Annex E
COMMUNIQUE FO 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 twelfth meeting in Washington, D.C. on September 24,
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 emphasizes 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 emphasizes 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 liberalization. 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 liberalization 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 liberalization,
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 globalization
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
report2 are to:
Make surveillance more effective;
Adapt to new challenges and needs in different
member countries;
Help build institutions
and capacity;
Prioritize and reorganize 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 globalization 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 percent 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 G-8 countries' commitments
to provide additional resources. It also emphasizes 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 finalization 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 Thirteenth 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 eighteen years.
20. The next meeting of the IMFC will be held in
Washington, D.C. on April 22, 2006.
INTERNATIONAL MONETARY AND FINANCIAL COMMITTEE
ATTENDANCE - SEPTEMBER 24, 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)
Nicolás 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 September 8, 2000.
2 The report can be
found at http://www.imf.org/external/np/omd/2005/eng/091505.pdf.
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