An increasingly broad and dynamic global recovery set the tone for an upbeat gathering of the world’s finance ministers and central bank governors on April 24 in Washington, D.C., for the spring meeting of the International Monetary and Financial Committee (IMFC)—the IMF’s ministerial steering committee. The top financial leaders welcomed the better global economic outlook, with industrial production and global trade picking up sharply. But they warned of risks from large global imbalances, higher interest rates, volatile oil prices, and geopolitical concerns. And they cautioned that most developing countries were headed to miss most of the UN Millennium Development Goals (MDGs) by the target date of 2015. Not on the agenda of the meetings, but much discussed by the media and other observers, was the impending selection of a new IMF Managing Director (see box, page 132).
IMFC Chair Gordon Brown, U.K. Chancellor of the Exchequer, told reporters after the meeting on April 24 that all countries need to cooperate in tackling global imbalances (see IMFC press briefing, page 120). For the United States, this will mean fashioning a credible medium-term framework that will allow it to transit from expansionary fiscal policies—which have helped fuel its recovery—to a healthier budget environment in which the pension and health care costs of an aging population can be addressed (see World Economic Outlook, page 130). For Europe, where subdued growth cast one of the few shadows on a generally bright global horizon, it will mean accelerated labor market and other structural reforms; and for Japan, continued banking and corporate reforms.
Greater urgency on trade
Brown also pointed to what he termed the strongest language yet from the Group of Seven top industrial countries on the urgency of revitalizing global trade talks. “Rapid progress on and early conclusion of the Doha Round is imperative,” the group’s communique said, noting that this “will require action by all parties to resolve key outstanding issues” (see Group of Seven communique, page 124). The Group of 24 developing countries concurred, but its chair, Minister Conrad Enill of Trinidad and Tobago, also chided advanced countries “to deliver on their commitments to increase market access for developing country exports and drastically reduce impediments to agricultural trade so that the round can be concluded as scheduled in 2005.”
The IMFC commended the IMF’s work in advocating trade liberalization and in helping countries take the steps needed to benefit fully from open markets—stressing the importance of open markets, fair access, and reductions in trade-distorting subsidies (notably in sectors crucial to developing countries, such as agriculture, textiles, and clothing). Also widely welcomed was the IMF’s establishment of the Trade Integration Mechanism. IMF Acting Managing Director Anne Krueger told reporters that it put the IMF in a position to provide “very quick financial support” if a country experienced a “shortfall in its exports or an increase in commodity prices of its imports” because of multilateral trade liberalization efforts.
On the eve of the IMF’s biennial review of its surveillance, the IMFC credited this core responsibility with contributing an “essential element of the international community’s efforts to enhance crisis prevention, promote financial stability, and foster high and sustainable growth.” It welcomed the IMF’s increased focus on the financial sector and international capital market issues and its pilot projects on one of the most vigorously debated issues of late—that is, how public investment should be treated in IMF advice and arrangements and what can be done to ensure that valuable infrastructure investment is protected without putting at risk macro-economic stability and debt sustainability.
As for giving poorer countries a bigger say in the policies and procedures of the IMF, the IMFC noted that the IMF’s credibility as a cooperative institution rests in part on all members’ having appropriate voice and representation. It called for continued efforts “to enhance the capacity of developing and transition countries to participate more effectively in IMF decision making” and asked the Executive Board to continue its work on IMF quotas, voice, and representation.
Among developing countries, notably in meetings of the African finance ministers (see page 127) and the Group of 24, however, there were indications of growing impatience with the pace of progress on these issues. Enill called for a more concrete timetable that would allow for completion of this work by the 2006 Annual Meetings—the time frame set by the international community at the March 2002 UN Conference on Financing for Development held in Monterrey, Mexico. He also expressed his group’s particular concern over the selection process for the head of the IMF. The choice of a head for a Bretton Woods institution should always, he said, “be open, inclusive, and transparent, involving the full participation of all members.”
Chasing the MDGs
On April 25, the joint World Bank-IMF Development Committee met to review progress toward achieving the MDGs, which include cutting poverty in half by 2015 from its 1990 level. Despite progress on many fronts, the Development Committee noted that most MDGs will not be met by most developing countries, particularly in sub-Saharan Africa, if current trends continue (see Development Committee communique, page 122). The joint World Bank-IMF Global Monitoring Report, released on April 22, challenged rich and poor countries and the international financial institutions to keep the promises made in Monterrey. It said that aid flows would need to roughly double from their current level of $50-60 billion to support adequate progress toward the MDGs. World Bank President James Wolfensohn told reporters that the international community has its priorities backward—with global defense spending about $900 billion a year and farm subsidies in wealthy nations totaling $300 billion a year. “If we spent $900 billion on development,” he said, “we probably wouldn’t need to spend more than $50 billion on defense”