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Presentation of the Thirty-Eighth Annual Report1 by the Chairman of the Executive Board and Managing Director of the International Monetary Fund, J. de Larosière

Author(s):
International Monetary Fund. Secretary's Department
Published Date:
November 1983
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Mr. Chairman, Governors, ladies, and gentlemen, it is a pleasure to join previous speakers in welcoming all of you at the Annual Meetings. We are honored by the presence here this morning of the President of the United States, and I was much heartened by his expression of his full personal support and commitment to the Fund.

Mr. Chairman, when we met last year in Toronto, the world economy was facing perhaps the most critical combination of circumstances of the postwar period. The recession was becoming increasingly severe. Inflation and interest rates remained very high. And the debt difficulties of several of the most important borrowing countries were in imminent danger of becoming unmanageable. The possibility existed of a failure of international financial mechanisms, setting in train a further contraction of trade and capital flows and threatening another twist in the downward spiral of economic activity.

Now, a year later, considerable progress has been made in dealing with this threat. Economic recovery is under way in the industrial world. Inflation, though still high, has receded, permitting some decline in interest rates. And a concerted strategy has been set in place for the adjustment and financing of the external position of borrowing countries. Much, however, remains to be done. The recovery in industrial countries is still limited geographically and is not broad enough in its composition. A long process of convalescence will be necessary before the economies of many heavily indebted countries are restored to health. Moreover, other difficulties have remained serious including, most importantly, the spread of protectionism and exchange market instability.

In my remarks today, I want to address in turn the twin issues of fostering a sustainable recovery and consolidating the progress made in dealing with the adjustment and financing problems of heavily indebted countries. In light of these observations, I shall then consider how, and under what conditions, the International Monetary Fund can contribute to a strengthening of the international monetary and financial system.

1. Recovery in the Industrial World

a. The present situation

Led by North America, the industrial world has begun to recover from the most severe and prolonged recession of the postwar period. Industrial production in the seven major industrial countries is estimated to have been some 6 percent higher in July than at its low point in December last year. Gross national product (GNP) in the industrial countries as a group is now estimated by the Fund staff to be expanding at an annual rate of 3 to 4 percent and to continue at broadly the same pace into next year.

The recovery of output and demand has been accompanied and facilitated by a continuing decline in inflation. The average annual rate of increase in the consumer price index in industrial countries, which as recently as the first quarter of 1980 had been some 13 percent, has been reduced to about 5 percent in the latest 12-month period. While this progress owes something to special and temporary factors, it is encouraging that the rate of increase in basic costs—particularly wages—has moderated and that productivity growth is picking up again after a long period of decline. These developments augur well for further progress toward price stability.

The recovery has also had a beneficial impact on commodity prices and the prospective growth of world trade. Commodity prices had by August 1983 risen about 14 percent from their very depressed levels of the final quarter of 1982. This should enable developing countries to enjoy a modest improvement in their terms of trade in 1983 after five years of continuous and pronounced decline. Also, it would increase their capacity to participate in, and eventually contribute to, global recovery. World trade, which actually contracted in volume by 2½ percent in 1982, is likely to increase moderately in the current year and more substantially in 1984.

Despite this improved outlook, however, there are aspects of the recovery that must continue to give policymakers cause for concern. To begin with, the recovery thus far is confined to relatively few countries. While demand is now increasing rapidly in the United States and Canada, many other countries have only just begun to experience an increase in economic activity and others are still caught in the down-phase of the cycle. Potentially even more disturbing is the lack of dynamism and balance in the structure of demand expansion. Demand has been fed so far by interest-sensitive consumers’ expenditure and stock building. Fixed investment—which is the decisive element in boosting productivity and growth over the longer term—remains weak. This underlines the fact that business confidence has been slow to revive and that interest rates are still too high.

b. Policies for the future

The central task of policy in present circumstances is to consolidate the recovery that is taking hold and to ensure that it is extended and sustained. As noted in the Williamsburg communiqué, this requires avoidance of short-term policy adaptations in the face of temporary changes in circumstances and, instead, steadfast pursuit of sound policies over the medium term. This is the strategy that has been espoused by most industrial countries, and it is showing signs of success. We must build on this initial success. Those elements of the medium-term strategy that have already been put in place must be maintained, while those aspects of present economic policy which remain unsatisfactory must be corrected. Let me now deal with what this implies in concrete terms.

  • —First, it is essential that the progress that has been made toward greater price stability be safeguarded. Allowing inflationary expectations to gather strength again would be a damaging blow to the sustainability of recovery. To avoid this, rates of growth of monetary aggregates must be, and must be seen to be, consistent with a further deceleration in price increases. I know that some observers fear this may keep interest rates high and complicate the task of fostering a recovery in investment. I do not believe this is the case. If interest rates today are high—and they are— they reflect largely the fear that competition for funds in capital markets is likely to intensify in the period ahead. The way to deal with this situation is not to loosen the reins on monetary expansion but to reduce inflationary expectations and improve the balance between available savings and the demands that are placed on them.

  • —This brings me to my second point: the need for a credible plan for reducing fiscal deficits in those several countries—including the United States—where structural budget deficits are high in relation to available savings. This is perhaps the most important policy element that remains to be set in place. Now that recovery has begun, early steps must be taken by these countries to implement a medium-term strategy for restoring fiscal balance. Such a strategy is really the only means of building public confidence in the determination of national authorities to put an end to inflation and to bring about a durable reduction in interest rates. Otherwise one of two undesirable outcomes would seem all too likely to ensue. On the one hand, continuation of such deficits in certain major countries in combination with continued monetary restraint would keep upward pressure on interest rates and lead to a misuse of global saving, jeopardizing the prospects for a balanced and sustainable recovery. On the other hand, the persistence of large budget deficits in conjunction with a more accommodative monetary policy would have even graver consequences through reviving inflation and undermining growth. There is, unquestionably, a close association over the medium term between inflation and interest rates. To attempt to bring down interest rates by increasing the money supply is not only futile but counterproductive. In present conditions, determined action to deal with structural budget deficits would serve to dispel inflationary expectations and ease the pressures on capital markets. As long as such a budgetary policy is not declared and implemented, monetary policy will continue to have to bear the brunt of the effort to contain inflation.

  • —A third central element of policy will have to be the pursuit of structural reforms aimed at improving the climate for a sustainable expansion in private investment. Fiscal responsibility is part of this climate. So is the development of wage-setting procedures that allow the cost of labor to respond in a timely way to changes in the demand for it. The high cost of labor has been a factor inhibiting the growth in employment opportunities, especially in Europe. It contributed to a decline of almost one half in the return on capital in industrial countries since the late 1960s. Adequate profit levels are an essential condition for a revival of investment. They are at the heart of a durable revival of employment and income levels. Another aspect of structural policies calling for re-examination is the nature of government involvement in industry. In an age of rapid and widespread technological change, industrial structures and practices must be responsive to shifts in comparative advantage. Resistance to such shifts, whether in the form of regulation, protectionism, subsidies to declining industries, or other means, produces rigidities that ultimately work to the detriment of those they are intended to help.

  • —Fourth, and closely connected with the need to maintain structural flexibility, is the importance of resisting protectionism. Recovery can only be considered firmly based when it is achieved in the context of an open and liberal trading system that allows countries to expand international sales of items in which they have a comparative advantage. The growth of protectionism has been an alarming feature of our recent experience. It poisons economic and political relationships among countries and prevents the full benefits of the recovery from being shared by those countries, particularly in the developing world, where the need for open foreign markets is greatest. I, therefore, welcome the special emphasis given to the need to halt protectionism by the leaders of the seven major industrial countries at the Williamsburg summit and their commitment to dismantle trade barriers as recovery proceeds. The Fund, for its part, will continue to collaborate closely with the GATT toward that end. Also, the Fund is ready to take every practical initiative that has the support of its members to encourage a more open trading environment.

2. Adjustment and Financing in the Developing World

The developing countries have not yet shared in the recovery that is beginning in the industrial world. Indeed, 1983 is shaping up as another year in which growth in non-oil developing countries will be under 2 percent. This will be the third consecutive year in which GNP per capita in these countries, taken as a group, has been stagnant if not falling. And of course this average conceals a diversity of experience in which many countries have actually had to endure substantial declines in economic welfare. In addition, many of these countries have been facing acute external financing problems. The origins of these problems have been the subject of considerable analysis and are by now well known to all of us. I shall, therefore, focus my remarks on the key issues for policy arising out of the current situation.

a. The need for adjustment

In the years up to 1982, many developing countries were accumulating debt at an excessive rate. From 1973 to 1981, the total outstanding debt of non-oil developing countries increased at an average annual rate of some 20 percent. Much of this increase represented lending by private financial institutions at floating rates of interest. It was sustained by the expectation that worldwide inflation would be allowed to continue and would facilitate the servicing of the growing volume of debt. This expectation, as is now realized, rested on a false assumption.

The rate of price increase that was reached in recent years could not have been allowed to continue unchecked without grave consequences for economic growth and employment. Indeed, the experience of the 1970s graphically demonstrated that inflation, when it gains hold, saps the economic strength and resilience of countries and breeds recession. It was clear that a stop had to be put to inflation and that adequate incentives to save had to be provided by restoring positive real interest rates. The disinflationary process was eventually set in place. Of course, such a process accompanied by high interest rates has had painful consequences for heavily indebted countries. They are thus forced to curtail their external borrowing and, to achieve this, to cut back their net absorption of resources from abroad.

b. The magnitude of adjustment under way

Thus, debtor countries had to adjust to the new realities. The results of that adjustment are becoming increasingly evident. Though there are still some countries that have yet to take serious action to deal with their payments problems, balance of payments adjustment is well advanced throughout the developing world. A considerable measure of external adjustment has already been achieved. The external current account deficit of the non-oil developing countries as a group in 1983 is projected at 14 percent of their exports of goods and services, down from 23 percent in 1981 and somewhat lower than the proportion recorded in the period 1976–78. Underlying this improvement is a massive reduction in the combined trade deficit of this group which, in 1983, is projected at $40 billion, or approximately half of its level two years ago.

The Fund has been playing a crucial role in assisting in the process of orderly balance of payments adjustment in the developing world. We are currently providing financial support for programs under stand-by and extended arrangements in 46 countries. Progress toward external adjustment by these countries has been particularly encouraging, given that many of them have been experiencing acute external financing difficulties. The combined current account deficit for those countries with standby or extended arrangements currently in effect with the Fund is projected at $34 billion in 1983, about half of its nominal level in 1981. Their trade deficit is projected at $17 billion in 1983—one third of its level two years ago.

c. Adjustment and growth

The argument has been made that the adjustment measures required of debtor countries have the effect of slowing down their growth and, thereby, adding to recessionary influences in the world economy. This line of argument betrays a very fundamental misunderstanding and it offers no alternative solution. As soon as a country’s external deficit begins to outstrip the availability of foreign financing, that country has no alternative but to retrench and to bring its external deficit within the bounds that are dictated by the availability of foreign financing. That process cannot be said to impair recovery, since recovery cannot be based on trade which is beyond the ability of importing countries to finance.

Comprehensive adjustment programs, such as those supported by the Fund, facilitate a much smoother process of adjustment than would otherwise be the case. By providing financial resources to countries implementing adjustment programs and by unlocking or “catalyzing” by means of those programs access to substantial amounts of additional external finance—on average of the order of four times the amounts provided by the Fund itself—the Fund enables deficit countries to sustain larger imports than would be possible if those countries were left to themselves. Adjustment programs also help to moderate any cutback in imports by their effects in helping countries to exploit more fully their export potential. Ultimately, however, the extent to which export-led adjustment is possible pivots upon the strength and durability of world demand, and continued, if not expanded, access by developing countries to the markets of the industrial world. I shall come back to the last point again later.

At this point, let me illustrate what I have been saying by reference to a specific example. Take the case of Mexico. The remarkable progress already realized in the Mexican external position attests to the fact that adjustment policies, when implemented with determination, do work. In the second half of 1982, prior to the adoption of a program with the Fund, Mexico’s imports were cut by some 50 percent in dollar terms below the levels of a year earlier. From a low point in the first quarter of 1983, and despite the introduction of a rigorous program of domestic demand restraint, imports have been picking up and this growth is expected to continue. This is the result of the introduction of a credible program of adjustment, a strengthening of export earnings, and renewed access to external financial resources made possible by the determined implementation of the program by the Mexican authorities. Taking all those countries that entered into new arrangements with the Fund during 1982 we find that imports fell by 21 percent in that year, that is, prior to the first full year of implementation. These programs envisage a recovery of imports beginning this year. Imports are projected to rise by 8 percent in 1984 for 31 countries under Fund-supported programs for which projections are available.

Thus, by helping countries with adjustment programs to sustain imports, the Fund helps to sustain growth. Moreover, in a medium-term perspective, Fund-supported adjustment programs incorporate policies that are aimed at removing impediments to growth. Let me mention just a few of the policy elements of such programs.

In the first place, a widespread tendency that needs to be counteracted is for government expenditures to grow faster than revenues. The reasons for this tendency are often understandable, but the result is all too familiar: excessive foreign borrowing, monetization of public debt, increasing inflationary pressure, the crowding out of private sector investment, and as soon as an external financing crisis breaks, a need to resort to measures to restrain government spending that do not adequately distinguish between the productive and the unproductive. A restoration of a prudent fiscal policy stance together with action to promote domestic saving is therefore at the heart of a sound adjustment strategy and is an essential prerequisite for growth.

A second necessity is an exchange rate that gives the right incentives for domestic production and for domestic savings to be invested locally rather than abroad. The use of special ad hoc incentives to earn or save foreign exchange is rarely an adequate alternative to an appropriate exchange rate. Such mechanisms often distort the allocation of resources, leading to inefficiency. And they require administrative resources that could be better employed elsewhere. A realistic exchange rate policy, therefore, helps to promote both adjustment and growth.

Third, structural reforms are often called for in adjustment programs to enhance supply capacity and improve the prospects for achieving longer-term growth. Removal of rigidities in price-setting mechanisms, improvements in tax systems and in the efficiency of public sector enterprises, and the restructuring of development plans along more realistic lines are among the most important matters that typically need attention. In recent years the Fund has intensified its collaboration with the World Bank to ensure that the balance of payments adjustment process is compatible with progress toward development objectives. To this end, we have continued to increase the emphasis given to structural measures aimed at improving resource allocation and enhancing supply capacity.

Thus, the programs of adjustment that the Fund has supported have attempted to address these issues of demand management and structural reform. And the facts show that these policies are helping to foster growth. For example, those countries that have entered into arrangements with the Fund over the past twelve months will see their growth rates pick up in 1983, and conditions are being laid for a resumption of stronger and durable growth next year and beyond. The choice is not adjustment or growth. It is a choice between adjustment or more inflation and higher unemployment.

d. Need to maintain financing

I have already spoken of the magnitude of the adjustment that is now under way in the developing world. Impressive though it is, it must not divert attention from the fact that, in a number of countries, it involves considerable hardship in the short run and is being realized at high social and political cost. Some countries are already approaching the limits of social and political tolerance of their adjustment efforts. This underlines the crucial need for adequate financing flows to facilitate and underpin the adjustment process. If the present difficult situation is to be overcome, all parties involved in international financing will have to continue to cooperate closely, recognizing fully their mutual interest in preserving financial stability. Informed understanding by creditors is needed to complement the determined adjustment actions of debtors.

This understanding has already shown positive results. In the case of several major debtor countries, the immediate threat of crisis has been averted by concerted action on the part of the Fund, governments, central banks, the BIS, other multilateral agencies, and commercial banks. The danger is not over, however. Recent collaborative efforts will have to be extended over a period of years and need to be consolidated by ensuring (i) that all commercial bank creditors, small as well as large, participate in restructuring efforts; (ii) that credits to large countries do not pre-empt the flow of funds to smaller ones; (iii) that official lending plays an important role in capital flows and in restoring a more viable debt structure; and (iv) that credits are provided on reasonable terms. In this regard, I am particularly heartened by the agreement in principle that was reached yesterday on the concerted financing of the Brazilian adjustment program for 1983 and 1984.

While the Fund’s resources form an important part of international financial flows, they are relatively small in comparison with those of private creditors. This year, for example, when the Fund will make available record amounts of finance, our net contribution will represent under 20 percent of the current account deficit of developing countries. Continued financing by the commercial banks will be needed in support of the adjustment programs now in place in many debtor countries, but net new bank lending in the period ahead will be on a much smaller scale than the unsustainable rates recorded as recently as 1981. It seems clear that the transmission mechanism involving heavy reliance on commercial banks, which has been a dominant feature of international financing flows to the developing countries during the past decade, will have to be improved. In this connection, let me say a word on two forms of capital flows that need to be expanded.

First, foreign direct investment should come to play an increasingly important role. Not only does such investment avoid creating an overhang of debt, it often facilitates the transfer of technology and skills and is directly tied to productive capital formation. To the extent that a greater proportion of resource transfers takes the form of direct investment, the danger of future debt-servicing crises is lessened. Governments in countries with debt problems should move decisively to attract direct investment from abroad.

Second, for the poorest among the developing countries the main prospective source of finance from abroad is official development assistance. The low-income countries were among those most seriously hit by the adverse shifts in terms of trade up until 1982. Their adjustment efforts have been hampered by the weakness of their resource base, their underdeveloped infrastructure, and the difficulty of actions that might compress further their already low standards of living. For these countries, the marginal value of additional foreign resources, permitting as they often do the activation of complementary domestic resources that would otherwise remain idle, far exceeds their cost to donor countries. The role of the World Bank and of other multilateral development organizations in channeling concessionary foreign assistance to the developing world is of particular importance. Expanded flows of official development assistance are an essential element of an orderly adjustment process. Moreover, such action will pay dividends, not only in terms of the economic development potential of the recipient countries but also in terms of their capacity to contribute to the global recovery.

3. The Fund’s Role in Strengthening the International Monetary System

I have dwelt at some length on the problems of adjustment and financing of developing countries. Confidence in the stability of the international monetary system depends upon a satisfactory resolution of these problems. I should now like to turn to two other aspects of the system where the role of the Fund needs to be strengthened: I shall speak first of surveillance and then of international liquidity.

a. Surveillance and developments in exchange rates

Considerable progress has been made toward a convergence of inflation rates among the major countries. Nevertheless, swings in exchange rates that appear to be unrelated to fundamental shifts in competitiveness have continued. Conditions like these do not inspire confidence in the system and can lead to balance of payments trends that are unsustainable over the medium term. On occasion, exchange rate instability is used as a justification for the introduction of protectionist measures by countries whose currencies appear to be overvalued.

The challenge of restoring greater stability to exchange rates among major currencies is an important one. It is clear that in present circumstances the role of exchange market intervention can only be a limited one. It may play a role in countering disorderly conditions in exchange markets. This was noted in the study by the Working Group on exchange market intervention established at the Versailles summit in their report published in March of this year. It is generally recognized, however, that intervention is not a useful instrument for reversing underlying trends in exchange rates arising from divergent economic policies and performance. Promoting a greater measure of convergence and stability in the policies and conditions of the major countries is central to the exercise of the Fund’s surveillance responsibilities. To this end surveillance must focus not only on actions taken directly in exchange markets, but on all aspects of policy that impinge on international payments and the stability of exchange rates. Furthermore, our surveillance must be evenhanded. The obligations of countries in surplus are just as great as those of countries in deficit. Indeed, in many respects they are greater. It is to the strong countries that the world looks for a lead in developing sound medium-term policies and avoiding short-term expedients.

A responsible policy strategy in present circumstances means not simply fostering recovery and continuing to bring down inflation. It means the adoption of a “mix” of domestic policies designed to achieve these objectives without adverse repercussions on trading partners. The Fund will continue to give special attention to this aspect of its surveillance responsibilities in the course of its regular consultation discussions with member countries. These discussions are focusing, even more than in the past, on the international interactions of national economic policy and on their implications for the smooth functioning of the international trade and payments system.

The exercise of multilateral surveillance, introduced about a year ago among a limited number of the industrial countries in collaboration with the Fund, constitutes a discreet but important and positive step toward improved understanding of the current problems and toward a consensus as to the policies that are needed to tackle them. Beyond that, and for this exercise to be fully effective, it is essential that member countries agree to take due account in their policy actions of the indications arising out of these consultations.

b. The Fund and liquidity

A second area in which current decisions will influence the longer-term evolution of the system is that of the provision of international liquidity, both conditional and unconditional. Even if the membership is not yet in a position to decide whether to proceed with a new allocation of SDRs at this time, the past year has illustrated the vital need for conditional lending from the Fund both to fill a sudden shortfall in available financing and to facilitate the adoption of appropriate adjustment policies. Here I would like to pay tribute to the Saudi Arabian authorities whose foresightedness and high sense of international cooperation enabled the Fund to launch the enlarged access policy in March 1981. With the enlarged access policy in place, the Fund was equipped to respond to the crises of 1982 in a meaningful way.

The need for Fund assistance continues, and we expect our net new commitments to remain at a high level for some time. In these circumstances, it is vital that the Fund be endowed with the resources needed to give confidence to member countries that strong programs of adjustment will be adequately supported. The agreement reached in February, involving a 47.5 percent increase in Fund quotas and a tripling of borrowing facilities under the GAB, will lead to a sizable increase in the Fund’s usable resources. Let me emphasize, however, that these proposed increases are the minimum needed for the Fund to play its role in preserving an orderly adjustment process. Failure to bring them into operation quickly would cripple this institution and could have incalculable consequences for economic and financial stability worldwide. Members’ access to Fund resources would have to be curtailed, and the fragile progress made in restoring economic health in the developing countries would be put in jeopardy. Strains on private financial mechanisms would increase, and their effects could well spill over into the domestic financial structures of creditor countries, adding new pressures on interest rates and on the international monetary system. The consequences of such a sequence of events for growth and world trade shed light on the importance of what is at stake for all countries.

The urgency of obtaining additional resources is underscored in two ways. There is growing strain on the Fund’s usable resources through meeting large-scale demands for balance of payments financing by members adopting adjustment programs. In addition, the Fund has committed more borrowed resources than it has available—the so-called commitment gap. This shortfall of borrowed resources is at present SDR 4.1 billion and is expected to rise to the order of SDR 6 billion by the end of 1983. It is of the utmost importance for the Fund to cover those commitments by concluding new borrowing arrangements of SDR 6 billion in the very near future. Otherwise, by the beginning of 1984, the Fund would have effectively earmarked almost all of its remaining uncommitted ordinary resources, while the established enlarged access policy entails commitments of borrowed resources. To continue further on this course would threaten the Fund’s ability to preserve the unquestioned liquidity and full usability of members’ reserves held in the Fund. I have already found it necessary to take steps to hold back on new negotiations involving resources under the enlarged access policy, and the Executive Board will have to address this issue and possible steps to conserve the Fund’s liquidity immediately following these meetings.

It is, therefore, of crucial importance that the ratification of the Eighth General Review of Quotas and of the enlarged GAB be completed by member countries so that the new resources can become available to the Fund by the end of November. Given the weight of the United States in the Fund’s quotas, it is essential that the U.S. Congress act decisively and urgently on this matter. Moreover, we must be confident that members in a position to lend to the Fund will continue to cooperate with the institution. This support will also be needed after the quota increase becomes effective. Indeed, the realities of the time require the continuation of a meaningful enlarged access policy, as has been agreed by the Interim Committee on Sunday last. The financing of such a policy will require further borrowing by the Fund over the next few years. This is all the more important because adjustment and debt problems will be with us for a number of years to come.

*****

Mr. Chairman, I noted at the beginning of my remarks that the international economic situation is considerably brighter now than it was when we met in Toronto. So it is. But, as I have indicated, a great deal remains to be done. There are, in my view, three remaining challenges. First, the recovery must be consolidated. To this end, the importance of strengthening policies, particularly in the major industrial countries, and of improving the mix of those policies along the lines I have outlined cannot be overemphasized. The full potential of the recovery must be realized for the benefit of the entire world economy. Second, the forces of protectionism must be resisted and reversed. The benefits of protectionism are ephemeral. The costs grow and last. They are felt by everyone, but particularly by developing countries whose debts can only be serviced and repaid in an open world economy. Maintaining open markets is therefore not simply an abstract concept. It is an essential prerequisite for regaining the momentum of economic advance and for securing the prosperity of all member countries. Finally, we must not allow the debt problems to unravel. We have certainly made progress on this front, but the danger is not past, and if we do not act the situation could well get out of hand. In this respect, the Fund must be financially equipped if it is to continue to play its unique role in arranging orderly adjustment programs, which are the only way out of the debt crises.

These are challenges that must be met. And they can be met. Their resolution will require action on the part of the entire membership. Action that is not simply confined to the immediate future but is extended into the future on a lasting basis. That action must also be integrated in a worldwide context. It therefore requires economic statesmanship to look beyond domestic concerns and particular interests to the great mutual benefits that will flow from cooperative actions. Cooperation is not easy. But, as 37 years of concrete experience has taught us in the Fund, it is possible and is ultimately the only way to make progress. I am confident that the spirit of cooperation that has sustained the Fund over the recent difficult period can be strengthened so that we can meet the challenges that lie ahead.

September 27, 1983.

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