We met today with the Managing Director of the IMF to review recent developments in the world economy and, with the IMF Managing Director and the President of the World Bank, discussed reform of the international financial institutions. We also discussed implementation issues of the enhanced HIPC [Heavily Indebted Poor Countries] Initiative and abuse of the global financial system.
Group of Seven economies
Prospects for continued expansion in industrial countries and the world economy more generally have further improved in recent months as underlying fundamentals have strengthened. A more balanced and therefore more sustainable pattern of growth among our economies is emerging. Continued vigilance, however, remains important, and we reaffirmed our commitment to macroeconomic and structural policies directed at improving conditions for strong and sustainable growth in each of our economies.
We are concerned about the adverse effects on the world economy of the recent sharp increase in the world oil price. It is important that world oil prices return to a level consistent with lasting global economic prosperity and stability for both oil producing and oil consuming countries and, in particular, for the poor developing countries. In light of continuing high prices and low levels of stocks, it is crucial for the world economy that OPEC [Organization of Petroleum Exporting Countries] and other oil producing countries take actions to contribute to a reduction in oil prices and greater stability in oil markets. Improved efficiency in the use of energy in all economies would contribute to that objective. We welcome the U.S. action to release a limited quantity of its oil reserves in the form of swap transactions. We agreed to remain in close contact and to continue our discussions with oil producing and oil consuming countries as we evaluate measures appropriate to the evolving situation in oil and product markets.
We discussed developments in our exchange and financial markets. We have a shared interest in a strong and stable international monetary system. At the initiative of the European Central Bank, the monetary authorities of the United States, Japan, the United Kingdom, and Canada joined with the European Central Bank on September 22, in concerted intervention in exchange markets, because of the shared concern of finance ministers and governors about the potential implications of recent movements of the euro for the world economy. In light of recent developments, we will continue to monitor developments closely and to cooperate in exchange markets as appropriate.
Emerging market economies
Recovery in emerging market economies is well under way. Macroeconomic fundamentals have generally strengthened, and market sentiment remains positive. Policies in these countries must be directed at deepening economic reforms, in particular by improving underlying fiscal positions and debt structures and by strengthening the financial sector. Countries should, however, maintain the momentum for reform and address real and potential underlying vulnerabilities. We stress, in particular, the need for further progress in corporate and financial restructuring in many Asian countries and the need for policies aimed at reducing vulnerabilities in many Latin American countries.
We are encouraged by the continuing robust growth of the Russian economy this year, combined with a strong revenue and export performance, a comfortable balance of payments situation, and substantial accumulation of foreign reserves. We welcome the economic program of the government of the Russian Federation aiming at creating a legislative framework to improve the investment climate, structural reform, and financial stability. The recently approved tax reform is an encouraging sign of progress in implementing this program and in achieving sustainable growth. We call upon Russia to firmly implement other key structural reforms, such as securing property rights, enforcing the rule of law, combating money laundering, improving corporate governance, strengthening accountability and transparency in its central bank, and creating an efficient financial sector to unlock Russia’s economic potential. We call upon the international financial institutions and Russia to work together to achieve this common goal.
International financial institutions
The international financial institutions are key players in ensuring that globalization is a force for good and that the poorest nations can participate in, and benefit from, the international financial system. We welcome the recent joint statement from the Managing Director of the IMF and the President of the World Bank Group, in particular their commitment to make these institutions work effectively together to increase the effectiveness and sustained impact of their operations to reduce poverty, increase growth, and strengthen the stability of the international financial system. We will continue to work together with other members of the international community to further strengthen the global financial system.
We welcome the Managing Director’s commitment to reform of the IMF and look forward to working with him to ensure the IMF is well equipped to face future challenges. We note the progress achieved in strengthening the surveillance role of the IMF to help prevent crises and promote domestic and international financial stability and call on the IMF to speed up its work in this area. This includes strengthening the IMF’s central role in the surveillance of codes and standards and promoting their implementation, greater transparency of the IMF’s activities and members’ policies, increasing the emphasis on national balance sheet and liability management, enhancing its ability to identify sources of vulnerability, and paying close attention to the appropriateness of a country’s exchange rate regime. We welcome the recommendations by the Financial Stability Forum on promoting market and official incentives for the implementation of standards and codes.
We reaffirm the importance of building stronger and more resilient national financial systems in emerging market economies that can withstand the challenges that come with progressive financial liberalization. We call on the IMF to continue its work in this area.
We welcome the agreement achieved in the IMF to adapt its lending instruments to reflect better the realities of global capital markets—encouraging countries to take preventive measures to reduce vulnerabilities and providing temporary and appropriately conditioned support for balance of payments adjustment and, in defined circumstances, medium-term finance in support of structural reform, while avoiding unduly long, or repeated use of, and deterring large-scale access to IMF resources. We look forward to the upcoming review of conditionality associated with IMF lending to ensure that it is focused and addresses issues essential to the success of the program.
We welcome progress in developing a framework for private sector involvement in preventing and resolving crises. Private external creditors, including bond holders, have been more involved in the financing of recent IMF-led programs. We look forward to further progress at the IMF in making operational this approach in the design of IMF programs so as to provide greater clarity to countries and market participants. An efficient coordination with the Paris Club is also of utmost importance in this regard. We welcome the establishment by the IMF of a Capital Markets Consultative Group, which can play an important role in exchanging information with capital markets.
We look forward to ongoing improvements in the accountability and modernization of the structure and operation of the IMF itself. We welcome the agreement in the IMF Board on the terms of reference for the Independent Evaluation Office. We urge implementation of the IMF’s recently strengthened framework for safeguarding resources. In addition, we call on the IMF to enhance its cooperation with other international institutions, including the World Trade Organization and the International Labor Organization. It is essential that the IMF’s decision-making structure and its operation remain accountable. In view of the importance of having an allocation of IMF quotas that reflects developments in the world economy, we take note of the effort now under way in the IMF to examine the formula for calculating country quotas.
Multilateral development bank reform
We reaffirm our commitment to multilateral development bank reform aimed at helping countries reduce poverty and welcome the substantial progress that has been made in translating these shared priorities into core policies and operational practices. The challenges are to build on this progress to translate the principles of good governance, selectivity, and accountability, and the importance of ownership and participation into concrete action aimed at a substantive development impact.