The Group of 20 finance ministers and central bank governors met in Montreal on October 24—25 to discuss the state of the world economy, associated policy challenges, and ways to address potential weaknesses in the international financial system. IMF Managing Director Horst Köhler participated in the meeting. In a statement released on October 25, ministers and governors welcomed “the continuing strengthening of global economic growth,” but said they remained “mindful of the importance of sound national and economic and financial policies in building an international financial system that is less prone to crisis.”
While reaffirming their belief in economic integration and the powerful benefits of globalization, including “an unparalleled opportunity to achieve sustained and broad-based improvements in living standards” the financial leaders agreed that globalization, like any economic transformation, “can also give rise to economic difficulties and social dislocations.” The ministers and governors therefore agreed “that putting in place the right frameworks and policies for promoting a globalization process that works well for all of its participants will be the key challenge for the international community in the twenty-first century.”
Meeting the challenge
Pledging to work together to promote policies to meet this challenge, the finance ministers and governors of the Group of 20 specifically agreed to
commit themselves to further improve the effectiveness of international institutions, which are fundamental to a strong and stable global financial system;
implement the emerging international consensus on policies to reduce countries’ vulnerability to financial crisis, including through appropriate exchange rate arrangements, prudent liability management, private sector involvement in crisis prevention and resolution, and the adoption of codes and standards in key areas;
improve integration into the globalized financial world;
create more favorable conditions for the integration of heavily indebted poor countries (HIPC) into the global economy by urging both bilateral and multilateral creditors to participate fully in the enhanced HIPC Initiative;
strengthen efforts to combat financial abuse, including money laundering, tax evasion, and corruption, given its potential to undermine the credibility and integrity of the international financial system;
contribute to international efforts to increase the provision of other global public goods to address serious issues, such as infectious disease, agricultural research, and the environment, which cut across national borders and require concerted global cooperation;
support continued efforts by the World Trade Organization to build a consensus toward further multilateral trade liberalization and a strengthening of trade rules that would bring broad-based benefits to the global economy by reflecting the needs and interests of both developed and developing countries;
promote the design and effective implementation of social safety nets that protect the most vulnerable groups of society in the process of liberalization; and
ensure that efforts in the areas identified above, and in other areas, take account of a diversity of perspectives.
In an annex to the statement, the Group of 20 finance ministers and governors welcomed the movement by many countries toward exchange rate arrangements that are “more supportive of financial stability.” The IMF, the statement said, “plays a key role in advising and supporting countries in this area” and should “reinforce its assessment of the compatibility of members’ exchange rate regimes with their macroeconomic and financial policies.” The IMF should also “encourage countries to adapt their policies by giving them advice and support, when appropriate, to help avoid unsustainable positions.”
The full text of the statement, as well as related material on the Group of 20, is available on the Group of 20’s website (www.g20.org/indexe.html).
Group of 20
The Group of 20 was created in September 1999 to provide an international forum for industrial countries and emerging market economies to discuss and review policy issues, with a view to promoting international financial stability.
Member countries of the Group of 20 include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States, and the European Union. The IMF Managing Director and the President of the World Bank, as well as the chairs of the International Monetary and Financial Committee and the Development Committee of the IMF and the World Bank, participate fully in the discussions.
Paul Martin, Finance Minister of Canada, chaired the meeting in Montreal.