Enhancing Macroeconomic Policies Through CommunicationsWelcoming Remarks by Takatoshi Kato, Deputy Managing Director, International Monetary Fund
At the Regional Media Seminar on Middle East and IMF: Cooperation for Development
Dubai, United Arab Emirates
December 18, 2006
As Prepared for Delivery
1. Good morning. I would like to thank Nasser Saidi, Chief Economist of the Dubai International Financial Center, for his kind introduction. Let me also extend a warm welcome to everyone—those of you resident here in Dubai and the many of you who have traveled to Dubai from your home countries across the region.
2. I am delighted to be here today. Since my days as Vice Minister with Japan's Finance Ministry, and now as Deputy Managing Director of the IMF, meeting with the press corps has always provided fresh challenges and learning experiences. Today is my first meeting with such a representative group of media from the Middle East. I welcome this opportunity and look forward to hearing your views.
3. Forums like this are an important part of the public debate on the economic policy challenges that countries face. Both the IMF and our member governments will be more effective if the policies we promote command broad understanding and support in society. To this end, to enhance public knowledge of economic developments, we have taken steps to ensure that IMF transparency goes beyond the mere publication of official documents to more active outreach by IMF management and staff, and to engagement in public policy debates. We are increasing our support for journalists, particularly in emerging economies and low-income countries, by providing opportunities for meaningful discussions with IMF staff. One of our many objectives is to try to promote high-quality reporting on economic issues. But discussions with media and non-official groups are also learning opportunities for us. We hear your perspective on what the IMF's role and priorities should be, and this strengthens the quality of our own analysis of issues.
4. Forums like today's seminar also contribute, through your impact on the general public, to capacity building, which has been a central component of the IMF's message in many countries where there is a particular need for strengthening institutions. Conferences often complement direct technical assistance by enabling public debate on economic policy challenges, and by assisting policymaking for longer-term development as well as stabilization policies. Public debate and political accountability increase the incentives for policymakers to strengthen their institutions, which are at least as important for growth and development as good policies.
5. There is now a broad recognition that the stability of the international financial system in recent years is partly due to the increased transparency and communications by the national authorities in the conduct of monetary and fiscal policy. The IMF has been instrumental in promoting internationally recognized transparency standards and publishing statistical data, enabling better-informed decision-making in the public and private sectors.
Let me give you some examples. In 1996-1997, after the Mexican crisis, the IMF established a two-tiered system to enhance the availability of timely and accurate economic statistics. The first tier, the Special Data Dissemination Standard (or SDDS), is tailored to countries that already meet high quality standards. The second, the General Data Dissemination System (or GDDS), is focused on improving statistical systems in countries needing help to provide more accurate data. Today, 151 countries—about 80 percent of the Fund's membership—participate in one of these facilities to promote the dissemination of high-quality data to the public. In addition, in the areas of fiscal and monetary policy, the IMF promotes transparency through the development of internationally-recognized standards and codes and through publishing reports on their observance by member countries. Some 80 countries have agreed to the publication of fiscal transparency reports.
6. Let me now turn briefly to the global and regional economy. In the past year the global economy showed itself resilient to high oil prices and increases in interest rates. IMF staff growth projections for the world economy for 2006 and 2007 are also encouraging, averaging 5 percent annually, but inflation risks are a concern as output gaps narrow. High oil prices could also adversely affect both inflation and growth. And, we need to address the risk of a disorderly adjustment of global economic imbalances.
7. Overall, the economy in the MENA region is doing relatively well, despite security problems in some countries and recent asset price corrections. The benign global environment and high oil prices have contributed to the strong economic performance in the Middle East. Economic growth in 2003-05 averaged over 5½ percent, compared to just under 4 percent during 1998-2002. The outlook for the region for 2007 is also good. Risks are associated with the potential for further conflict and a worsening of security situation. At the same time, governments need to adjust policies to better suit this environment, as we believe that high oil prices are here to stay, at least for a while. In this respect, we are encouraged by some governments' resolve to seize the opportunity to build stronger macroeconomic foundations. They are boosting investment in human development, physical infrastructure, and major investments aimed at sustaining the rapid growth of the non-oil sector and creating new job opportunities. These investments will also contribute to the international effort to reduce global imbalances.
8. Following my remarks, Mohsin Khan, Director of the IMF's Middle East and Central Asia Department, will discuss with you recent economic developments in the region and the advice we provide to economic policy makers. This includes policy advice we customarily offer through publication of the Regional Economic Outlook. Many of you are perhaps already familiar with these periodic reports, which take into account the regional and international implications of national policies.
9. As I said earlier, the world economy has now seen several years of strong growth. However, changes in the global economic environment, massive movements of capital, and the rise of new economic powers are presenting all countries and global institutions with fresh challenges. Policymakers throughout the world need to adapt to these changes to establish policies and tools to sustain stability and economic growth. With a view to modernizing both the IMF's governance and its tools and functions, the IMF Managing Director has launched a Medium Term Strategy for the institution. It was motivated by the central insight that the world is changing fast, and that the IMF needs to adapt accordingly to help our member states deal with the challenges of 21st century.
10. The strategy received a broad endorsement by the IMF membership. This included a package of measures, agreed at our Annual Meetings in Singapore this past September, designed to better align members' quotas with changes in the world economy, and to protect the participation and voice of its low-income countries. Masood Ahmed, Director of our External Relations Department, will discuss with you ongoing progress under the main areas of the Medium Term Strategy, and plans from now through the Spring Meetings in 2007.
11. This is an exciting time for the IMF as we embrace the reform of our own institution. We believe these efforts are critical if we are to continue to play an important role in keeping the global economy on the path of strong and sustainable growth.
12. Let me conclude by saying that this seminar is an opportunity for us to enhance mutual understanding of economic policy issues, and to strengthen public support for reform and development.
13. I wish you fruitful and productive discussions here.