Communiqué of theInternational Monetary and Financial Committee of the Board of Governors of theInternational Monetary Fund
Washington, D.C.
April 12, 2003
1. The International Monetary and Financial Committee held its seventhmeeting in Washington, D.C. on April 12, 2003, under the Chairmanship of Mr.Gordon Brown, Chancellor of the Exchequer of the United Kingdom.
Global Economic Outlook
2. Meeting at a time of economic uncertainty, the Committee reaffirms itscommitment to close international cooperation to strengthen confidence andsupport the global recovery. It underscores the importance of continuedvigilance. But with readiness to adjust policies as necessary and determinedfurther action on the structural front, the world economy has the prospect ofstrengthening growth and renewed prosperity. Substantial and concrete progresswith multilateral trade liberalization is a key priority for the coming monthsand has the full political commitment of Ministers.
3. In the advanced economies, sound fundamentals and policies should deliverstronger growth in the second half of the year. With inflationary pressures wellcontained, monetary policies should remain accommodative, and in many countriesthere is room to ease monetary policy further if needed. On the fiscal side, theautomatic stabilizers should be generally allowed to operate, though in manycountries action is needed to address medium-term fiscal pressures, includingthose arising from ageing populations. The advanced economies have a sharedresponsibility to go further in implementing structural reforms-to enhanceprospects for a sustained broad-based world recovery that helps correct globalimbalances. In the United States, policies consistent with a sound medium-termfiscal position remain important. In Europe, labor and product market reformsneed to be accelerated. In Japan, further steps are needed to strengthen thebanking and corporate sectors and end deflation, accompanied by a start towardstrengthening the medium-term fiscal position.
4. Emerging market countries will need to continue to strengthen their policiesfor macroeconomic stability and structural reforms and therefore theirresilience to adverse global developments. In countries facing externalfinancing constraints, efforts to sustain macroeconomic stability will continueto be key to restoring confidence. For all countries, the continuedimplementation of reforms to strengthen banking and corporate sectors andunderpin growth remains a priority. The IMF has a key role to play in supportingthese efforts.
5. Prospects for stronger growth in low-income countries should be supported byimproved economic policies, stronger institutions, progress in resolvingregional conflicts, and increased donor resources, including through debt reliefunder the HIPC Initiative. Sustained implementation of sound policies, supportedby strong ownership and the Monterrey Consensus, will remain key to reducingpoverty and meeting the Millennium Development Goals (MDGs). African countriesneed to continue to press ahead with the wide-ranging reforms embedded in theNew Partnership for Africa's Development (NEPAD)-in particular to improve thequality of their institutions and ensure peace and security. The Committeereiterates the importance of technical assistance, including the contribution ofAFRITACs and other regional technical assistance centers. It calls on theinternational community to urgently mobilize additional assistance to addressthe serious food shortage in Africa.
6. The Committee notes that the present situation in Iraq poses significantchallenges, with an urgent need to restore security, relieve human suffering andpromote economic growth and poverty reduction. We support a further UN SecurityCouncil resolution. We further note that engagement by the internationalcommunity including the Bretton Woods institutions would be essential forsustained economic, social, and political development in Iraq, recognizing thatthe Iraqi people have the responsibility to implement the right policies andbuild their own future. The IMF and the World Bank stand ready to play theirnormal role in Iraq's re-development at the appropriate time. They will alsomonitor closely the impact of the conflict on all their members and stand readyto help and support those adversely affected. It is important to address thedebt issue, and we look forward to early engagement of the Paris Club.
7. The Committee-having greatly benefited from the views of Dr. SupachaiPanitchpakdi, Director-General of the World Trade Organization-underscores theurgency of concrete progress toward multilateral trade liberalization under theDoha Round through the continued commitment of the international community. Thiswill be critical in supporting higher economic growth and poverty reduction, andenabling developing countries to participate more fully in the benefits ofglobalization. The Committee accordingly calls on industrial, emerging, anddeveloping countries to play their part in renewed efforts to address obstaclesto further progress in advance of the ministerial meeting of the World TradeOrganization in Cancún next September. Urgent progress is needed in a number ofareas, including agriculture, where better market access and lower tradedistorting subsidies are particularly important for developing countries. TheIMF, in collaboration with other international institutions, stands ready tosupport members' closer regional cooperation in the context of deeperintegration into world markets.
Strengthening Crisis Prevention
8. The Committee reiterates the importance it attaches to strengthening theIMF's crisis prevention capacity and welcomes the steps in many countries toimprove economic resilience and financial stability. However, there is stillroom for further improvement. Going forward, sustained implementation of astrengthened framework of bilateral, regional, and multilateral surveillancewill be essential to provide more robust assessments of crisis vulnerabilities,debt sustainability, currency mismatches and other balance sheet and capitalaccount developments, as well as further progress in strengthening dataprovision to the IMF and data dissemination to the public.
9. The Committee welcomes progress with the standards and codes process and theFinancial Sector Assessment Program (FSAP) and the role these play in enhancingIMF surveillance. It calls on the IMF to continue to move forward with theseinitiatives to strengthen members' institutions, policy frameworks, andfinancial sectors, including through technical assistance. It stresses theimportance of further enhancing the quality and effectiveness of standards andcodes assessments, and calls on the IMF to implement quickly agreed measures tostrengthen prioritization, technical assistance, and follow up of FSAP and ROSCassessments. In this context, the Committee looks forward to the further work ofthe Financial Stability Forum and standard-setting bodies on strengthening thecontent and coverage of standards in accounting, auditing, and corporategovernance, and on improving transparency and financial disclosure.
10. The Committee supports the IMF's continued efforts to make surveillance morecomprehensive and accountable, including through strengthening the IMF's policyadvice on reducing vulnerabilities; greater attention to the spillovers frompolicies in countries of systemic or regional importance; more effective use ofthe IMF's cross-country experience; enhanced awareness of political economyfactors; and bringing to bear a fresh perspective in surveillance of programcountries. The Committee looks forward to the IMF's further work on surveillanceand other crisis prevention issues and a report on progress for this year'sAnnual Meetings.
11. The Committee welcomes the increase in voluntary publication of countrystaff reports, but notes that the rate of publication across countries andregions remains uneven. It looks forward to further progress through theforthcoming review of the IMF's transparency policy, and stresses that thecandor of the IMF's analysis and advice should be preserved.
12. The Committee emphasizes support for ways to achieve the objectives of theContingent Credit Lines (CCL) in encouraging policies to reduce vulnerabilitiesand providing a means of support for members with strong policies in dealingwith global financial developments. It looks forward to a report on how best topromote these objectives following the conclusion of the review of the facility.
Improving the Capacity to Resolve Financial Crises
13. Effective crisis resolution mechanisms, by promoting sound policies andbetter functioning capital markets, contribute to crisis prevention. TheCommittee welcomes the strengthened framework on access to IMF resources. Thisincludes: the substantive criteria for exceptional access in capital accountcrises; and strengthened procedures, such as early involvement of the ExecutiveBoard in the process and a separate report evaluating the case for exceptionalaccess. Consistent implementation of the framework will provide members andmarkets with clarity and predictability about IMF decisions in crises.
14. The Committee welcomes the inclusion of collective action clauses (CACs) byseveral countries, most recently Mexico, in international sovereign bond issues.It also welcomes the announcement that, by June of this year, those EU countriesissuing bonds under foreign jurisdictions will include CACs. The Committeewelcomes the work of the G-10, emerging markets, and the private sector incontributing to the development of CACs. It looks forward to the inclusion ofCACs in international bond issues becoming standard market practice, and callson the IMF to promote the voluntary inclusion of CACs in the context of itssurveillance. The Committee welcomes recent initiatives to formulate a voluntarycode of conduct for debtors and their creditors, which will improve therestructuring process, and encourages the IMF to contribute to this work.
15. The Committee welcomes the work of the IMF in developing a concrete proposalfor a statutory sovereign debt restructuring mechanism (SDRM) and expresses itsappreciation for the IMF management and staff's efforts. The extensive analysisand consultation undertaken in developing the proposal have served to promotebetter understanding of the issues to be addressed in bringing about orderlyresolution of crises. The Managing Director's report sets out the currentposition. The Committee, while recognizing that it is not feasible now to moveforward to establish the SDRM, agrees that work should continue on issues raisedin its development that are of general relevance to the orderly resolution offinancial crises. These issues include inter-creditor equity considerations,enhancing transparency and disclosure, and aggregation issues. The IMF willreport on progress at the Committee's next meeting.
Implementing Initiatives to Support Low-Income Countries
16. The Committee recognizes the urgent need to address the challenge of meetingthe Millennium Development Goals, and reiterates that the IMF continues to havean important role to play in assisting low-income countries progress towardthem. This will require enhanced efforts by developing and developed countriesworking in partnership. The Committee stresses the importance of soundmacroeconomic policies and strong public expenditure and financial managementsystems. The Committee recognizes the urgent need to enhance market access andto increase the level and effectiveness of donor resources for developingcountries. Proposals to achieve this, including facilities, are beingconsidered, and the Committee looks forward to progress in the coming months.Building on countries' poverty reduction strategy papers (PRSPs), the Committeeencourages the IMF to work with low-income countries to strengthen further thealignment of the PRGF, domestic budgets, and the PRSP approach. This will befacilitated through more realistic economic projections, systematic analysis ofthe sources of growth, effective Bank-Fund collaboration, and flexibility inprogram design, including to accommodate higher aid inflows. The Committeeencourages donors to coordinate and harmonize their assistance in line with PRSPpriorities, and to provide technical assistance to help members build the neededcapacity to design and operationalize PRSP strategies and to improve publicexpenditure management. It endorses further work on the linkages between growthand poverty reduction, including the role of the private sector. The Committeealso looks forward to the review of the role of the IMF in low-income countriesover the medium term, and its paper on helping low-income countries to deal withshocks.
17. The Committee welcomes the further progress made in implementing the HIPCInitiative, but notes that some countries have experienced delays in reachingthe completion point, and that other eligible countries are facing obstacles toparticipation in the Initiative. It looks forward to a review of these issues atits next meeting. The Committee reaffirms its commitment to the full financingof the Initiative. It urges all creditors to participate fully, and encouragesfurther Bank-Fund efforts to help creditor and debtor countries addressHIPC-to-HIPC debt relief and creditor litigation issues. It emphasizes the needto ensure lasting debt sustainability, which will require both the fullimplementation and financing of the Initiative, and continued sound economicpolicies, good governance, and prudent debt management. In this context, theCommittee welcomes the efforts by some countries to provide additional debtrelief beyond HIPC terms. The Committee supports joint Bank-Fund work to improveits assessments of longer-term debt sustainability for heavily indebted poorcountries, and looks forward to a progress report at the next meeting.
Other Issues
18. The Committee welcomes the further actions by members to combat moneylaundering and the financing of terrorism, and notes with satisfaction theprogress with the 12-month pilot program of AML/CFT assessments. It underscoresthe importance of continued close cooperation between the IMF, the World Bank,the FATF, and regional bodies to complete the pilot successfully, and of furtherenhancing the delivery of critically needed technical assistance. The Committeeencourages all members to adopt AML/CFT laws and practices consistent with theagreed international standards, and looks forward to a full report at theconclusion of the pilot program.
19. The Committee considers it important that, as pointed out in the MonterreyConsensus, all members should have an adequate voice and representation in theinstitution. It welcomes recent administrative steps to strengthen the capacityof the African constituencies. The Committee notes that the Twelfth GeneralReview of Quotas has been concluded and that the IMF is well positioned to meetthe projected needs of its members. The Committee looks forward to receiving astatus report by the 2003 Annual Meetings on the adequacy of IMF resources, thedistribution of quotas, and measures to strengthen IMF governance, consistentwith the resolution of the Board of Governors, in the context of the ThirteenthGeneral Review of Quotas. The Committee recommends completion of theratification of the Fourth Amendment.
20. The Committee welcomes the thorough follow up being given to the firstreport of the Independent Evaluation Office on prolonged use of IMF resources.It looks forward to future IEO reports as a way of enhancing the listening andlearning culture within the IMF.
21. The Committee expresses its appreciation of the work of Eduardo Aninat asDeputy Managing Director.
22. The next meeting of the IMFC will be held in Dubai, on September 21, 2003.
INTERNATIONAL MONETARY AND FINANCIALCOMMITTEE
ATTENDANCE April 12, 2003 Chairman
Gordon Brown
Managing Director
Horst Köhler
Members or Alternates
Hamad Al-Sayari, Governor, Saudi Arabian Monetary Agency (Alternate for IbrahimA. Al-Assaf, Minister of Finance and National Economy, Saudi Arabia)
Edward George, Governor, Bank of England, United Kingdom (Alternate for GordonBrown, Chancellor of the Exchequer, United Kingdom)
Felipe Pérez Martí, Minister of Planning and Development, RepúblicaBolivariana de Venezuela (Alternate for Diego L. Castellanos, Governor, BancoCentral de Venezuela)
Ian Campbell, Parliamentary Secretary to the Treasurer, Australia (Alternate forPeter Costello, Treasurer of the Commonwealth of Australia)
Job Graca, Deputy Minister of Finance, Angola (Alternate for José Pedro deMorais, Jr., Minister of Finance, Angola)
Hans Eichel, Minister of Finance, Germany
Geir Hilmar Haarde, Minister of Finance, Iceland
A.H.E.M. Wellink, President, De Nederlandsche Bank N.V. (Alternate for HansHoogervorst, Minister of Finance, The Netherlands)
Jamaludin Mohd Jarjis, Finance Minister II, Malaysia
Mohammed K. Khirbash, Minister of State for Finance and Industry, United ArabEmirates
Aleksei Kudrin, Deputy Chairman of the Government and Minister of Finance,Russian Federation
Mohammed Laksaci, Governor, Banque d'Algérie
Roberto Lavagna, Minister of Economy, Argentina
John Manley, Minister of Finance, Canada
Francis Mer, Minister of Economy, Finance and Industry, France
Antonio Palocci, Minister of Finance, Brazil
Guy Quaden, Governor, Banque Nationale de Belgique (Alternate for DidierReynders, Minister of Finance, Belgium)
Masajuro Shiokawa, Minister of Finance, Japan
Bimal Jalan, Governor, Reserve Bank of India (Alternate for Jaswant Singh,Minister of Finance and Company Affairs, India)
John W. Snow, Secretary of the Treasury, United States
Paul Toungui, Minister of State, Minister of Finance, Economy, Budget andPrivatization, Gabon
Giulio Tremonti, Minister of Economy and Finance, Italy
Kaspar Villiger, Minister of Finance, Switzerland
Li Ruogu, Assistant Governor, People's Bank of China (Alternate for ZhouXiaochuan, Governor, People's Bank of China)
Observers
Oscar de Rojas, Acting Head, Financing for Development Office, Department ofEconomic and Social Affairs, United Nations (UN)
Willem F. Duisenberg, President, European Central Bank (ECB)
Heiner Flassbeck, Chief, Macroeconomic and Development Policies Branch, UnitedNations Conference on Trade and Development (UNCTAD)
Donald J. Johnston, Secretary-General, Organisation for Economic Cooperation andDevelopment (OECD)
Malcolm D. Knight, General Manager, Bank for International Settlements (BIS)
Caio Koch-Weser, Interim Chairman, Financial Stability Forum (FSF)
Eddy Lee, Economic Adviser and Director, International Policy Group Department,International Labour Organization (ILO)
Trevor A. Manuel, Chairman, Joint Development Committee
Pedro Solbes, Commissioner for Economic and Monetary Affairs, EuropeanCommission
Supachai Panitchpakdi, Director-General, World Trade Organization (WTO)
James D. Wolfensohn, President, World Bank |
