Concluding Remarks 1
- International Monetary Fund. Secretary's Department
- Published Date:
- November 1980
Statement by the Governor of the Bank for Uruguay—Valentín Arismendi
Uruguay accepts the Chairmanship of the Thirty-Sixth Annual Meetings of the International Monetary Fund and World Bank with a keen awareness of the honor and great responsibility this represents.
Despite the somber picture of the world economy which emerges as the general conclusion of the statements made at these Meetings, it is our hope that, by the next time we meet, a clear understanding of the growing economic interdependence of nations will guide us toward solutions that will make assistance to the developing world more effective.
In reiterating our confidence in the leadership of both institutions, we join in the consensus of gratitude expressed to Mr. Robert McNamara as he leaves the position he so brilliantly filled. Finally, we cannot fail to acknowledge the way Mr. Amir Jamal, Minister of Finance of Tanzania, has conducted the Meetings now drawing to a close.
Statement by the Chairman of the Executive Board and Managing Director of the International Monetary Fund—J. de Larosière
Mr. Chairman, our discussions this week have been useful and constructive. The issues we face are both complex and controversial. Nevertheless, we have been able to achieve a remarkable degree of consensus on two central topics: the economic policies that should be pursued by member countries, and the steps that can and should be taken to enable the Fund to render greater service to its members over the next few years in the area of its primary responsibility—balance of payments adjustment and financing.
Our discussion of national policies occurred against the backdrop of a very troublesome economic situation. In varying degrees, most of our member countries are experiencing high inflation, slow growth, substantial underutilization of resources, and balance of payments difficulties. The problems being encountered are both widespread and deep-seated. In these circumstances, as the statements of Governors have indicated, it would be a mistake to base policies on short-run considerations. Instead, the primary objective must be to work toward the solution or amelioration of problems over a period of several years.
Governors are convinced that the top priority being given in many countries to the fight against inflation must be continued. Substantial progress on this front is considered necessary for the achievement of better investment performance and sustained economic growth over the longer run. It is widely understood and agreed that premature relaxation of fiscal and monetary policies would have serious consequences extending over a number of years. Furthermore, Governors have urged that demand management policies be complemented by greater use of “supply policies” designed to achieve better productivity gains and faster growth of output without intensification of inflation. I also note that great emphasis has been placed on the problem of energy. I believe that this problem is fundamental and must be tackled resolutely if we are to achieve better economic performance during the 1980s.
Our discussion showed widespread serious concern about the plight of the non-oil developing countries. It is indispensable that development assistance be increased, especially for the low-income countries with their weak capacity to save and to incur external debts. Much attention was also given by Governors to the need for industrial countries to improve market access for the exports of developing countries. Protectionism was sharply criticized. I fervently hope that the many statements of concern and intention on these matters will be translated into effective action.
Let me now turn to the role of the Fund in payments adjustment and financing. Governors have welcomed the Fund’s readiness to play a larger part in the financing of external imbalances. Members of the Fund pursuing sound policies are now able to obtain considerably larger amounts of assistance from the Fund than constituted normal practice in the past, and the guideline of 600 per cent of quota over three years was welcomed as an appropriate response to the difficulties members face in the present economic situation.
This Annual Meeting has been notable for the questions that have been raised—most forcefully in your opening speech, Mr. Chairman—about the conditions on which the Fund makes its resources available to members. These questions are complex, but let me offer a few thoughts on them.
It has to be recognized that non-oil developing countries need time to adjust to external shocks, such as the recent serious deterioration in their terms of trade. In the absence of an increase in the volume of aid, these countries are led to increase their borrowing. But this borrowing will not be sustainable unless it is used to strengthen a country’s economy and to enhance its capacity to service external debt. This is where the Fund can play an important role. We work with national authorities on the design of programs so as to limit demand for resources, including imports, to what can be financed by domestic production and external capital flows.
With or without Fund resources, adjustment must take place. The injection of our resources makes the adjustment less harsh; these resources allow domestic demand in a country to be larger than otherwise would be the case. Furthermore, the adoption of a Fund-supported program often has a catalytic effect in unlocking flows from other sources. These are the reasons why our policy of enlarged access to the Fund’s resources is important in assisting countries in the present difficult environment.
Let me also stress that the Fund’s approach to adjustment serves to improve supply conditions through incentives to save and invest. This contributes to a longer-term strategy for fostering economic growth and development. In this context, Governors have laid emphasis on the importance of close collaboration between the Fund and the World Bank. The Fund is guided by the Bank on the composition and appropriateness of development programs, and the Bank is guided by the Fund on balance of payments adjustment policies. We must continue to review this collaboration in the light of Governors’ interventions at this meeting. I would like here, Mr. Chairman, to add a personal word. During our two years of continuous collaboration, I have always found in Bob McNamara a man of great understanding and total dedication to our common goals, and a man of openness to new ideas. It has been, for me, a great privilege to learn from his experience, to benefit from his judgment, his intelligence, and also his friendliness. It is also for me a great loss to see him retire.
I come now to the remarks that have been made about the financing of enlarged access to the Fund’s resources. Governors have emphasized that the Fund should continue to place primary reliance on quotas as a source of financing. We hope that the Seventh Review will come into effect at the earliest possible date. However, this boost to our liquidity will only be of a limited and temporary nature.
Thus, Governors agreed that the Fund should organize its borrowing in a smooth way so that we are ready to meet the needs of our members as they arise. In the period immediately ahead we will be examining carefully all aspects of such borrowing, including the possibility of borrowing at a somewhat shorter range of maturities than we have been accustomed to in the past. We will work closely with central banks and other parties and, in accordance with views expressed in this meeting, we shall explore carefully various types of borrowing, including the private market.
Nevertheless, I repeat that quotas should continue to be the primary source of the Fund’s financing. Quotas are indeed the manifestation of the collaborative nature of our intergovernmental institution. Since experience shows that it takes a long time to adjust quotas, we shall soon begin preliminary work in the Fund on the Eighth General Review. The Executive Board agreed that the customary method of calculating quotas will be reviewed when the Seventh Review has been completed. We are going to start with the question of the quota formula, and immediately after that we will need to begin work on the distribution and the overall size of the increase. This review will be the occasion to reflect in quotas the developments in members’ positions in the world economy and to focus attention on the participation of the different groups of countries in the decision-making process of the Fund.
The Fund has an important program of work for the coming months. There are the questions of borrowing and quotas to which I have already referred. We shall be completing arrangements to establish a Subsidy Account for the supplementary financing facility, and I sincerely thank those countries which have announced their intention to make voluntary contributions to the Account. The Executive Board has also been urged to give prompt consideration to the suggestion that the Fund should extend temporary financial assistance to low-income member countries adversely affected by a crop failure or a sharp increase in the world price of food items, especially cereals. Let me say here, Mr. Chairman, that an early, positive response to this suggestion is very desirable because of the fundamental nature of this problem, and because our economists in the Fund tell us that most of these fluctuations in food availability are temporary and reversible, and thus compatible with the character of the Fund. We all know that the human suffering these fluctuations entail is, by contrast, absolute.
Furthermore, we have before us a number of important issues relating to the SDR. We shall be giving early attention to the question of adjusting the SDR interest rate to the full market rate and of eliminating the remaining reconstitution requirement. We shall be giving active consideration to the question of the appropriate level of SDR allocations. Also, we shall be carrying out a more comprehensive study of a possible link between SDR allocations and development finance.
Finally, we have the continuing task of strengthening the role of the Fund in surveillance over members’ exchange rate policies. Firm surveillance is essential to the effective functioning of the international monetary system.
In closing, Mr. Chairman, I should like to express my appreciation for your frank and stimulating address that launched our meeting, and for the effective manner in which you have conducted our proceedings. At the same time, I congratulate the Governor for Uruguay, who will succeed you in the year ahead.
I look forward to seeing all of you next year in Washington.
Statement by the Chairman of the Boards of Governors, The Governor of the Fund and the Bank for Tanzania—Amir H. Jamal
As Chairman, it was my privilege to open these Thirty-Fifth Annual Meetings three days ago. Now as we come to the end of our work, I would like to thank my fellow Governors for the cooperation and understanding that I have received from them in making this gathering a fruitful and businesslike one—and particularly my fellow Governor from Brazil who kindly chaired the plenary sessions when meetings of the Joint Procedures Committee required me to be away from the plenaries. In my opening remarks, I had expressed my earnest hope that the question of observer status for the PLO and the legal issues surrounding it would be dealt with in a manner that will safeguard the fundamental interests of the two institutions and of the participating member states. In this connection, I should like to express my sincere appreciation to members of the Joint Procedures Committee for their assistance, and I might mention here in particular the Governors for Arab countries and for the United States, for their cooperation and understanding in bringing the matter to a definitive conclusion.
The Governors have adopted a resolution recommended to them by the Joint Procedures Committee. I would like to express my hope that the Committee will discharge the responsibility placed on it with total objectivity and the greatest degree of technical competence. Only then would the Fund and the Bank be able to ensure the integrity of their decision-making process.
I take this opportunity of placing on record my firm belief that in the matter of observer status for the PLO I have acted fully within the rules and regulations governing the Fund and the Bank. I deeply regret that events developed in the manner in which they did. I also continue to hold the view that at a time when the Bretton Woods institutions are under increasing pressure for change, the overt support from the PLO to them by its readiness to associate itself with the Fund and the Bank should be considered a welcome development.
The statements made by Governors in the course of the Joint Meetings have underlined the seriousness of the international economic situation. Both Mr. de Larosière and Mr. McNamara’s statements leave no doubt that these two chief executives have a total understanding of the nature and magnitude of the needs of the international community and in particular of the developing countries.
In many respects Mr. de Larosière faces an urgent and complex task for which the Fund will need to equip itself without delay. He deserves the cooperation of all concerned in his endeavor to mobilize resources to meet the challenge of the times. I am sure the Governors would want to wish him full success in his endeavors, in cooperation with the Fund staff, to carry out the recommendations of the Interim Committee, while bearing in mind the concern expressed by the Group of Twenty-Four, as well as Governors who spoke in the course of the Meetings. Equally, I very much hope that the Fund’s programs with developing countries in particular will reflect the realities of the particular structures of developing countries as well as of the increasingly adverse environment in which these countries must continue to struggle.
It is gratifying that the proposal for an institution to deal with energy development has received a large measure of endorsement.
It is a measure of interest in the proposal that Governors wanted to obtain further clarification of the proposed structure and its competence. The answers, in the final event, will be provided by the capital-surplus and technology-surplus countries. Let us hope that as they proceed to take the necessary initiatives, they will not overlook the interests of developing countries which are as yet poor.
I can think of no greater tribute to Robert McNamara than that his large vision and deep dedication to the cause of development be enshrined in an institution concerned with energy development.
It is my pleasant task to express the appreciation of all of us for the excellent arrangements that the staffs of the two institutions have provided to us at these Meetings. The smooth functioning of such a large gathering is evidence of their competence and dedication. I am particularly indebted to Mr. Van Houtven and Mr. Thahane for their invaluable assistance to me in steering the business of these Meetings.
I wish to extend my sincere thanks to the Government and people of the United States for their warm hospitality and courtesy in accommodating our needs.
Finally, I would like to extend my warm good wishes to the Governor for Uruguay who is succeeding me in this office.
As we take leave of one another and prepare once again to face the heavy tasks of some complexity at home, let us take with us a message of hope that those who have the power and the ability to take timely action in the interest of stability and progress for all will exert their best endeavors.
Delivered at the Closing Joint Session, October 3, 1980.