Journal Issue

Closing press conference: IMF, Bank laud renewed spirit of multilateral cooperation

International Monetary Fund. External Relations Dept.
Published Date:
October 2003
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Two points stand out from this year’s Annual Meetings, Villiger said. First, there is optimism that the global economy appears to be recovering, although the recovery remains fragile. To enhance growth and restore confidence, he said, policymakers must continue to pursue structural reforms and reduce fiscal imbalances. He noted that many governors regretted that the trade talks in Cancún did not yield a more positive signal, which could have helped boost confidence and raise global growth.

Second, progress toward achieving the Millennium Development Goals by 2015 needs to be accelerated, Villiger said. Developing countries need to redouble their efforts to promote good policies, while industrial countries need to increase official development assistance to finance growth, development, and poverty reduction. He noted that many governors had stressed the importance of enhancing the voice and participation of developing and transition countries in the decision making of the IMF and the World Bank. Developed and developing countries must continue to work together as partners if they are to continue making progress toward the Millennium Development Goals.

In Wolfensohn’s view, the meetings represented a useful step forward in two respects. First, he said, there was a greater sense of balance in the discussions between the developed and the developing countries and a sense of realism about trade and aid, debt relief, and what each side had agreed to do in Monterrey. Perhaps as important as anything, Wolfensohn said, was the ability to meet in Dubai and project an image of the Middle East as an area of growth and great potential.

Köhler was also encouraged by the meetings, first because the global economy is “on a good track of recovery.” Second, he said, the discussions underlined that there is a spirit of multilateral cooperation. Third, he was encouraged by the U.A.E. approach to policy. It relies on its own abilities and creativity, is responsible and self-confident, and is outward looking. This is needed not only for the Arab world but for the world as a whole, Köhler concluded.

Question: What are the most important results of the 2003 World Bank-IMF meetings?

Wolfensohn: First, the economy, which is central to any issue of development, appears to be stronger. Second, there was an extremely valuable discussion of the link between trade, aid, and debt forgiveness and a recognition that we need to address these questions with urgency and probably on a greater scale than we have up to now. We picked up from Cancún that the voices of the developing and developed worlds need to be more equal.

Köhler: I would like to add that even more important than money is the recognition that we are all sitting in one boat—poor countries, rich countries, emerging market countries. We cannot move forward toward a better world with peace and prosperity if we do not recognize that this is an interdependent world and multilateral cooperation is needed.

Question: Can we speak of any tangible commitment on the part of industrial countries to fight poverty and commit to a real spirit of free trade rather than raise more barriers to agricultural imports?

Wolfensohn: I sensed at these meetings a recognition that we are all in this together and a willingness to engage on issues in a very positive sense. I did not sense any great hostility. That does not mean that people are writing checks immediately, but that the framework of the discussion this time was one in which people were prepared to address difficult issues together. More attention is likely to be given to the long-term impact of poverty. If you give attention to that, then you have to do more if you are a rich country. I sensed a different mood in the room.

Question: What can the World Bank, in particular, say to the Iraqi people that will give them hope that life in 2004 is going to be a lot better than it has been in 2003?

Wolfensohn: We have been very clear on where we stand: we are in for the long haul in terms of reconstruction. In fact, I have a meeting after this with representatives of the Iraqi people to discuss the needs assessment. We will participate in any of the preliminary meetings, including the one in October, and we look forward to having a full team working as quickly as possible with the Iraqi people. We do not yet have the numbers because we need to find out what the people who are going to live in Iraq think about them. So there is no attempt to distort or hide. We are going through a process, and we will have it done early in October.

Köhler: The leaders of the world must now set aside their disputes over Iraq and form a consensus so that the international community can unite, and the World Bank and the IMF and others can go to Iraq and work together with the Iraqi people.

Question: Mr. Wolfensohn, your reluctance to put out World Bank numbers on Iraq is obviously not shared by your largest shareholder. [Ambassador] Paul Bremer [Chief Administrator in Iraq] told Congress that the World Bank needs assessment, not the U.S. needs assessment, was $60-70 billion over 45 years. Is this is accurate or even in the ballpark?

Wolfensohn: Mr. [John] Taylor’s estimates are somewhere in the ballpark. I have the drafts and a summary of the preliminary estimates that have not yet been discussed with our Iraqi friends. So it would be foolish of me to come out with estimates at this stage. I am not sure how [U.S. Treasury Under] Secretary Taylor defined the use of the $60-75 billion. It may be part of the resources needed to run the country, and for basic reconstruction and oil- and securityrelated issues. We will have full disclosure, but it needs to be done when everybody has been consulted. Mr. Taylor is entitled to put out his estimates, but they are not World Bank estimates.

Question: Iraq’s debt is estimated at about $300 billion, which seems an impossible debt for its situation. If there were any decision to forgive Iraq’s debt, who would be responsible for the financial commitments to the World Bank and the IMF—the U.S. administration or the temporary government of Iraq, which has not yet been recognized by all the states of the world?

Köhler: I cannot confirm the $300 billion debt. The number may comprise not only sovereign debt, but possibly also private debt and compensation for previous wars. It is clear that Iraq has a heavy debt and that debt relief must, and should, be part of the comprehensive effort to help in the reconstruction.

Question: What do you have to say about the legitimacy of the drastic economic reforms suggested by the Iraqi ruling council in the absence of democratic accountability?

Wolfensohn: I will be discussing these issues with the Iraqi delegation. We did not come up with the program, and I do not have a lot of knowledge about it. So I cannot comment at this time.

Köhler: As to Iraq’s economic program, I can say only that I have not seen it, and nobody discussed it with me. But we should take it as a step forward, as the first articulated position about what could be the way forward. We have drawn the lesson that ownership [of policies] is important. If this is not in the mind of the people, then it does not work. My advice is to work with the Iraqi people and to draw on lessons from other countries. This should be an inclusive discussion.

Question: Mr. Köhler, the Group of Seven statement on currencies talked about flexibility. In your address yesterday, you used the phrase “more flexibility . . . .where appropriate.” Does that stem from a recognition on your part that, given the way the currency and the equity markets reacted to that news over the weekend, this was exactly the kind of slightly disorderly event the IMF is here to prevent?

Köhler: I do not think we should overinterpret the first reaction of markets. I expect markets to come down again. It was appropriate to say that global imbalances have to unwind in an orderly way. The first answer was clearly given: there has to be stronger domestic growth in regions outside the United States. But there was also an understanding, and I share this view, that exchange rates can also contribute to this orderly adjustment, but certainly the role of exchange rates is nothing that we should push ahead through public trumpeting and organizing pressure. We need to discuss it. We need to look at the fundamentals of economies and recognize that we are all sitting in one boat. So I am quite happy about this outcome of ministers’ discussions.

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