Following are edited excerpts from the International Monetary and Financial Committee (IMFC) press conference that took place on April 24 in Washington, D.C. Gordon Brown, Chair of the IMFC and Chancellor of the Exchequer of the United Kingdom, and Anne Krueger, Acting Managing Director of the IMF, participated in the press conference. The full transcript is available on the IMF’s website (http://www.imf.org).
Question: Could you give us some more details on the new International Finance Facility (IFF) proposed by the United Kingdom?
Brown: The proposal involves the front-loading of aid based on existing donor commitments, on the basis of which the facility would leverage in additional money from international capital markets. The existing bilateral and multilateral channels for distributing aid would remain in place. We believe it is possible to raise the amount of aid from $50 billion a year—a figure that in real terms has been relatively constant for some time now—to $100 billion a year, leading to an effective doubling of aid. The Zedillo Commission, the World Bank, and a number of other agencies agree this is the sum that is needed to meet the Millennium Development Goals (MDGs).
As part of the Monterrey Consensus, countries agreed that any developing country that carries out necessary reforms such as opening up to trade and investment and dealing with corruption should not be denied resources to invest in education, health, and antipoverty programs that would enable it to meet the MDGs. So that is the spirit of the IFF. We discussed the IFF during our current meeting, and a number of countries supported the facility, but we will await a report by the IMF and the World Bank on this issue before taking the proposal further.
Question: You mentioned a new international approach to fiscal rules in your statement to the IMFC, but I don’t see this point in the communiqué.
Brown: What I said this morning, speaking as the finance minister of the United Kingdom, was that, now that the world economy is strengthening, it is a good time to examine the performance of different fiscal policy mechanisms, during both the growth period of this economic cycle and the recent global downturn. I suggested we might compare existing fiscal discipline mechanisms—including the Stability and Growth Pact, the balanced budget rule, and the golden rule (which is the rule that guides British fiscal policy)—and see which of the different systems have been most helpful in moving economies through the global downturn. As you may know, the IMF is currently looking at fiscal policy and is working on a report that will be discussed at the IMF-World Bank Annual Meetings in October.
Question: Is there a consensus within the IMFC that the IMF is the right institution to take on the responsibilities of combating terror financing and money laundering?
Brown: The communiqué makes clear that all members of the IMFC support the IMF’s surveillance of issues related to the financing of terrorism. An organization that has surveillance as one of its primary roles should be involved in dealing with this problem. The international community will only be as strong as its weakest link in tackling the financing of terrorism. That is why it is important for every country that has promised to implement legislation to address the financing of terrorism in the wake of 9/11 to actually do so—not just in terms of laws, which often have been passed, but in terms of implementing the laws. It is important for the IMF to be involved in assessing the effectiveness of these measures, and it is also important that it help build capacity in countries that would otherwise not be able to get to the source of terrorist financing. We cannot, as an international body, stand by, having made these promises, and allow them not to be implemented. At the same time, it is important that the monitoring work be published so that people know what is happening. Our role is to make sure the international community is more secure by dealing with one of the root causes of terrorism.
Question: No international communique seems complete without a reference to the need to make progress on the Doha Trade Round. What specific steps do you think are necessary now to put trade talks back on track?
Krueger: There have been concerns from some of our member countries that their interests might be hurt if the Doha Round were completed. For instance, some countries worry they might lose their preferential access to industrial country markets while others worry that changes in commodity prices that might result from the Doha Round will hurt them. The IMF has undertaken research, provided to the World Trade Organization, in which we estimate the most likely range of such possible damage in the short run. In the long run, virtually all countries would benefit from trade liberalization. We have also developed the Trade Integration Mechanism, which was approved by the IMF Executive Board earlier this month. Under this facility, the IMF will be able to provide rapid financial assistance to any country that experiences a shortfall in its exports or an increase in commodity prices of its imports caused by multilateral trade liberalization.
Question: The Group of Seven communiqué says that Argentina has made some progress but that more is required. Will there be an increase in the fiscal surplus, and will the government improve on the offer to its creditors that was presented at the IMF-World Bank Annual Meetings in Dubai?
Krueger: The primary surplus is a matter between the Argentine government and its creditors. In its letter of intent last September, the government committed to a target level for 2004 and agreed that it should continue on a rising trend. The government takes the view that there are several components that determine how much it can pay on debt service, and the primary surplus is only one. That, again, is subject to negotiation between Argentina and its creditors. As far as the IMF is concerned, whenever a country is in arrears, we want to be in a position to support it. In order not to prejudice other negotiations, we have a policy of lending into arrears that stipulates good faith negotiations. That is the extent of our concern.
Question: What can the IMF offer Iraq after the transfer of sovereignty on June 30? Can you increase aid or otherwise enlarge your role?
Krueger: We are already assisting the Iraqis with working out their debt obligations and are helping them define a monetary framework and other economic policies. We will be able to continue providing technical assistance of that nature after the transfer of sovereignty. In addition, once Iraq acquires the appropriate institutions and mechanisms for carrying out policies, we might offer postconflict assistance and other financial support.