Chapter

Concluding Remarks1

Author(s):
International Monetary Fund. Secretary's Department
Published Date:
November 1990
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Statement by the Governor of the Bank for Ecuador, Jorge Gallardo Zavala

As a founding member of the International Monetary Fund and the World Bank, Ecuador is honored to accept the chairmanship of the Forty-Sixth Annual Meetings of the two institutions in Bangkok in 1991. This is an honor to our country, our people, and our region.

Ecuador will strive to carry out the duties of the Chairman with the same courtesy, responsibility, and efficiency that have characterized these meetings under the distinguished chairmanship of Mr. Saitoti, the Governor for Kenya.

The ongoing efforts by the International Monetary Fund and the World Bank to aid global economic growth and development have been joined in the past twelve months by new initiatives, such as the Enterprise for the Americas Initiative, announced by President Bush, for promoting economic growth in Latin America by expanding trade and investment, while reducing external debt and providing funds for local and environmental aspects.

Efforts are also under way to respond to the remarkable transformation now taking place in Eastern Europe. We hope the international community will find ways to facilitate this process while continuing with the ongoing efforts elsewhere in the world.

In addition, we must now also formulate our response to a new and unexpected challenge. I am referring to recent developments in the Middle East. Because of the Gulf crisis, the oil importing countries, especially in the developing world, will be facing significantly greater difficulties in the short run, and the front-line states in the Middle East are facing severe disruption of their economies.

The list of issues facing us remains large. The debt crisis is still with us. Poverty alleviation needs renewed world attention. Continuing attention is also needed to policy and regulatory changes in a great many countries. In our interdependent world, solutions to these and other problems must be sought as part of a global cooperative effort.

Managing Director Camdessus and President Conable deserve our gratitude for their leadership and vision in guiding this global effort. I would also like to take this opportunity to extend our thanks to the Executive Directors and the staff of the two institutions for their excellent work and dedication. It will be a great pleasure to work with them in the year ahead.

I am looking forward to welcoming all of you at our next Annual Meetings in Bangkok, Thailand, in October 1991.

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

Mr. Chairman, Governors, I mentioned in my opening address that the prospects for the world are cloudy. But our meetings have shown that there is a silver lining—in the strong sense of shared responsibility that has been reflected in Governors’ remarks and in the membership’s reaction to the present challenges. From this, I conclude that there is a high degree of consensus on the following principal issues that face the membership:

I. The Response to the Middle East crisis. I am heartened by the collective determination that the situation will be managed.

A recurrent theme of Governors’ interventions is that the membership will not repeat the mistakes of the 1970s. Hence, the consensus that the challenge demands a firm policy response from all members, and the widespread acceptance of the view that oil price increases should be passed through to consumers. I welcome also the widespread acknowledgement of a shared responsibility to assist two groups of members—the front-line states, and the developing countries that are especially harmed by higher oil prices, a loss of workers’ remittances, the disruptions and costs of re-absorbing workers from the Middle East, and by a curtailment of some export markets. The international community is extending assistance to these countries in a variety of ways. As part of the collective effort there is widespread support for the broad outlines of proposed IMF support: agreement that the existing facilities and access to Fund resources provide adequate scope for financial assistance to members, but that some appropriate modifications of existing Fund policies and practices would enhance the effectiveness of Fund assistance. The call was for the Fund to show what I understand to be responsible flexibility. I have been encouraged by some members to explore further a way to assist the limited group of non-ESAF countries for whom charges on the regular resources are very costly. I can confirm that the initial indications of support from some potential contributors to a subsidy mechanism are encouraging, while I fully share the Interim Committee’s hope that all countries that are in a position to contribute will do so.

Armed with this reinforcement of our mandate, the Executive Board will work swiftly to complete work on all these initiatives.

II. Policies of Industrial Countries. There is a widely-held consensus that the industrial countries have a special responsibility to maintain a sound and supportive global economic environment. They face the twin threats of recession and higher inflation. A steady policy response is essential. To borrow a nautical term, what is needed is a steady hand on the tiller. This means there must be no premature easing of monetary policy, no accommodation of the inflationary pressures resulting from higher oil prices. Governors have stressed also the importance of further fiscal consolidation to support investment, and a perseverance with structural reforms to make economies more efficient. In sum, they have reaffirmed that the medium-term economic strategy of recent years is on the right track, and should be reinforced. I am confident that the industrial countries will not allow themselves to be derailed by the current problems. By persevering with sound policies, their clear signals should reinforce confidence in the prospects for renewed growth with stability. Everybody knows that confidence is essential.

III. The strengthened debt strategy is clearly on track. I am encouraged by the endorsement of the existing strategy by so many speakers. There is also a realistic understanding, however, of the difficult challenges ahead for all parties to this process, including especially the debtors and bankers. It is time to negotiate acceptable financial packages, and to move progressively to a resumption of normal business relations. These Annual Meetings have been characterized by the exceptional number of constructive initiatives to alleviate the burden of official debt on the poorest countries. This is a most encouraging feature of these meetings. I am confident that the Paris Club will continue to develop its policies pragmatically in support of countries implementing Fund and Bank adjustment programs. A number of Governors referred to the difficult problems of the small number of members that are in arrears to the Fund. They urged the countries concerned, and the international community, to do all that is necessary to enable these countries to return to a normal relationship. In this respect the new “rights” approach is playing a crucial role. It was gratifying that Governors of several countries that had reservations about the Third Amendment of the Articles have now suggested that it is time to set aside their hesitations and to accept the necessity of the amendment in order to expedite an early coming into effect of the quota increase. No one, I think, disagreed with this.

IV. Economic Reforms. Governors welcomed wholeheartedly the movement toward market-oriented reforms in several countries, particularly in Eastern Europe and elsewhere. They confirmed their support for these reforms and for the assistance that the IMF is extending to a growing number of countries that are undertaking the major effort to transform their societies and economic systems. This is, I dare to say, a challenge to us of historic importance.

V. Foreign Trade. Governors of industrial and developing countries alike reiterated their sense of the importance of an early and successful finish to the Uruguay Round. As President Bush reminded us, it is a growth issue, not just a trade issue. Success is a must, and the time for action has come.

VI. Last, on the role of the Fund and the future of the international monetary system. I welcome the reinforcement of the Fund’s mandate in each of its main fields of responsibility, and the fact that so many Governors endorsed the call to expedite the quota increase, whose timeliness is reinforced by the new demands on Fund resources. We are evolving toward a monetary system that is more stable, in which policy coordination between countries is more effective, and which should help to ensure that the global economic environment supports the sound economic strategies of members. Several Governors noted that exchange rate relationships among the major currencies are now more closely in line with the underlying fundamentals, and that this should contribute to the reduction of their external imbalances. I noted with special interest the suggestion by Governor Hashimoto that we explore, in a longer-term perspective, the scope for a more stable international monetary system and the support for this idea, in particular, from Governor Maystadt. The Fund will continue to work on improving the system, in the light of experience, and in accordance with the expressed wishes of the membership. I can confirm that, while facing the immediate problems posed by the Middle East crisis, we will not lose sight of our continuing, and in some aspects unfinished, agenda. In so many parts of the world, the mere fact that the problems are of a long-term nature does not, in the slightest, reduce their tragic impact in human terms. Nor does it reduce the urgency of support from the international community to match the courageous efforts of so many governments.

As Governor Estanislao of the Philippines reminded us, “we are a family of nations, with a code of conduct that needs to be enforced for the common good”—the Universal Good. We can all leave this Annual Meeting with a strong sense of a need for steadiness of purpose. I was pleased to hear President Bush refer to the Bank and the Fund as paradigms of international cooperation: a phrase that has particularly stuck in my mind. It is gratifying, but it reminds me that we have a serious responsibility in the difficult period ahead. In assisting member countries to meet their challenges, the Fund will be buoyed by the Governors’ confirmation of our shared responsibility and solidarity.

Statement by the Chairman of the Boards of Governors, The Governor of the Fund and the Bank for Kenya, George Saitoti

It is now my duty as Chairman of the Boards of Governors to bring these Annual Meetings of the Fund and the Bank Group to a close. I must thank Mr. Camdessus, Mr. Conable, and my fellow Governors for their thoughtful and valuable contributions to our discussions.

Recent Developments

We all deplore that just before these Meetings were convened, the world economic outlook was overshadowed by developments in the Middle East. Our discussions over the past few days have therefore been heavily influenced by those events. Since we meet each year, not just to review past developments and achievements, but also to try and chart a credible and feasible path for our economies, individually and collectively, the uncertainties ahead have meant that our deliberations this week have been particularly important.

I am encouraged by the resoluteness with which Governors have agreed that the recent events should make us double our efforts to control inflation, reduce payments imbalances, and improve the conditions for sustainable growth through mobilization of savings and investment. Governors have agreed that monetary policy must remain tight and nonaccommodating of the necessary oil price adjustments; that fiscal correction must continue, where needed; and that structural policies aimed at raising the efficiency of resource use must be intensified. While countries do their part by adopting the correct policies, the Fund and the Bank have been called upon to make active use of, and to adapt as necessary, their instruments to provide stability to the system. Governors therefore welcomed the proposals put forward by Mr. Camdessus and Mr. Conable to enhance the responsiveness of our institutions to the new circumstances. The facts that the Bank has already embarked on a program of emergency assistance and that the Fund has the flexibility to adapt access to its facilities are welcome signs of our institutions’ ability to cope with the unforeseen.

Debt

While developing countries implement appropriate policies, including structural reforms, the industrial countries and the international financial institutions need to adopt those endeavors.

In this context, Governors stressed the catalytic role of the Fund and Bank in raising the necessary financial resources to support members’ adjustment programs. Governors welcomed the forgiveness by certain creditor countries the ODA obligations of low-income countries, as well as the recent decisions of the Paris Club regarding official debt owed by lower middle-income countries. They encouraged further initiatives toward official debt relief. Despite progress on the reduction of debt and debt service, such steps are now more urgent given that the oil importing developing countries will be hardest hit by the increase in oil prices.

Need for Resources

For our institutions to maintain their central role, as well as to meet their other responsibilities, they must be equipped with sufficient resources. I am, therefore, pleased to note that Governors have followed the urging of my opening statement and called for prompt ratification of the quota increase, with its implied acceptance of the Third Amendment to the Articles of Agreement, together with an early agreement of the capital increase for the IFC.

Eastern Europe

Excitement about the movements in Eastern Europe countries toward market-oriented economies has been contagious. Such developments are the very essence of the work at the Fund and the Bank—countries taking steps that allow them to help themselves, while taking their rightful place as players in the world economy. In this context, Governors stressed the importance of continued Fund and Bank technical and financial support to these countries. By the same token, they welcomed the study of the Soviet economy that is being undertaken in cooperation with others by the Fund and the Bank.

Trade

If the countries of Eastern Europe are making such dramatic efforts to move to market reform, it seems only fair and logical that the international trading system should also move toward greater liberalization as soon as possible. Governors stressed that the successful resolution of the Uruguay Round is a unique opportunity that cannot be allowed to slip away, and they urged the firm political determination of all to bring negotiations to a successful conclusion.

Environment

In discussing the environment, it was noted that the poorest countries suffer the most from environmental damage, and yet it is the industrial countries that are primarily to blame for it. Governors stressed the interdependence between environmental protection and economic growth. In this context, they welcomed the progress achieved to date toward the establishment of the Global Environmental Facility.

Poverty

I mentioned in my opening remarks that poverty would be an important theme of our discussions, and indeed it has been. Governors pointed out that the Fund, the Bank, and the international financial institutions must aim at facilitating not only higher economic growth, but a better quality of growth.

Programs to improve health and education, for example, not only help the poor’s earnings capacity but also greatly enhance their welfare. Poverty is therefore not only an issue for the Bank, but, on the macroeconomic level, is also one the Fund must not ignore. Raising the living standard of all people, while working toward a more even distribution of the fruits of growth, has to be the primary goal of our efforts and of the support of these efforts by our institutions.

Conclusion

While these meetings began under the cloud of uncertainties, we leave with a sense of reassurance. We now know that we are united in our ambitions for growth and equity and our determination to cope with adverse developments. Let us use this unity as an inspiration when we return to our countries and work to put into practice the advice that we have given and received over these past three days. This sense of reassurance and renewed commitment is due, in no small measure, to the efforts and initiative of Mr. Camdessus and Mr. Conable, and I would be remiss if I failed to convey our gratitude to them.

In closing, I wish you all a safe and pleasant journey to your homes, and I congratulate, and wish all success to, Ecuador, which will succeed Kenya in the Chairmanship of the Boards of Governors.

I hereby adjourn the 1990 Annual Meetings of the Boards of Governors of the International Monetary Fund and the World Bank and its affiliates.

Delivered at the Closing Session, September 27, 1990.

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