Speech

Remarks by Michel Camdessus

May 21, 1996

I am very pleased to join you in commemorating the fortieth anniversary of the Paris Club--even if my other commitments regrettably require that I do so from my desk here in Washington, rather than among you in Paris. I think, nevertheless, that forty years of working shoulder to shoulder on the common task of the Paris Club and the IMF excuse this merely geographical separation.

The Paris Club has turned forty. This event merits some thought, even if we might wish that there would be no need for such a thing as the Paris Club in the best of all possible worlds. But living as we do in this somewhat suboptimal world at the end of the second millennium, let us rejoice in being able to celebrate a noninstitution that fulfills, with a striking economy of means and with matchless effectiveness, its crucial mission of helping countries overcome balance of payments crises and regain the confidence of the international community.

As a former chairman of the Paris Club from 1978 to 1984, let me begin by briefly recalling the days when the Paris Club and the IMF had to act together to meet two challenges. One challenge was to respond to the debt crisis, which would lead us to make profound changes in many of our customs and methods of operation—such as going from one or two meetings a year to one or more meetings a month, to mention only the most evident. The other challenge was a more fundamental one: to gain recognition of the Club—particularly in the developing world—as a fully legitimate forum for the impartial and constructive handling of debt problems. Today, this goes without saying, but in 1978 it was still subject to controversy. To establish this credibility, the Club needed not only the famous "features" adopted at the UNCTAD conference in Manila, but also the patient, imaginative and highly professional work of all of you current members of the Club, your predecessors, and those few, but unfailingly devoted, individuals who have discreetly and competently provided administrative support. Over the last 18 years, there have been so many men and women on your delegations and on the secretariat itself, who have devoted themselves enthusiastically to the work of the Paris Club, which has been continually enriched so as to respond better to the changing requirements of the world economy.¹

Years have passed since the beginning of the 1980s. They have witnessed the growing role of the Club and our deepened cooperation.

Here at the Fund, we have particular appreciation for the role of the Paris Club and the complementarity between our mutual efforts to support stabilization and reform in developing countries. While we at the IMF provide the macroeconomic framework and the conditionality that underpin Paris Club reschedulings, you at the Paris Club help ensure that Fund-supported adjustment programs are fully financed. Thus, the Fund gives Paris Club creditors greater confidence that rescheduling countries are adopting policies that will ultimately enable them to overcome their balance of payments problems—and, in the meantime, will allow available resources to be used effectively. At the same time, the Paris Club gives the IMF greater assurance that Fund-supported programs will have the financial resources required for success and, indeed, that the resources that the Fund makes available to rescheduling countries—generally in circumstances in which others would be reluctant to lend—will be protected. In this way, each body reduces the risk to the other—each enables the other to be as bold as possible in its support for rescheduling countries; both contribute to the fulfillment of one of the basic purposes of the Fund according to its Article I.

The ultimate beneficiaries of this cooperation are, of course, the rescheduling countries themselves: not simply because their debts to official bilateral creditors have in one way or another been eased, but, more importantly, because this cooperation between the Paris Club and the IMF provides a framework for strengthening their economic policies and performance, a breathing space for them to put these policies into effect, and a signal to other creditors and potential sources of new financing that the country's balance of payments problems are being addressed in an orderly way.

In my view, the Paris Club's achievements are in large part due to its unique character: to its insistence on policy conditionality on the one hand, coupled with its pragmatism and creativity on the other; and to its commitment to equitable burdensharing among Paris Club members, combined with the refreshing informality, collegiality, and spirit of cooperation that characterize its proceedings. These are the qualities that enabled the Paris Club to make an important contribution to the resolution of the debt crisis of the mid-1980s; that have permitted it to handle some massive reschedulings, such as Poland and, last month, Russia, in an expeditious way; and that have produced the innovative and evolving approach to poorer countries' debt problems—from Toronto terms through London terms to Naples terms and whatever may come next. Indeed, as we look to the future, these will also be the qualities needed to reach a cooperative solution to our next challenge: the problems of the heavily indebted poor countries.

If there were something such as a logic to human history, we could reasonably expect that one day we would no longer need the facilities of the Paris Club—that the policies and practices of all countries—developed and developing would be such that debt and debt service levels would be manageable and external financing, spontaneous. Eighteen years of involvement with both the Paris Club and the IMF have taught me a lot about the deficiencies of such logic and suggest to me rather that such a prospect is remote. In the meantime, however, let us recognize the achievements of the Paris Club, which has so well epitomized the very fine contribution that a spirit of cooperation and mutual trust can bring about in handling the most difficult financial problems of our times.

1. The first three paragraphs were delivered in French.