SECTION D: IMFC COMMUNIQUE
Communique of the International Monetary
and Financial Committee of the Board of Governors of the International
Monetary Fund
WASHINGTON D.C. 28
SEPTEMBER, 2002
1. The International Monetary and Financial
Committee held its sixth meeting in Washington, D.C. on 28 September,
2002, under the Chairmanship of Mr. Gordon Brown, Chancellor of
the Exchequer of the United Kingdom.
THE GLOBAL
ECONOMY AND
FINANCIAL MARKETS
2. The Committee observes that the global
economic recovery is proceeding, although at a slower pace than
expected earlier this year. Growth is expected to strengthen in
the near term, supported by a strong policy response across the
international community. However, there remain downside risks
and uncertainties, as well as medium-term challenges associated
with persistent imbalances, underscoring the need for vigilance.
IMF members should continue to be ready to adapt policies as necessary
in order to foster broad and sustained growth, to strengthen policy
and regulatory frameworks, and to support durable poverty reduction.
The Committee underscores the importance of stability in oil markets
at prices reasonable for consumers and producers.
3. In the advanced economies, growth generally
is expected to strengthen. However, monetary policy-makers should
remain ready to respond to developments where necessary and to
ease policy further if the risk of economic weakness intensifies
and inflation prospects remain subdued. In Japan, monetary easing
should help end deflation. In many countries, there is scope for
automatic stabilisers to operate, but fiscal policy needs to be
attentive to the medium term challenge of consolidation in order
to ensure sustainable debt levels, improve the scope to respond
flexibly to future economic shocks, and help address challenges
such as those associated with population aging. Structural reforms
should also be pursued vigorously to further improve growth prospects
and strengthen resilience:
— In the United States, the actions
underway to strengthen corporate governance, accounting, and auditing
are important to underpin confidence.
— In Europe, further reforms, particularly
in labor and product markets, are needed.
— In Japan, banking and corporate restructuring
should be vigorously pursued, in particular addressing the issue
of non-performing loans.
4. Performance in emerging markets has been
mixed, reflecting both global developments and domestic circumstances.
While growth in Asia has picked up strongly, several economies
in Latin America in particular are facing a deterioration in conditions
due to external developments, country-specific vulnerabilities
and policy uncertainties. In countries that have room for manoeuvre,
the policy stance should generally remain accommodative, but countries
facing external financing difficulties will need to continue to
give priority to restoring market confidence. The Committee welcomes
Brazil's commitment to sound policies. It acknowledges the positive
steps taken in recent months by Argentina to address its difficult
economic situation, and urges the authorities, in cooperation
with the Fund, to move quickly to reach agreement on a sustainable
economic program that could receive the support of the international
financial institutions and provide the basis for the reestablishment
of stability and growth.
5. Many of the developing countries have
also been affected by global developments and adverse movements
in commodity prices, as well as domestic circumstances. The Committee
reiterates the need for sustained international efforts to fight
poverty. The Global Development Compact embodied in the Monterrey
Consensus and the Doha Development Agenda-based on mutual accountability,
country ownership, sound domestic policies and institutions, good
governance, increased and more effective international support
and commitment to an open multilateral trading system-was reaffirmed
at the World Summit in Johannesburg. The Committee looks forward
to the effective implementation, with international assistance,
of the New Partnership for Africa's Development (NEPAD) to strengthen
institutional foundations, governance, and infrastructure. Stressing
the critical importance of technical assistance to support this
effort, the Committee looks forward to the important contribution
that the AFRITACs will play. It also calls for urgent international
assistance to address the human and economic toll exacted by the
drought in southern Africa. It also stresses the positive role
of the CIS-7 initiative in improving prospects for enhanced growth
and reduced poverty.
6. The Committee underscores the vital importance
for global growth and effective development of achieving substantial
trade liberalization in the Doha round of multilateral trade negotiations,
which will benefit both developed and developing countries. Urgent
progress is essential in enlarging market access for developing
countries and phasing out trade distorting subsidies in developed
countries. Developing countries should also further liberalise
their trade regimes to maximise growth and development opportunities.
Trade-related technical assistance is also important to support
developing countries' capacity building.
STRENGTHENING CRISIS
PREVENTION AND
RESOLUTION
7. The Committee welcomes the Managing Director's
report on the IMF in a Process of Change, which sets out the reforms
underway to make the Fund more effective in promoting greater
financial stability and stronger global growth, the progress which
is being made, and the agenda for the period ahead.
8. The Committee supports the steps taken
by the Fund to improve the quality and effectiveness of its policy
advice, and to help countries strengthen policy frameworks and
prevent crises. These are the key priorities for surveillance.
In particular, the Committee:
— stresses that rigorous vulnerability
assessments will be key to the Fund's crisis prevention efforts,
and, in this regard, welcomes the progress in improving the framework
for assessing debt sustainability and looks forward to its application
to all members;
— welcomes in this context the increased
focus on the interactions between external shocks and domestic
vulnerabilities, the strengthened focus on global capital markets
in the Fund's multilateral surveillance, and the recent steps
to further improve data provision by members to the Fund;
— emphasizes the importance of surveillance
of systemically-important countries and their impact on the global
economy;
— supports the Fund's ongoing work
to ensure that surveillance in program countries reassesses economic
developments and strategy from a fresh perspective; and
— underlines the need for high quality
and persuasive surveillance of all member countries to help them
act promptly to minimize emerging vulnerabilities and avoid policies
that might have negative regional or global effects.
The Committee will review, at its next meeting,
ways of further enhancing the effectiveness of Fund surveillance.
It looks forward to further progress in the voluntary publication
of country staff reports, building on the positive role that improved
transparency and data dissemination by the Fund and its membership
are playing in informing the public and supporting financial market
assessments.
9. The Committee notes the substantial progress
on the Financial Sector Assessment Program and the standards and
codes initiative, including their increasing integration into
Fund surveillance. It looks forward to the forthcoming reviews
of these initiatives, and calls on the Fund to consider ways to
build on this progress, together with the World Bank and relevant
standard-setting bodies, to address gaps, strengthen technical
assistance, and promote broader participation. The Committee notes
the importance of enhanced standards and principles on corporate
governance, accounting and auditing, and of stronger national
practice. It also underscores the role that precautionary access
to Fund financing can play in safeguarding sound policy frameworks
in the face of uncertainty in international capital markets. The
Committee looks forward to the forthcoming review of the Contingent
Credit Lines.
10. The Committee endorses the Fund's continuing
work on private sector involvement and a stronger framework for
crisis resolution to provide members and markets with greater
clarity and predictability, including about the decisions the
Fund will take in crisis management. In particular, the Committee
welcomes the work underway to strengthen the policy on exceptional
access to Fund resources. This involves more clearly defined criteria
to justify exceptional access, and strengthened procedures for
early consultation and decision making. The priority now is to
finalise and implement the new framework, and the Committee calls
for a progress report by the Spring meetings.
11. The Committee strongly welcomes the
progress made with the contractual and statutory approaches to
restructuring unsustainable sovereign debts. It welcomes the ongoing
dialogue on collective action clauses in the G-10 and other fora
with private creditors and emerging market sovereign issuers.
Going forward, the Committee encourages the official community,
the private sector, and sovereign debt issuers to continue working
together to develop collective action clauses, and to promote
their early inclusion in international sovereign bond issues;
in that regard, it welcomes the recent decision by many countries
to include collective action clauses. The Committee also calls
on the Fund to consider the issues further and to develop, for
consideration at its next meeting, a concrete proposal for a statutory
sovereign debt restructuring mechanism to be considered by the
membership.
THE FUND'S
ROLE IN
LOW-INCOME
COUNTRIES
12. The Committee supports the Fund's continuing
role in helping poor countries address the challenge of meeting
the Millennium Development Goals by supporting economic reforms
aimed at accelerating growth and reducing poverty. It welcomes
the increased momentum in countries' efforts to develop and implement
their PRSPs, and the Fund's and donors' efforts to align their
support more closely with PRSPs. It recognises that there may
be a need to consider mobilizing new PRGF resources if high demand
for PRGF financing continues. The Committee stresses the importance
of: sound macroeconomic frameworks that can respond flexibly to
changes in the external environment; identifying ways to encourage
higher and sustainable growth; good governance; improving public
expenditure and financial management systems; and using poverty
and social impact analysis more systematically, and building country
capacity in this area. The Committee encourages the Fund and Bank
to continue their collaboration on these issues and looks forward
to reviewing progress. Furthermore, it looks forward to considering
the results of the Fund's work to better meet the diverse needs
of its low-income members, including those stemming from disruptive
exogenous shocks and emergence from conflict.
13. The Committee welcomes the progress
made on the HIPC Initiative, allowing countries to benefit from
lower debt servicing and higher social spending. It recognizes
that significant challenges remain to ensure that countries achieve
a lasting exit from unsustainable debt. The Committee reaffirms
the commitment to implement the initiative and finance it fully
to help countries overcome the burden of unsustainable debt, and
underscores that the HIPC Initiative has the flexibility to provide
additional debt relief at the completion point to help countries
that have suffered a fundamental change in their economic circumstances
due to exceptional exogenous shocks. These elements, together
with sustained commitment to sound economic policies—including
efforts to improve resilience to external shocks, to manage debt
prudently, and to reinforce good governance—and new financing
on appropriately concessional terms, should provide a basis for
long-term sustainability. The Committee notes that the financing
shortfall in the HIPC Trust Fund could be up to $1 billion, and
welcomes the recent pledges of support. It calls on other governments
to make firm pledges and contributions as a matter of urgency.
Furthermore, it urges all official and commercial creditors that
have not yet done so to fully participate in the HIPC Initiative.
The Committee acknowledges that the issues of HIPC-to-HIPC debt
relief and creditor litigation raise serious issues that should
be addressed.
COMBATING MONEY
LAUNDERING AND
THE FINANCING
OF TERRORISM
14. The Committee welcomes the actions taken
by many countries to combat money laundering and the financing
of terrorism, in response to the action plan agreed in Ottawa
last year, and urges countries that have not fully responded to
do so urgently. It also urges rapid progress on the exchange of
information between authorities. The Committee commends the substantial
progress made by the Fund, in close collaboration with the Bank,
in advancing the action plan. It endorses the conditional addition
of the Financial Action Task Force (FATF) recommendations to the
list of standards and codes for which Reports on the Observance
of Standards and Codes (ROSCs) are prepared, and looks forward
to the final adoption of the methodology and an early start of
the 12 month pilot program of assessments and accompanying ROSCs.
The Committee encourages countries to make available additional
experts and resources for the IMF/World Bank pilot program, welcomes
the pledges made so far, and urges the IMF and World Bank to coordinate
closely with the strong international and bilateral efforts to
provide critically important technical assistance. The Committee
looks forward to an interim report at its next meeting and a full
report at the conclusion of the pilot program.
OTHER ISSUES
15. The Committee welcomes the adoption
by the Fund's Executive Board of new guidelines on conditionality,
thus bringing to a successful conclusion the review of conditionality
initiated by the Managing Director two years ago. The consistent
implementation of these guidelines will help enhance the effectiveness
of Fund-supported programs by fostering national ownership and
streamlining conditionality, focusing it on elements critical
to the success of members' economic programs. The Committee stresses
that strengthened collaboration with the World Bank is an integral
part of these efforts to enable both institutions to provide complementary
and effective support.
16. The Committee stresses the importance
of the Fund having adequate resources to fulfil its financial
responsibilities. Quotas should reflect developments in the international
economy. The Committee notes that the Executive Board is continuing
its consideration of the Twelfth General Review of Quotas and
will present its report to the Board of Governors by January 2003.
It recommends an early implementation of the Fourth Amendment.
17. The Committee welcomes the first report
of the Independent Evaluation Office on "Prolonged Use of
Fund Resources" to the Executive Board. It welcomes the establishment
by Fund Management of an internal task force to propose steps
to carry forward the report's recommendations, as appropriate.
18. The next meeting of the IMFC will be
held in Washington, D.C. on 12 April, 2003.
SECTION E: DEVELOPMENT COMMITTEE COMMUNIQUE
Development Committee
JOINT MINISTERIAL COMMITTEE OF THE BOARDS
OF GOVERNORS OF THE BANK AND THE FUND ON THE TRANSFER OF REAL
RESOURCES TO DEVELOPING COUNTRIES
WASHINGTON D.C.,
28 SEPTEMBER, 2002
1. We met today to discuss implementation
of the strategies and decisions agreed in Monterrey and Johannesburg
and achieving debt sustainability for heavily indebted poor countries.
2. At our meeting last April, we welcomed
the very important progress achieved in Monterrey laying out a
new partnership between developed and developing countries, based
on mutual responsibility and accountability, to achieve measurable
improvements in sustainable growth and poverty reduction. We welcomed
the announcements by a number of donors of significant increases
in their ODA. Earlier this month, the WSSD concluded in Johannesburg
with a number of decisions that provide additional direction to
our task of eradicating poverty and achieving sustainable development.
A series of important commitments were made in the areas of water
and sanitation, energy, health, agriculture, biodiversity and
ecosystem management, accompanied by the launch of implementation
initiatives. Today we committed ourselves with a new vigor and
determination to implement the agreed strategies and partnerships
and to use our future meetings regularly to review progress through
clear and measurable indicators. Building on the outcomes of Monterrey
and Johannesburg, we also intend to have further discussions on
global public goods.
3. The global community must now convert
the ideas and the shared approaches agreed in Doha, Monterrey
and Johannesburg into concrete action and measure ongoing progress.
Experience has repeatedly shown that progress will only be made
through implementation of sound and sustainable country-driven
strategies. To make existing and new aid commitments more effective,
these strategies must also be supported by better coordination
and cooperation amongst development partners and by effective
alignment of donor support with country strategies. We underline
our commitment to work together and with civil society and the
private sector, under the leadership of the government concerned,
in a coherent way to achieve concrete results.
4. We reaffirmed the crucial importance
of trade as a source of growth and poverty reduction. We recognized
that it is essential for developed countries to do more to open
their markets and eliminate trade-distorting subsidies for products
that represent major potential exports for developing countries,
such as agriculture, textiles and clothing. At the same time,
we recognized the importance of continued efforts towards trade
liberalization in developing countries as part of an overall development
strategy, in conjunction with the necessary policies and capacities
that facilitate an appropriate supply response and minimize the
adjustment burdens on the poor. We therefore welcomed the increased
attention to trade issues in the work of the. World Bank and International
Monetary Fund in support of a successful Doha Development Agenda.
We urged intensified efforts to mainstream trade in the development
dialogue with the Bank's members, with an enhanced operational
focus on building both institutional and physical capacity to
help developing countries take advantage of new trade opportunities.
5. Last April, we endorsed a World Bank
plan to help make primary education a reality for all children
by 2015 and gender equality in primary and secondary education
by 2005. Today we reviewed implementation of the Fast Track Initiative
and requested a progress report on results achieved for our next
meeting. In addition, we considered the challenges of scaling
up activities in two additional areas: HIV/AIDS/Communicable Diseases
and water and sanitation. We urged the World Bank to pursue its
work in these areas.
6. We endorsed the overall approach set
out for discussion today for making results central to the management
of development programs in both developing countries and in development
agencies. We urged the Bank to expedite implementation of the
action plan for increasing its results orientation and to intensify
its work with multilateral and bilateral partners to share information
on planned and ongoing country development activities, including
diagnostic work and operational support, as a basis for enhanced
alignment of donor support for national development strategies.
We also urged increased use of joint evaluations of donor programs,
especially for country and sector program support, to complement
assessments of individual agencies' performance, including as
development partners. We highlighted the need for increased and
coordinated donor support for capacity building, including for
results-oriented monitoring and evaluation and statistics. We
asked the Bank to report on these efforts at our next meeting.
7. We recognised the need for intensified
efforts to harmonise operational policies and procedures of bilateral
and multilateral agencies at the institutional and country levels
so as to enhance aid effectiveness and efficiency and promote
greater ownership by developing countries. We committed to further
action in streamlining such policies, procedures and requirements
over the period leading to the high-level forum scheduled in Rome
in February 2003 and beyond.
8. Recognising the special challenges faced
by Africa in meeting the millennium development goals, we urge
the Bank and the IMF to scale up assistance to these countries
and to build on the NEPAD initiative as a unique opportunity to
make significant and quick progress building on African leadership.
9. Our discussions have reinforced our conviction
that major progress on achieving the Millennium Development Goals
is possible. What is needed now is determined implementation of
agreed strategies and partnerships on the part of both developed
and developing countries, as well as multilateral agencies and
the setting out of a clear framework identifying responsibilities
and accountabilities by which progress can be regularly measured.
The Development Committee intends to contribute to moving this
implementation agenda forward through regular monitoring and review
of the policies, actions and outcomes needed to achieve these
goals. We request the Bank and the Fund to present proposals at
our next meeting for taking this forward, whilst recognizing the
role of the United Nations in monitoring the MDGs.
10. The Monterrey Summit also stressed the
importance of greater coherence, coordination and cooperation
among multilateral organisations and the need to broaden and strengthen
participation of developing countries and countries with economies
in transition in international decision-making and norm-setting.
The Summit encouraged the World Bank and the IMF to find pragmatic
and innovative ways to further enhance participation of these
countries and thereby to strengthen the international dialogue
and work of these institutions. We requested the Bank and the
Fund to prepare a background document to facilitate consideration
of these important issues at our next meeting.
11. We welcomed the continued progress made
on the HIPC initiative and reconfirmed our commitment to its implementation
and full financing. We fully support the objective of helping
our poorest, most heavily indebted members achieve an enduring
exit from unsustainable debt but we recognize that considerable
challenges remain. Success will require: a sustained commitment
by HIPC countries to improvements in domestic policies and economic
management; capacity building for the management of financial
assets and liabilities; full participation and delivery of relief
by all affected creditors; and adequate and sufficiently concessional
financing by international financial institutions and the donor
community. We call upon all official and commercial creditors
that have not yet done so to fully participate in the HIPC Initiative.
We have asked the Bank and the Fund to undertake an early review
of the difficult issues of HIPC-to-HIPC debt relief and creditor
litigation. We stressed the urgency of meeting the financing shortfall.
of the HIPC Trust Fund which could be up to $1 billion. We welcome
the recent announcements of support and call upon other donor
countries to make firm pledges and contributions as early as possible.
At the same time, we reaffirm our commitment to ensuring that
the cost of debt relief to IDA is not permitted to compromise
IDA's resources, and we note the arrangements in place to accomplish
this objective.
12. We reviewed further experience with
PRSPs which confirmed the broad findings of the joint Bank/Fund
review earlier this year. The Committee is encouraged by the increased
momentum in countries' efforts to develop and implement their
PRSPs. We call on the Fund and Bank together with all donors to
align their support with country PRSPs and to collaborate with
each other to: strengthen their analysis of the sources of growth;
streamline conditionality; help countries improve their public
expenditure management systems; facilitate an environment conducive
to private sector development; and intensify efforts to help countries
undertake poverty and social impact analyses on a more systematic
basis.
13. Finally we reviewed the role being played
by the Bank and Fund, in collaboration with other international
institutions, in combating money laundering and the financing
of terrorism (AML/CFT). We endorse the conditional addition of
the FATF 40+8 Recommendations to the list of international standards
and codes useful to the operational work of the Bank and the Fund,
and the conditional beginning of the 12 month pilot program of
comprehensive AML/CFT assessments and accompanying ROSCs, in accordance
with the voluntary, cooperative and uniform approach. We encourage
the Bank and the Fund to continue to integrate these issues into
their diagnostic and surveillance work in line with their respective
mandates and to enhance their technical and capacity building
efforts.
14. We express our deep condolences to the
family of the late Mr. Bernard Chidzero, former Minister of Finance
of Zimbabwe. Minister Chidzero served with great skill and distinction
as Chairman of the Development Committee from 1986 to 1990.
15. The next meeting of the Development
Committee will be held in Washington, D.C. on 13 April, 2003.
Department for International Development
October 2002
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