Concluding Remarks 1
- International Monetary Fund. Secretary's Department
- Published Date:
- November 1979
Statement by the Governor of the Fund for Tanzania—E.I.M. Mtei
Tanzania accepts with pride the Chairmanship for the coming year of the Boards of Governors of the World Bank Group and the International Monetary Fund as an honor to our people, our region, and to me personally. I should like to sincerely thank all Governors for selecting me for this high office.
The meetings for 1979 are nearly concluded. Partly because of the excellent manner in which they have been prepared and organized by our hosts, the Yugoslav authorities, and by the Bank and Fund staff, they have served well to accentuate the world’s problems and to provide a clear direction for cooperation toward progress in development and in further improving the operation of the international monetary system. It is my hope that between now and the next Annual Meetings a genuine effort will be made by all member countries to help our institutions to put into effect the declarations and resolutions which have been reached here over the last week. I also hope that the 1980 Annual Meetings will initiate a new decade of efforts toward cooperation. As my country’s representative and in recognition of the importance of the Bank and the Fund to the welfare of their members, I shall strive to carry out my new task with the same efficiency and sense of purpose that has been displayed in his capacity as Chairman by Mr. Muldoon, Prime Minister and Minister of Finance of New Zealand. In doing so, I shall, of course, count on the cooperation of all Governors, the Executive Directors, management, and staff of both these institutions.
I should like to congratulate Mr. McNamara and Mr. de Larosière, the Executive Directors, and the staff of both institutions for their efforts in helping to advance the solution of the difficult problems which face us. I look forward to working with them in the coming year and to meeting with Governors of the Bank and the Fund at our 1980 Annual Meetings in Washington.
Statement by the Chairman of the Executive Board and Managing Director of the International Monetary Fund—J. de Larosière
The central theme of our deliberations this week has been the grave threat to our economic and financial system posed by inflation. From their speeches, it is evident that Governors consider the persistence and worsening of inflation to be the most troublesome aspect of the international economic situation. Inflation at present rates is widely recognized as intolerable, since it is inimical to economic growth and development, causes distortions and inequities, and disrupts all aspects of economic policymaking.
I was deeply impressed by the degree of unanimity in the statements by Governors on the problem of inflation. There was agreement that inflation must be tackled with greater determination and accorded higher priority among the objectives of national economic policy. Moreover, it was held that inflation had to be dealt with not only through the control of demand—by means of a decisive use of fiscal and monetary policies—but also through greater emphasis on supply policies directed toward longer-term problems of a structural nature. In this regard, great importance was attached to the need for better policies and international mobilization of capital in the energy field. Also, measures to arrest protectionism and to promote the freedom of international trade received much attention. I trust that the strong anti-inflation statements by Governors, stronger than I have heard in any previous Annual Meetings, reflect a definitive change in policy—one that will be sustained and, in due course, lead to a reduction in inflationary expectations and the restoration of confidence.
Along with the central focus on inflation, numerous speakers voiced concern about the prospective international slowdown in growth of output at a time when many countries throughout the world already suffer from a substantial underutilization of resources, including high levels of unemployment. I fully share this concern. But it must be recognized that a slowdown of worldwide growth is virtually inevitable because of the emergence of a recession in the United States, the need for anti-inflation policies in many other countries, and the deflationary impact of the recent increase in oil prices. The international cyclical picture, to be sure, is relatively favorable in that the economies of most industrial countries other than the United States are still moving ahead. However, because of their inflation problems, these other countries are not in a position to adopt stimulative measures to offset the U.S. recession, although they could reasonably be expected to maintain their growth rates as much as possible. In the United States itself, despite the recession, the priority that has been accorded by the U.S. authorities to the reduction of inflation over the medium term will need to be maintained.
This situation clearly calls for a better working of the international adjustment process, according to principles that have been established in the Fund. The central principle is that each country should contribute to the amelioration of world economic problems in light of the strength or weakness of its economic position. Thus, countries in a relatively strong external position would act to support domestic demand to the extent that this would not jeopardize their anti-inflation programs. At the same time, countries in a relatively weak external position and with high inflation would adopt corrective measures of a fundamental nature to deal with their problems.
Not surprisingly, the situation of the non-oil developing countries came in for a great deal of discussion this week. The facts regarding their situation are by now widely known, and I will not repeat them. Rather, I want to address the broad question of how the problems of the developing countries can be eased. Action on at least three fronts is urgently needed.
—First, as a number of Governors noted, an improvement in the domestic policies of developing countries—particularly fiscal policy—is clearly called for. In many cases, these policies have been an important cause not only of high rates of inflation, but also of difficulties in the external position.
—Second, many Governors stressed the crucial point that both the developed countries and the major oil exporting countries should make every effort to assist the non-oil developing countries in their external financing. Much emphasis was placed on an expansion in the flow of official development assistance, especially to the low-income group of developing countries. I fully realize that developed countries may face budgetary or other domestic problems that make it difficult to increase development assistance, but I urge them to put forth maximum efforts in this area. One thing to be borne in mind is that an increase in financial aid to developing countries would, in turn, lead to an increase in exports of the developed countries themselves. Along with expanded flows of capital and aid, as a number of Governors pointed out, measures to improve market access for the exports of developing countries are also essential for economic development.
—Third, Governors were also right to emphasize the role that international institutions can play in assisting the developing countries. For its part, as I explained in my opening address, the International Monetary Fund has continually adapted its policies in ways that have proved beneficial to developing countries among its membership. The Fund stands ready to play an active role: assisting countries in the formulation of programs of adjustment tailored to their specific problems and providing finance for their balance of payments deficits.
Our discussion this week gave considerable attention to the marked improvement that has occurred in the distribution of current account balances in the major industrial countries, especially with respect to the United States, the Federal Republic of Germany, and Japan. According to projections by the Fund staff, the United States should experience a substantial positive shift in its current account balance from 1978 to 1979 despite a $15-16 billion increase in the net oil import bill, and a further substantial shift—into surplus—is expected for 1980. These improvements in fundamental factors should make themselves felt in the exchange markets. Also, it is to be welcomed that the major industrial countries have reinforced their commitment to cooperation in the monetary field.
On the subject of the substitution account, I am very encouraged by the general support the Governors have given to this endeavor. The main conclusion that has now been reached is a very significant one—that such an account, if properly designed, could contribute to an improvement of the international monetary system and could constitute a step toward making the SDR the primary reserve asset in the system. It will be no easy task to draw up a plan for the substitution account, and that is why I particularly appreciate the guidance that Governors have offered on the specific features that they would wish to see incorporated in the design of the account, as well as on related issues. I hope very much that the Board will be able to report substantial progress to the Interim Committee at its meeting next April in Hamburg.
In reviewing our discussion this week, I also wish to recall the many statements by Governors concerning the important role of the Fund and the need for a strengthening of that role. In this regard, I welcome the attention that a number of Governors gave to the essential function of surveillance over exchange rate and related policies. We will carefully study the suggestions that Governors have made about this and other aspects of the Fund’s work.
In my opening address I described the present world economic situation as “gloomy” but went on to outline a series of complementary policies that I believe could serve to turn the situation around and get things moving in the right direction. The policies adopted will be all the more effective if they are pursued within a framework of international cooperation that reflects the growing interdependence of national economies and takes account of the vast needs and opportunities for economic development and progress throughout the world. Working together with patience and courage, we will surely succeed.
In closing, Mr. Chairman, I should like first to express my appreciation for your 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 Tanzania, who will succeed you in the year ahead.
Second and last, I would wish once again to express my most heartfelt thanks to the people of Yugoslavia and to the city of Belgrade for their gracious hospitality. Our special thanks go to President Tito, who honored us with his presence. I would also wish to single out Governor Kostic and Governor Bogoev. It has been a pleasure to work with them and their associates in making our meetings so successful.
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 New Zealand—R.D. Muldoon
My fellow Governors, Ladies and Gentlemen:
We have come together here in Belgrade by the confluence of the Sava and Danube rivers to find that our thoughts, also, flow very much together.
From Tuesday’s opening speeches, several themes have run consistently through our meetings: a recognition of interdependence and the need for cooperation between countries and groups of countries; the need to rigorously resist inflationary and protectionist pressures, and the need to join together in seeking as much international economic growth as possible.
In this context there has been a recognition, perhaps stronger than ever before, of the role the Bank and the Fund must play as a focal point of a cooperative effort to achieve stability, growth, and development. I could not agree more with my colleague, the Governor from the United States, in his description of these two institutions as providing “the infrastructure for world cooperation. . . .”
Specifically, our discussions have reaffirmed the importance of the job the Fund must undertake regarding balance of payments financing, surveillance over members’ exchange rate policies and, in general, assisting in an improved working of the adjustment process. In particular, we have heard many references this week to the need for symmetrical surveillance; this clearly is one aspect of the Fund’s work that will require priority development. Having raised this matter in Malta, I have been heartened to have the idea supported by the Governor for the United States and the Chairman of the Interim Committee as well as other Governors. In my view, a move in this direction will encourage deficit countries to come to the Fund earlier because they will know that the economic policies of surplus countries are also under scrutiny.
We have also had an invaluable discussion on the concept of a substitution account and have reached an important conclusion that such an account, if properly designed, could be a useful adjunct to the international monetary system. We must now move to detailed consideration and implementation of this proposal.
As to the Bank, Mr. McNamara’s call to turn ourselves now toward a new international development strategy—a development agenda for the 1980s—has been welcomed and supported by many Governors. We have, I think, a consensus that the coming Third United Nations Development Decade must be shorter than the last on the rhetoric of development and much stronger in providing the resources and carefully targeted policy instruments needed to create jobs, production, and trade in the developing countries.
That the Bank and the International Development Association will need adequate new resources to carry out this assignment represents more than a consensus—it is a point on which we are firmly agreed. In this light, I would recall the warning of our African member countries, as expressed by the Governor for Liberia, against member countries “flirting” with parliamentary measures that could jeopardize the IDA’s ability to commit future resources—or even those already contributed to it. This is a time for statesmanship in the U.S. Congress and I am sure it will be forthcoming.
Some have termed our discussions here this week “gloomy.” I feel we have been too bathed in warm Yugoslav hospitality and the clear autumn sunlight of Belgrade for this characterization to hold true. As to our tone, I think we have, together, sent a clear and positive message that we still feel that we can change the course of events by our own efforts, and that our dedication to making those efforts with the greater strength of cooperation and togetherness is stronger than ever before. That we more fully recognize the challenges ahead is a positive statement, not a negative one.
In closing these Annual Meetings this morning, many of us will be saying good-bye until we reconvene again in Washington. For two of our number, however, these will be their last Annual Meetings.
Purviz Damry, as Vice President and Secretary of the Bank and Secretary to the Bank Board of Governors since our meeting in Nairobi, has provided wise counsel to a succession of Chairmen; I, myself, have found his help most valuable. Dana Brantley has played a key role as Deputy Secretary for these Annual Meetings since the mid-1960s, assuring that their logistics have moved with almost invisible smoothness. Together, Mr. Damry and Mr. Brantley have provided much of the infrastructure for our deliberations here, in Washington, and in other cities around the world. I think it only fitting that we extend to them our special thanks, and our wishes for continued success in the future.
Delivered at the Closing Joint Session, October 5, 1979.