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Discussion of Fund Policy at Sixth Joint Session1

Author(s):
International Monetary Fund. Secretary's Department
Published Date:
November 1982
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Statement by the Governor of the Fund and the Bank for Afghanistan—Abdul Baqi Samandari

I am greatly honored to represent the Democratic Republic of Afghanistan in this assembly of distinguished leaders of finance and banking.

To begin with, my delegation and I would like to convey our sincere appreciation and thanks to the Government of Canada for their warm and cordial reception as well as for the excellent arrangements made for the conduct of these Meetings.

The current world economic situation, which has been thoroughly reviewed by the reports of both the International Monetary Fund and the World Bank, continues to be dominated by problems of slow or even negative growth and large imbalances on external current account payments. The prevalence of recessionary conditions is reflected in the growing unemployment in the capitalist industrial countries.

Inflation also continues to be an acute problem facing the Western industrial countries. Notwithstanding the restrictive financial policies adopted by these countries, the problem remains yet to be brought under control, though inflation rates have come down somewhat from their peak levels.

The impact of these undesirable developments has been most adverse on the non-oil developing countries. Moreover, the weakening of the spirit of international economic cooperation together with the increasing protectionist tendencies in the Western industrial countries further compound the problems for the poorer developing countries. Along with stagnation in the growth of their exports, the non-oil developing countries also suffer from growing costs of imports from the developed countries because of the high rates of inflation in those countries. Consequently, there has been a further widening of the current account deficits in the external payments situations of these countries, posing problems for financing of these deficits in view of the continued high rates of interest in the world capital markets.

The non-oil developing countries suffered a sharp decline in the rate of growth. Indeed, in 1981 for the first time in several decades, the average growth rate of oil importing developing countries seems to have been less than the rate of increase in population so that per capita income appears to have fallen.

The non-oil developing countries also suffered a further acceleration of inflation. Apart from the expansionary policies pursued by some of these countries, an important contributory factor was the higher cost of imported goods from the industrial countries. The rise in the prices of their imported goods and the slowdown in the demand for their exports caused by the recessionary conditions in the Western industrial countries also led to the deterioration in the terms of trade of the non-oil developing countries.

Thus, the deficit on current account, which was $53 billion in 1979, enlarged to $86 billion in 1980, and further to $99 billion in 1981. The deficit is estimated to persist around this level ($97 billion) in 1982 also. Naturally, financing of deficits of this magnitude poses difficult problems for the developing countries. Furthermore, in the case of the poorer and the least developed countries, the stagnation in the flow of concessional financial assistance (which forms a major source of external capital for these countries) is retarding considerably the progress in planned development.

It is in this context that the flow of official development assistance on concessional terms, including aid from the world financial institutions, assumes crucial importance. It is unfortunate that such assistance has been stagnating and might, in real terms, perhaps be declining.

Altogether, the economic situation facing the non-oil developing countries, especially the low-income and least developed countries like ours, is extremely difficult and grim. Nor do immediate prospects hold out any hope for improvement in their plight.

I shall now turn to review briefly the major developments in the economy of the Democratic Republic of Afghanistan.

In addition to the adverse impact of the international economic developments I have indicated above, the destructive activities of the counterrevolutionaries supported by international imperialism, hegemony, and regional reactionaries, and the consequent damage to productive assets, including infrastructure facilities and dislocation of economic activities, compounded the problems facing our country. The year 1360 (corresponding to the year ended March 20, 1982) has thus been another difficult year for us. Nevertheless, the economy has been kept on an even keel and there have been significant improvements in several areas. The gross domestic product registered an increase of 1.5 per cent. This compared with a decline of 3.7 per cent recorded in the previous year. The gross national product, however, remained almost unchanged at around Af 154.3 billion as against Af 155.4 billion in the preceding year. The agriculture and forestry sector, which is by far the predominant activity in our country, registered an improvement of 13.1 per cent as against a decline of 1.9 per cent in the year ended March 1981. During the year 1981–82, in addition to a whole series of measures adopted by the Government to implement the democratic land reform for the benefit of the huge number of landless peasants and small-holding farmers, attention was also paid to giving continued aid to farmers with respect to the provision of chemical fertilizers and agricultural machinery and implements. Improved seeds and pesticides continued to be provided to farmers at concessional prices. At the same time, remunerative prices were ensured for farm output, especially for cotton and sugar beet which are procured by the Government. One of the significant measures taken was to absolve peasants from penalties on tax arrears for the three preceding years, as a result of which some 760,000 farmer families were exempted from paying Af 722 million owed by them.

In the industrial sector, it is notable that output of factories in the private sector during the most recent fiscal year has in fact increased by 5.6 per cent as compared with the decline of as much as 10 per cent in the previous year. It has always been the policy of the Government to promote investments by the private sector in productive channels and provide adequate incentives for maximization of output in addition to ensuring availability of bank credit to finance working capital needs.

The general increase in the prices of food articles in spite of the growth in the agricultural output during the year reflected in part a disruption in supplies caused by the destructive activities of the counterrevolutionary elements. Steps have already been taken by the Government to overcome these problems. Meanwhile, supply of essential articles for mass consumption was ensured and no material shortages were allowed to develop. In this context, I mention with gratitude the continuing assistance from the friendly countries, especially our good neighbor, the Soviet Union, in providing all-sided assistance including essential goods for consumption by the poorer sectors of the community which has been very helpful in keeping the price situation under control. The Government’s fiscal policy during the fiscal year ended March 20, 1982 was also most useful, since for the second year in succession the Government was able to ensure a balanced budget. The rate of monetary expansion during the same year was somewhat higher than that recorded in the preceding year. However, the Government was vigilant in combating inflation and it adopted measures to restrain excessive lending by banks and to bring the price increases under control.

During the year, steps were taken by the Government to promote the welfare of the state officials, workers, and employees. Wages and salaries of workers and contract employees have been increased between 26 per cent and 50 per cent. Also, lunch allowances for workers, employees, and officials were increased by 50 per cent.

As regards external trade, the policy of the Government is to expand trade and economic relations with all countries for mutual benefit. Pursuance of this policy in the fiscal year ended March 1982 has led to the growth in volume of foreign trade. But there has been a decline in the rate of expansion of trade. There have also been, during the year, larger repayments of the external debt, while there were also sharp declines in receipts of commodity loans and grants. As a result, compared to a surplus on external account noticed in the preceding year, there was only a nominal surplus during the year ended March 20, 1982. Convertible foreign exchange reserves, however, have declined during the latter year by 16.2 per cent. The continued sharp decline in these reserves is to be mainly explained by the shift in the direction of trade in favor of bilateral payments agreement countries, forced upon us by the Western capitalist industrial countries because of the policy of curtailment of economic relations by these countries in the aftermath of the April Revolution.

Our country is a low-income and landlocked developing country and is inhibited by several constraints. Developing the national economy and raising the standard of living of the vast masses of our people are among the main aims of the April Revolution.

Other significant objectives of the April Revolution include introduction of general democratic changes in all walks of social and political life, elimination of all feudal and prefeudal vestiges in social and national relationships, creation of social justice through land reform, gradual abolition of illiteracy, and expansion of education.

Socioeconomic development plans are being framed and implemented by my Government in pursuance of these objectives. Successful implementation of these plans requires continued external assistance to a substantial extent. . . .

We believe that the undeclared war waged by international imperialism against our Revolution should stop immediately and a political solution to the situation around Afghanistan be found on the basis of the earnest and practical proposals put forward on May 14, 1980, and August 24, 1981, by the Government of the Democratic Republic of Afghanistan. Carrying out those constructive proposals will create an atmosphere of trust and confidence among the neighboring countries in this part of the world and will bring about peace and security in the region. Consequently, as a nonaligned and peace-loving country, the Democratic Republic of Afghanistan will be able to take radical measures to expedite its economic and social development.

The basic tenets of the foreign policy of the Democratic Republic of Afghanistan are very clear. To quote Babrak Karmal, General Secretary of the Central Committee of the People’s Democratic Party of Afghanistan, and President of the Revolutionary Council of the Democratic Republic of Afghanistan

We are prepared to establish and expand our relations without any exception with all the nations regardless of their political and social systems on the basis of equal rights, serious respect for the independence, national sovereignty and territorial integrity, mutual interest and good cooperation, noninterference in the internal affairs of each other and respect for the rights of nations to choose their independent path of development and pursue a specific method of living and likewise respect for the historical, cultural, religious and traditional values.

The Democratic Republic of Afghanistan has respected fully all its commitments and obligations to international institutions and will continue to do so in the future. However, we expect that this approach should be reciprocated by international institutions. We earnestly hope that our righteous cause will prevail ultimately and the flow of assistance to our country will be resumed, in accordance with the true objectives underlying the establishment of these institutions.

Statement by the Governor of the Bank for Thailand—Sommai Hoontrakool

First, let me join my colleagues in welcoming our new members, the Hungarian People’s Republic, Belize, and Antigua and Barbuda to the 1982 Annual Meetings of the Boards of Governors.

At this Meeting, we are deliberating on no less grim a situation economically as any in the past three decades. We are experiencing a world economy plagued by monetary volatility, little overall growth, slow progress in development financing endeavors, and an increasing world economic structural impasse. This forum can show, and should sincerely try to show, that those difficulties can be overcome and that the world’s economies can be dynamic and progressive again as before.

However, where we are now is grim. The energy shocks of the 1970s have left in their trail the difficult tasks of economic adjustment. Those of us who have not easily overcome these problems are finding it more difficult to adjust, because more alternatives are being foreclosed. The world’s economies that used to enjoy prosperity interdependently are departing more and more from the cherished norms. Concessional flows of resources are falling. Development finance institutions are finding it necessary, or expedient, to pass on increased costs. Capital markets are becoming more and more shielded as a result of monetary volatility. Developmental fervor is compromised by the call for help-yourself-first thinking. And so on.

As problem compounds problem, we are now at the point where, I hope, practical considerations will keep us from driving to a standstill. The evils of inflation have been combatted extensively. But the payoffs in pursuing it more intensively now seem not advisable. Reasonable growth in industrial countries is necessary for global economic recovery and stability. This year’s zero growth in the industrial economies is a decline from last year’s 1.2 per cent—an unfavorable development. Prospects would be brighter if the accessibility of international markets were generally improved. The record level of some 30 million unemployed in industrial economies will mean substantial dampened demand and is a signal of increased economic inactivity. Are we benefitting sufficiently from so severe a treatment of the state of economic malaise? From original concerns with inflation and monetary volatility it seems the remedial prescriptions have created more worries. As a result of stagnant growth in world trade in the last two years, and coupled with other difficulties involved in adjustments, developing countries’ overall current account positions steadily deteriorate. Even the oil exporting developing countries have to witness the dramatic dwindling of their current account surpluses to $15 billion this year. Other developing countries’ current accounts are even less buoyant: combined deficits are now about $100 billion and directly or indirectly driving up these countries’ debt service ratios in relation to exports approaching the range of 20 per cent.

The fight against inflation should not be given up, but urgency should be given now to generating a minimum steady growth momentum. Without such a momentum, more and more smaller economies will be overwhelmed with a loss of alternatives.

For the non-oil developing countries caught up in this situation with not much to fall back on, developmental progress becomes slow and difficult. Now, they find that existing avenues for the development of their economies and societies are being redesigned with no likelihood that expected developmental characteristics will be retained. We have listened to arguments why lending rates of development finance institutions should float; why their resource base cannot/should not be expanded now; why resource flows for development through private sources should be strengthened; why official resources for development should actually be falling; why specialized organizations, such as an energy affiliate, are not appropriate now, and so on. But such departures should be well considered before permanent adoption. Reasonable accommodation for every country should be expected from this gathering.

To facilitate adjustment in the medium term, it is of utmost importance that the Fund’s financing mechanism be strengthened so that the Fund can continue effectively with enlarged access policies. Regrettably, the trend points toward a much harder time ahead for countries in need of support, with the tightening of the Fund’s conditionality and the discernible lack of flexibility in its application. As apparent in almost all stand-by and extended arrangements of the Fund, the persistently severe world recession and the volatile nature of the current world economic condition belittle the credibility of those assumptions on which the performance criteria are based. The rigid and mechanical application of the Fund performance criteria with inadequate regard for exogenous factors seems to have been responsible for a large number of cases of Fund arrangements that fail or face difficulty. Clearly, a thorough review of the application of the Fund’s policy on stand-by and extended arrangements is in order.

With regard to the general consensus that quotas should serve as the primary source of liquidity for the Fund’s lending operation I would like to stress that the size of the overall increase for the Eighth General Review of Quotas should be made as large as practicable in order to reflect the much larger need for Fund financing of the members’ external payments imbalances. We could accept the quota increase in the range of SDR 100–125 billion under discussion, but consider it by far a modest adjustment. As a precautionary measure, we urge the Fund to continue exploring the possibility of securing additional borrowed resources. While on the subject of the quota exercise, we are not quite satisfied that the Fund quotas as determined by the various formulas truly reflect the actual economic position of a country.

On SDR matters, I once again wish to reiterate our strong support for a new allocation of SDRs, the fourth basic period of which has at the outset of this year commenced with the highly disappointing zero allocation. Such a manifestation does not help promote the role of the SDR as the principal reserve asset in the international monetary system. And even with an allocation of a magnitude similar to that in the previous basic period, the declining proportion of SDRs to existing reserve assets is not likely to be reversed. Considering the prospects of a further decline in the inflation rate, a new SDR allocation cannot be interpreted by any sensible government as giving a signal that will encourage inflationary policies.

For the same reasons that the Fund and the Bank were established 38 years ago, the international community should maintain the original aims and support ongoing developmental efforts. In particular, the flows of real resources to developing countries ought not to decline if poverty is to be wiped out and the plight of the least developed countries, such as those in the sub-Saharan region, is to be alleviated. . . .

To the people and the Government of Canada, my delegation and I are sincerely appreciative of the kind hospitality accorded us during our stay in Canada and of the excellent arrangements made for the Meetings.

Statement by the Governor of the Fund for Western Samoa—Tofilau Luamanuvae Eti

This is my first attendance at the International Monetary Fund and World Bank Meetings, and, first, I wish to express appreciation on behalf of myself and my delegation for the hospitality accorded to us by the Government and people of Canada.

I would also like to take this opportunity of welcoming Antigua and Barbuda, Belize, and Hungary who have joined the Fund and the Bank since our last Annual Meetings.

A new Government assumed office in Western Samoa only a few months ago. But, even in this brief time span, we have come to realize and appreciate the crucial roles being played by the Fund and the World Bank in the economic and financial welfare of the community of nations. In this context, I wish particularly to acknowledge the financial and technical assistance extended to us by both these institutions in the past decade.

As at previous Annual Meetings, several new ideas and new proposals are being placed before us by the Interim Committee, the Development Committee, individual Governors, and the Fund and Bank staffs aimed at increasing the effectiveness of the two Bretton Woods institutions. Taking a cue from the welcoming address of the Prime Minister of Canada, when the world economy is so fluid and passing from crisis to crisis, the Fund and the Bank must continually adapt their activities to the changing circumstances lest they fail, resulting in disastrous consequences for the world economy.

My Government welcomes all proposals aimed at substantially raising Fund quotas, establishing appropriate minimum quotas for all members, considering a new SDR replenishment, strengthening the SDR role, augmenting IDA resources, and bringing more flexibility in Fund and Bank operations. In particular, we strongly endorse the proposals for a substantial increase in Fund quotas, with an equitable distribution of the increase between the developed and developing nations and between large and small member countries. We believe that establishment of an appropriate level of minimum quotas should assist in ensuring a fairer share for the smaller countries.

However, I am not taking a stand here just to restate what you all know so well about the economic disorder pervading us or to endorse the various proposals to strengthen the Bank and the Fund. I am here to touch delicately, though passionately, on a matter that we feel is very crucial for developing positive, meaningful relationships between the Fund, the Bank, and other international institutions, on the one hand, and countries like Western Samoa, which either because of population or area, are very small, are geographically isolated, or are otherwise specially disadvantaged.

These countries have very special, almost unique in some instances, historical, sociopolitical, institutional, or economic circumstances that require deep study with open, sympathetic minds. In the past 15 years, substantial contact has developed between such countries and the world bankers and financiers, which has improved their understanding of our unique problems. Based on such understanding and study, some definitive conclusions can be arrived at about the special financing needs of these countries, which would beacon the need for establishing a special flexibility of approach within the Fund and the Bank, and other international financial institutions, to meet these unique needs. Such flexibility of approach can, we strongly believe, well be established within Fund and Bank operational latitudes under the broad gambit of the overall goals of these two institutions. Perhaps, such an approach could, in the course of time, lead to the establishment of new facilities within the Bank and the Fund for meeting such unique needs of the specially handicapped countries.

In conclusion, I would be remiss if, while supporting the proposals for strengthening the two Bretton Woods organizations and urging for greater flexibility in their approaches toward small countries, I did not emphasize that we, for our part in Western Samoa, will step up our efforts to expand and diversify our domestic production base, explore further our export potential, and improve further the efficiency of our public sector administrative and management machinery.

Statement by the Governor of the Fund for Antigua and Barbuda—John E. St. Luce

On behalf of the Government and the people of Antigua and Barbuda, I wish to thank you and all the delegations for the warm welcome extended to us at this our first annual Governors’ Meeting. I also wish to take the opportunity to compliment the Government and people of Canada and the hardworking staff of the Fund and the Bank for ensuring that our stay here in Toronto is an enjoyable one.

The occasion of my country’s participation in its first Meeting of the Fund and the Bank is one of both happiness and foreboding.

We are delighted to join nations in the international community as a sovereign independent state and to participate with them in pursuing the goal of creating a better world, one of prosperity and peace where all our peoples may live free from want, from hunger, and from despair.

At the same time, we are distressed that the pursuit of such a goal may prove elusive for, as we attend our first Meeting, the world economy is on the brink of depression. Unemployment stalks the streets of our cities and rampages through our rural areas. In the OECD countries alone, unemployment now stands at close to 30 million people, bringing some of the social disquiet and unease that has characterized developing countries for decades. In the developing countries, only an immunity to suffering, born of a lifetime of exposure to its consequences, has restrained our peoples from grave social and political upheaval.

Unemployment is but one of our serious problems. High inflation in the industrial world has had disastrous effects on the economies of developing states and especially on countries such as mine with small market economies. Tourist travel has been reduced, investment has dried up, and growth has been retarded by our inability to borrow at anything but high interest rates. We welcome the recent decline in the rate of inflation in some industrial nations and express the hope that this is not a lull in a storm that has merely eased only to return with greater intensity.

The policies of some industrial nations, which seem to believe that they can by some miracle subsist even if other countries collapse, have served only to cause the economies of other states and the world economy as a whole to deteriorate. I speak here of protectionism that has forced our exports out of the marketplace. It is significant that a study just published by the Economic Policy Council of the United Nations Association states that “over the last decade the developing country market has expanded much faster than that of the developed world.” In relation to one developed country only—the United States—the study pointed out that developing countries alone buy just under 40 per cent of all U.S. exports; this translates into 2 million American jobs.

It should be obvious that if developing countries are forced into economic collapse, there will be a catastrophic effect on industrial nations. There is an urgent need for a political resolve by governments to tell their people the facts and urge upon them short-term sacrifices in order to achieve long-term well-being, for if this is not done, the politics of popularity being pursued by some today will lead only to calamity tomorrow.

In this regard, and with special reference to the role of the Fund and the Bank in the stabilization and improvement of the world economy, my Government endorses the belief, expressed by the Ministers of Finance of the Commonwealth at their meeting last week, that “the whole framework of international economic cooperation needs reform.” Particularly, we give support to the call of the distinguished Commonwealth Secretary General, Mr. Ramphal, which was actively supported by New Zealand’s Prime Minister, Mr. Muldoon, that there is a case for a “Bretton Woods-type” conference to assess the present state of the world economy, to examine our existing institutions, and to recommend reforms that acknowledge that the world has drastically changed since the 1940s and address the urgency to establish new, or at least different, mechanisms for growth and development. It is our hope that countries represented here will recognize that the situation is so dangerous that we can either agree to a “Bretton Woods-type” conference now or, in the words of Mr. Muldoon, “do so after the catastrophe.” And while we make urgent preparations for a comprehensive approach to the world’s economic problems, we should not use these preparations as an excuse to avoid adopting short-term measures that can help to alleviate the situation now.

As a first and fundamental step, each of us has to recommit ourselves to strengthening the Fund and the Bank by increasing their resources. None of us should linger under the false impression that if the role of the Fund and the Bank is diminished, the private sector will assume their responsibilities. Private firms would not view the diminution of the Fund and the Bank as an opportunity but as a deterrent, for who would finance the vital infrastructural requirements necessary for successful business in developing countries, and further, who would monitor Third World economies and economic policy, which private investors regard as imperative? It may be a condition in large developed countries that infrastructure such as roads, bridges, electricity grids, and irrigation are handled by the private sector, but in developing countries economies of scale demand that those be done by governments or not at all.

Who, in all seriousness, would stand in this room today and say that the people of the Third World do not have a right to a civilized standard of living? Who would deny us access to an International Monetary Fund or a World Bank that is responsive to our needs, not as philanthropic institutions but as responsible creditors.

A new issue of SDRs and the early completion of the Eighth General Review of Quotas are both urgently needed. With regard to the Fund, the growth of quotas has not kept pace with the growth of the world economy and world trade. In the mid-1960s, the quotas equaled 12 per cent of world trade; the percentage today is just 3.5. Similarly, while in 1960 quotas accounted for 67 per cent of the aggregate reserves of the Fund’s members, the percentage today has shrunk to under 19. . . .

I want to end by thanking you for the opportunity to make this presentation on behalf of my small island state, Antigua and Barbuda, and by urging that we all strive to make Toronto 1982 not another Meeting of the Fund and Bank, but the Meeting that produced a declaration of principles and measures designed to restore global economic well-being and, ultimately, global peace and justice. It is not a task beyond us; it is a task that we should pursue with vigor, or history may judge us the worse for having failed to do what we knew was right to save the world from economic calamity and ruin.

Statement by the Governor of the Fund and the Bank for St. Vincent and the Grenadines—R. Milton Cato

I would like to express on behalf of my country, St. Vincent and the Grenadines, our sincere appreciation for the very warm welcome extended to us on our admission to membership in the World Bank, and it is indeed a signal honor for me to be the representative of my country in this forum today.

I would like in particular to put on record the thanks of my Government for the ready cooperation given to us by the President and staff of the Bank in expediting our admission at such short notice, and particularly at a time when they must all have been fully occupied with the numerous important details of organizing this Meeting.

St. Vincent and the Grenadines has been pragmatic and cautious in its approach to membership in international organizations. This is so for the very good reason that we view the commitments and responsibilities of membership with the utmost seriousness. In addition, my country, because of our financial constraints, is compelled to be cautiously selective in determining the priority and order in which we apply for membership in various institutions. We are mindful of the immense prestige and authority of the Fund and the Bank and pledge that in St. Vincent and the Grenadines they will have a member firmly committed to the proper execution of its responsibilities and constructive in its contribution. We therefore take our place here with full confidence that both organizations will be responsive to the needs of our small country.

Following two successive years of natural disasters in 1979 and 1980, the economy of St. Vincent and the Grenadines recovered strongly in 1981, growing in real terms at an estimated rate of 9 per cent. Significant increases in production were recorded in agriculture and manufacturing. The balance of payments situation also showed an improvement, with the current account deficit falling to 8 per cent of GDP in 1981 from an average level of 15 per cent in 1979 and 1980.

In order to ensure sustained economic growth in the medium to long term, we require both to consolidate and expand industry and tourism, and to strengthen our agricultural base. However, the success of our efforts in these areas is to a large degree influenced by global economic conditions over which we have no control.

As amply described in the latest edition of the Bank’s World Development Report and the Fund’s Annual Report, the state of the international economy and the prospects for recovery have worsened during the course of the past year. The industrial countries are experiencing continued recession, and are faced with the problems of fiscal deficits, inflation, and rising unemployment. The tight monetary policies followed by some countries have served to raise interest rates to unprecedented levels. Growth in world trade has also fallen to a very low level, with consequent effects on the export earnings of developing countries.

May I respectfully suggest that in coping with the problems besetting their economies, it is essential not only that the industrial countries adopt appropriate and sound policies, but also that they continue to embrace the spirit of international cooperation.

In this regard, we would wish to focus on two particular areas which are of major relevance to low-income countries like St. Vincent and the Grenadines.

We are concerned, first, to note the increasing pressures within the economies of developed countries for the adoption of protectionist policies. The implementation of such policies cannot solve the structural unemployment problems faced by industrial countries. They will be effective, however, in retarding the development efforts of economies attempting to expand manufactured exports, and ignore the potential benefits to be gained from increased world trade.

Second, St. Vincent and the Grenadines has formulated an investment program for the period 1981/82–1984/85 totaling $46 million (EC$124 million) of which $29 million has still to be secured. St. Vincent and the Grenadines has a limited debt capacity and must rely to a large extent on concessional assistance for implementation of this program. Our development and adjustment efforts would be severely hampered if the availability of such concessional financing were to be curtailed.

We would, therefore, urge the Fund and the Bank to exercise their powers of surveillance to ensure that countries adopt consistent policies and to ensure that such policies do not introduce distortions into the world economy. Both institutions have a vital role to play in ensuring the creation of an environment conducive to the economic development of all countries. . . .

I would reluctantly like to draw attention to another part of the world which President Reagan has recently described as the third frontier of the United States. In this area of which my own country forms a part—with populations numbered not in millions but in some cases mere thousands, we have got to cope with the problems of poor infrastructure, lack of technology, and general poverty. These very small and poor countries might yet have an important part to play in the new world economic order.

Finally, if I might be permitted to borrow the words of the President of the Bank, societies such as ours are in many cases vulnerable to social tension and civil unrest which might spill over and affect even more economically advantaged countries.

Mr. Chairman, may I once again thank you for the opportunity to address this Meeting and, in doing so, place on record the appreciation and thanks of my Government for all the courtesies extended by the Government and people of Canada, not only to my delegation, but to all Vincentians now resident in Canada. Thank you, Mr. Chairman.

Statement by the Governor of the Bank for Iraq—Thamer Rezooki

It pleases me to express sincere appreciation and gratitude to the Government of Canada for hosting the joint Annual Meetings of the IMF and World Bank Board, and for providing this opportunity to visit the beautiful city of Toronto and get acquainted with the hospitable people of Canada. On this occasion I would also like to welcome the countries attending the Annual Meetings for the first time.

As you are well aware, Iraq was among the founders of the World Bank and the IMF. The Iraqi delegation was among the participants in the historical Bretton Woods Conference which laid the foundation for the emergence of these two institutions in the course of achieving a better world economic order.

Since 1946 to date, Iraq has been in the forefront of the countries that supported the joint international effort toward the realization of stability and justice in international economic relations. Iraq has been resolutely keen on backing up the international institutions; notably including the Fund and the Bank. It has always taken the initiative to attend to the problems and issues tackled by the Annual Meetings, being keen not to see differences emerge among member countries in such a way as to affect the proper functioning of the Bank and the Fund.

However, to our regret, the Governor for Iran has violated this principle by deviating from the basic issues before this Meeting to mention matters irrelevant to the basic objectives of our Meetings; he has launched an attack on Iraq and dwelt upon recriminations that are improper for such an international gathering.

For this, we find it imperative to retaliate the attack by tangible facts and objective evidence to be contained in the Meeting minutes, leaving it to the prudent judgment of the Governors to weigh the facts and appraise the situation.

It was not our intention to preoccupy this Annual Meeting with tackling a question that falls within the context of bilateral relations between Iraq and Iran. We proceed in this connection from our desire to permit the authorities concerned with the financial and monetary affairs to deal with the dire difficulties confronting the world today. However, the fabrication and distortion of facts which yesterday’s speech of the Iranian delegate involved, and his flagrant attack on Iraq, have made it imperative for us to elaborate tangible facts and expose the fundamental attitudes in the current situation between Iraq and Iran, for the perusal of this conference and the world at large.

The Iranian delegate claimed that Iraq had launched a war of aggression against Iran on September 22, 1980. This historical fabrication, no doubt, involved an attempt to camouflage the real intentions of the Iranian Government and provide the pretext for the rulers of Iran to carry on their policy of expansion and aggression in the area. The fact that is perceived by the whole world is that Iran launched an armed military onslaught on the Iraqi border areas on September 4, 1980, that is, before the Iraqi legitimate retaliation in self-defense. The Iranian attack resulted in the destruction of economic installations and displaced the civilian inhabitants of the border area. Iraq had to adopt a decisive attitude to repel the aggression and contain its serious danger.

In fact, Iraq resorted to the military retaliation after it had exhausted all the political and diplomatic means at its disposal. It resorted to the U.N. Security Council to induce Iran to surrender its policy of expansion and refrain from interference in the internal affairs of Iraq and its encroachment on Iraq’s vital rights and interests. Through a number of protest memoranda handed over to the Tehran Government, Iraq tried to put an end to such aggression and interference. It demanded that the Government of Iran drop its policies and practices of aggression and expansion; it held the Iranian Government responsible for the grave consequences of its hostilities against Iraq and the Arab countries in the area.

However, the Government of Iran, proceeding from its tribal mentality and racial congestion, proceeded with its aggression and aggravated its coercive actions and illegal practices against Iraq and its Government. It proclaimed its determination to overthrow the Government of Iraq and install a lackey regime against the desire and basic aspirations of the Iraqi people. The racist, reactionary, and underdeveloped regime in Tehran tried to divert the attention of the Iranian peoples from the calamities inflicted on them by the Khomeini clique; hence the bloodshed, mass persecution, and genocide practiced against the Iranian forces which sought to establish good-neighborly and friendly relations with Iraq. Even the old men, women, and children could not escape the Khomeini atrocities.

Iraq has repeatedly confirmed, through H.E. President Saddam Hussein, its genuine desire to put an end to the war and negotiate a peaceful settlement of the Iraqi-Iranian dispute, to reach such a dignified solution as would guarantee the vital interests of both sides and result in good neighborly relations between them. This attitude has been expressed despite the decisive victories scored by the Iraqi army, in contrast with the allegations put forth by the Iranian delegate yesterday. However, the Iranian Government turned these initiatives down, as it did any other peaceful initiative made by the U.N. organization, the Islamic Conference, and nonaligned group. The Iranian Government reflected, thus, a desire to escalate its aggression and intensify its coercive policies and expansionist practices, against which Iraq has had to defend its territory, safeguard the interests of its people, and preserve its national independence.

We declare from this important international forum that Iraq has always been willing to accept any peaceful initiative to resolve its differences with Iran, but we shall never accept any such attitude that would involve an encroachment on our legitimate rights and vital interests.

We extremely deplore the exploitation by the Iranian delegate of this forum to launch an impertinent attack on Iraq, seizing, thus, the opportunity of the distinguished participants being preoccupied by the attempt to relieve the burdens of the poor nations in a world of confrontation between the virtuous aspirations and vicious arrogance.

I would like to reaffirm that my intention is to elaborate the facts and remove the ambiguity brought about by the Iranian speech. We are confident that the whole world has become aware of the real state of affairs in the Arab gulf area and the reflections of the Tehran policies on the international developments, including their threat to the peace and security of the area and the world. I wish our conference every success in addressing itself to the settlement of international problems.

Statement by the Governor of the Bank for Algeria—Boualem Benhamouda

It is a pleasure for me to be attending the Annual Meetings of the IMF and the World Bank taking place this year in the beautiful city of Toronto.

May I first join with the other delegations in expressing my gratitude to Prime Minister Trudeau for his cordial welcoming address and assure him of the importance I attach to the contents of his statement. I should like to take this opportunity also to address my heartiest congratulations to Antigua and Barbuda, Belize, and Hungary, which have just joined the Fund and the Bank.

I shall not dwell on the figures that are fully presented in the Annual Reports of the Fund and the Bank. I shall merely note that they agree in indicating that one cannot discern since the last Meetings any prospects for improvement in the world economic situation.

To the contrary, the situation has further deteriorated for many countries, compromising many a development effort at a time when satisfaction of the food needs of several million people remains far from assured.

It is easy to see that the argument of a causal relation between oil prices and the deterioration of the economic situation in the developing countries does not hold. Moreover, the financial surplus due to oil exports, estimated at $115 billion in 1980, is likely to be far below $15 billion in 1982. Despite the significant decline in oil prices, the condition of the developing countries unfortunately continues to worsen.

Another belief strongly held by some is that the condition of the developing countries is linked to the level of interest rates. But we note that the fall in interest rates has not given rise to optimism concerning the prospects for the least advantaged economies.

The Annual Reports of the World Bank and the International Monetary Fund stress the urgent need for steps to revive and develop agriculture and for lifting the protectionist measures adopted by certain industrial countries.

In this regard, we must point out the contradiction between the orthodox line taken in the area of domestic policy by the countries with advanced economies and their protectionist attitude toward the economies of the developing countries.

This concept of international trade is not very coherent, nor is it a consistent extension of their monetaristic approach to budget policy.

My country regards it as vital that the system of international economic relations be reorganized. The present trade mechanisms are having untoward effects, such as burdening the projects of developing countries with extra costs. In combination with the excessive margins demanded on the international financial market and paid by the countries with access to it, these extra costs are aggravating the disequilibria stemming from the fall in the value of primary product exports.

What is happening is this: the poorer one is, the more one pays. That is the meaning of the present system, which rules out any chance for improvement in the condition of the developing countries, and that is why we persist in urging global negotiations in the context of the North-South dialogue….

For all these reasons a comprehensive examination, in a global context, of the world economic situation and its underlying causes could help to speed up a reform of the international monetary system. This must take the form of a real commitment by the developed countries to solving the problems of the developing countries and overcoming the contradictions generated by the malfunctioning of the financial and monetary system.

Technology transfer from the industrial nations to the developing countries should be less restricted and less onerous. What is occuring is not so much technology transfer as the spread of production facilities, with the industrial countries setting up plants in Third World countries in order to take advantage of their low wage costs, without making any effort to integrate this relocated production into the economies of these countries.

Indeed, in most cases the commercial transactions grouped under the heading of technology transfer bring about no such transfer at all, but are merely a cover for the sale of industrial products that do not lead to any changes in the level of technological knowledge in the developing countries acquiring those products.

In conclusion, I must mention the problem of food dependence, whose seriousness need hardly be stressed; on its solution depends the survival of hundreds of millions of men, women, and children suffering from malnutrition.

In this equally crucial area we are far from seeing implementation of the genuine, effective solutions that are required. Although a more or less satisfactory consensus has emerged on questions such as the development of an emergency international reserve, negotiation of a new international agreement for cereals, and the restructuring of IF AD, these measures are still not enough. Others must be taken to assist countries that face serious, lasting food shortages. We must show imagination and put an end to the inhumanity of a situation where stocks of food products remain frozen in certain countries for selfish economic reasons when they could be used to relieve the tragic plight of other nations.

It is a paradoxical fact that the prices of numerous tropical agricultural products, largely consumed in the richer countries, and which often constitute the sole source of income for a number of Third World nations, are continuing to fall, with disturbing effects on the economies of the producer countries. I will mention only the principal effects—declining production, the exodus from the land, malnutrition, and financial and food imbalances.

The distortion of the markets for agricultural products, which are entirely dominated by a few large transnational corporations and which lead the Third World countries to neglect the production of food crops in favor of cash crops for export in order to earn foreign exchange, only aggravates the situation.

These successive imbalances, compounded by the difficulties affecting the developing countries in other areas, can only have a cumulative impact on the so-called developed economies.

The statistics in the latest Bank report are instructive on this point. They stress the known fact that the developing countries are still an important and valuable outlet for the products of the industrial countries. The imports of the developing countries amount to almost $500 billion, of which a substantial proportion is used to pay for food products. The report also notes that in fact 24 per cent of the total exports of the industrial countries go to the developing countries. These figures illustrate very clearly the importance of the role of the developing countries in the world economy.

Algeria thus declares its willingness to work and participate actively in the search for solutions to all these problems that will enable us to stand up to the current economic crisis together.

Statement by the Governor of the Bank for Fiji—Charles Walker

I thank the Right Honorable Pierre Trudeau, Prime Minister of Canada, for his cordial words of welcome. I also thank the people and Government of Canada for the warm hospitality around us and for the excellent arrangements under which we meet this week. I compliment the Managing Director of the Fund and the President of the Bank for their comprehensive coverage of the world economic situation.

Three new members, Antigua and Barbuda, Belize, and the Hungarian People’s Republic, have joined the membership since we last met. I would like to join colleagues who preceded me in extending a very warm welcome to them.

I shall not elaborate upon the current and prospective world economic situation as they are covered in detail in the Annual Reports of the Fund and the Bank. I shall focus only upon a number of issues that are of great concern to all of us.

World economic performance since we last met is rather mixed. Unemployment remains a matter of widespread concern. Economic growth continues to be sluggish. This environment has, unfortunately, brought increased protectionist tendencies in its wake. World trade has not grown. Weak demand in the industrial countries does not augur well for the past and present depressed prices of primary commodities. These factors together with high interest rates in the capital markets have contributed to the escalating current account deficits of the non-oil developing countries.

There are, however, some encouraging developments on the horizon. Inflation and interest rates are declining, although they are still relatively high at present. The volume of world trade is expected to grow by more than 2 per cent this year compared with no growth last year. Faced with stagflation, the industrial countries resorted to increasingly restrictive financial policies in the recent past. In most of these countries, due to the rigidities of fiscal policy, monetary policy has had to bear the burden of adjustment, resulting in high levels of interest rates and weakened output growth. By and large, some of the restrictive counterinflationary policies have been maintained despite growing unemployment and stagnant economic growth.

Economic recovery of the industrial countries is fundamental to the health of the world economy. The timing of economic policies in the direction of economic expansion needs to be carefully assessed. Introduced too early, such policies could erode whatever confidence consumers and investors may have gained. Yet the current unsatisfactory state of the world economy will only improve with the onset of increased investment and economic activity within a climate of global financial stability. It is, I believe, time for a cautious move toward expansionary policies by the industrial countries. This can be done provided fiscal policies are allowed to play a greater role than over the last months.

The weakening of terms of trade is the most serious problem facing the developing countries. I concede that this is a complex problem and that its causes are deeply rooted in the domestic and international economic environment. The solutions to this problem, therefore, lie in global cooperation in economic management. In this respect it is sad to note that some economically strong countries are reducing economic and financial assistance to developing countries, as well as to multilateral lending institutions. This trend is taking place in the face of growing caution by international private banks toward lending to developing countries.

For some developing countries the precarious nature of their economies will not allow them to bear further rigors of adjustment. The need for Fund and Bank assistance by some of these countries has never been greater than at present.

Having said this I must however enter a word of caution. External imbalances require both financing and adjustments. It is obviously impossible to expect that balance of payments deficits could be sustained indefinitely without adjustments. We need to examine the economic policies we have in place. We have to recognize that policies which may be politically unpalatable in the short term tend to be the ones upon which stable and steady growth could be assured in the long run.

It would be clear from what I have just said that conditionality of the class imposed by the Fund has its place. Indeed, all the member countries agree upon this. Those of my colleagues who have spoken strongly against this subject differed, I believe, only in degree. The policies of the Fund emphasize that programs supported by Fund resources will take into account the economic, social, and political circumstances of members. That is fine. All we as Governors can emphasize at this forum is that both the spirit and letter of these policies should be carefully observed by the Fund in the difficult months ahead.

Since the breakdown of the Bretton Woods system in the early 1970s, the international financial system has moved away from a single reserve currency system with externally imposed discipline toward a multireserve currency system which relies heavily upon self-imposed discipline by each and every member. The Second Amendment to the Articles of Agreement contains our collective resolve to make the SDR the principal reserve asset. Yet, the proportion of SDRs in terms of world trade has declined. The share of SDRs in total world reserves excluding gold fell from 7.47 per cent in 1973 to 4.78 per cent in 1981. Further allocations of SDRs are overdue.

Opposition to increased allocation of SDRs has been based upon the likelihood that such a move might have upon exacerbating inflation. Now that inflation has steadily come down I hope that consensus on this important subject would be easily achieved. The Executive Board has been requested by the Interim Committee to continue to strive toward an early agreement on SDR allocations in the fourth basic period which, as we all know, began on January 1 of this year. I wish the Managing Director of the Fund well with his efforts in this area. I hope the few countries that still hold strong negative views on increased allocations would now make it easier for the Managing Director to extract a consensus. I believe that an allocation of at least SDR 10 billion is justifiable.

The policy of enlarged access to Fund resources was taken as an interim measure pending the finalization of the Eighth General Review of Quotas.

This interim arrangement was done in recognition of the unavoidable and expanded role which the Fund must play in a climate of growing international economic and financial instability. We all recognize that there is no substitute for increased capitalization through enlarged quotas. Without it the Fund will continue to play the very limited role it has had in recycling finance from those in surplus to those who badly need funds. We have all expressed concern about the degree of exposure some private international banks now have toward certain sovereign borrowers. Those banks have played an important role and filled a vacuum which the Fund was not able to do much about. All this makes the finalization of the Eighth General Review of Quotas more urgent than ever.

The Executive Board and the Managing Director are to be complimented for their efforts toward an early agreement on the Eighth Review. But here too they cannot be expected to succeed without the political will and commitment toward the common good by all the member countries. I believe that on this subject we can and should be bold. The Fund’s quotas should be increased by at least 100 per cent. I strongly support the proposal aimed at increasing quotas from the current SDR 60 billion to SDR 125 billion.

May I conclude by emphasizing what we all know. The health of the world economy and that of our individual economies are dependent upon our collective efforts to coordinate our economic policies. The Fund and the Bank were established to promote and coordinate economic and financial policies. We meet annually to contribute, exchange, and develop our thoughts on how to minimize economic conflicts and promote mutual cooperation in economic management. It is a sobering thought that with all our accumulated economic wisdom we cannot look back upon an impressive collective track record. But coming as we do from finance ministries and central banks we must never entertain pessimism. We shall succeed, but we must be prepared to recognize the signs, accept and implement the inevitable when called for, and patiently protect and nurse the positive developments that have begun to emerge.

Statement by the Temporary Alternate Governor of the Fund and the Bank for the Lao People’s Democratic Republic—Kikham Vongsay

First of all, the delegation of the Lao People’s Democratic Republic would like to offer its warm congratulations to His Excellency Abdlatif Y. Al-Hamad, of Kuwait, on his unanimous election to the important office of Chairman of this Thirty-Seventh Annual Meeting of the Boards of Governors of the International Monetary Fund and the World Bank. We feel that his wide experience and his competence ensure that under his leadership this Meeting will achieve the desired results.

My delegation would also like to take this opportunity to tender a sincere welcome to the delegation of the Hungarian People’s Republic, a developed socialist state with which the Lao People’s Democratic Republic maintains fraternal relations and close cooperation in every field. Its presence among us will undoubtedly contribute to achievement of the noble objectives of these two institutions, which by this well-judged action move a further step toward that universality which is the very foundation of their existence.

May I also warmly welcome the other friendly countries that have become full members of our two institutions.

I should like to tender my sincere thanks to the people and Government of Canada for the warm welcome extended and the satisfactory facilities furnished to my delegation and for the excellent manner in which they have organized this Meeting.

Our thanks are due also to the Managing Director of the International Monetary Fund, the President of the World Bank, and their staffs for the unflagging work they have done to ensure the efficient conduct of this Meeting and for the high sense of responsibility they have unfailingly displayed in the performance of their duties.

As the reports of the International Monetary Fund and the World Bank rightly stress, this Meeting is taking place at a time when the world economic situation, and particularly that of the developed market-economy countries, faces an acute crisis, characterized by worrying stagnation in a number of economic sectors, galloping inflation, and high unemployment. This adverse situation has had harmful consequences for the economies of the small developing countries, especially the less advanced and the landlocked countries. In addition to this critical situation, one of the effects of which is a heavy trade balance deficit, these small countries have to contend with ever widening recourse to protectionism.

Turning to the situation in my own country, the Lao People’s Democratic Republic, the multinational Lao people have concentrated all their efforts on binding up the wounds suffered in the long war of aggression and building a new life. In spite of the numerous problems bequeathed by the devastating war and the unremitting maneuvers by our enemies to undermine us, aggravated by a succession of natural disasters during the years 1977 and 1978, we have accomplished significant progress in a number of fields, particularly in consolidating our nation and laying its economic, social and cultural bases. That we have been able to achieve these substantial successes in a brief time is due to the resolute efforts of our own people together with the assistance of brother socialist countries, other friendly countries, and international organizations, including the International Monetary Fund and the World Bank. I should like to take this opportunity to extend to them, on behalf of the people and Government of the Lao People’s Democratic Republic, sincere thanks and deep gratitude for their effective assistance.

This year marks the second year of our five-year program. The results so far have been encouraging. In particular, our gross national product has risen by 43 per cent and per capita national income by 40 per cent, while the population has grown by only 10 per cent, since 1976.

While these accomplishments, significant as they are, have not of course enabled us to achieve all the results we desire, they have nevertheless brought about a progressive improvement in the level of living of our people. We are confident that through the resolute will of our people, together with ever increasing assistance from brother countries, other friendly countries, and international organizations, we shall succeed in carrying through in full the tasks defined in our five-year plan.

With regard to the policy pursued by our two institutions, I fully concur in the views expressed by many delegations of developing countries. My delegation considers that we shall have to move faster toward increasing the resources of the International Monetary Fund and the World Bank. . . .

On the subject of lending and borrowing policy, my delegation considers that our two institutions should make every effort to persuade those countries that are in a position to accord greater loans and borrowing facilities to the Fund and the Bank to enable them to meet their members’ growing needs. . . .

Another matter to which my delegation attaches great importance is that of cofinancing. It considers that cofinancing with various organizations, such as the OPEC Fund for International Development, IFAD, UNDP and others, should be pursued and further developed. . . .

In conclusion, my delegation feels that the views expressed above will help to strengthen the role and the effectiveness of our two institutions on the world level. Please accept the assurance of my full cooperation for the success of this Thirty-Seventh Annual Meeting.

Statement by the Governor of the Fund and the Bank for Malaysia—Tengku Razaleigh Hamzah

It gives me great pleasure to address distinguished fellow Governors at these Thirty-Seventh Annual Meetings of the Boards of Governors of the International Monetary Fund and the World Bank.

When we met last year, there was some optimism for a slight recovery in the world economy in 1982. However, conditions have changed dramatically since then. High interest rates continue to prevail particularly in the United States and this has effected a pickup in business investment and consumer spending. As a result, economic activities have slowed down and, according to the latest forecast, the economies of the OECD countries will remain weak with real output increasing by only about 0.2 per cent compared with 1.2 per cent in 1981. Unemployment is expected to worsen further from 7.2 per cent in 1981 to 8.5 per cent in 1982. In absolute terms, the number of people unemployed could reach 30 million in 1982. Unemployment could further increase unless immediate remedial measures are taken. While prospects for growth and unemployment are not encouraging, inflation has appreciably declined in almost all countries but the levels are still high.

For 1983, although the forecast indicates a moderate resumption in economic growth, there is still uncertainty about this growth prospect in view of prevailing high interest rates and the policies pursued by some industrial countries, particularly the United States. A low rate of growth or no growth can not be ruled out if interest rates, which currently show some signs of declining, continue to remain high. Thus, in short, there is as yet no firm basis for being too optimistic about the future. In view of this, we should be cautious and yet firm and positive in our approach in the light of the present economic difficulties.

Although it is appreciated that industrial countries have continued to pursue strict monetary policies in order to fight inflation with some encouraging results, it is important that greater emphasis should be placed on fiscal and structural adjustment measures. Rigidities and structural imbalances, especially in the fiscal field and in the labor and goods markets, need to be eliminated to improve economic efficiency. At the same time, industrial countries should continue to implement policies to reduce inflation and to strengthen productive capacity. This is important in order to provide the basis for more sustainable economic growth in the future. However, in continuing these policies, greater attempt should be made to minimize the possible adverse effects of these policies on the developing countries.

In the area of trade, industrial countries should look toward promoting an open environment for international trade as trade plays an important role in the economies of the developing countries. Efforts should be made, especially in this difficult period, to further increase international cooperation so as to avoid intensification of protectionism and improve market access for developing countries’ commodities and products. Industrial countries should avoid inward-looking policies as these may not only be detrimental to their long-term national interest in terms of encouraging inefficiencies in their own domestic industries and loss of competitiveness in overseas markets but also can be detrimental to the economies of other countries, especially developing countries that are dependent on the markets of these industrial countries for their commodities and manufactured goods. In this respect, structural adjustments in the economies of the industrial countries may have to be made, however painful this may be, in the interest of the world community at large. In this way, economic activities and trade may be promoted and can result in higher real incomes to both developed and developing countries alike.

As to Fund matters, I understand there has been extensive discussion in the Executive Board with regard to the Eighth General Review of Quotas and that there are some fundamental issues which remain to be resolved. As I see it, there are two basic issues, namely, the size and the distribution of quotas among members. In regard to the size of quotas, there is no doubt that an increase in present quotas is necessary in view of the present unfavorable world economic situation which has caused increasing disequilibria in the balance of payments of developing countries. These deficits in balance of payments, which at present are severe and pose extreme hardship on developing countries, must be financed in order to avoid further deterioration in the economies of these countries. Although the Fund might partly finance these deficits through borrowing in the capital markets, we feel that quotas should remain the main source of finance of the Fund and therefore adequate quotas should be provided. This could further strengthen the role of the Fund in meeting the financing needs of the developing countries. A number of calculations have been made by the Fund staff which indicate that an increase ranging from SDR 100 billion to SDR 125 billion, that is, a doubling of the present quota, would be reasonable. We would support a figure of that magnitude as being appropriate. A lower amount than this would, in my view, be inadequate in the context of the present economic malaise.

With regard to distribution of quotas, the Fund should attempt to allocate quotas in line with the relative economic position of member countries and, at the same time, maintain a proper balance between the different groups of countries. This is in line with the discussion reached at the Interim Committee meeting in Helsinki in May of this year. It is hoped that the Fund will be able to consider this question of quota increase and its distribution and reach an early decision on this matter.

On the question of SDR allocation, it is most unfortunate that no progress has been made in this direction. We feel that with inflation moderating in both the industrial and developing countries, it should be possible to provide at least a modest increase in the allocation of SDRs without fear of giving wrong signals. Allocation of SDRs is intended to improve over time the functioning of the international monetary system. It is therefore logical that there should be an adequate supply of SDRs in order to enhance that asset’s role. At present, SDRs only form a small proportion of total nongold reserves and, if we are to see SDRs developing as an international reserve asset, its supply must be increased. I would therefore urge that the matter be given serious attention without further delay.

As I mentioned earlier, the continued international recession has adversely affected the developing countries, especially the oil importing developing countries. These countries find it extremely difficult to make necessary adjustments in view of declining revenues, balance of payments problems, and the inability to obtain loans from the international capital markets. While concerted expansionary policies by the OECD countries would benefit the developing countries, an increase in financial assistance is necessary to enable the developing countries to make the necessary adjustments. At present the flow of resources is inadequate to meet the financing needs of the developing countries. Official development assistance, for example, constitutes only 0.35 per cent of the GNP of the developed countries, lower than the United Nations’ target of 0.7 per cent. In this connection, it is most unfortunate that some developed countries, especially the United States, have adopted strict attitudes toward international multilateral financial institutions and, as a result, the flow of real resources to developing countries has somewhat declined in real terms….

In conclusion, I wish to congratulate the Fund and the Bank for another year of successful operation, in particular the Fund Managing Director, Mr. J. de Larosière, and the Bank President, Mr. Clausen, for their unselfish devotion to the cause of development in the Third World. It is hoped that in this decade of the 1980s the Fund and the Bank will continue to pursue policies with greater vigor and imagination as well as flexibility, bearing in mind the special needs and circumstances of the developing countries so that we will see greater progress and prosperity for all nations, developed and developing countries alike.

Statement by the Governor of the Fund for Malta—Lino Spiteri

Since our Meeting in Washington last year, the world economic situation has remained very bleak, other than some decline in the rate of inflation. The negative impact of persistently low economic activity resulting in high unemployment, lower effective demand, and stagnating world trade has been compounded by increasing protectionism. This situation, while benefiting no one, has been particularly harmful to non-oil developing countries, especially the smaller vulnerable ones like my own small island state.

The sick world economy has been further burdened by the debilitating effects on investment and demand of the monetarist policies stubbornly implemented by the major industrial economies in their professed effort to combat inflation. Malta has always recognized the importance of fighting inflation, not least because international inflation erodes the value of the hard-won foreign exchange reserves of the smaller less developed economies—reserves much more important than the contingency, temporary deficit-financing reserves of the industrial economies, since the reserves of the less developed economies are awaiting transformation into productive real assets in the difficult process of development. Nevertheless, the policies of stringent monetary restraint being pursued by the world’s major economies, which, combined with large fiscal deficits, pushed up interest rates to levels that few borrowers can afford, on balance seem to have done more harm than good. These policies, by destabilizing the foreign exchange markets, stifling productive investment, restraining growth, and fueling unemployment pressures, are threatening to plunge the world economy still deeper into recession. The depressed market conditions that prevail in such a situation inevitably induce a pronounced shortfall in export earnings—the lifeblood of small open economies like that of Malta. Intensified protectionism by the industrial countries aggravates the problem. Small developing economies, on the other hand, are defenseless in the face of such adversities because their restricted domestic markets cannot sustain their industries in the absence of export orders.

The immediate current problem for the international community seems to be one of finding an appropriate mix of monetary and fiscal policies in the industrial countries so that interest rates may be brought down to—and stay at—levels that would not choke off any incipient recovery in the world economy. However, in our opinion, the present recession should not be viewed merely as a cyclical phenomenon. The 1970s as a whole have, after all, been a stagflationary decade. To find the remedies for this situation we have to view things from a broader and more long-term perspective. Only thus can we get at the root causes of stagflation and apply the appropriate remedies.

Malta, among others, has often expressed the view that structural imbalances in the world economy would lead to slower worldwide growth and increased barriers to trade unless appropriate corrective measures were taken. Now, the Fund has also singled out the “failure to tackle directly the rigidities and other structural problems” in the world economy as being one of the root causes of stagflation. As a result of this failure, the imbalances in the world economy have become more intractable, and the policy of monetary restraint has had a more depressive effect on output, employment, and trade than on prices.

This problem of adjustment has to be tackled with urgency. If countries refuse to face reality and adjust, then recovery, if it ever comes, can only be temporary and incomplete—as it was in 1976–78. So far, however, the burden of adjustment has fallen most disproportionately on the weakest members of the international economy, that is, the developing countries, who, in the words of the Ministers of the Group of Twenty-Four, “are undertaking structural adjustment on all fronts.” We feel the time is long overdue for the industrial countries to shoulder a greater part of this burden to bring some symmetry into the adjustment process. In this connection, we cannot but make our own the call of the Ministers of the Group of Twenty-Four for basic reforms in the international monetary system so as to enable the Fund to exercise effective surveillance over the policies of all member countries, rich and poor, powerful and weak, alike.

If the Fund is to play its appropriate role in the international monetary system, however, it must have adequate resources commensurate with the members’ potential financial requirements in the 1980s. For this reason, we share the conviction that the increase in quotas under the forthcoming Eighth General Review should be substantial. At the very least, it should restore the former relationship between quotas and world trade. We should not lose sight of the fact that the ratio of Fund quotas to world imports has slipped from 12 per cent in the mid-1960s to 4 per cent in recent years. This development has been far more dramatic in Malta’s case, with this ratio plummeting from 52 per cent in 1970 to 4 per cent in 1981. The Fund’s capital resources, moreover, should be established on the basis of long-term policy designed to cope with the problems of the coming decade. Viewed in this light, the quota increase needs to be considerably higher than that being proposed by some highly industrial countries. Such an increase would also serve to reduce the Fund’s dependence on borrowing and to restore the role of quotas as the primary source of Fund financing.

At the same time, we feel that the criteria for determining quotas, both in terms of the variables used and of the weights attached to them, should be revised to take account of the changes that have occurred through the years and the realities of the current situation. These realities call for, among other things, increased representation of developing countries in the Executive Board of the Fund. This would contribute to correct somewhat the marked imbalances in voting power between developed and developing countries that highlight the system at present.

With regard to SDRs, we must express our disappointment over the lack of agreement on new allocations in the fourth basic period. It has been pointed out that an annual allocation of SDR 12 billion would be required merely to restore the proportion of SDRs to reserve assets to the level reached in 1972. It seems to have been forgotten that the Second Amendment of the Fund’s Articles of Agreement committed us to the objective of making the SDR the “principal reserve asset” of the international monetary system. We do not believe that allocations of SDR 12 billion annually would be inflationary—particularly if, as has so often been argued, they were linked with development finance. Unless progress is made toward the goal of internationalizing reserve asset creation, it is hard to see how the Fund can ever be in a position to exercise its surveillance role equitably and symmetrically.

We are also disappointed by the sharp drop noted this year in the rate at which the Fund is undertaking new commitments to developing countries. This is occurring at a time when official assistance is needed most by Third World states. While the policies and attitudes of the Fund should be critically reviewed, and also while more attention should be given to the lending policies of the IBRD and particularly to the absence of a realistic policy toward middle-income developing countries, the time is ripe, we feel, for an overall revision of the existing international economic mechanisms to be made.

In a world bedeviled by economic woes, more attention needs to be paid to the need for mutual global cooperation and for convergence and coordination of policies. A better appreciation is also called for of the effects of self-concerned actions of the dominant economies. Shortsighted individualism is not simply potentially harmful—we are presently living the dramatic actuality of its harmfulness. The existing world bodies and forums seem no longer able to cope, as they coped so well in the quarter century after World War II. The world today is vastly different from the world of Bretton Woods.

We share the view, therefore, that an attempt to fashion new updated mechanisms must be made. Such mechanisms should take into account the new political and economic realities of today. They should not give any one country a disproportionate weight in the decision-making process, nor any one country or group of countries freedom to fall out of line with impunity while themselves unfairly retaining the freedom to attempt to push other countries into directions not of their choosing. The new mechanisms should be geared toward economic stability—yes, toward the reduction of unemployment, the removal of payments imbalances, and the promotion of sustained higher growth. But they must also take into account the basic principle that the independence and sovereignty of countries must be respected by one and all; that no one has the right to interfere, openly or underhandedly, directly or indirectly, in the internal affairs of others.

In short, new mechanisms are needed that take into account both the economic interdependence of the world as it has developed and also the essential interdependence between economics and politics. Otherwise, the shortcomings that hamper so many of our attempts at cooperation today will simply be carried with us into the future. And in that case, the hopeful protestations of so many of us will be meaningless and the future will be no better than the unsatisfactory present. Indeed, it is likely to be worse—to the detriment of all of us.

Statement by the Governor of the Fund for Papua New Guinea—Phillip Bouraga

I am pleased to attend for the first time these Meetings as the new Finance Minister of the Papua New Guinea Government, which has recently been elected for a five-year term. My Government is committed to retain responsible economic management and to do its best to facilitate faster development of our nation.

Papua New Guinea’s experience of the effects of the current general recession is no different from that of the other member countries. As a small open economy, Papua New Guinea has adopted various mechanisms to stabilize internal economic activity in the face of inevitable fluctuations in the prices of our export commodities. We have learned to plan for fluctuations. However, events of the last two years contain elements of long-term difficulties which require more far-reaching domestic adjustment measures.

Two important factors are depressing the outlook for Papua New Guinea:

  • 1. The steep rise in oil prices in 1979–80, which worsened Papua New Guinea’s terms of trade, has been compounded by the probability of reduced prices for agricultural commodities over the remainder of the decade;

  • 2. Mineral contents at our single large copper and gold mine will decline faster than anticipated, which implies a substantial reduction in the flow of mineral revenues to the budget.

My Government’s response has been to consider first a medium-term fiscal adjustment program, which will entail both expenditure reductions and a scaling down of overseas commercial borrowing. Papua New Guinea is also seriously considering greater restraint on wages, so as to improve competitiveness and to maintain limited scope in the budget for expenditure to provide the required stimulus for development. Monetary policy will also remain restrictive, bearing in mind overseas interest rate movements and lower foreign exchange earnings resulting from reduced commodity prices.

Long-term development prospects for the country are relatively favorable, with a productive resource base in agriculture, forestry, fishing, and metals. Development potential, therefore, remains sound, but will require adequate government expenditure and a responsible macroeconomic framework, as well as responsible resource management, to bring about the growth and development that the country is capable of.

It is also of great importance that the international community, including the multilateral institutions, does not react to the recession with responses that may harm long-term growth. Protectionism and lower development assistance flows are inappropriate long-term responses to present economic difficulties and will, I am afraid, deny us the considerable benefits inherent from growing economic interdependence. So is the view that World Bank credit for financing further development of coffee, cocoa and tea ought to be restricted. Producers who can demonstrate viability even at low projected prices should have their case considered on its merits. Less efficient producers should look to alternative crops. It is just as important for structural change along the lines of comparative advantage to occur in the developing world as it is for the developed group of countries.

In Papua New Guinea we are planning for and looking forward to increased investment in our traditional agricultural export sector, and to some progress in food import replacement. Agriculture remains the key element in my Government’s plan to bring about broad-based development in which all Papua New Guineans can share. For this purpose, the continued financial and technical involvement of the World Bank is appreciated.

I know that the Governors will use the formal and informal opportunities provided by the Meetings to understand and appreciate the many problems we are facing, and hopefully to develop a framework capable of delivering mutual benefits to the peoples of our nations.

Statement by the Governor of the Fund for Paraguay—Oscar Jacinto Obelar

On behalf of the authorities of the Government of the Republic of Paraguay, I have the great honor to convey friendly and cordial greetings to the Chairman of this Joint Meeting, to the Government and people of Canada, to the Managing Director of the International Monetary Fund and the President of the World Bank, to the Governors and other representatives of the participating countries, and to the officials who are performing such valuable work in furthering the purposes of the International Monetary Fund and the World Bank. I should like also to welcome the new members that have recently joined the Fund.

It is once again my pleasure, at this Thirty-Seventh Joint Meeting of Governors, to express the satisfaction of the people and Government of Paraguay with the valuable work done by these two great international institutions to which we have the honor to belong.

The efforts of the two institutions in the economic and financial areas have been fruitful, and have been supplemented by the national efforts of each member country, resulting in improved well-being for our peoples.

In the case of Paraguay the technical assistance and recommendations furnished by the International Monetary Fund have greatly facilitated the implementation of development policies by the Government enabling Paraguay to achieve rates of economic and social development that are among the highest in the world.

Thus, growth of gross domestic product has averaged 10.8 per cent over the last five years, registering 8.5 per cent in 1981. Moreover, sectoral distribution of GDP has been good, with the basic sectors of the economy accounting for major shares: agriculture, 30 per cent; industry, 17 per cent; services, 26 per cent; and other sectors, 27 per cent. These figures show that the primary sectors that employ a large part of Paraguay’s active population also receive major income shares, which translates into a greater likelihood of improved well-being for the Paraguayan people.

This high rate of growth has been accompanied by a prudent fiscal revenue and expenditure policy and has enabled Paraguay to maintain a sound budget position. This in turn has meant that the necessary counterpart funds have been available for the execution of very large programs of investment in basic infrastructure and other projects with a high social component.

Budget execution in 1981 was in line with projections, so that the budget ended in balance. The combination of favorable budgetary and economic performance yielded savings for the public sector. It follows that the situation described is a perfectly normal one, attributable to prudent management of the resources entrusted to the Government.

Further work has been done on improving the tax system with the aim of keeping the effective tax burden within limits consistent with full economic activity. Thus, the tax burden has declined steadily over the last three years, from 10.1 per cent in 1979 to 9.1 per cent in 1980 and 8.1 per cent in 1981.

As part of this gradual and cautious process, some of the major consumer taxes have been converted to an ad valorem basis, and new income tax legislation has been submitted to the legislature. The strengthening of administration and accounting has continued through modernization of systems of data processing and centralized control of financial resources.

In addition, the Government has made large investments in basic infrastructure, agriculture, and the social sector during the last three years. At the same time, the growth of farm and livestock production has helped to maintain an adequate supply of basic commodities for domestic consumption and yielded increasing exportable surpluses. As a result Paraguay has been able to maintain satisfactory international reserves, exchange stability, and domestic price levels.

Paraguay’s net international reserves, totaling some $800 million at the end of 1981, were 17 per cent higher than at the end of the previous year.

The rise in the consumer price index slowed from 1979 to 1981. Thus, while consumer prices increased 28.2 per cent in 1979, the rate of increase was 22.41 per cent in 1980 and 13 per cent in 1981.

With respect to energy, recognized as a critical problem in many countries of the world, while Paraguay’s consumption of oil-based fuels has been expanding, we are starting to produce a significant amount of fuel from plants, specifically sugarcane, and might thus be able to curtail our dependence on external oil supplies.

At the same time, construction of the Itaipú power dam with Brazil has been proceeding according to plan. The first turbine is scheduled to come on line in mid-1983, and commercial operation should start in March 1986, enabling the nation to accelerate its industrialization and the electrification of its urban and rural areas. At the same time, sales of electricity not used by Paraguay will earn a considerable amount of foreign exchange, thus strengthening the balance of payments.

Despite the efforts being made and the development projects underway, the coming years can be expected to pose a severe challenge to Paraguay as a consequence of the difficulties created by the uncertain, contentious international situation.

My country’s people and Government are confident that joint action and efforts by the more developed countries and such international organizations as the Fund and the Bank will continue.

In conclusion, I sincerely thank the authorities of the host country and of the sponsoring institutions for their many courtesies to us and the efficient work they have done.

Statement by the Governor of the Bank for the Solomon Islands—Bartholomew Ulufa’alu

I am most grateful for the hospitality that has been given us by the Canadian Government, and I join others in welcoming the new members who have joined us.

I am struck, as so many Governors must be, by the contrast between the amount and quality of the analysis presented to us, leading unavoidably to very clear conclusions, and the abysmally slow speed at which political will and action can be marshaled in support of logic and necessity. Are we really saying that there is a choice to be made, whether or not to expand the Fund and revitalize the Bank? Because if we do not, we sentence these great institutions to a slow death by starvation.

If the industrial countries, led by the United States, allow these institutions to decline in effectiveness, they will have only themselves to blame for an increasingly fragmented and destabilized world. The buying and selling of political and strategic influence, in return for bilateral support of various kinds, will replace the broad-based impartiality and good faith of these institutions.

Perhaps that is what some of the richer countries want; but, if so, I think they have wrongly perceived even their own interest. Economic and political chaos does not serve the real long-term interests of any country or group of countries. Yet we seem to be witnessing deliberate moves in that direction, in the blocking by the United States and others, of even a moderate degree of growth of these institutions. The two institutions will become increasingly irrelevant to our needs as we perceive them, unless the Fund can be enabled to respond to our balance of payments needs on a much larger scale, and the Bank given the resources to finance a significant part of our investment needs on concessionary terms.

Governors here know what political imperatives are at work on us at home. Faced with young and growing populations, in countries with inadequate infrastructure, minimal domestic capital, and export markets that are closed to us or offer us prices below the cost of production—is it any wonder that frustration sometimes lends heat to our arguments based on economic common sense? As Ministers of Finance, we are charged with the preservation of effective monetary and fiscal systems under almost impossible circumstances, and all too often our colleagues, as well as our political opponents, clutch in desperation at straws offered them by advisers and salesmen of outlandish schemes, which we must subsequently disallow.

However, there are proposals now on the table that are not outlandish and that do offer us the prospect of real partnership in tackling our enormous problems.

Dealing first with the Fund, it is essential that a very large increase in quotas should be agreed as quickly as possible; nothing less than doubling the size of the Fund is likely to suffice for the needs of the next few years. And within that total, the special needs of the smallest members should be met by the reintroduction of a minimum quota. The idea of a minimum quota is not new. In the early 1960s, minimum quotas were applied to a number of smaller countries joining the Fund. Two years ago, we argued in the Annual Meetings for a minimum quota of SDR 10 million. The passage of time has only underlined the argument, and I think our case is typical of many small members. Our present quota is SDR 3.2 million, which is equivalent to 3 per cent of our annual payments for goods and services, and 10 per cent of our present level of external reserves. Even doubling our quota will not make the resources and advice of the Fund a substantial factor in our financing policies. It will be necessary to have a minimum quota of SDR 12 million for the Fund to be able to play its proper role in Solomon Islands. Without such an increase, I fear that we cannot hope to find in the Fund the quality of assistance we shall need to deal with the medium-term balance of payments problems. . . .

Two points then I wish to emphasize: on the Fund side, the need for a very large overall increase, and a minimum quota of SDR 12 million; on the Bank side, the need to revive, replenish, and expand IDA. Unless these improvements can be achieved, then these institutions must become increasingly irrelevant, as our external financing needs become more sharply felt in the next few years. We may then find ourselves turning to sources of finance devoid of every merit except apparent availability of cash.

I believe in argument and logic, not emotion, as a way of reaching decisions. There is no logical barrier, no argument resting on empirical evidence, to prevent the increase in quotas, and funding of IDA. I trust that wisdom will prevail during these Meetings and action will follow forthwith.

Statement by the Governor of the Bank for Viet Nam—Nguyen Duy Gia

On behalf of the Vietnamese delegation to the Thirty-Seventh Annual Meetings of the Boards of Governors of the International Monetary Fund and the International Bank for Reconstruction and Development and affiliates, I would like to congratulate Mr. Abdlatif Y. Al-Hamad as Chairman of the Meetings and want to join other Governors in expressing a warm welcome to new members of both institutions.

I wish to convey my sincere thanks to the Government and people of Canada, especially the people of the city of Toronto for the facilities made available for the Meetings.

I also wish to express to Mr. de Larosière, Managing Director of the International Monetary Fund, Mr. Clausen, President of the World Bank and their staffs our appreciation for the careful preparations for the Meetings.

The world economic, financial, and monetary situation is disappointing, and this was fully reflected in the Annual Reports of the Fund and the Bank and voiced by previous speakers. In this connection I should like to draw your attention to some recent developments:

  • —The harmonious trends of international markets with a détente in relations among nations was put under the force of a threat of punishment by one country to another. This in fact prevents countries from maintaining a sustainable economic growth and controls others’ markets, leading to a dangerous confrontation and creating a grave concern in the world.

  • —The developing world is not only suffering from the impact of inflation and high interest rates in developed countries, but is also in a disadvantageous position with its exports underpriced in comparison to higher-priced imports from developed countries.

From these, one notes that the prosperity of the world economy must spring from an economic exchange, the equal and mutually beneficial cooperation among nations of different levels of development and of identical or different political views. We believe that the operations of the Fund and the Bank must be devoted to the promotion of international cooperation and economic exchange. . . .

Now let me come back to the relations of my country with the Fund and the Bank. After 30 years of war, our country was liberated and became reunited in 1975. As it is endowed with rich natural resources and abundant labor forces, we intend to develop economic relations with all countries and international organizations.

Our country suffers from financial difficulties as a result of the most serious destruction of war and continuous natural calamities. That is why we need assistance from the Fund and the Bank, but while the Fund does respond to our need, the Bank has so far refused our requests on grounds of well-known noneconomic reasons. We demand equal treatment and rights from both institutions like other members.

Governments friendly toward us, people, and international organizations come to our need in difficult times with sympathy, support, and valuable assistance. I avail myself of this opportunity to express, on behalf of my Government and people, our gratitude to these friendly governments, people, and international organizations for their effective assistance.

May I wish my fellow Governors good health. My wishes also go to the management and staff of both institutions for the greatest success in their task. May relations between the Socialist Republic of Viet Nam and both institutions be ever improved and developed.

Statement by the Governor of the Bank for Yugoslavia—Joze Florjancic

Let me first welcome the new member countries of Antigua and Barbuda, Belize, Hungary, St. Vincent and the Grenadines, who joined our institutions last year.

In his excellent speech Mr. Abdlatif Al-Hamad very rightly assessed the current world economy. We fully share this assessment. World economic developments during the past few years, especially in 1981 and 1982, prove that the developing countries were correct about the dangers generated by the exaggerated concern for the anti-inflation battle, restrictive monetary policies, high interest rates, and foreign trade protectionism. More than ever before in the postwar period, we approached the abyss of a great recession eroding the results achieved in international economic and monetary cooperation.

In considering the reports prepared for this Annual Meeting, we can conclude that an urgent change in the current approach is indispensable in solving the difficulties existing in the international economy: to initiate, wherever possible, measures aimed at averting the current decline in the world economic growth rate, and to activate the depressed potential for the growth of the world economy.

We strongly believe that the countries that have basically managed to fight inflation and have balance of payments surpluses can and should inprove the growth rate of their national economies. This would be of great help for the developing countries, and the world as a whole. There would be greater possibilities to increase exports from the developing countries, which would facilitate their access to capital markets. At present, access of developing countries to capital markets is almost impossible. This will have far-reaching negative consequences for developing countries and the world economy.

In our belief, the principal task at this stage is to help the world economy gradually recover from the recession. Our institutions should also turn toward that goal and provide the contributions expected from them.

Referring to some of the topics at this Annual Meeting, it is important to stress the importance of an accelerated quota increase in the framework of the Eighth General Review of Quotas. Persistent warnings from the developing countries have repeatedly stressed the need for an accelerated quota increase. Had this policy been accepted by industrial countries, we would have been better able to cope with the present difficulties. As past experience already warns us, it is hard to understand why some countries still strongly resist a substantial quota increase, which in our opinion should be at least doubled. It is also necessary to improve the very low share of the developing countries in the IMF. The situation of the developing countries is much more difficult than that of the industrial countries, and the support of the IMF is of essential importance for them.

Current developments have also manifested justification of the request by developing countries for a substantial new SDR allocation. Expanded use will further affirm SDRs as an important element of the international monetary system. It will also mean a practical approach to solving the difficulties generated in the sector of international reserves and liquidity. For the first time in many years we are faced with the decline in international monetary reserves and with increasing difficulties in maintaining international liquidity. When—if not now—will the need emerge for a new SDR allocation? We expect and hope that the IMF will foster its efforts aimed at providing significant new SDR allocations. We would like to pay tribute to the Managing Director, Mr. de Larosière, for all the initiatives he has undertaken in this field, and wish him much success in his further efforts. . . .

Official development assistance (ODA) faces increasing resistance by many industrial countries. At a time when the least developed countries are strongly affected by developments in the world economy that are beyond their control, the growth of ODA funds is lagging far behind existing needs. The least developed countries are, therefore, facing an even more difficult situation. . . .

In its Program of Action adopted in Belgrade in 1979 at the ministerial level of the Group of 77, the developing countries warned about the increasing number of sources of crises in international economic and financial relations. Three years ago they pleaded for the initiation of a reform of the international monetary system and elimination of negative developments in the field of transfer of real resources to developing countries. The developed industrial countries did not respond to that plea. Key questions from the Program of Action remained without response, with the world moving deeper and deeper into recession.

Today, when the elimination of recession and the revival of the world economy have become the basic concern of us all, the Group of 77 Program of Action can help in finding new roads leading to the revival of the world economy.

September 9, 1982.

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