The IMF and World Bank Group:
An Enhanced Partnership for Sustainable Growth and Poverty Reduction
THE WORLD BANK
Washington, D.C. 20431
September 5, 2000Members of the Executive Boards
Members of the Staffs
We share a vision of our two institutions working closely together to make a strong contribution to a better world. We are committed to a strong partnership between the IMF and the World Bank Group, to increase the effectiveness and sustained impact of our operations to reduce poverty, increase growth, and strengthen the stability of the international financial system. The attached statement outlines our understanding, which should guide our work as we strive to implement this vision, based on a clear sense of the complementarities of our two institutions.
We urge you to join with us to make this vision a reality as together we face the enormous challenges of our time.
September 5, 2000
THE IMF AND THE WORLD BANK GROUP: AN ENHANCED PARTNERSHIP FOR SUSTAINABLE GROWTH AND POVERTY REDUCTION
Joint Statement by Horst Köhler and James Wolfensohn
As heads of the Bretton Woods institutions, we wish to set out our joint vision for our roles and enhanced partnership in the new century. Given the challenges facing the global economy, the work of the Fund and the Bank has become even more essential in helping to promote financial stability, sustainable growth and poverty reduction.
Context. The second half of the twentieth century was one of unprecedented economic achievement. Rapid growth in the world economy, fueled by expanding international trade and advancing technology, brought more rapid increases in living standards to more of the world's people than ever before in history. And yet, despite these significant gains, we live in a world with severe deprivation and inequality. Over one billion people - one fifth of the world's population - live on less than a dollar a day, and per capita incomes in some countries have been declining for decades. In the next two decades, world population will grow by another two billion people. Nearly all of them will be born in developing countries. Without action by the international community, the global divide will worsen.
We live in one world, and poverty is a threat to global security and welfare. The purpose of our institutions is to help all our member countries develop their human potential and productive resources, thereby building the foundations for sustainable economic growth. Recent history shows that countries that pursue the right policies, operating in a growing world economy, and with the right support, can achieve rapid economic growth and reduce poverty. An enhanced partnership between the Bank and the Fund is essential to the success of this effort.
Shared Objective. The Bretton Woods institutions were born at the same time, as parts of a design to restore a world economy devastated by global depression and war. The IMF was established as the world's central monetary institution, charged with the promotion of international monetary cooperation and international trade. The Bank was established to promote post-war reconstruction and the flow of capital to developing countries. As the world economy has grown and changed, so too the roles of the Fund and the Bank have evolved, their joint efforts now covering the spectrum of developing, transition, and industrial economies. Both institutions, however, share the same broad objective: helping to improve the quality of life and reduce poverty through sustainable and equitable growth.
Guiding Principles. The Fund and the Bank are guided by the same set of principles, derived from five decades of experience:
· For growth and development to be truly effective and lasting, it must be equitable. Barriers related to gender, ethnicity or social status need to be overcome. The benefits of development must be accessible to all.
· Country ownership is paramount, with nations accepting responsibility for their own development, and with strategies tailored to country circumstances and involving broad-based participation;
· Support should be linked to levels of performance;
· Transparency is important to ensure clarity and accountability around roles, responsibilities and outcomes.
Role of the Fund. The Fund's core mandate is to promote international financial stability and the macroeconomic stability and growth of member countries. To that end, the Fund must focus on its core responsibilities: monetary, fiscal, and exchange rate policies, and their associated institutional and structural aspects. In particular, the Fund needs to adapt to the dramatic changes in international financial markets. These have seen unprecedented growth in volume and sophistication, especially during the past decade. Private capital flows are now a major financing source for many emerging market and developing countries. But they can also be volatile and a source of abrupt crisis. This obliges the Fund to concentrate on systemic issues relating to the functioning of financial markets, both domestic and international, and make crisis prevention a priority objective in its activities.
Efforts to strengthen the stability and soundness of the financial system require close cooperation between the Fund and the Bank, with its expertise in domestic financial sectors. Cooperation in financial sector work between the Fund and the Bank has been greatly improved by the establishment of the Financial Sector Liaison Committee, which is working well, and we shall continue to work closely together in this area.
Role of the Bank Group. The core mandate of the World Bank Group is to help countries reduce poverty, particularly by focusing on the institutional, structural and social dimensions of development-thus complementing the Fund's macroeconomic focus. Over the years, the Bank Group's approach has evolved in response to the changing needs of its members. The Comprehensive Development Framework (CDF) encompasses this experience and brings the development agenda together at the country level-helping each country to identify its priorities and implement programs in conjunction with other partners.
A major challenge facing the Bank is to further tailor its programs to the evolving needs of its diverse clients. In the poorest nations-where the role of IDA remains vital-the Bank is planning to introduce the Poverty Reduction Support Credit (PRSC), which will link Bank financial support to the Poverty Reduction Strategy Paper (PRSP) which is prepared by the country and assessed jointly by the Fund and the Bank. In the middle-income countries, the Bank's focus is on adding value where the private sector cannot or will not-using lending and non-lending services to help address the structural and social agenda, improve the investment climate and reduce vulnerability to capital market volatility. And it is important for all countries that the Bank takes a more strategic approach to the provision of global public goods and supports the use of modern information technology.
In no area is our cooperation in the coming months more critical than in the Enhanced Heavily Indebted Poor Countries Initiative (HIPC). We are determined to bring the benefits of debt relief to as many countries as possible, as rapidly as possible. Our staffs are working together closely to make sure this happens. The ultimate test of the success of this initiative is how effectively debt relief contributes toward poverty reduction.
In the coming years, we will be working also to improve our policies related to conditionality, seeking to streamline it and make it as practical, straightforward, and as helpful to our members, as possible. In addition, we are working together to strengthen further our capacity to reach out and listen to the various actors involved in development-particularly at the local level where communities are often impacted by our actions. Our institutions must do a better job of engaging civil society in the development dialogue-and we will work to ensure that they do so.
Challenges for the Member Countries. Our institutions can do much to help our members and their citizens. But this task also requires direct efforts by all our members. All governments should pursue the policies that will ensure sustainable growth and reduce poverty. This challenge is especially great for the developing countries. The industrial countries also have a key role to play. For them, the main responsibility is to maintain the health of their own economies and thus contribute to a growing global economy from which all nations can benefit. In addition, the richer countries should:
· Open their markets, especially for agricultural products and textiles, to developing countries. This would bring major benefits - greater than the benefits they receive from current levels of aid - to developing countries.
· Increase aid. Aid flows from most countries have declined sharply as a percentage of GDP. The record shows that aid works in countries that pursue good policies. Donors should increase the overall level of aid, and concentrate the increase on countries that pursue good policies.
· Provide debt relief. The funding for debt relief is not yet fully assured. We urge our member governments to act to ensure that we are able to deliver debt relief to the heavily indebted poor countries.
We are strongly committed to enhance the partnership between our institutions-and with our other bilateral and multilateral partners. But to do that, we need the support of our entire membership. We ask for that support-and look forward to working with all our members in the period ahead.