Camdessus: The financial foundations of the new architecture must be based on five basic principles: transparency, sound financial systems, private sector participation, the orderly liberalization of capital flows, and the modernization of the international markets on the basis of universally accepted standards.
Much has already been achieved. There is a consensus in a number of areas, particularly on transparency in policymaking and corporate affairs, on financial sector stability, and on working through standards and codes of practice toward stable, efficient, and transparent markets. While this work may not be complete, there is broad agreement on objectives.
First, there is the area of surveillance. Surveillance plays a central role in the work of the IMF. It is given priority when we allocate our human and budgetary resources, since the IMF alone has this mandate; it is growing in importance, and its primary focus is on matters that are the traditional responsibility of the IMF—issues of monetary stability, balance of payments sustainability, and growth-oriented economic policies.
Since it is all too clear that major destabilizing factors can emerge anywhere and at any time, these traditional elements have now been supplemented by considerations involving the stability of banking and financial systems; governance; relations between governments, banks, and enterprises; and supportive social policies. There is also the question of how far the work of monitoring standards and codes of conduct should be integrated with IMF surveillance and enter into our day-to-day work. Some of the responsible agencies report that they do not have the capacity to monitor such implementation on their own. This raises the question of how far the IMF, with its limited resources, might use the surveillance process for such monitoring. The Executive Board is to discuss this issue in the next few months.
Second, exchange rate regimes and the conduct of economic policy have to be adapted to the new economic environment. It has frequently been noted that the countries affected by the recent crises had operated some form of pegged arrangement or tightly managed float, and this raises the question of whether such arrangements were defective either in principle or in the way they were managed. Are they suitable only for countries at certain stages of development and, hence, do they have only limited relevance? In the final analysis, if domestic policies are right, how much does it matter which exchange rate regime is adopted? The Board is taking account of recent experience as it reconsiders these questions.
Third, there is the question of involving the private sector more fully in crisis prevention and resolution. This issue is still under discussion. The basic point is that all our efforts should aim at preventing crises. When difficulties occur, voluntary market-based solutions should normally be found to keep the private sector engaged. Yet there may be extreme situations, in which some international intervention is needed to ensure that debtors have the time to reach orderly resolution with their creditors. One possibility might be to devise a mechanism through which the international community could sanction a temporary stay of litigation by creditors. I believe this would be useful, and Article VIII, 2b, provides a good vehicle for that. But the issue remains controversial, and more work is needed in this area.
A fourth objective is to foster sound, open, and integrated capital markets. The central question is how to achieve this goal and what role the IMF should play. The IMF will be considering proposals for a gradual, country-specific approach to the liberalization of capital movements that recognizes the great variety of country situations. The IMF will in any event play a key role in assisting countries to ensure that the right conditions—a sound macroeconomic framework and a strong financial system—are in place. This role could be strengthened by appropriate amendments to our Articles of Agreement. I do not, however, anticipate an early end to this task.
Camdessus: Trade liberalization will be of direct benefit for all countries, both developed and developing. It is already evident that many countries should take a look at the experiences of those countries in Asia and Latin America that have achieved accelerated growth through outwardly oriented economic policies, including progressive trade liberalization. The international community can make a major contribution in this area. The industrial countries should open their economies to the exports of all countries, starting right away with those of the poorest countries. It is essential not only to encourage primary commodity exports, but, more important for long-term growth, to create the potential for new, more diversified export production. Such a step would have a strong positive impact on the poorest countries and could be achieved with minimal cost to the more advanced economies. As I said in Seattle, debt relief—important as it now could be—will make little sense if industrial countries do not totally open their borders to the exports of the poorest countries.
Camdessus: As its name indicates, the mandate of the new committee has been extended to cover financial as well as purely monetary issues. There is also an explicit provision for preparatory meetings of deputies, which will facilitate the formal deliberations of the committee. We look forward to this strengthened committee playing a positive role in providing high-level advice on major policy issues.
I must confess that I regret that more consideration could not have been given to a contemplated reform that would have transformed the committee, as provided for by the Articles, from a purely advisory body into a decision-making committee for all the major strategic issues that we are confronted with at the IMF.
However, after 13 years in this job, I have learned to become patient, and we shouldn’t rule out that, confronted with the tough demands of globalization, the new IMF committee might evolve in that direction.
What do you anticipate as likely to be the next great challenge to face the international economy and how should the world prepare for it?
Camdessus: Without any doubt, the next great challenge is humanizing globalization, which calls immediately for an intensified fight against poverty. Although the IMF is not, strictly speaking, a development institution, it is nonetheless our task to seek continuously to help governments and to be responsive to the cries of the poor. These issues are not new to the IMF. For many years, IMF programs have explicitly incorporated social policies. We have been able to observe increases in spending on education and health care in countries with IMF-supported programs. There have also been improvements in important social indices. But much more needs to be done—both by ourselves and by the countries immediately concerned—if these countries are to be able to generate high-quality growth. An important step in this direction will occur on January 17-19, when the Summit meeting of African Heads of State on poverty reduction will be held in Libreville.
Camdessus: I need only ask you to take a look at the IMF website [www.imf.org] to see what a great amount of material is now being released and made publicly available. This active program extends not only to the website, but to publications and staff participation in seminars and conferences. In addition, I and my senior colleagues, the deputy managing directors, as well as department directors and other senior staff, have been speaking out increasingly, both here in Washington and overseas, on important issues concerning the world economy and the IMF. Not only are we making more material available, but we are doing so in a more transparent and accessible form.
We have recently conducted a review of our external relations effort with the help of a respected consultant organization and are starting to put its recommendations into effect. We have also launched a new initiative to expand communications with the financial markets.
Certainly I am at times frustrated that I have not been fully able to counter the propensity of too many of our critics to blame the IMF for whatever catastrophe strikes the world. I am often concerned that, despite all our efforts, there is still widespread misunderstanding among the public and in the press of the purposes and operations of the IMF. Obviously, it will take time and a large effort to counter these misunderstandings. Possibly I should accept part of the blame for that, as I have always been reluctant to devote resources to image building. But I am heartened that I can already see signs that progressively the effectiveness of the IMF in dealing with the issues of the past two years is now better recognized.
Camdessus: I am proud to say that the IMF staff is second to none in its dedication and the quality of its work. In recent years, this quality has been fully displayed, particularly in our work with the HIPC countries; in many crisis countries, not the least in Asia; and in the work of the staff in helping Russia and the other countries of Central and Eastern Europe make the difficult transition to a market economy.
Much of our work, however, is conducted in a quieter but no less important way. On a typical day, one is likely to find 30 to 40 IMF staff missions in action in our member countries. Some of these missions will be engaged in providing financial support to countries hit by balance of payments crises. In some countries, they will be providing technical assistance to governments and central banks, and in others they will be working with the authorities on statistical systems and data dissemination standards. The most widespread activity is what we call the Article IV mission, which lies at the core of surveillance and which more and more embraces the monitoring of newly established standards in the framework of the new architecture of the international financial system. We conduct this regular policy dialogue with every member—from Palau, our newest member, to the United States. I should also mention another important element in our surveillance activities and that is the biannual World Economic Outlook exercise, in which the staff provides policy analysis covering the main issues affecting the global economy as well as its projections for the coming period. All this work is time-consuming and difficult and would be impossible without the dedicated efforts of all staff members.
Photo Credits: Kevin Lamarque for Reuters, page 1; Denio Zara, Padraic Hughes, and Pedro Marquez for the IMF, pages 5, and 7; Viktor Korotayev for Reuters, page 10; and Reserve Bank of Fiji, page 16.
I am certain that when the world better understands the need to prevent crises, the importance of this unique surveillance mission will appear to all to be even more essential.
Camdessus: Really, I have had no time so far to make plans! After 13 years in the service of the IMF and its member countries and many equally intense years in the public service of my own country, I have simple ambitions: to live in my country at a slower pace than has been the case so far, with time for reading, thinking, and, perhaps, writing. Certainly, I hope to have more time for my family, for my friends around the world, and for worshipping my God. This is what I refer to when I speak half-jokingly about my constitutional rights to life, liberty, and the pursuit of happiness.