists to give confidence to the entire membership and to the markets. Governors have urged the Fund to continue to work on strengthening the international monetary system, including the role of the SDR; and, finally

  • —Governors have indicated strongly that they wish to substantially reinforce the Fund. We all appreciate very much President Bush’s indication yesterday that the Fund must have resources that are commensurate with the critical role it must fulfill. I believe these meetings have established an important consensus on the need to strengthen the Fund’s resources so that it can meet the challenges of the first half of the 90s. The Executive Board will move expeditiously to resolve the remaining questions so that the Governors can complete the Ninth Quota Review before the end of the year.

In each of these areas, I am grateful for your support. I thank you very much, Mr. Chairman, for your guidance in presiding over our meetings, and we look forward to working with your successor, the distinguished Governor for Kenya. I wish you all a safe trip home.

Statement by the Chairman of the Boards of Governors, the Governor of the Fund and the Bank for Korea—Kyu Sung Lee

It is now my duty as Chairman of the Boards of Governors of the Bank Group and the Fund to bring to a close the 1989 Annual Meetings.

I think we can all agree that these meetings have provided the opportunity for fruitful discussions on some of the main issues facing our economies. In my opening remarks to this gathering two days ago, I outlined a number of issues on which I felt Governors might wish to focus during this week. On the positive side, I mentioned the impressive performance of the world economy in recent years, progress through policy coordination in reducing external imbalances, the support given to our strengthened debt strategy, and the move toward economic reform in certain Eastern European member countries.

On areas of concern, I took note of the continuing obstacles to free trade and the need for improved structural adjustment. It is accepted that agreement on the existence of problems is the first step toward their resolution. The attention that my fellow Governors have given in their interventions to the challenges ahead has strengthened my confidence that we can move to solve them together. While Governors spoke on many and diverse topics, I found the following six of particular interest—the global economic situation and prospects, debt, the resource needs of the developing countries, structural adjustment, recent reforms in certain countries, and the environment.

Global Economic Situation and Prospects

Governors noted the strong but unevenly distributed expansion of the world economy in 1989 and the prospects for continued growth at a more sustainable rate. Policies in industrial countries need to remain geared to preventing a resurgence of inflation and, where appropriate, to a further reduction of fiscal and external imbalances. There is an urgent need for resumption of sustainable growth in indebted developing countries which requires both strong domestic policies and an open international trading system. Everywhere, structural reforms are required to raise savings and investment and improve resource allocation. Surveillance through the Fund is crucial in this process.

Debt

Many Governors welcomed the progress already made in a number of cases in implementing the strengthened debt strategy consistent with the operational guidelines on debt and debt-service reduction that have been approved by both the Bank and the Fund. At the same time, the institutions were urged not to overlook the needs of the lower middle-income countries whose debts are mainly to official creditors and of those countries which, despite high debt burdens, have been able to preserve their access to financial markets.

Resource Needs

Both Mr. Conable and Mr. Camdessus referred to the need for additional resources to enable their institutions to fulfill the roles foreseen for them in the 1990s. I join with those Governors who called for a substantial Ninth Replenishment for the International Development Association to help the poorest countries whose need for assistance is most pressing. Likewise, many Governors pointed to a need for a substantial increase in Fund quotas to ensure that it remains able to meet the needs of the membership in a period of rapid economic change and to instill confidence in members. The Ninth General Review should be completed by the end of the year, and the distribution of quotas should reflect members’ relative positions in the world economy.

Governors welcomed the additional resources that are being provided to the private sector in developing countries by the International Finance Corporation and stressed the important role that the Multilateral Investment Guarantee Agency is to play in providing policy advice and guarantees for private investment.

In view of the importance of new financing for many countries, including those that are attempting to reduce their debt burdens in the context of the strengthened debt strategy, the decrease in flows from commercial banks is indeed regrettable. I am sure that Governors can agree with Mr. Camdessus when he invites the banking community to join with us in making sure that the opportunity to achieve lasting progress for the developing countries not be lost. In that context, we have urged the banks to be fully contributing partners to the strategy by providing timely financial support to countries undertaking essential economic reforms.

Structural Adjustment

Governors commended both the Bank and the Fund for their increased support to structural adjustment. While those efforts should continue, they noted that measures should also be taken to mitigate the transitory adverse effects of economic reforms on the poorest segments of society. In addition, I would like to repeat the Development Committee’s statement that, although growth-oriented structural adjustment can yield positive results even under unfavorable external conditions, the pace, scale, and sustainability of benefits would be adversely affected by an unsupportive external economic environment. The industrial countries are therefore urged to adopt trade, agricultural, and industrial policies that will provide the needed support for developing countries’ economic reforms.

Recent Reforms in Some Eastern European Countries

I would like to note that a recurring theme was the changing status of several of the countries of Eastern Europe. I am gratified by the hope expressed by the Interim Committee and a number of individual Governors that these countries’ economie reforms could soon be integrated into strong and sustainable programs that could be supported by our institutions.

The Environment

A large number of Governors welcomed the strong emphasis placed on the environment. Mr. Conable outlined the Bank’s expanded environment effort and the new initiatives that are being pursued. It was also noted that the Bank has expanded its collaborative work on the design and financing of environmental programs. We are encouraged by President Bush’s support for these efforts.

As Governors, we all have our parts to play. We must return to our countries and encourage our governments to provide the support and resources essential to meeting the goals we have set.

Fellow Governors, it has been a great honor for Korea and for me personally to have served as your Chairman for the 1989 Annual Meetings. As they draw to a close, I know that you share my appreciation and gratitude for all those who have worked to make them a success.

Before closing, I want to congratulate the Governor for Kenya who will serve as Chairman of the Boards of Governors for the coming year. I wish him good luck and much success in carrying out the tasks before him in the coming year.

I thank you for your cooperation, and I wish you all a safe journey home.

Delivered at the Closing Joint Session, September 28, 1989.

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