Concluding Remarks1

International Monetary Fund. Secretary's Department
Published Date:
November 1984
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Statement by the Governor of the Fund for Senegal—Mamoudou Touré

Senegal is happy to accept the chairmanship of the Fortieth Annual Meetings of the International Monetary Fund and the World Bank as an honor to our country, our people, and our region. For my own part, I will strive to carry out the duties of the chairmanship with the same courtesy, sense of responsibility and, as far as possible, the same efficiency that have characterized these meetings under the chairmanship of Mr. Takeshita, Governor for Japan.

We have come a long way in the past 12 months. The fact is that solutions to some problems that seemed insurmountable just a few short years ago now seem to be within our reach. However, as Governors have made plain in their statements, many serious difficulties remain to be faced. Now is not the time to relax our efforts, but to intensify them. That is the challenge facing us in the year ahead.

Before closing, I would like to commend all my fellow Governors for their positive contributions to this week’s discussions and decisions. I would like to thank Mr. de Larosière, Mr. Clausen, the Executive Directors, and the staff of our institutions for having ensured the smooth functioning of the meetings. I look forward to working with them during the year ahead and to greeting all of you at our next Annual Meetings in Seoul, Korea, in October 1985.

Statement by the Chairman of the Executive Board and Managing Director of the International Monetary Fund—J. de Larosière

Mr. Chairman, we have had a fruitful week of meetings. Governors in their interventions have touched on a wide range of subjects and have given constructive guidance on many of the key policy issues facing the Fund. In these closing remarks, I will group my comments under three broad headings: the economic situation in industrial countries, adjustment and financing in the developing world, and international economic cooperation.

Economic Situation in Industrial Countries

In their comments on the economic situation of industrial countries, Governors generally welcomed the progress that has been achieved over the past year. They noted, in particular, that further improvements in price performance have provided the conditions in which a recovery in the growth of output and investment has occurred. As a result, international trade has been growing more vigorously, contributing to a further strengthening in the external position of developing countries.

Governors took these developments as evidence that the medium-term strategy being pursued by the major countries is the correct one. Nevertheless, as was generally recognized, important problems remain and cast a shadow over the durability of the recovery. These problems include the geographical imbalance of the present expansion and the continuance of disturbingly high unemployment in many countries. As many Governors pointed out, high interest rates are a source of very serious concern. They jeopardize the prospects for a sustained and balanced expansion and add to debt service burdens. It was also stressed that, especially in Europe, structural rigidities have retarded recovery and impeded the growth of employment opportunities.

Dealing with these problems will not be easy. As you pointed out yourself, Mr. Chairman, and as many other Governors have emphasized, the only effective way to bring down interest rates on a durable basis is to combine monetary discipline with determined action both to curb the growth of public expenditure and to reduce the extent to which budget deficits pre-empt available savings. In this latter connection a number of Governors noted the particular responsibilities of the United States. Action to improve fiscal positions will require a sustained commitment on the part of governments. So, too, will the tackling of the other rigidities besetting economic performance. But, in dealing with these problems, governments have, as the Governor for Italy put it, “a political duty that cannot be put off.”

Adjustment and Financing in Developing Countries

Recent improvements in the economic situation of many developing countries were welcomed. Governors noted that the aggregate current account deficit of non-oil developing countries, in relation to exports, has fallen to its lowest level in many years. At the same time, output growth has been picking up in a number of countries.

These encouraging trends, however, mask a wide diversity of individual experiences. As the Chairman of the Development Committee has said, many developing countries still face severe difficulties: their per capita incomes are low and their debt situation worrisome. Particular attention was drawn to the plight of sub-Saharan African countries, and the special financing needs of that area. Concern was also expressed about the impact on developing countries of the recent downward trend in commodity prices, the persistence of high interest rates, and protectionist tendencies.

Much remains to be done if a firm basis is to be laid for durable economic growth with financial stability. From what Governors have said, there is a consensus that adjustment efforts must be pursued with determination; that external financial resources must continue to be provided in appropriate amounts and on appropriate terms in support of those efforts; and that policies in the major countries must be such as to facilitate the adjustment and financing process.

As far as handling the debt issue is concerned, considerable emphasis was placed on the importance of adhering to the present case-by-case approach, involving a mutually supportive mix of adjustment and financing measures. Effective adjustment would help restore confidence, deter capital flight, and enhance the prospects for attracting the inflows of foreign capital needed to support development. In this respect, recent multiyear reschedulings are an encouraging development. At the same time, however, many Governors noted that the external economic environment that affects debt servicing conditions was a shared responsibility, with a reduction in international interest rates and adequate access to growing world markets being essential elements. In the absence of these developments, as many Governors have emphasized, the adjustments required of debtor countries are difficult and onerous and frequently involve considerable sacrifice and hardship.

Clearly, adjustment programs must reflect international economic realities, and be cast in a medium-term perspective. In this context, the need for continued close collaboration between the Fund and the Bank was noted. Governors also looked forward to the discussions in meetings of the Interim and Development Committees in the spring of 1985 as foreshadowed in the communiqués issued at the conclusion of their meetings last weekend.

International Cooperation

The challenge of restoring sustainable growth and financial stability in the world economy will, as many Governors have recognized, hinge importantly on the effectiveness of international cooperation. This is particularly significant in the field of debt. We can take satisfaction from the fact that a willingness to work together enabled the crisis of 1982 to be surmounted and has laid the basis for a medium-term approach to debt problems. The need for the Fund to continue to play a central role in this process was firmly endorsed by the Governors. This followed the agreement reached last Saturday in the Interim Committee to extend the enlarged access policy, though with slightly lower limits for 1985 than prevail currently. This agreement will give the Fund the capacity and the flexibility needed to assist and encourage determined adjustment efforts by member countries.

Other aspects of international cooperation addressed by Governors included trade, foreign assistance, and Fund surveillance. Virtually all Governors voiced concern about rising protectionist pressures over the past few years. There is widespread understanding of the overriding importance of preserving an open trading environment and of the urgent need for countries to act on their commitments to roll back existing protectionist measures.

As far as foreign aid is concerned, many Governors stressed the need for an enhanced flow of official development assistance if the special problems of the poorest countries are to be adequately treated. These countries, many of which have suffered prolonged economic weakness, cannot regain the momentum of their development without well-conceived programs of domestic investment supported by adequate foreign assistance.

Lastly, there is a general recognition of the need to strengthen Fund surveillance and make it more evenhanded. Many of the problems currently facing the world economy including issues related to the pattern of interest rates, exchange rates, and current account positions are associated with divergences in policies and performance across countries. Recognizing this, Governors underlined the importance of taking adequate account of the international dimension of national economic policies. At the same time, a number of Governors have called for renewed attention to issues in the evolution of the international monetary system. On the question of a further allocation of SDRs, I noted that there were no changes in the positions that had been taken earlier; as agreed in the Interim Committee this matter will be kept under close and continuing consideration.

* * * * *

Mr. Chairman, as these meetings draw to a close, we have a full agenda of work for the coming months. The recovery that is under way in the world economy must be sustained and broadened; the debt situation must be managed carefully and prudently; and existing mechanisms of international collaboration must be strengthened. These are difficult challenges, but I believe our meetings this week have shown that the membership is ready to meet them.

It remains for me to thank you, Mr. Chairman, for the skillful and effective way in which you have guided our discussions. I wish all of you a safe journey home, and I look forward to seeing you next year in Seoul.

Statement by the Chairman of the Boards of Governors, the Governor of the Fund and the Bank for Japan—Noboru Takeshita

As I had the privilege of opening the Thirty-Ninth Annual Meetings of the Boards of Governors three days ago, I have the duty to bring them to a close. This year’s meetings have been highlighted by constructive exchange of views on the now brightening prospects of the world economy and issues thereof from various perspectives. On this occasion, I should like to express my sincere gratitude to the Governors of Ghana and the Netherlands for kindly assisting me as Vice Chairmen, and all the other fellow Governors, the Managing Director of the Fund, and the President of the World Bank for their thoughtful contributions to our deliberations.

On behalf of us all, I should like to express our sincere gratitude to President Reagan for his continuous warm support for the Fund and the Bank.

World Economy

Looking back on the deliberations at the Annual Meetings this year, it should be pointed out first that we have confirmed the need to come to grips with the tasks remaining before us with as progressive a spirit as ever and further cooperation in order to translate the brightening prospect of the world economy into a reality. We are encouraged by the increasing growth rate of the world economy, brighter prospects on the manageability of the immediate liquidity problem in debtor countries, and agreement on or implementation of various measures to strengthen the resources of the Fund and the Bank. It is equally true that many Governors have raised basic questions as to whether the present economic recovery will pervade; whether there exist uncertainties as to its sustainability; whether the sound economic development of developing countries will be resumed; and whether the debt problem is on the right track toward its ultimate solution.

The first task confronting us is how to sustain and spread the global expansion of the economy which is now materializing as a result of our joint efforts in recent years. The fact that many Governors have emphasized the future challenges confronting us much more often than they have shown their satisfaction for the present economic recovery indicates the breadth and depth of the difficulties of the world economy. At the same time, however, it implies the determination to solve these difficulties by ourselves and not leave them for later generations.

Prudent stance of policy management demonstrated in many Governors’ addresses strengthens the possibility of making the present economic recovery durable. The following points have generally been agreed upon as future efforts in the right direction. First, the industrial countries should continue to give priority to containing inflation, sustaining prudent monetary and budgetary policies, and trying to lower high interest rates, with continued efforts to curtail public expenditures and to reduce fiscal deficits.

At the same time, the effort to achieve economic adjustment is required not only of developing countries but also of industrial countries. Industrial countries should proceed with various reforms in their respective context so that new ideas and vitality are fully infused into the labor market, industrial structure, and capital market.

Furthermore, the necessity to avoid and roll back protectionism has been pointed out, almost without exception, in addresses by Governors. What is needed now is to translate this determination into concrete and concerted actions.

Second, profound concern has been expressed regarding the present situation of sub-Saharan countries which is in sharp contrast to the improved circumstances in general. We should be prepared to provide a concessional flow smoothly to those nations, while technical assistance is also indispensable for the formulation of appropriate development programs and for the management of those programs.

As to the debt problem, which should continue to be dealt with case by case, it is important to maintain the collaboration among those concerned and advance the economic adjustment effort of debtor countries, in order to make appropriate funds available to those countries.

Role of the Fund

The Fund has played well its role required by the times with due flexibility to adapt to the changing circumstances of the world economy. Especially its role as a pilot in tiding over the economic difficulties of the 1970s and its role as a core of strategic action against the debt problem, which became acute two years ago, should be highly noted. Realization of the rapid enlargement of the Fund’s resources since last year and the agreement on the maintenance of enlarged access to the Fund’s resources in 1985, with some reduction in access limits at the Interim Committee, attest to the great credibility of the Fund.

In the addresses by the Governors, many referred to more effective use of surveillance conducted by the Fund concerning economic management of both industrial and developing countries. Moreover, the Interim Committee meeting next year is expected to discuss how to improve the functioning of the international monetary system.

Now that we are gradually being freed from the heavy pressures of immediate problems, such as worldwide recession and the debt problem, I am convinced that the Fund surely offers the most appropriate forum to cope constructively with such new tasks of the medium- to long-term framework.

Role of the World Bank

We have reached a broad agreement that addressing the developmental problem requires medium- to long-term structural support in accordance with the particular situation of individual countries. In the context of such country assistance, I should like to confirm that many Governors have pointed out the following: first, the Bank needs to enhance policy dialogue with borrowing countries and utilize structural adjustment lending effectively; second, the Bank needs to strengthen its financial base and catalytic role. To this end, I earnestly hope that the selective capital increase for the World Bank and the Seventh Replenishment of IDA will be mobilized as soon as possible and the general capital increase for IFC will be authorized as scheduled. Furthermore, I hope cofinancing with private banks will be promoted. Also, we should carry forward our discussions on the future role of the Bank, keeping in mind the need to start consideration for its general capital increase.

International Cooperation

As I pointed out in my opening address three days ago, there is a danger that the gap in living standards between countries could widen if no positive action is taken. I, thus, underscored the indispensability of comprehensive international collaboration based on effective adjustment efforts by each country if we are to realize sound and well-balanced growth of the world economy. Indeed, many Governors stressed that international cooperation must generate more concrete results than ever in order to cure the worldwide economic problems.

An important outcome of the Annual Meetings this year was the agreement reached at the Interim Committee and the Development Committee to discuss at their next meetings financial and development aspects of the problems of developing countries in their efforts to achieve sound economic growth within a medium- to long-term framework.

Let us take on this assignment together and discuss through what policies and in what form it would be appropriate to further international collaboration in the framework of the Fund and the Bank and report the outcome of our discussions to the Annual Meetings next year.

Concluding Remarks

Lastly, I would like to express the appreciation of us all for the excellent arrangements that the staff of the two institutions have provided us with at these meetings. On behalf of my fellow Governors, I should like to thank the Government and the people of the United States for their warm hospitality. And I extend my congratulations and best wishes to the Governor for Senegal, who is succeeding me as Chairman of the Boards of Governors.

I look forward to seeing you again in the beautiful city of Seoul, the capital of Korea. Finally, let me wish you all a safe journey home.

The 1984 Meetings of the Boards of Governors of the International Monetary Fund and the World Bank and its affiliated institutions are hereby closed.

Delivered at the Closing Joint Session, September 27, 1984.

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