International Monetary and Financial Committee
Attendance, 2 October 2004
Chairman
Gordon Brown
Managing Director
Rodrigo de Rato
Members or Alternates
Ibrahim A Al-Assaf, Minister of Finance, Saudi Arabia
Mervyn King, Governor, Bank of England, United Kingdom
(Alternate for Gordon Brown, Chancellor of the Exchequer,
United Kingdom)
Palaniappan Chidambaram, Minister of Finance, India
Martin Parkinson, Executive Director, Macroeconomic
Group, The Treasury,
Commonwealth of Australia
(Alternate for Peter Costello, Treasurer of the Commonwealth
of Australia)
M R Pridiyathorn Devakula, Governor, Bank of Thailand
Hans Eichel, Minister of Finance, Germany
Per-Kristian Foss, Minister of Finance, Norway
Francisco Gil-Diaz, Secretary of Finance and Public
Credit, Mexico
Ralph Goodale, Minister of Finance, Canada
Sultan Al-Suwaidi, Governor, Central Bank of the
United Arab Emirates
(Alternate for Mohammed K Khirbash, Minister of State
for Finance and Industry, United Arab Emirates)
Aleksei Kudrin, Minister of Finance, Russian Federation
Mohammed Laksaci, Governor, Banque d'Algérie
Roberto Lavagna, Minister of Economy and Production,
Argentina
Tito Titus Mboweni, Governor, South African Reserve
Bank
Hans-Rudolf Merz, Minister of Finance, Switzerland
Antonio Palocci, Minister of Finance, Brazil
Didier Reynders, Minister of Finance, Belgium
Nicolas Sarkozy, Minister of State, Minister of Economy,
Finance and Industry, France
Domenico Siniscalco, Minister of Economy and Finance,
Italy
John W Snow, Secretary of the Treasury, United States
Sadakazu Tanigaki, Minister of Finance, Japan
Paul Toungui, Minister of State, Minister of Finance,
Economy, Budget and Privatization, Gabon
Gerrit Zalm, Minister of Finance, The Netherlands
Zhou Xiaochuan, Governor, People's Bank of China
Observers
Mohammad Alipour-Jeddi, Head, Petroleum Market Analysis
Department, Organization of the Petroleum Exporting Countries
(OPEC)
Joaquin Almunia Amann, Commissioner, European Commission
Roger W Ferguson, Chairman, Financial Stability Forum
(FSF)
Heiner Flassbeck, Officer-in-Charge, Division on
Globalization and Development Strategies, United Nations Conference
on Trade and Development (UNCTAD)
John William Hancock, Counsellor, World Trade Organization
(WTO)
Donald J Johnston, Secretary-General, Organisation
for Economic Co-operation and Development (OECD)
Malcolm D Knight, General Manager, Bank for International
Settlements (BIS)
Trevor Manuel, Chairman, Joint Development Committee
José Antonio Ocampo, Under Secretary-General,
Department of Economic and Social Affairs, United Nations (UN)
Juan Somavia, Director-General, International Labour
Organization (ILO)
Jean-Claude Trichet, President, European Central
Bank (ECB)
James D Wolfensohn, President, World Bank
Washington DC, 2 October 2004
Annex E
DEVELOPMENT COMMITTEE COMMUNIQUÉ,
2 OCTOBER 2004, WASHINGTON DC
1. As we celebrate the 60th anniversary
of the Bretton Woods Institutions and approach the fifth anniversary
of the UN Millennium Declaration, we recommit ourselves to supporting
efforts by developing countries to pursue sustainable growth,
sound macroeconomic policies, debt sustainability, open trade,
job creation, poverty reduction and good governance. These actions
need to be reinforced by stronger international action and partnerships,
including reforming trade, more and more effective aid and stronger
private flows in order to make progress on the Millennium Development
Goals[1]We
remain concerned that most MDGs will not be met by most developing
countries.
2. Global economic growth is strong, supported
by exceptionally robust growth in developing countries, as the
world benefits from the significant reforms undertaken by many
countries over recent years. Private sector driven growth resulting
in new jobs and higher tax revenues, which can be used to finance
poverty-reducing public expenditures, is critical to the success
of country-led efforts to reduce global poverty. Success in the
Doha Development Agenda can only complement these developments
and we stress the importance of translating the recently agreed
WTO frameworks into tangible results. We urge all countries, developing
and developed, to participate fully in the negotiations and urge
the IMF and World Bank to continue to support work to this end,
and to help developing countries assess the impact and to provide
additional support to address potential adjustment costs.
3. To help developing countries take advantage
of the new opportunities that can arise from a better economic
setting and to strengthen the foundations for economic growth,
we welcome the renewed focus being given by the World Bank Group
to private sector development, improving the investment climate
and strengthening financial sectors, and urge the Bank to continue
to translate this into country operations. Complementing macroeconomic
stability, capacity building and a greater results focus in public
services and institutions and improving the quality of governance,
successful private sector investment, social development as well
as gender equality are key to accelerating pro-poor growth. We
note the important role played by remittances in this context.
We urge the Bank to intensify its analytical work on the potential
sources of growth and ways to mobilize them and to help countries
build the relevant analytical capacity.
4. Strengthening the foundations for growth
will also critically depend on addressing large infrastructure
needs in many countries. We welcome the Bank Group's plans to
scale-up activities in implementing the Infrastructure Action
Plan and urge accelerated support of country efforts in accordance
with the Bank's safeguards. We emphasized the importance of addressing
maintenance and other costs to ensure the sustainability of infrastructure
investments. We also stressed the need to pursue—together
with the IMF—efforts to increase fiscal space for public
infrastructure investments within limits of fiscal prudence and
debt sustainability. We also endorse further Bank engagement to
meet infrastructure needs at the regional and sub-sovereign levels,
enhancing application of risk mitigation instruments, and continuing
efforts to offer a more complete and seamless client product line
across the World Bank Group; accordingly, we urge the Bank to
present options to its Board to move this agenda forward concretely.
These actions will be particularly important in enhancing the
Bank's support for development in middle-income countries, as
well as in low-income countries.
5. These and other actions required to lay
the basis for sustained stronger growth are critical to our ability
to achieve the MDGs, as is progress in providing effective health
systems (in particular tackling HIV/AIDS, malaria and other communicable
diseases), education for all and other basic social services.
We noted the special needs of low-income countries under stress
(LICUS), where technical assistance is especially necessary to
strengthen weak policies and institutions. We look forward to
reviewing progress in all these areas in the second Global Monitoring
Report at our next meeting.
6. We agree that reform efforts in developing
countries must be supported by improved aid effectiveness, increased
aid and other financial flows, and coherent policies to achieve
development results. The international community has agreed to
harmonize and align their support behind country-owned development
strategies, streamline the use of conditionality, increase the
focus on results, and use country systems where appropriate. We
are committed to using the Second High-Level Forum on Harmonization
in Paris next spring to translate these agreements into clear
and specific commitments and timetables and call for the development
of indicators and benchmarks to monitor the participation of all
partners in this effort at the country level.
7. We must also enhance our efforts to help
developing countries build capacity and address absorptive capacity
constraints. We welcome the progress achieved to date in implementing
the Poverty Reduction Strategy (PRS) process as indicated in recent
independent evaluations. We note the important challenges that
remain in implementing the approach fully and effectively both
at the country level and in the Bank and Fund and among other
development partners, and welcome the revisions to the PRS architecture
to help achieve this. One area which deserves closer attention
in next year's PRS report is the continued efforts by the Bank
and Fund to streamline their aggregate conditionality. We also
call on the Bank to review its own policy and practice on conditionality
and report at our meeting in Fall 2005.
8. The provision of additional, predictable
and timely financial assistance to countries committed to sound
policies, remains a critical issue, particularly for sub-Saharan
Africa. We urge those donors, who have not yet done so, to make
concrete efforts towards the target of 0.7% of GNP as ODA. We
welcome the progress announced by some countries, including, in
some cases, the setting of clear timetables to achieve this objective.
We also reaffirm our commitment to a substantial and timely replenishment
of IDA, recognizing the critical timetable to reach the MDGs.
9. To address the needs for additional stable
and predictable financing to help developing countries undertake
ambitious investment plans to meet the MDGs and to finance associated
recurrent costs where appropriate, we reviewed proposals to complement
increased aid flows and commitments with innovative mechanisms.
We welcomed the World Bank and IMF analysis of these options,
notably the International Finance Facility, global taxes and voluntary
contributions, including the analysis of their technical feasibility.
We also took note of the international meeting on Action Against
Hunger and Poverty convened by President Lula on 20 September
2004 in New York. We ask the Bank and the Fund to continue their
work and report at the next meeting on how to take such options
forward. We also encourage the Bank to explore the potential for
increasing leverage through blending aid with other flows, including
MDB lending.
10. Debt sustainability is an essential
underpinning for growth. We reviewed progress under the enhanced
HIPC Initiative, welcomed the recent decision to extend the sunset
clause and urged full creditor participation. We welcome the development
of a forward-looking debt sustainability framework that aims to
help low-income countries manage their borrowings and avoid a
build-up of unsustainable debt, while pursuing the MDGs. We stressed
the need to provide resources to low-income countries on appropriate
terms, including the degree of concessionality and level of grant
financing. We look forward to further work on the remaining issues
by the Bank and the Fund to make the framework operational as
soon as possible. We underscore the need for joint Bank/Fund Debt
Sustainability Analyses (DSAs) (based on a clear division of labor)
to provide countries, and their development partners, with clear
and coherent analysis and guidance. We also urge the Bank and
the Fund to accelerate their work on means to help mitigate the
impact of exogenous shocks on low-income countries and to report
to their Boards at an early date.
11. We also reviewed reports from our Boards
with respect to their work on enhancing the voice and participation
of developing and transition countries in our institutions. This
work takes place within a broader context of reflections on how
best to address governance issues within the international community.
We welcomed the progress to date in making Bank and Fund operations
more responsive to borrowers' needs. We urge the Boards to cooperate
closely together in exploring all relevant options and to strive
to achieve consensus amongst all members. We look forward to receiving
a report regarding the feasibility of these options, to allow
us to address the necessary political decisions at our next meeting.
12. The next meeting of the Committee will
be held in Washington DC on 17 April 2005.
Annex F
KEY OUTCOMES OF THE 2004 ANNUAL MEETINGS
OF THE WORLD BANK AND THE INTERNATIONAL MONETARY FUND (IMF)
The IMFC and Development Committee Communiqués
record the agreed outcomes of those meetings. This note highlights
key outcomes from the UK Perspective
THE INTERNATIONAL
MONETARY AND
FINANCIAL COMMITTEE
(IMFC)
The IMFC discussed the Global economy and financial
markets; making IMF surveillance more effective and strengthening
crisis prevention; and enhancing international support for low-income
members. In addition, the IMFC received progress reports on crisis
resolution initiatives; IMF quotas, voice, and representation;
and the activities of the Independent Evaluation Office (IEO).
The Global economy and financial markets
Ministers welcomed the strengthening and broadening
of global growth in 2004, and expect growth to continue at a solid
pace into 2005, particularly if all countries implement required
policies and reforms. The UK emphasised the importance of progress
on the trade and structural reform agendas, highlighted the need
for countries to use the recovery to address medium term vulnerabilities,
and made proposals to bring stability to oil markets and help
ensure high oil prices do not undermine global growth. Ministers
and the IMF agreed with these messages at the IMFC, and the committee
emphasized that IMF surveillance should focus on the impact of
higher oil prices, especially on the most vulnerable; the sustainability
of medium-term fiscal positions and debt in many members; and
managing the policy response to potential inflationary pressures.
Ministers also urged all countries to work toward a development
trade round by making progress on liberalizing trade and reducing
trade-distorting subsidies, notably in agriculture.
On oil specifically, Ministers agreed that further
measures should be undertaken to increase capacity, and stressed
the importance of further progress to improve oil market information
and transparency, as proposed by the UK. As noted above, Ministers
identified the impact of higher oil prices, especially on the
most vulnerable, as a key priority for IMF surveillance; and Ministers
also reiterated that the IMF stands ready to assist members that
may be adversely affected by the increase and volatility in oil
prices.
Making IMF surveillance more effective and strengthening
crisis prevention
The UK maintained its emphasis on the importance
of independence, transparency, and credibility in surveillance.
Ministers welcomed the steps identified by the biennial surveillance
review to increase the effectiveness of Fund surveillance. The
UK strongly supports a clear and measurable approach to assessing
and enhancing the effectiveness of surveillance. To ensure the
independence of surveillance from IMF lending decisions the UK
attaches great importance to the work on bringing a fresh perspective
to surveillance in programme countries. Ministers called for progress
on this to be kept under review. The Committee also called for
a strengthening of efforts to ensure the objectivity of surveillance,
including through enhanced debt sustainability analysis, a further
area of key UK interest.
The UK maintained its support for facilities
that enhance crisis prevention, and raised the potential role
of a precautionary Poverty Reduction and Growth Facility (PRGF).
We also support the ongoing work of the IMF into its signalling
role. Ministers together welcomed consideration of whether there
are gaps in the IMF's range of instruments and policies and called
for further work on proposals for facilities to prevent capital
account crises, precautionary PRGFs, and non-financial policy
monitoring and signalling arrangements.
Enhancing international support for low-income
members
Highlighting the need for further progress to
meet the Millennium Development Goals (MDGs), the UK announced
that we will go further than we already have under the Heavily
Indebted Poor Countries (HIPC) Initiative and provide our share
of up to 100% relief of multilateral debt to IDA and the African
Development Fund, and asked the IMF to examine options to finance
relief for its poor country debtors by making better use of its
gold reserves. Our decision will ensure that instead of having
to make their payments to the International Financial Institutions
(IFIs), countries will be able to use more of their resources
to make the necessary investments in health, education and infrastructure
to meet the MDGs. In addition, the UK urged other donors to follow
our example and go further on multilateral debt relief. Ministers
in the IMFC welcomed progress under the extended HIPC Initiative
and looked forward to further consideration of outstanding issues
in the proposed framework for debt sustainability; and of further
debt relief, including its financing.
Ministers were presented with the IMF and World
Bank's final paper on Aid Effectiveness and Financing Modalities,
which found that the UK proposal for an International Finance
Facility (IFF) was technically feasible, and noted that the IFF
was the most advanced proposal to frontload aid. Ministers welcomed
the World Bank and IMF analysis of options to increase aid flows,
such as the IFF, and looked forward to a further report on options
to take these forward.
The UK welcomes the emphasis Ministers placed
on the Poverty Reduction Strategy (PRS) approach, and IMF support
to low-income countries under the Poverty Reduction and Growth
Facility, including the call that international support should
be more fully coordinated with domestic economic priorities. Ministers
also called for increased incorporation of Poverty and Social
Impact Analysis (PSIA) into IMF supported programmes, which the
UK has frequently called for in the past.
THE DEVELOPMENT
COMMITTEE
There were four items for discussion at this
year's Development Committee: Aid Effectiveness and Financing
Modalities; Strengthening the Foundations of Growth and Private
Sector Development; Enhancing Voice and Participation of Developing
and Transition Countries; and Debt and Debt Sustainability.
Aid Effectiveness and Financing Modalities
There was general consensus at the Development
Committee (DC) on the urgent need to scale up efforts to provide
more financing for development if the Millennium Development Goals
(MDGs) are to be met. We welcome the commitment made by Ministers
to step up their efforts to help developing countries build capacity
to absorb the extra financing required. We also welcome the statement
of support in the DC Communiqué for the analysis of different
financing options carried out by the World Bank and the IMF, and
their conclusion that the IFF is technically feasible. There was
some discussion of the different proposals at the Committee meeting
and we were pleased that the IFF proposal received general support,
including from developing countries.
Ministers recognised the need for all donors
to continue to intensify harmonisation efforts at all levels prior
to the Development Assistance Committee (DAC) High Level Forum
on Harmonisation in March 2005. The UK reiterated the need for
this to be translated into practice on the ground. We also welcomed
the call in the DC Communiqué for the international community
to support country owned development strategies, and to use country
systems where appropriate.
The World Bank also agreed to undertake a review
of its policy and practice on conditionality prior to the Annual
Meetings next year; this was in large part a response to a specific
request of the UK. We also used the Development Committee to launch
a consultation document on aid conditionality, setting out a clear
UK position and approach to aid relationships with recipient countries.
Strengthening the Foundations for Growth and Private
Sector Development
The DC Communiqué welcomed the renewed
focus being given by the World Bank Group to private sector development
and improving the investment climate; and the Bank Group's plans
to scale up activities to implement the infrastructure action
plan. Ministers also endorsed a balanced approach to public and
private sector roles in financing the infrastructure needs of
developing countries. The UK supported these positions, but highlighted
the need for investment in infrastructure and infrastructure services
to have an appropriate enabling environment. We also called for
the Bank to pay increased attention to public consultation in
the design and implementation of service delivery.
In the margins of the Annual Meetings, the World
Bank hosted a meeting to mobilise donor support for achieving
the MDGs in Middle Income Countries (MICs). The UK supported this
move, and used the meeting to launch its new strategy for engaging
in MICs, which places particular emphasis on collaboration among
donors.
Enhancing Voice and the Participation of Developing
and Transition Countries
We were disappointed with the lack of time devoted
to this item in the Development Committee meeting. The UK pressed
strongly for the World Bank to prepare a further report for the
Spring Meetings on the specific feasibility of a number of options
for structural reform of the Bank Boards.
Debt and Debt Sustainability
The UK welcomed the agreement by Ministers to
extend the period in which countries can access the Heavily Indebted
Poor Country (HIPC) Initiative until the end of 2006. We also
highlighted the need for a review of potentially eligible countries
to be carried out before this point, in order to ensure that as
many countries as possible are added to the list before it is
closed.
The UK also reiterated the commitment made at
the IMFC to go further than we have already under the Heavily
Indebted Poor Countries Initiative, and provide our share of up
to 100% relief of multilateral debt to IDA and the African Development
Fund, and asked the IMF to examine options to finance relief for
its poor country debtors by making better use of its gold reserves.
We urged other countries to join us as we take this initiative
forward.
To avoid debt crises in the future, it is essential
that lending decisions by the IFIs and other creditors are based
on a robust debt sustainability analysis. The UK welcomed Ministers'
support for the proposed World Bank/IMF debt sustainability framework,
and their agreement that financing to developing countries needs
to be provided on appropriate terms in order to help these countries
both achieve long term debt sustainability and also access the
investment necessary to meet the MDGs. We also reiterated our
call for the World Bank and IMF to continue to work together in
developing individual country by country debt sustainability analyses.
1 As endorsed by Heads of State and Government in the
UN General Assembly on 8 September 2000. Back
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