Book
Share
IMF History (1972-1978) Volume 3
Chapter

Selected Communiqués of the Group of Twenty-Four

Author(s):
International Monetary Fund
Published Date:
February 1996
Share
  • ShareShare
Show Summary Details

Reproduced below are nine of the communiqués issued by the Intergovernmental Group of Twenty-Four on International Monetary Affairs (Group of Twenty-Four) from April 1972 through September 1978 that contain passages of particular relevance to the history of the Fund for those years.

April 6-7, 1972

The inaugural Ministerial Meeting of the Group of Twenty-Four was convened in Caracas on April 6-7, 1972, on the invitation of the Government of Venezuela. The Minister of Finance of Venezuela, Pedro R. Tinoco, hijo, was unanimously elected Chairman of the Meeting, and the Minister of Finance of Ceylon, N. M. Perera, and the Governor of the Central Bank of Algeria, M. S. Mostefai, were also unanimously elected Vice-Chairmen. The purpose of the Meeting was to establish the position of the developing countries on the several fundamental issues concerning the reform of the international monetary system within the terms of reference specified in the declaration and working program of Lima. Mr. Pierre-Paul Schweitzer, Managing Director of the imf, and Mr. Manuel Pérez Guerrero, Secretary-General of Unctad, also attended the Meeting.

The Ministerial Meeting was preceded by a meeting of the Deputies of the Intergovernmental Group in Caracas on April 3-5, under the chairmanship of Carlos Rafael Silva of Venezuela, with Lai Jayawardena of Ceylon as Vice-Chairman and S. B. Falegan of Nigeria as Rapporteur. Mr. Silva reported to the Ministers on the work of the Deputies. The Intergovernmental Group of Twenty-Four was constituted as a result of a mandate given in Lima by the Group of Seventy-Seven to their Chairman, to consult Member Governments on the establishment of an intergovernmental group on monetary issues. On the basis of these consultations the Group of Twenty-Four was accordingly constituted and held its preliminary meeting at the level of Deputies in Geneva in February 1972.

The Ministerial Group reviewed various substantive and procedural issues facing the international monetary system at the present time. It expressed its dissatisfaction that important decisions affecting the international monetary system have been taken by a small number of developed countries to the exclusion and neglect of the interests of the rest of the international community, and have adversely affected the economies of developing countries.

The Group, therefore, considered that the most important task facing it at this moment is to provide for fundamental improvements in the decision-making process regarding international monetary issues. The Group agreed that the institution for decision making on international monetary matters should be the International Monetary Fund. The members of the Intergovernmental Group unanimously decided to support the creation of a Committee of the Board of Governors of the imf to advise the Board on issues related to the reform of the international monetary system. The Committee should be composed of 20 Governors, each selected from a constituency that appoints or elects an Executive Director, in a manner to be determined by each constituency. The representation of developing countries in this committee should not be less than that in the present Board of Executive Directors. Such a Committee would represent a satisfactory compromise between the participation of the entire membership of the Fund in decision making, and the need to limit numbers to levels that would promote effective consultation and negotiation. The Group of Twenty-Four at Ministerial level will establish contact with the Governors representing developing countries in this Committee, once set up, to consider arrangements for adequate coordination with the Group of Twenty-Four.

The Ministerial Meeting also examined the issues connected with the next activation of SDRs from the standpoint of the Articles of Agreement of the imf according to which the activation of SDRs would depend on the long-term global needs for liquidity. The Group concluded that the international monetary experience of recent years is not sufficiently representative to constitute a reliable basis for predicting the future course of evolution of international liquidity. Furthermore, it considered that recent developments in the pattern of holdings of international liquidity while tending to increase difficulties surrounding technical judgment in this area, should nevertheless be taken account of in determining the magnitude of liquidity creation. In the light of these considerations the Ministerial Meeting strongly supported the idea of a new activation of SDRs as from January 1, 1973.

The Group recognized that the magnitude of SDR creation should at all times be determined by the liquidity needs of the world economy. At the same time they were convinced that the SDR mechanism should be used to channel additional development finance to developing countries. Since the SDR system has enabled the developed countries to acquire additional international liquidity without the expenditure of real resources, there is a strong case for transferring some portion of these savings to developing countries. The Group accordingly gave its fullest endorsement to the establishment of a link between SDRs and additional development finance. The Group urged that this principle be accepted by the international community at the forthcoming Unctad and be followed up by appropriate action by the International Monetary Fund and its members.

The Group expressed its dissatisfaction with the present system of determining Fund Quotas as this does not reflect the relative economic positions of Fund Members. It further recognized the necessity for modifying the present basis for the distribution of SDRs as between developed and developing countries.

The Group agreed to meet again before the annual meeting of the imf and ibrd, on the invitation of its chairman after previous consultations with member countries.

June 9-10, 1974

The Ministers of the Intergovernmental Group of Twenty-Four on International Monetary Affairs held their seventh meeting at the headquarters of the International Monetary Fund in Washington, D.C., on June 9 and 10, 1974, under the chairmanship of Mr. Smail Mahroug, Minister of Finance of Algeria, with Mr. N. M. Perera, Finance Minister of Sri Lanka, and Mr. Manuel Moreyra, representing the Finance Minister of Peru, as Vice-Chairmen. The meeting of the Ministers was attended by Mr. H. J. Witteveen, Managing Director of the International Monetary Fund, Mr. Ali Wardhana, Chairman of the Committee of Twenty, and Mr. Gamani Corea, Secretary-General of the United Nations Conference on Trade and Development.

The meeting of the Ministers was preceded by a meeting of their Deputies chaired by Mr. Rachid Bouraoui of Algeria, with Mr. Lai Jayawardena, Sri Lanka, as Vice-Chairman and Mr. Allan Wagner, Peru, as Rapporteur.

The Chairman of the Deputies presented to the Ministers a report on their discussions of the Draft Outline of Reform and submitted proposals for consideration by the Ministers.

The Ministers take note that Part I of the Outline represents a broad conception. Consequently, while they do not consider that it represents an adequately balanced approach which takes account of the interests of the developing countries, they refrain from elaborating upon these reservations at this time. They reaffirm their understanding that no decision will be taken to implement any element of Part I without the explicit endorsement of the entire membership of the Fund and expect that the concerns of all countries will be accorded due consideration in giving final shape to the international monetary reform.

On the basis of their discussions, the Ministers affirm their position that the immediate reform package should reflect in a balanced manner items of reform which are of interest to both the developed and the developing countries. Such a package of immediate steps should include the following:

1. The Link and International Liquidity

The Ministers observe that the question of establishing a link between development finance and SDR allocation in the context of reform has been thoroughly examined and the technical feasibility fully established. The principle of the link has been accepted by a large majority of the membership of the Committee of Twenty. The Ministers wish to emphasize that the political acceptance of the link is overdue and a final decision to establish it should be taken without further delay and its provisions included in the draft composite resolution to be considered by the Committee of Twenty.

The Ministers are emphatic in their view that any solution to the problem of gold should not jeopardize the effective implementation of the link; that it should serve to promote the objectives of the reform, with the SDR becoming the principal reserve asset and with the role of gold and reserve currencies being gradually reduced; that it should not accentuate the already inequitable distribution of world liquidity; and that it should be internationally agreed in the Fund.

2. Extended Fund Facility

The Ministers urge that the Fund take urgent steps to establish the extended Fund facility before the end of July 1974. They stress that this facility should in no way be considered as a substitute for the link.

3. Quotas and Voting Power

Present quotas and voting power in the Fund do not reflect adequately the needs or the importance of the developing countries in the world economy in terms of population, capacity for development, and supply of raw materials. Nor do the quotas adequately reflect either the ability of developing countries to contribute, or their need for access, to balance of payments finance. In line with principles of efficiency, equity, and democracy, all developing countries should have a substantially higher share of both quotas and voting power in the Fund than those that they presently command.

4. Joint imf-ibrd Ministerial Committee and Interim imf Committee

The Ministers support the establishment of a joint ministerial committee of the Fund and World Bank and are agreed on the main features that such a Committee should take. They consider that this Joint Committee on the Transfer of Real Resources should come into existence as soon as possible and in any case not later than the occasion of the next Joint Annual Meeting of the Boards of Governors, and should be charged with the preparation in its first year of operation of concrete proposals for action.

The Ministers support the establishment of an Interim Committee of the Board of Governors of the imf. They attach importance to adequate representation of developing countries in it, which would be ensured by according each multicountry constituency one member, seven associates and the Executive Director. The terms of reference of the Committee should explicitly provide that within its purview it should review and supervise the adequacy of the net transfer of real resources to the developing countries as a separate item.

* * * * *

The Ministers of the Intergovernmental Group of Twenty-Four on International Monetary Affairs consider that the above points represent the minimum necessary for the improvement of the position of developing countries in the interim monetary arrangements. The Ministers are convinced that the solutions that they have proposed are indispensable to make the system more responsive to the interests of the developing countries, and will accelerate the reform and introduce stability into the new system. For these reasons, the Ministers would be unable to endorse an outcome which would not respect the attainment of the above solutions. Hence, they are resolute in their view that these solutions, none of which are substitutes for each other, provide the bare essentials for an acceptable package of measures for immediate implementation.

The Ministers also attach particular importance to the following points:

(a) Guidelines for Floating

The Ministers welcome and support the understanding that all guidelines will be applicable only to currencies that float independently and not to currencies that are pegged either to another currency or to a composite of currencies even when, as in some cases, the rate is changed at frequent intervals on the basis of formulae.

(b) The Rate of Interest of the SDR and of Charges on Fund drawings

If necessary, an amendment to the Articles of Agreement should be adopted to ensure that any rise in the rate of charges on Fund drawings and in the rate of interest of the SDR place no additional burden on developing countries.

(c) The Transfer of Real Resources

The developed countries should, as a matter of urgency, take concrete steps to increase the net flow of real resources to developing countries, particularly to those in greatest need.

(d) Controls

The developing countries should be exempt from controls on trade or capital movements imposed by developed countries.

(e) Rules Governing the Use of the SDR

The rules governing the use of SDRs should be revised as envisaged in the Outline, including items such as reconstitution and the requirement of need.

The Ministers decided to hold their next meeting in Washington on the occasion of the 1974 Joint Annual Meetings of the Boards of Governors of the ibrd and the imf.

June 8-9, 1975

1. The Ministers of the Group of Twenty-Four held their tenth meeting at the Centre de Conférences Internationales, Paris, on June 8 and 9, 1975. Mr. N. M. Perera, Minister of Finance of Sri Lanka, was in the chair, with Mr. Sanchez Gongora representing the Minister of Economy and Finances of Peru, and Mr. Donkoh Fordwor, Special Assistant responsible for Finance of Ghana, as Vice-Chairmen. The meeting was attended by Mr. H. J. Witteveen, Managing Director of the International Monetary Fund, Mr. Gamani Corea, Secretary-General of the United Nations Conference on Trade and Development, Mr. E. Stern, World Bank, and Mr. Konan Bédié, Chairman of the Joint Ministerial Committee of the Boards of Governors of the World Bank and International Monetary Fund on the transfer of real resources to developing countries.

2. The meeting was preceded by the nineteenth meeting of the Deputies with Mr. Lai Jayawardena, Sri Lanka, in the chair, Mr. Sanchez Gongora, Peru, as Vice-Chairman, and Mr. Danso Misa, Ghana, as Rapporteur.

3. Ministers expressed grave concern at the adverse impact of inflation and the continuing recession in several developed countries on both the real value and volume of exports of developing countries and the sharp deterioration of their terms of trade. The result of these developments has been a worsening of the overall balance of payments problem for the developing countries. Ministers took note that the exceptionally large need for additional capital inflows was the result of continuing malfunction in the international economy as a whole, which imposed an inequitable burden on the developing countries.

4. During the period since Ministers met in January 1975, developments in the world economy have been seriously adverse to the developing countries. Recessionary trends in most developed countries have proved more severe than had been expected. Although in some developed countries rates of price increase have been reduced modestly, inflation continues at a very high rate. The short-term trade and balance of payments outlook for developing countries has deteriorated significantly.

5. In view of the considerations urged in the preceding paragraphs, Ministers stressed that additional external resources were required by low-income developing countries and by all other developing countries, and urged that appropriate solutions were needed to tackle the problem in its entirety. In this context, they emphasized the need for international cooperation in all fields—monetary, trade, and financial—and for new techniques, to bridge the prospective payments gap of all developing countries and to prevent lasting disruption of their development prospects.

6. On gold, Ministers recommended that the amended Articles of the Fund should oblige each member of the International Monetary Fund to undertake to collaborate with the Fund and with other members regarding the policy of the member with respect to gold, and that any action by any member or arrangements among members with respect to gold should be consistent with the Articles of Agreement and with policies designed to ensure the gradual reduction of the role of gold in the international monetary system and the strengthening of the role of the SDR. Ministers examined the various proposals which have been under discussion in the imf for the disposal of the gold held by the Fund. They found that none of these proposals in their present form was acceptable to the developing nations. They indicated, however, that no arrangements with regard to gold would be acceptable that are not designed to raise substantially the flow of financial resources to developing countries, without imposing a loss on any individual developing country. The Ministers reaffirmed that no decision on gold should accentuate the already inequitable distribution of international liquidity.

7. Ministers saw a need to finalize the sixth general review of quotas in line with the agreement reached by the Interim Committee at its January meeting which provided for doubling the aggregate share of the major oil exporting countries in imf quotas and maintaining the aggregate share of the other developing countries which is presently 22.73 per cent. Ministers urged that, in the interests of international cooperation, agreement should be reached swiftly on the quotas of individual developed countries. Ministers expressed support for amendment of the Fund’s Articles designed to provide flexibility in the means of payment for quotas. Ministers stressed that in future quota reviews the share of developing countries should gradually increase, and that countries not satisfied with the quota increase should have opportunity to make representations before quotas are approved. Ministers agreed that quota increases for any country or group of countries should in no way be made conditional on the usability of currencies. They further agreed that decisions to increase the number of elected directors, and consequently of members of the Interim Committee, Development Committee, and possible Council, should be subject to a majority of not more than 70 per cent of the total voting power. Ministers agreed that the present representation of developing countries in the decision-making bodies of the Bank and Fund should be substantially improved and the broad geographical representation of developing countries should not be adversely affected.

8. On exchange rates, Ministers reaffirmed the stand that they had taken at the previous meeting against the legalization of floating other than in particular circumstances subject to conditions which should take account of the characteristics of countries and in a manner designed to prevent undue instability in the value of major trading currencies. Ministers expressed support for amendments envisaging a return at the appropriate time to a system of par values, containing provisions for the establishment of central rates and empowering the Fund to authorize individual countries to continue to float thereafter in particular circumstances.

9. On the proposal to establish a Council, Ministers agreed that such a decision could not be taken now, but only after further experience had been gained with the Interim Committee, and by an 85 per cent majority of the total voting power.

10. Ministers agreed that the oil facility had made a useful contribution to the adjustment process, for both developed and developing countries. Ministers welcomed the fact that resources are being committed for the oil facility, allowing it to operate in 1975. Ministers stressed that the tightening of criteria governing access to the facility was inappropriate and that the conditionality governing use should be relaxed when the facility comes under review in July. Ministers noted that the principal contributors to the facility were [oil exporting] developing countries which shared in the unanimous position of the developing countries on the issue of conditionality. In particular, Ministers stressed that in view of the inability of developing countries to reduce their dependence on imported sources of energy, the related conservation measures governing access to the oil facility should not be imposed. They also stressed the need for developing countries contributing to the oil facility to have an increased role in framing the policies governing access to the oil facility. Ministers expressed disappointment at the lack of positive response thus far on the part of several major developed countries to the proposed subsidy account, and urged that all countries in a position to contribute should do so early. Ministers agreed that, in view of the massive deficit in prospect for the developing countries, it was necessary for the oil facility, possibly broadened in its objectives, to continue for a longer period than had originally been envisaged. Ministers also agreed that the financing needs of developing countries would require enlargement of imf quota tranches, in addition to, and not as a substitute for, the oil facility.

11. Ministers saw need for improvement in imf facilities. They urged the liberalization of the compensatory financing facility, so as to expand its coverage of current account transactions to include services; to ensure that, wherever possible, compensation of export shortfalls takes place at the same time that it occurs, and takes into account movements in import prices; and to lengthen the repayment period. Ministers urged that drawings under the buffer stock financing facility should be accorded treatment with respect to floating alongside the gold tranche similar to that governing those under the compensatory financing facility, and that the imf should be empowered to lend directly to buffer stock agencies organized either by producer-consumer groups or by producer groups alone under suitable guarantees by interested members of the imf.

12. Ministers reaffirmed their support for the early establishment of a link between allocation of SDRs and development finance.

13. Ministers, having reviewed the results of the work of the Development Committee to date, expressed the hope that the Committee would come forward quickly with concrete recommendations to deal with the problems confronting all developing countries in addition to the items presently on its agenda.

14. In order to make progress toward the substantial additional capital required by the developing countries to achieve the agreed rate of growth for the Second Development Decade, Ministers emphasized that developed countries should take steps to increase the net flow of Official Development Assistance (oda), to reverse the current downward trend and make progress toward meeting the agreed oda target of 0.7 per cent of gnp. In this context Ministers noted that opec as a group had contributed 2.2 per cent of gnp to oda, whereas the figure for dac member countries was 0.33 per cent.

15. Ministers emphasized the need to enlarge the lending of the World Bank and the regional banks, and endorsed the expanded five-year lending program proposed by the management of the World Bank. They stressed the urgent need to expand the capital base of the World Bank and the regional institutions as soon as possible.

16. Ministers expressed their support for the immediate establishment of the Third Window in the Bank which could provide $1 billion of additional lending. They urged universal contributions on the part of all countries with a capacity to contribute to be made on the basis of certain criteria to be applied to all donors and as soon as possible so that the facility could become operational by July 1, 1975.

17. Ministers also stressed the need for the establishment of a Trust Fund, financed from a number of sources, and subscribed to universally by all countries with a capacity to contribute, to provide urgently needed additional balance of payments support in the next several years on concessional terms.

18. Ministers agreed that eligibility for both the Trust Fund and the Third Window should take into account the needs of low-income developing countries and other developing countries, within the resources which may become available. They stressed that these facilities should be supplements to presently existing facilities.

19. Ministers emphasized that priority should be accorded to ida, which assists the poorest countries, and recommended that the next ida replenishment should offset the effects of inflation and provide for a substantial increase in real terms.

20. Ministers were of the view that the deterioration in the terms of trade of developing countries due, among other factors, mainly to the declines in commodity prices, emphasized the need for measures to safeguard in real terms the export earnings of developing countries. In this context, they expressed support for an expansion of and improvement in the imf buffer stock financing facility and welcomed the initiatives taken by the World Bank for financing buffer stocks. They also strongly endorsed the objectives set forth by developing countries concerning buffer stocks, and the Unctad integrated commodity approach. Ministers also welcomed the initiatives that had been taken by certain developing countries to provide finance for buffer stocks. Ministers were of the view that negotiations in, and action by, any international body on commodities should not be delayed or hindered by the fact that proposals on commodities were under consideration in other fora. The Ministers recommended to the Development Committee that it encourage member countries and the appropriate international institutions to consider other measures, including those needed to expand the exports of manufactured goods from developing countries.

21. Ministers also recommended to the Development Committee that it should consider other proposals before it to meet the capital requirements of all the developing countries. They therefore suggested that a special working group be established to develop proposals in detail on improved access to capital markets. In particular, the working group should consider the feasibility of a multilateral guarantee fund. The working group should report to the next meeting of the Development Committee.

August 30, 1975

1. The Ministers of the Group of Twenty-Four held their eleventh meeting at the Sheraton-Park Hotel, Washington, D.C., on August 30, 1975. Mr. H. E. Tennekoon, Governor of the Central Bank of Sri Lanka, was in the chair, with General Amilcar Vargas Gavilano, Minister of Economy and Finances of Peru, and Mr. K. Gyasi-Twum, representing the Commissioner for Finance of Ghana, as Vice-Chairmen. The meeting was attended by Mr. H. J. Witteveen, Managing Director of the International Monetary Fund, Mr. Gamani Corea, Secretary-General of the United Nations Conference on Trade and Development, Mr. E. Stern, Director, Development Policy, World Bank, and Mr. Konan Bédié, Chairman of the Joint Development Committee.

2. Ministers discussed the international economic situation and current problems. They expressed concern at the slow and uncertain nature of the recovery in the industrial countries, continued inflation, and the worsening terms of trade of the developing countries. They expressed particular concern that the developing countries were faced with increasing payments deficits and, on present indications, gloomy prospects for the future; by contrast, the developed countries had largely overcome their payments problems. Ministers agreed that the causes of the difficulties being faced by developing countries lay in world economic conditions, and in trade restrictions, including discriminatory restrictions, on products of export interest to developing countries, imposed by developed countries. Ministers pointed out that the developing countries were bearing the brunt of maladjustments in developed countries through reduction in the demand for their exports.

3. Ministers felt that a vicious circle had set in, whereby the fall in export income of the developing countries and the general balance of payments difficulties faced by them were restricting their demand for imports from developed countries, thereby aggravating the recession in those countries. They were therefore of the view that the time was particularly appropriate for the industrial countries, in their own interest, to expand the flow of real resources to developing countries and thereby also fulfill their international commitments regarding official development assistance. Such an approach would provide added support to ensure the needed recovery of the world economy, through the expansion of the export sector of the industrial countries.

4. Ministers agreed that developing countries would need substantial balance of payments assistance in the coming months. In this connection, they pointed to the heavy responsibilities that would fall upon the imf. They stressed the need to fashion the policies and procedures of the Fund to meet the exigencies of the situation. In particular, the Ministers felt strongly that conditions traditionally attached to drawings from the Fund were no longer appropriate because they placed the burden of adjustment on the developing countries and did not facilitate the correction of the maladjustments which are to be found in the developed countries. They urged the imf to review its policies and procedures with a view to ensuring their suitability to meet the exceptional and new needs of developing countries. In this connection, they called for increasing the amounts available under the tranche policy.

5. Ministers agreed that the oil facility had proved to be very useful. They were also of the opinion that in view of the uncertainty of other forms of financing available to developing countries, there would be a continuing need for this or a similar facility for the next year, but with less conditionality, in addition to, and not as a substitute for, a widening of the tranches. They felt that access to the 1975 oil facility should be allowed to the full extent of maximum eligibility, and urged all countries in a position to contribute to its financing to do so. Ministers urged that developed countries that had recourse to other sources of finance should voluntarily refrain from using the oil facility. Ministers urged that developing countries, many of whom were contributors to the facility, should have a greater say in determining the conditions of drawings.

6. Ministers welcomed the establishment of the oil facility subsidy account. However, they noted with disappointment that less than half the required amount of contributions had been pledged and that some contributions were subject to conditions. Ministers urged that all countries with the capacity to contribute should do so, and without conditions.

7. Ministers, while welcoming the agreement reached by the Executive Directors of the imf to allow drawings under the buffer stock financing facility to “float” alongside the gold tranche, urged that the Fund should be empowered to lend directly to buffer stock agencies. They also reiterated their support for a substantial improvement in the compensatory financing facility.

8. Ministers reaffirmed their support for establishing a Trust Fund, and agreed that the Executive Directors should work out the details of a Trust Fund in order to permit its establishment as expeditiously as possible.

9. Ministers noted with regret that the Sixth General Review of Quotas is being held up by the absence of agreement among industrial countries and expressed the hope that agreement would be reached on the occasion of the forthcoming Joint Annual Meetings of the World Bank and the Fund to double the aggregate share of the major oil exporting countries, while maintaining the aggregate share of the other developing countries, which is presently 22.73 per cent.

10. Ministers stressed that in future quota reviews the share of developing countries should progressively increase, and that countries not satisfied with the quota increase should have an opportunity to make representations before quotas are approved. Ministers reaffirmed that the present representation of developing countries in the decision-making bodies of the Bank and Fund should be substantially improved and the broad geographical representation of developing countries should not be adversely affected.

11. On gold, Ministers reaffirmed that the amended Articles of the Fund should oblige each member of the International Monetary Fund to undertake to collaborate with the Fund and with other members regarding the policy of the member with respect to gold, and that any action by any member or arrangements among members with respect to gold should be consistent with the Articles of Agreement and with policies designed to ensure the gradual reduction of the role of gold in the international monetary system and the strengthening of the role of the SDR.

12. Ministers also affirmed that no arrangements with regard to gold would be acceptable to the developing countries unless they met the above principles and also unless,

  • (a) they were designed to raise substantially the flow of financial resources to the developing countries, without imposing a loss on any individual developing country;

  • (b) they did not accentuate the already inequitable distribution of international liquidity.

In this context, Ministers agreed that there was a need to expedite the study of a gold substitution account.

13. Ministers considered the various proposals currently under discussion regarding the disposal of the gold held by the Fund, and found that none of them in their present formulation was entirely acceptable to the developing countries.

14. Ministers reaffirmed their support for the early establishment of a link between allocations of SDRs and development finance.

15. Ministers reviewed the work of the Development Committee and they stressed the need to pay attention to the longer-term problems of the transfer of real resources in addition to dealing with immediate issues.

16. Ministers welcomed the establishment of the Third Window [in the Bank]. They expressed disappointment that total contributions thus far were not enough to permit a total lending program of $1 billion, which was, in the view of the Ministers, a modest sum in the light of the capital requirements of developing countries. Ministers urged all countries with a capacity to contribute to do so and ensure that their contributions to the Third Window and that Third Window lending were additional to the normal levels of development assistance.

17. Ministers noted with satisfaction that the Development Committee is working on the question of access to capital markets, and expressed the hope that this work will result in concrete action to widen and strengthen the access of developing countries to capital markets.

18. Ministers emphasized the importance of giving due consideration to the long-term problems of all developing countries, and in this connection they stressed the need for the Bank to update its estimates of and for the Development Committee to review the capital requirements of developing countries, and for the international financial institutions to gear their lending programs in the light of such estimates. Ministers attached high priority to a selective followed by a general expansion of the capital base of the Bank, in order to allow the Bank to expand its lending program and thereby cater to the needs of all developing countries. With regard to fiscal year 1976 Ministers stressed that the $4.7 billion agreed by the Board should not be taken as a limit, but rather as a minimum figure for lending by the Bank. Ministers also stressed the importance of the continuation of the transfer of the net income of the Bank to ida in the next year.

January 6, 1976

1. The Ministers of the Group of Twenty-Four on international monetary affairs held their twelfth meeting in Kingston, Jamaica, on January 6,1976. Mr. Carlos Santistevan, President of the Central Bank of Peru, was in the chair, with Mr. Kwame Fordwor, Special Assistant responsible for finance of Ghana and Mr. Osman Ali, Governor of the Reserve Bank of Pakistan, as Vice-Chairmen. The meeting was attended by Mr. G. D. Arsenis, Unctad, Mr. Konan Bédié, Chairman of the Joint Ministerial Committee of the Board of Governors of the World Bank and the International Monetary Fund on the Transfer of Real Resources, Mr. M. A. Hassanein, opec, Mr. E. Stern, World Bank, and Mr. H. J. Witteveen, Managing Director of the International Monetary Fund.

2. The meeting was preceded by the twentieth meeting of the Deputies of the Group of Twenty-Four with Mr. M. Moreyra, Peru, in the chair, and Mr. W. Danso-Misa, Ghana, as Vice-Chairman.

3. Ministers noted with grave concern the continuing deterioration in the international environment for the development of their economies as reflected in highly discouraging trends of aid flows and trade of developing countries. Performance of developed countries in fulfilling obligations under internationally agreed targets has fallen far short of both their capacity to provide assistance and the objective needs of developing countries. They pointed out that the Development Committee, which was charged with the function of finding effective solutions to these problems, has not made progress for want of adequate cooperation and exercise of political will on the part of major developed countries. Ministers also expressed their strong disappointment that the interests and concerns of developing countries have received so little attention in the negotiations on international monetary reform, and that decisions affecting all countries continued to be taken in restricted groups of countries. They emphasized that unless there was a fundamental change in the attitude of developed countries, the dialogue on international economic cooperation now under way in many fora is unlikely to produce any constructive results.

4. Ministers agreed that the various issues before the Interim and Development Committees were closely interrelated. They stressed that a successful conclusion of the forthcoming meetings of the Committees would, as a minimum, depend on a set of measures of particular importance to developing countries being adopted by those Committees, and agreed, to that end, to be in close consultation with each other in the coming days.

5. Ministers noted that, as had been amply shown by studies undertaken by the imf and ibrd, the current account position of non-oil exporting developing countries had deteriorated by approximately $7.5 billion from 1974 to 1975 to reach a deficit of $35 billion. By contrast, that of developed countries had improved by $27 billion over that period to register a surplus of $16 billion in 1975. Ministers pointed out that the inelasticity of demand for imports of developing countries has helped the developed countries by serving as a buffer to deeper recession, and that expansion of the import capacity of developing countries would alleviate significantly the problems of both developed and developing countries.

6. Ministers, recalling the strong reservations registered at the last meeting of the Interim Committee in connection with the proposed arrangements on gold, expressed strong dissatisfaction with the fact that those proposed arrangements would grossly distort the distribution of international liquidity at the expense of developing countries, and undermine the position of the SDR. They strongly emphasized that the developing countries would not accept or condone any infringement of the Fund’s Articles of Agreement regarding purchases by national monetary authorities of gold above the present official price. Ministers were of the view that ways existed for activating the Trust Fund prior to amendment of the Articles without violating the present Articles.

7. Ministers urged that, in the future, in the course of disposing of the portion of its gold holdings remaining after the disposal of the first 50 million ounces, the Fund should arrange for the bulk of the benefit to go to the developing countries, with the Fund empowered to distribute to developing countries directly a portion of the profits on the basis of quotas, either in currency or in specie.

8. There was strong support among Ministers in favor of an enabling clause for a gold substitution account in the amended Articles of Agreement.

9. Ministers agreed that the reconstitution requirements for special drawing rights should be abrogated both entirely and immediately.

10. Ministers agreed that each member of the imf should undertake to collaborate with the Fund and with other members in order to ensure that the policies of the member with respect to reserve assets is consistent with the objective of making the special drawing right the principal reserve asset in the international monetary system.

11. Ministers agreed that in interpreting the obligations and applying the principles under the amended Articles dealing with exchange arrangements, the imf should pay due regard to the special circumstances of the developing countries and to the importance of currencies for the international financial system.

12. Ministers were opposed to calling upon the Fund, explicitly, to discourage the maintenance of unrealistic par values. They were prepared to see the Fund encourage realistic par values, but the Fund should do so particularly with respect to the par values of major currencies.

13. Ministers expressed strong support for a substantial enlargement, on a permanent basis, of the access of developing countries to Fund credit. They advocated the immediate addition of two credit tranches with the same conditionality as the first credit tranche.

14. Ministers agreed that the conditionality attached to the use of Fund resources in the higher credit tranches was currently excessive and required reduction.

15. Ministers reaffirmed their request for early action to establish a Trust Fund to provide substantial and additional balance of payments assistance to low-income developing countries.

16. Ministers noted that the liberalization of the compensatory financing facility agreed to by the Executive Board fell far short of the expectations of the developing countries, and suggested that there should be an early review of the facility to

  • (a) provide for shortfalls to be calculated in real terms;

  • (b) expand the facility and extend the repayment period.

17. Ministers noted that although it had been decided at the final meeting of the Committee of Twenty that the link should be considered as part of the interim package, it was not included in the package before the Interim Committee. Ministers reaffirmed their strong support for an enabling clause to permit the link to be established.

18. Ministers expressed grave concern at the maintenance and intensification of restrictions on access to markets for primary commodities which were causing great damage to the balance of payments positions of the producing countries, and stressed the need to remove such restrictions immediately. Ministers were also agreed that there was an urgent need to stabilize the prices of primary products; the Development Committee should undertake an early review of the imf buffer stock financing facility.

19. Ministers were of the view that the relevant provisions of the Rome Communiqué and the trade pledges in the oecd had as their rationale the discouragement of escalation of trade restrictions in developed countries. They expressed regret that those pledges were not being fully observed by the industrial countries at the same time as the developing countries were being pressed to avoid trade restrictions, even when these were necessary for the maintenance of their development programs.

20. Regarding access to capital markets by developing countries, Ministers urged the early completion of studies in the Development Committee which would enable prompt and effective measures of an operational character to be taken, particularly regarding obstacles to access to capital markets and the creation of a multilateral guarantee fund designed to secure additional resources for developing countries that do not have access to private capital markets. Ministers were of the view that developing countries with access to private capital markets should not for that reason be denied access to borrowing from development finance institutions.

21. Ministers stressed the need for international financial agencies to help establish a secondary market for debt instruments issued by developing countries by investing part of their liquid assets in such paper, and by other means. Ministers also emphasized that cofinancing could make a substantial contribution to meeting the capital needs of developing countries.

22. Ministers acknowledged with satisfaction that opec countries have increased substantially their financial assistance to other developing countries, noting that it has multiplied fivefold between 1973 and 1974 to a figure approaching $15 billion, divided roughly evenly between bilateral and multilateral aid. On an annual basis, commitments in the first half of 1975 were running well in excess of $21 billion.

23. Ministers reaffirmed the urgent need for developed countries to reach the 0.7 per cent target for official development assistance, and stressed that the Development Committee could and should serve to strengthen the political will required to achieve that target by the end of the decade.

24. Ministers reiterated their strong support for the lending program proposed by the management of the World Bank. They also expressed strong support for a two-step increase in the capital of the Bank of which the first step, which should be undertaken immediately, would consist of a selective increase of approximately $10 billion, and the second of a general increase at a later stage. They stressed that a firm recognition should be obtained that the general increase would continue to be an urgent necessity and that it should be completed as soon as possible to avoid any restrictions in the Bank’s lending program in the near future.

25. In this connection, Ministers also affirmed that the voting power of the non-oil exporting developing countries should not be reduced from their present level and that the Board representation of those countries should at least be maintained or increased, if necessary, to preserve a balanced geographical representation.

26. Ministers acknowledged with satisfaction the contributions made by some countries to the Third Window of the World Bank and urged that all countries in a position to do so should contribute to that facility without further delay, so as to allow the original target of $1 billion to be reached. They stressed that such contributions should be additional, and that the Third Window should be administered flexibly with regard to access.

27. Ministers expressed concern at the diminishing share of upper- and middle-income countries in the ibrd’s lending program and considered that present lending to these countries should be increased.

28. The Ministers strongly supported a substantially increased replenishment of ida, in real terms. Negotiations for the replenishment of ida should be completed by June 1976, in time to ensure continuity of operations.

29. The Ministers also stressed the need to expand the capital of the regional development banks and of the International Finance Corporation.

30. Ministers expressed their concern at the apparent lack of political support from the developed nations for the Development Committee, as well as at the lack of concrete measures to be adopted so as to increase the transfer of resources to developing countries. They were of the view that the Committee, its Executive Secretary, and associated international organizations, should proceed promptly to consider concrete solutions to existing problems, so as to achieve the objectives of the Committee. Urgent action was seen to be necessary if the minimum acceptable growth targets are to be attained.

October 2, 1976

1. The Ministers of the Group of Twenty-Four on International Monetary Affairs held their thirteenth meeting in Manila, Philippines, on October 1 and 2, 1976. Mr. Luis Barua Castañeda, Minister of Economy and Finance of Peru, was in the chair, with Mr. R. K. A. Gardiner, Commissioner for Economic Planning of Ghana, and Mr. Osman Ali, Governor of the State Bank of Pakistan, as Vice-Chairmen. The meeting was attended by Mr. G. D. Arsenis, Unctad, Mr. Henri Konan Bédié, Chairman of the Joint Ministerial Committee of the Boards of Governors of the World Bank and the International Monetary Fund on the Transfer of Real Resources, Mr. Robert McNamara, President of the World Bank, and Mr. H. J. Witteveen, Managing Director of the International Monetary Fund.

2. The meeting was preceded by the twenty-first meeting of the Deputies of the Group of Twenty-Four with Mr. Winston Temple-Seminario, Peru, in the chair, and Mr. S. K. Botchway, Ghana, as First Vice-Chairman, and Mr. Z. Ahmad, Pakistan, as Second Vice-Chairman.

3. Ministers reviewed international economic developments and expressed concern at the huge current account balance of payments deficits of the non-oil developing countries which rose from $10 billion in 1973 to $37 billion in 1975 and are projected to be around $32 billion in 1976. The financing of this huge deficit has increased the external debt of developing countries and aggravated the debt problems of some of them. Ministers expressed strong disappointment that official development assistance continues to lag behind the need for concessionary assistance and urged those industrialized countries which have so far not done so to intensify their efforts to reach the 0.7 per cent target set for the un Second Development Decade.

4. Ministers noted the significance of full employment as the most urgent objective of economic policy in the industrialized countries necessary for their full recovery, and urged a continued flow of funds to the developing countries from the international private banking community.

5. Ministers noted that the ratio of international reserves to world imports has gone down since 1970, and that the increase in international liquidity in this period was highly unevenly distributed, with non-oil developing countries being the worst off. The role of the SDR as a reserve asset has continued declining since 1972, while that of reserve currencies has continued to strengthen. This tendency has been aggravated by the lack of new allocations of SDRs and the weak international surveillance over the process of liquidity creation. They favored a new allocation of SDRs which they thought was warranted, inter alia, by the need to enhance the role of the SDR in the international monetary system, which is in the interest of the entire international financial community.

6. The Ministers also took note of the fact that very few of the developing countries had made use of Fund resources beyond the first credit tranche, that only two countries had availed themselves of the extended Fund facility, and that this had been because of the limited size of these facilities and the severity of their conditionality. They also called for a review of the Fund policies to enable the developing countries to secure more adequate balance of payments support from the Fund on reasonable terms. In view of the inadequacy of Fund liquidity, consideration also needs to be given to devising appropriate recycling mechanisms to tap additional resources.

7. To augment the resources of the Fund the Ministers stressed the need for a further substantial increase in the Fund quotas through the Seventh General Review.

8. Ministers welcomed the establishment of the Trust Fund on May 6, 1976. However, they expressed concern that the amount realized so far from the three gold auctions indicated that its target of SDR 3.7 billion would not be realized. Ministers therefore urged member countries in a position to do so to supplement the resources of the Trust Fund through voluntary donations. Ministers felt that gold sales should proceed in a manner that shall meet the interests of developing countries.

9. Ministers expressed regret that some countries which were expected to contribute to the Fund’s Interest Subsidy Account, associated with the oil facility, have not yet done so, and urged them to donate their shares as soon as possible.

10. Ministers believed that the reform of the international monetary system will be resumed and that special consideration should be given to the interest of the developing countries, particularly as regards the need to introduce a link between the allocation of SDRs and the flow of financial resources to developing countries.

11. Ministers urged that donor countries would complete their promised contributions to the Fourth Replenishment of ida, as early as possible. They also discussed the Fifth Replenishment of ida and emphasized the need to replenish at a much higher level. In this connection they agreed that a replenishment level of $9 billion would be appropriate, although even this would allow for only a small increase in real terms. Ministers noted that negotiations for replenishment had already started and urged that every effort must be made to complete the negotiations by March 1977. Since the necessary legislative approval may not be forthcoming before June 1977, they were of the view that at least advances of contributions should be pledged by April 1977 to prevent a hiatus in the operations of ida.

12. Ministers reaffirmed their full support for the recommendation of the Executive Directors for a selective increase in the authorized capital of the World Bank from the present level of $27 billion to $34 billion (1944 dollars). They urged the expeditious implementation of this recommendation, and they called upon member countries to subscribe fully to the additional shares allocated to them. At the same time they called for an early agreement on a general capital increase for the Bank and at the latest by the end of fiscal year 1977 in order to prevent both a reduction in the lending program of the Bank in real terms in fiscal year 1978 and after, and a further hardening in its terms of lending. Ministers expressed grave concern about the modifications in the nature and level of operations of the Bank as regards lending terms and the new method of amortization of loans. They were of the view that these features of the Bank assistance to developing countries should be reviewed promptly.

13. Ministers stated that Third Window lending had been of benefit to countries which qualified for loans under the scheme. Ministers wished the Third Window operations to continue in order to provide additional resources over and above those normally available under the lending program of the World Bank. Ministers also emphasized the need to reach the original target of $1,000 million in additional loans under the Third Window. They urged that the Interest Subsidy Account for the Third Window be kept open to receive contributions.

14. Ministers discussed the problem of external debt and stressed the importance of accepting the general principle, namely, that of those countries not presently having access to capital markets net transfers of official development assistance from industrialized countries should be maintained at a level compatible with a reasonable rate of growth in such countries.

15. Ministers called on industrialized countries to adopt measures that would result in reduced fluctuations in commodity prices and substantial improvement in the export earnings of developing countries, especially their increased access to markets in industrial countries. They also urged the implementation of the Common Fund under the Integrated Program for Commodity Exports.

16. Ministers called on developed countries to give the necessary political support to the Development Committee so that it would be effective in the transfer of real resources to developing countries. Ministers also took note of the report of the Working Group on Access to Capital Markets and fully supported the recommendations that capital market countries should declare that they would move progressively toward greater liberalization of capital exports and that authorities in capital markets countries should give favorable treatment to developing countries and exercise flexibility by permitting developing countries to sell bonds denominated in currencies which are in strong demand both in local markets and in the Eurobond market.

17. Ministers recommended the establishment of working groups of the Development Committee in the year ahead to study and help a coordinated view being taken of the following problems:

  • (i) concessional flows as they relate to ida operations, debt problems, and balance of payments support through the quick disbursement of aid;

  • (ii) capital flows through multilateral institutions relating to the volume and terms of lending programs, increases in capital, etc;

  • (iii) promotion and expansion of private capital flows as a follow-up to the work of the Working Group on Access to Capital Markets.

April 26, 1977

1. The Ministers of the Group of Twenty-Four on International Monetary Affairs held their fourteenth meeting in Washington, D.C., on April 26, 1977. Mr. R. K. A. Gardiner, Commissioner for Economic Planning, Ghana, was in the chair, with Mr. Osman Ali, Governor of the State Bank of Pakistan, and Mr. Julio Rodolfo Moctezuma, Secretary of Finance and Public Credit, Mexico, as Vice-Chairmen. The meeting was attended by Mr. M. A. Hassanain, opec, Mr. R. Lawrence, Unctad, Mr. E. Stern, Vice-President, World Bank, Mr. Cesar Virata, Chairman of the Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries, and Mr. H. J. Witteveen, Managing Director of the International Monetary Fund.

2. The meeting was preceded by the twenty-second meeting of the Deputies of the Group of Twenty-Four with Mr. Gyasi-Twum, Ghana, in the chair, and Mr. Z. Ahmad, Pakistan, and Mr. A. Phillips O., Mexico, as Vice-Chairmen.

3. The Ministers took note of the resumption of economic growth in the industrial countries of 1976 after the recession of 1974-75 and the rebound in the volume of world trade following the sizable decline of the preceding year. The Ministers were, however, concerned that non-oil developing countries were not getting commensurate benefit from the world economic recovery and they were still beset with serious balance of payments problems. The Ministers also expressed anxiety about the marked slowdown in economic activity in the industrial countries during the second half of 1976. In this context they noted in particular that the annual rate of expansion of non-oil trade had declined to about 7 per cent in the second half of 1976 compared with some 14 per cent in the first half. They expressed concern that if this trend continued it would aggravate the problems of the developing countries, and expressed the view that adequate demand expansion policies should be pursued by the surplus industrial countries to sustain the world economic recovery.

4. The Ministers observed that the current account deficit of the non-oil developing countries has declined from $38.4 billion in 1975 to $28.0 billion in 1976. However, this decline has entailed painful adjustment measures taken by the developing countries in the absence of adequate financing and in the face of restrictive trade policies by the industrial countries. The projections for 1977 indicated an almost equally sizable current account deficit. The Ministers believed that developing countries would not be able to attain their growth targets unless special means were taken to expand the supply of concessional and other forms of sustainable financing and to reduce barriers to exports from developing countries.

The Ministers of the Group of Twenty-Four were of the view that

  • (i) A second allocation of SDRs should be considered imperative both in the context of the present international liquidity position and in moving towards the objective of making the SDR the principal reserve asset of the international monetary system. Appropriate steps should be taken to enhance the reserve characteristics of the SDR;

  • (ii) Serious consideration should be given to the establishment of a link between SDR allocation and the provision of financial resources to developing countries;

  • (iii) The supplementary credit facility now under consideration should be established as early as possible. It should have low conditionality and should be available on the basis of balance of payments needs irrespective of the status with regard to drawings under the credit tranches. The period of repayment should be longer than those of existing facilities. The present imf Interest Subsidy Account for the low-income developing countries should be continued and expanded;

  • (iv) The conditionalities attached to the various credit facilities of the Fund need to be reviewed bearing in mind that members have been discouraged from making use of some of the Fund’s resources available to them on account of severe conditionalities;

  • (v) Notwithstanding the establishment of the supplementary credit facility there is need for substantial augmentation of the resources of the Fund to enable it to play a greater role in the financing of payments imbalances, and in this context an increase of 100 per cent in quotas under the Seventh General Review is favored;

  • (vi) The temporary increase of 45 per cent in the tranches should be maintained up to the coming into effect of the Seventh Review of Quotas;

  • (vii) In the context of the principles and procedures of surveillance, the Fund should take into consideration the particular circumstances of the developing countries in decisions affecting the exchange rates of members;

  • (viii) Donor countries should not allow their official development assistance as a percentage of gross national product to fall below levels reached in recent years, and should attain the oda target of 0.7 per cent. The special effort made by opec countries in the field of development assistance was a matter for satisfaction, and it was hoped that it would stimulate attainment by the developed countries of the 0.7 per cent target as early as possible;

  • (ix) The capital of the World Bank and the regional development finance institutions should have a sizable increase. In particular, member countries that have not yet done so should take prompt action to approve the selective capital increase of the World Bank, the capital increase of the ifc and the fifth replenishment of ida. In addition, the Executive Board of the Bank should proceed expeditiously on the proposed general increase of the capital of the Bank and reach agreement on this question not later than June 30, 1978. The ratio of program lending to the total lending of the World Bank should be increased and the Bank’s lending procedures simplified to expedite disbursement;

  • (x) The industrial countries should improve the access to their markets of goods exported by the developing countries;

  • (xi) As a general principle, the net transfer of oda from the industrial countries to the low-income countries not presently having access to capital markets should be maintained at an appropriate level so as to alleviate the burden of their external debt and help them to attain and sustain a reasonable rate of economic growth;

  • (xii) Developed countries should give their support to the creation of the Common Fund currently under consideration in the Unctad, which aims, inter alia, at the stabilization of commodity prices;

  • (xiii) The World Bank and the regional development banks should use their present authority within their capital structure to consider requests for guarantees from interested member countries if additional resources become available.

April 28, 1978

1. The Ministers of the Group of Twenty-Four on International Monetary Affairs held their sixteenth meeting in Mexico City on April 28, 1978. Mr. K. Gyasi-Twum, Ghana, opened the meeting on behalf of Mr. R. K. A. Gardiner, Commissioner for Economic Planning, Ghana, the outgoing Chairman. Mr. S. Osman Ali, Governor of the State Bank of Pakistan, then took the chair, with Mr. David Ibarra-Muñoz, Secretary of Finance and Public Credit, Mexico, and Mr. O. O. Vincent, Governor of the Central Bank of Nigeria, as Vice-Chairmen. The meeting was attended by Mr. G. D. Arsenis, Unctad, Mr. E. Stern, Vice-President, World Bank, Mr. Cesar Virata, Chairman, Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries, and Mr. H. Johannes Witteveen, Managing Director, International Monetary Fund.

2. The meeting was preceded by the twenty-fifth meeting of the Deputies of the Group of Twenty-Four. Mr. K. Gyasi-Twum, Ghana, relinquished the chair in favor of Mr. Ziauddin Ahmad, Pakistan. Mr. A. Phillips O., Mexico and Mr. S. B. Falegan, Nigeria, were Vice-Chairmen.

3. The Ministers of the Group of Twenty-Four discussed the general economic situation and took note of a number of developments during 1977 which had led to increased difficulties for the developing countries. The marked decline in the growth rate of industrial countries, slowing down in the growth of the volume of world trade, deterioration in the terms of trade of non-oil developing countries in the second half of 1977, the lack of progress in respect of the access of developing countries to capital markets, and increased recourse to protectionist measures exercised an adverse influence on the growth performance of developing countries. The unsettled conditions in the exchange markets had also aggravated the problems of the developing countries.

4. The Ministers noted that the current account balance of payments of non-oil developing countries had shown some improvement in 1977, but this was largely due to the measures taken by them to limit imports which adversely affected their investment levels.

5. In discussing the prospects for the world economy in 1978, the Ministers expressed their concern about the projected deterioration of the current account deficit of the non-oil developing countries from $22 billion in 1977 to $30 billion in 1978.

6. On account of inadequate flows of Official Development Assistance, a number of low-income developing countries were not able to meet their external financial requirements, while others had to take recourse to sizable borrowings from commercial banks.

7. The Ministers underlined the need for greater coordination in the economic policies pursued by industrial countries which would result in an expansion of the world economic activity and world trade to the benefit of the entire international community. Recognizing the growing interdependence between developed and developing countries, the Ministers felt that developing countries could make a significant contribution to world economic recovery if they were provided with adequate long-term financing.

8. The Ministers stressed that inflationary effects, if any, of recovery measures taken by developed countries would be minimized if these countries reviewed rigidities in price and wage policies and reduced the levels of protection against exports from developing countries.

9. The Ministers strongly urged developed countries to avoid import restrictive measures that jeopardize the export growth prospects of developing countries, to gradually dismantle existing protectionist measures and take necessary reallocative measures. Furthermore, they stressed the importance of an early conclusion of the multilateral trade negotiations so that developed countries fulfill their commitments to developing countries undertaken in the Tokyo declaration.

10. The Ministers stressed the need for a substantial increase in the flow of oda and urged the developed countries that had not yet done so to take appropriate measures to reach the un target of 0.7 per cent of their gnp.

11. The Ministers noted that multilateral development institutions had played a vital role in the transfer of resources to the developing countries and urged that they should continue to do so. In order to enable them to perform this increasingly important function, Ministers recommended that the capital of these institutions should be substantially augmented.

12. The Ministers took note of a proposal to set up a long-term financing facility for developing countries and suggested that a study on this subject should be undertaken by the Development Committee.

13. Recognizing the importance to low-income developing countries of official debt relief as a significant means of securing an increase in the transfer of resources, the Ministers urged the developed countries to take speedy action pursuant to the agreement recently reached on this subject under the auspices of Unctad in Geneva.

14. The Ministers took note of a report by the International Monetary Fund on the developing countries’ access to capital markets. They were concerned that not much progress had been made in the implementation of the recommendations on the subject by the Development Committee. In fact, restrictions on the outflow of capital had been intensified by certain countries. They appreciated that a review by the imf would become a regular feature.

15. The Ministers stressed the need for a new allocation of SDRs in order to improve the composition of reserve creation, to increase net reserves of the system, and also to contribute toward making SDRs the principal reserve asset in the international monetary system. Moreover, a new allocation of SDRs will also help meet liquidity requirements of the member countries, especially countries with low reserves and no access to capital markets.

16. The Ministers took note of the recent proposal which would combine the allocation of SDRs with a reduction in the amount of outstanding reserve currencies and expressed the view that the proposal had a number of implications which required further study. They were of the view that further consideration of the substitution proposal should not delay a new allocation of SDRs, and that the proposal should bring about additionality.

17. The Ministers favored measures to increase the attractiveness of the SDR as a reserve asset, and in this context they supported increasing the interest rate on the SDR to 80 per cent of the weighted market rate. Also the remuneration rate should be 80 per cent of the SDR interest rate to avoid an increase in Fund charges. They were agreed that the reconstitution obligation in respect of SDRs should be abrogated. The flexibility of SDR uses in operations and the broadening of the definition of other holders of SDRs should be further studied.

18. The Ministers considered the question of the Seventh General Review of Quotas and favored an increase of at least 50 per cent.

19. For the Eighth General Review, the Ministers urged that the imf should re-examine the criteria on which quota allocations are based with the aim of rationalizing them and making them relevant to the economic position of the developing countries.

20. The Ministers were of the view that the supplementary financing facility should be made operational as early as possible. Means should also be found to relieve the least developed and other most seriously affected countries of part of the cost of borrowing from this facility.

21. The Ministers considered that the strict conditionality attached to drawings in the upper credit tranches and in the extended Fund facility should be modified, keeping in mind the fact that at present very limited use was being made of these facilities by the developing countries.

22. The Ministers expressed their continued support for the Development Committee, underlined the importance of the role it should play as a high-level political forum for actions designed to increase the transfer of real resources to the developing countries, and strongly urged its continued existence to fulfill the objectives for which it was established.

The Ministers appreciated the cooperation they have received in their work from Mr. H. Johannes Witteveen, the Managing Director of the International Monetary Fund, and expressed good wishes for his future after he retires from the Fund.

The Ministers were greatly appreciative of the hospitality received by them from the people and the Government of Mexico and the excellent arrangements made for the meeting.

September 22, 1978

1. The Ministers of the Group of Twenty-Four on International Monetary Affairs held their seventeenth meeting in Washington, D.C., on September 22, 1978. Mr. A. G. N. Kazi, Governor of the State Bank of Pakistan, was in the chair, with Mr. David Ibarra-Muñoz, Secretary of Finance and Public Credit, Mexico, and Mr. O. O. Vincent, Governor of the Central Bank of Nigeria, as Vice-Chairmen. The meeting was attended by Mr. Gamani Corea, Secretary-General, Unctad, Mr. A. M. Jaidah, Secretary-General, opec, Mr. J. de Larosière, Managing Director, International Monetary Fund, Mr. R. McNamara, President, World Bank, and Mr. Cesar Virata, Chairman, Joint Ministerial Committee of the Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries (Development Committee).

2. The meeting was preceded by the twenty-sixth meeting of the Deputies of the Group of Twenty-Four, with Mr. Ziauddin Ahmad, Pakistan, as Chairman, and Mr. A. Phillips O., Mexico, and Mr. G. O. Nwankwo, Nigeria, as Vice-Chairmen.

3. The Ministers expressed their concern over current trends in the world economy. They noted that following the satisfactory rates of expansion in world output and trade in the period of initial recovery from the severe recession of 1974-75, economic activity and world trade have slowed down though modest progress has been achieved in the abatement of inflation. They noted that in most industrial countries unemployment rates in 1978 are similar to those prevailing in the worst phase of recession in 1975, and that the short-term prospects do not suggest a significant improvement. The Ministers expressed concern over the renewed deterioration in the terms of trade of the developing countries and the increase of the current account deficit of the non-oil developing countries, which in 1978 is estimated to reach $32 billion.

4. The current situation gives rise to concern because the international economy seems to be in danger of stagnating at low rates of growth of output and trade, with high rates of unemployment and inflation. This prospect is undesirable, not only because of the substantial underutilization of resources, but also because it is giving rise to all kinds of protectionism, which make the adjustment process more difficult for developing countries.

5. The Ministers were of the view that a stronger political commitment to achieve higher rates of growth, consistent with the long-term growth potential of industrial nations, was required. They noted that policies pursued by both oil exporting and non-oil developing countries had made considerable contribution to the adjustment process. They urged that industrial countries in external surplus should increase their domestic activity and capital outflows. They expressed concern at the low level of development assistance which is far below the internationally agreed targets, and underlined the need to expand capital flows, both in the form of official development assistance and through liberalizing access to the capital markets. This will help improve the working of the adjustment process, and bring about faster recovery in the level of world economic activity.

6. They noted the persistance of an undesirable asymmetry in the adjustment process, the burden of which falls mainly on non-reserve-currency deficit countries. They urged the Fund to intensify its surveillance of surplus industrial and reserve-currency countries, in order to achieve a more equitable adjustment. This would also reduce the instability in the exchange rates of major currencies, which has given rise to considerable uncertainty and has had adverse effects on the rate of investment and economic activity.

7. The Ministers reiterated the need for a new allocation of SDRs in order to meet the global needs for international reserves, to increase net reserves of the system and also to contribute toward making SDRs the principal reserve asset in the international monetary system. In this connection, they support the proposal made by the Managing Director of the imf for a new allocation of 4 to 6 billion SDRs per year over a three-year period.

8. The Ministers favored measures to increase the attractiveness of the SDR as a reserve asset. In this context, they favored the abrogation of the reconstitution obligation; they supported increasing the interest rate on the SDR to 80 per cent of the weighted market rate; and they were prepared to support the remuneration rate at 90 per cent of the SDR interest rate, provided no increase in Fund charges would result. They emphasized that such an increase in the SDR interest rate would be acceptable and meaningful only if a new allocation of SDRs were decided upon. They favored expanding the uses of SDRs to include three additional ones, namely: operations related to settlement of obligations, making of loans, and security for obligations. Other uses of SDRs should be further studied.

9. The Ministers considered the question of the Seventh General Review of Quotas and favored an increase of at least 50 per cent. In regard to the method of payment, the Ministers were of the view that member countries should be given the option to pay their subscription wholly in their own currency.

10. Although the Ministers did not accept the view that the issue of a new allocation of SDRs be linked with the Seventh General Review of Quotas, in case it was decided to link them, and 25 per cent of the subscription was to be in SDRs, the size of the new SDR allocation should be such as not to require a drawdown in members’ SDR balances.

11. The Ministers expressed the need for the supplementary financing facility as approved by the imf Executive Board to be made operational as early as possible and for a subsidy account to be established for the charges that would be payable by low-income countries.

12. Regarding conditionality in the use of Fund resources, the Ministers expressed concern at the multiplicity of performance criteria and some other forms of conditionality that inhibit access to Fund resources by member countries. Hence, they urged the Executive Board of the imf to set appropriate guidelines and establish other institutional procedures related to the use of Fund resources, especially in the upper credit tranches, in support of economic adjustment programs. In this context, they were of the view that the guidelines should be designed so as to limit the performance criteria only to relevant macroeconomic variables, paying due regard to the growth considerations of member countries, and their prevailing economic and social situations.

13. The Ministers welcomed the initiative of the World Bank in preparing the World Development Report, 1978, which provides an analysis of some of the fundamental problems confronting the developing countries. They were concerned that the projections contained in the report provided for insufficient acceleration of the growth rate of the low-income developing countries, which would leave the problem of absolute poverty practically untouched. The prospects for middle-income countries which also have substantial segments of population living in conditions of absolute poverty are also unfavorable, due to the slowdown in the growth of world economic activity and trade and increasing restrictive practices in the trade and financial spheres.

14. The Ministers regarded the recommendations contained in the report as insufficient to remedy the urgent problems faced by developing countries. They therefore urged the international community to make a more determined effort towards the adoption of the main measures leading to the establishment of the New International Economic Order. In particular, in order to achieve higher levels of transfer of real resources, they recommended:

  • (a) a substantial increase in the level of official development assistance;

  • (b) a substantial increase of the capital of the World Bank before the first quarter of next year and a simplification of its lending procedures, and an increase in the capital of the regional development finance institutions;

  • (c) early completion of contributions to ida’s fifth replenishment and timely conclusion of negotiations for the sixth replenishment, which should provide for an increase in real terms;

  • (d) an increase in the flow of capital on commercial terms at longer maturities suitable for development financing.

15. As part of the efforts to stabilize the current account receipts of developing countries, the Ministers emphasized the need to strengthen the compensatory financing facility by adopting the following measures:

  • (a) The limit on outstanding drawings under the facility should be increased from 75 per cent to 100 per cent of a member’s quota. Drawings in any twelvemonth period should be increased from 50 per cent to 100 per cent;

  • (b) The repayment period should be lengthened from the present 3-5 years to one of 5-7 years;

  • (c) Countries should be given the choice of basing the calculation of their shortfalls on their total receipts from merchandise exports or the combined receipts from merchandise exports and services;

  • (d) In the calculation of shortfalls, account should be taken of the increase in the price of imports;

  • (e) Increased import volume resulting from climatic or other factors beyond the control of the country concerned should also be taken into account in calculating the shortfalls;

  • (f) Drawings under the facility should not be subject to any credit tranche conditionality.

16. Furthermore, the Ministers recommended the establishment of the common fund of the integrated commodity program, an expansion in program lending by the World Bank, and a further examination of the feasibility of a new stabilization facility of the type of stabex.

17. The Ministers reviewed the work of the Development Committee and concluded that it represents an appropriate forum in which issues in regard to the transfer of resources to developing countries could be dealt with. They agreed that the Development Committee should continue with its present joint composition, thus allowing it to consider issues which fall under the jurisdiction of the Fund or the Bank, or beyond them.

    Other Resources Citing This Publication