Annex E
COMMUNIQUÉ OF THE INTERNATIONAL MONETARY
AND FINANCIAL COMMITTEE OF THE BOARD OF GOVERNORS OF THE INTERNATIONAL
MONETARY FUND
1. The International Monetary and Financial
Committee held its 12th meeting in Washington, DC on 24 September
2005 under the Chairmanship of Mr Gordon Brown, Chancellor of
the Exchequer of the United Kingdom.
THE GLOBAL
ECONOMY AND
FINANCIAL MARKETS—OUTLOOK,
RISKS, AND
POLICY RESPONSES
2. The Committee welcomes the ongoing global
economic expansion, although it notes that growth divergences
between countries remain wide. Global growth is expected to continue,
although downside risks to the outlook have increased, especially
high and volatile oil prices, recently exacerbated by the effects
of Hurricane Katrina, the widening of global imbalances, increasing
protectionist sentiment, and the possibility of tighter financial
market conditions. While core inflation generally is contained
and inflation expectations remain well anchored, higher oil prices
remain a risk to price stability. The Committee notes that these
areas should be a particular focus of IMF surveillance and policy
advice in the coming months.
3. The Committee emphasises that oil producers,
oil consumers, and oil companies will all have their part to play
in working together to promote greater stability in the oil market.
First, the Committee welcomes the action by members of the International
Energy Agency and oil-producing countries to continue to increase
supplies to the market. Second, the Committee calls for further
investment both now and in the long term throughout the supply
chain, particularly in refining capacity including of heavy oil,
and for efforts to create a favourable investment climate. Third,
the Committee also stresses the importance of policies to promote
energy conservation, efficiency, and sustainability, including
through new technologies, alternative sources of energy, and reducing
subsidies on oil products. Fourth, the Committee encourages closer
dialogue between oil producers and consumers, and further efforts
to improve oil market data and transparency to improve market
efficiency. Fifth, the IMF should stand ready to provide assistance
to help members, especially poor countries, deal with oil price
shocks.
4. The Committee welcomes recent progress
in implementing the agreed policies to address global imbalances
and foster growth, but urges further action to promote orderly
adjustment in view of the heightened risks to the outlook. This
includes: fiscal consolidation to increase national savings in
the United States; greater exchange rate flexibility in emerging
Asia; further structural reforms to boost potential growth in
the euro area; and further structural reforms, including fiscal
consolidation, in Japan, where the economy is regaining momentum.
Measures to promote a more investor-friendly environment, including
in a number of emerging market economies, would also contribute
to reducing imbalances. Oil-exporting countries will also need
to play their part, including through efficient absorption of
higher oil revenues in countries with strong macroeconomic policies.
5. Steps to strengthen medium-term fiscal
positions remain crucial for supporting global growth and stability.
Fiscal deficits in many industrial countries need to be lowered
further, and reforms to address pressures from aging populations
and ensure the sustainability of pension and health care systems
need to be accelerated. Improvements in the fiscal positions and
debt structures of many emerging market countries are welcome,
but in countries with high public debt levels continued fiscal
consolidation efforts are needed. The Committee also calls for
more ambitious efforts to address rigidities in labor and product
markets in many countries. Regulatory and supervisory authorities
should remain alert to risks stemming from ample global liquidity
and associated risk taking and leverage.
6. The Committee emphasises that a successful
outcome to the Doha Round by the end of 2006 remains of critical
importance for global growth and poverty reduction. Serious challenges
remain in reaching agreement at the WTO ministerial meeting in
Hong Kong SAR in December. As finance ministers and central bank
governors of WTO member countries, we have a vital interest in
successful multilateral trade liberalisation. Benefiting from
a useful exchange of views with Mr Pascal Lamy, the Director-General
of the WTO, the Committee calls on all countries to ensure progress
on ambitious trade liberalisation with the urgency that the timetable
now demands. Key areas for action are: increasing market access,
especially for developing countries; significantly reducing trade
distorting domestic support; eliminating all forms of export subsidies
in agriculture; and making significant progress on services, including
financial services, and on issues of intellectual property. The
Committee welcomes the joint IMF-World Bank staff report on proposals
to enable low-income countries to benefit fully from trade liberalisation,
and urges the Executive Board to consider these proposals expeditiously.
7. The Committee welcomes the enhanced growth
performance and prospects of many of the world's poorest countries,
reflecting improvements in their underlying policies. With ten
years remaining to meet the Millennium Development Goals (MDGs),
[1]those
countries should move rapidly to strengthen policies needed for
sustainable growth and poverty reduction, including through sound
macroeconomic frameworks and building the sound, accountable,
and transparent institutions that are essential for fostering
growth and supporting vibrant private sector growth. Also, the
international community must follow through expeditiously on its
renewed commitments to provide additional resources, including
at the Gleneagles Summit and the Millennium Review Summit. An
ambitious outcome to the Doha Round is also essential for poverty
reduction.
IMF OBJECTIVES AND
MEDIUM-TERM
STRATEGY
8. The Committee welcomes and supports the
broad priorities set forth in the Managing Director's Report
on the Fund's Medium-Term Strategy to improve the IMF's effectiveness
in support of its members. In the coming years the IMF will continue
to work to help members meet the economic challenges of globalisation
within its mandate in the macroeconomic and financial areas. The
Committee looks forward to specific proposals and timelines on
the main tasks identified in the medium-term strategy in the Executive
Board's work program, within the context of the IMF's medium-term
budget framework and the staff compensation review.
9. The broad priorities set out in the Managing
Director's report[2]
are to:
— Make surveillance more effective;
— Adapt to new challenges and needs
in different member countries;
— Help build institutions and capacity;
— Prioritise and reorganise the IMF's
work within a prudent medium-term budget; and
— Address the issues of fair quotas
and voice.
The Committee agrees that the IMF needs to deepen
its analysis of globalisation and continue to develop its strategy
for responding to the long-term challenges it poses.
STRENGTHENING IMF
SUPPORT FOR
LOW-INCOME
COUNTRIES—INSTRUMENTS;
FINANCING; AND
DEBT RELIEF
10. The Committee reiterates that the IMF
has a critical role in supporting low-income countries through
policy advice, capacity building, and financial assistance. The
PRGF remains the main instrument for IMF financial support for
low-income country members. The Committee agrees that the IMF's
concessional lending should be financed at an appropriate level
as assessed by the IMF. The Committee calls for incorporation
of the lessons from the recent review of the design of PRGF-supported
programs in the future work of the IMF in low-income countries.
11. The Committee welcomes the progress
made on new instruments that will strengthen IMF support for low-income
countries. The Policy Support Instrument (PSI) will be available
to members that do not need, or want, IMF financial assistance,
but voluntarily request IMF endorsement and continued assessment
of their policies as meeting the standard of upper credit tranche
conditionality. The country-owned policy frameworks designed by
the authorities would consolidate medium-term macroeconomic and
financial stability, and deepen reforms in support of poverty
reduction and economic growth. A new window in the PRGF Trust
will also be available to complement existing instruments by providing
timely concessional support to low-income members without a regular
PRGF arrangement and who are facing exogenous shocks, and we look
forward to contributions from countries.
12. The Committee supports the proposal
to provide 100% cancellation of debts owed by Heavily Indebted
Poor Countries (HIPCs) to the IMF, the International Development
Association and the African Development Fund. This will provide
significant additional resources for countries' efforts to reach
the MDGs and reinforce longer-term debt sustainability. The Committee
welcomes the approach subsequently discussed in the IMF to ensure
that the IMF's resources will be used consistently with the principle
of uniformity of treatment. It stresses the importance of ensuring
that the IMF's capacity to provide financing to low-income countries
is maintained, and therefore welcomes G8 countries' commitments
to provide additional resources. It also emphasises that countries
benefiting from irrevocable debt relief should have demonstrated
sound policies and high standards of governance. Following this
agreement now reached on all the elements, the Managing Director
has informed the Committee that he will now call the Executive
Board together to complete its approval of the arrangements to
deliver debt relief by the end of 2005. The implications of debt
cancellation for the new debt sustainability framework should
be addressed in the review scheduled for Spring 2006. There should
be a regular report on progress at future meetings of the Committee.
13. The Committee underscores the importance
of full creditor participation, including by non-Paris Club creditors
and private creditors, in contributing their share to implementing
the enhanced HIPC initiative. It takes note of the work on identifying
low-income countries with unsustainable debts as of end-2004,
with a view to finalisation by early 2006 of the list of countries
potentially eligible for HIPC assistance.
14. The year 2005 is the International Year
of Microcredit. The Committee notes the IMF's role in improving
data availability on microcredit and in addressing microcredit
issues in the Financial Sector Assessment Program.
OTHER ISSUES
15. The Committee welcomes the rapid progress
on the inclusion of collective action clauses in international
sovereign bonds, and the efforts by emerging market issuers and
private sector creditors to broaden the consensus on the "Principles
for Stable Capital Flows and Fair Debt Restructuring in Emerging
Markets." The Committee looks forward to further work on
the orderly resolution of financial crises, including the implementation
of the IMF's lending into arrears policy.
16. The Committee calls for continued actions
by all countries to develop strong programs on anti-money laundering
and combating the financing of terrorism (AML/CFT). The Committee
supports the IMF's efforts to implement its intensified AML/CFT
work program, and notes the critical importance of supporting
countries' efforts with well-targeted and coordinated technical
assistance.
17. The Committee recommends members' acceptance
of the Fourth Amendment of the Articles of Agreement. The Committee
reiterates that the IMF's effectiveness and credibility as a cooperative
institution must be safeguarded and further enhanced. Adequate
voice and participation by all members should be assured, and
the distribution of quotas should reflect developments in the
world economy. The 13th General Review of Quotas presents an opportunity
to address the issue, and we look forward to progress on this
issue and a report back at our next meeting.
18. The Committee looks forward to continued
high-quality reports by the Independent Evaluation Office (IEO)
under the leadership of its new Director, Thomas Bernes, and to
the upcoming external evaluation of the IEO.
19. The Committee paid tribute to Alan Greenspan,
in his last meeting of the IMFC, for his outstanding leadership
of the Federal Reserve and his unprecedented and much valued contribution
to the Committee's work over the last 18 years.
20. The next meeting of the IMFC will be
held in Washington, DC on 22 April 2006.
INTERNATIONAL MONETARY
AND FINANCIAL
COMMITTEE
ATTENDANCE—24
SEPTEMBER 2005
Chairman
Gordon Brown
Managing Director
Rodrigo de Rato
Members or Alternates
Burhanuddin Abdullah, Governor, Bank of Indonesia
Ibrahim A Al-Assaf, Minister of Finance, Saudi Arabia
Thierry Breton, Minister of Economy, Finance and
Industry, France
Mervyn King, Governor, Bank of England, United Kingdom
(Alternate for Gordon Brown, Chancellor of the Exchequer,
United Kingdom)
Palaniappan Chidambaram, Minister of Finance, India
Axel Weber, President, Deutsche Bundesbank
(Alternate for Hans Eichel, Minister of Finance,
Germany)
Nicolas Eyzaguirre, Minister of Finance, Chile
Per-Kristian Foss, Minister of Finance, Norway
Ralph Goodale, Minister of Finance, Canada
Duck-Soo Han, Deputy Prime Minister and Minister
of Finance and Economy, Korea
Sultan Al-Suwaidi, Governor, United Arab Emirates
Central Bank
(Alternate for Mohamed 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
Tito Titus Mboweni, Governor, South African Reserve
Bank
Hans-Rudolf Merz, Minister of Finance, Switzerland
Antonio Palocci, Minister of Finance, Brazil
Armando León, Director, Board of Directors,
Central Bank of Venezuela
(Alternate for Gastón Parra Luzardo, President,
Central Bank of Venezuela)
Karl-Heinz Grasser, Minister of Finance, Austria
(Alternate for Didier Reynders, Minister of Finance,
Belgium)
John W Snow, Secretary of the Treasury, United States
Toshihiko Fukui, Governor, Bank of Japan
(Alternate for Sadakazu Tanigaki, Minister of Finance,
Japan)
Paul Toungui, Minister of State, Minister of Finance,
Economy, Budget and Privatization, Gabon
Giulio Tremonti, Minister of Economy and Finance,
Italy
Gerrit Zalm, Minister of Finance, Netherlands
Zhou Xiaochuan, Governor, People's Bank of China
Observers
Joaquín Almunia, Commissioner, Economic and
Monetary Affairs, European Commission
Duncan S Campbell, Director, International Policy
Group, International Labour Organization (ILO)
Roger W Ferguson, Jr, Chairman, Financial Stability
Forum (FSF)
Heiner Flassbeck, Officer-in-Charge, Division on
Globalization and Development Strategies, United Nations Conference
on Trade and Development (UNCTAD)
Donald J Johnston, Secretary-General, Organisation
for Economic Co-operation and Development (OECD)
Malcolm D Knight, General Manager, Bank for International
Settlements (BIS)
Pascal Lamy, Director-General, World Trade Organization
(WTO)
Trevor Manuel, Chairman, Joint Development Committee
José Antonio Ocampo, Under-Secretary-General,
Department of Economic and Social Affairs, United Nations (UN)
Adnan A Shihab-Eldin, Acting Secretary-General, Organization
of the Petroleum Exporting Countries (OPEC)
Jean-Claude Trichet, President, European Central
Bank (ECB)
Paul Wolfowitz, President, World Bank
1 As endorsed by Heads of State and Government in the
UN General Assembly on 8 September 2000. Back
2
The report can be found at http://www.imf.org/external/np/omd/2005/eng/091505.pdf. Back
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