Spain and the IMF
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Heavily Indebted Poor Countries -- A Factsheet
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PRESS CONFERENCE BY THE|
World Bank/IMF Spring Meetings
Saturday, April 15, 2000
P R O C E E D I N G S
MR. BAKER: Good afternoon, ladies and gentlemen, and welcome to the press conference of the Chairmen of the Ministers of the Group of Twenty-Four.
At the center of the head table, the Chairman of the Ministers of the G-24, Mr. Germain Suarez, President of the Central Bank of Reserve of Peru; the First Vice-Chairman, Mr. Ernest Ebi, Deputy Governor of the Central Bank of Nigeria; the Chairman of the Deputies of the G-24, Mr. Carlos Saito, Advisor to the President of the Central Bank of Reserve of Peru; the Second Vice-Chairman, Dr. Habib Abu Sakr, Director General of the Ministry of Finance of Lebanon.
Before we start the press conference, the Chairman of the Ministers of the Group of Twenty-Four will have a few remarks.
MR. SUAREZ: Thank you. Good afternoon, ladies and gentlemen. It is a pleasure to meet with you. The G-24 was created in Lima, Peru in November 1971 by the Group of 77 with the aim of defending the interests of the developing countries on international financial issues and to influence the decisions that are adopted within the framework of the Bretton Woods institutions.
Now 29 years later, much work remains to be done in order to reduce the gap between the richest and the poorest countries of the world. With this in mind, the communique underscores the importance of strengthening the efforts to fight poverty, including the timely and adequate funding of the Enhanced HIPC Initiative and lowering barriers to developing country exports.
Regarding the Enhanced HIPC Initiative, we expressed deep concern about the insufficiency of bilateral contributions from donor countries to the HIPC Trust Fund, the future availability of IDA lending for HIPC and non-HIPC poor countries, and the burden of the cost of the initiative that falls on other developing countries that have lent to HIPC countries.
Our group has also analyzed other important issues such as surveillance, standards and safeguards. In essence, we recognize the importance of effective surveillance of all members. It should focus especially on the regional and international implications of domestic policies pursued by the largest economies.
The communique reflects our particular concern about the negative impact of an excessive increase in short-term interest rates in the major industrial countries on growth prospects and the cost of credit for developing countries. We are also concerned about the potential dangers of too much volatility among the major currencies and financial asset markets.
We welcome the debate on the reform of the Bretton Woods institutions. However, we have strong reservations about the proposals to reduce the access, increase the costs or shorten the maturities of the lines of credit provided by the Bretton Woods institutions. The G-24 finds positive the strengthening of cooperation between the Bank and the Fund within their areas of expertise to foster sustainable economic growth and poverty reduction.
I am ready to answer your questions and I will answer the questions in Spanish.
A QUESTIONER: Mr. Suarez, is there a great concern in the G-24 about the impact of volatility in Wall Street and the most recent situation on Friday [April 14]? How can that impact the prospects of growth in developing countries, and especially in Latin America? And if that is the case, is there any measure that the G-24 is looking for that?
MR. SUAREZ: [Interpreted from Spanish.] The stock markets are subject to ups and downs. There is always some degree of volatility in exchange markets as well as in the stock markets.
And what happened on Friday may be a trend or may just be a temporary thing. Undoubtedly, this specific instance may be very short-term but they need to be analyzed in the context of the major policies over the next few months, year or medium-term that are conducted by the industrial countries, in particular the major financial markets.
So, in this context, the G-24 has focused on the outlook for the world economy in the coming months and on any possible risks there may be in light of what you may read in the communique.
A QUESTIONER: Is it possible to illustrate the kind of trade barriers that are standing in the way of developing countries getting better access to the markets of the developed countries? Which are the particular areas or articles you have in mind?
MR. SUAREZ: Regarding barriers to international trade, and as we related in the communique, we are sorry that the industrial countries place these barriers for developing countries and there are some products which are quite sensitive. I am referring here to textiles, foodstuffs and the products of industrial countries that are subsidized.
And we believe that these trade negotiations should continue, and as soon as possible they should take due account of the negative impact of such barriers and hindrances to international trade, especially from the industrial countries' markets.
Developing countries have liberalized their external trade and there needs to be some reciprocity on the part of the industrial countries.
A QUESTIONER: A follow-up question. Will this communique be sent to the WTO and to the Committee on Agriculture in their current negotiations on agricultural trade liberalization?
MR. SUAREZ: This point was not looked at in the G-24 but I will refer you to the communique.
A QUESTIONER: The reservations that the G-24 has in regards to the Bretton Woods agreements, could you elaborate on that a little more, particularly on where you feel it is most problematic to some of the initiatives that are currently underway?
MR. SUAREZ: Yes. This is mainly in connection with the proposal made by the Meltzer Commission at the request of the U.S. Congress. We agree with the Commission only in that we need to reduce poverty.
And secondly, we need to improve the efficiency and the effectiveness of the Bretton Woods institutions. Thirdly, as we say in the communique, it is unacceptable to propose that the Fund stop granting concessional loans to the poorest members of the Fund, or that access to the World Bank resources be limited to specific countries, or that Fund surveillance be applied only to some countries without taking into account--which is also proposed by the Commission-- that IMF loans should be short-term.
A QUESTIONER: I wonder if I could ask the Minister from Nigeria, could you comment about the discussions that went on today concerning debt relief for the African countries, and particularly the decision to defer action on Ugandan debt? I assume there must have been some discussion about that.
MR. EBI: I don't think there was any discussion at the Ministers' meeting this morning on that particular issue of debt relief. There was no specific discussion on that.
Except if you want me to address something that was not mentioned at the meeting, which is totally out of the question here, but there was no mention at all about the relief with specific reference to Uganda this morning.
QUESTION: Can you just address it from the African perspective?
MR. EBI: Well, as you well know, Nigeria has not qualified for the HIPC Initiative for some reasons. We are trying to get an agreement now with the Fund before we can go to the Paris Club to discuss the issue of debt relief for Nigeria. I am talking about Nigeria now.
However, the picture we get is that we can get rescheduling but without concessions; that is, if at all. We are still at that point of reaching an agreement before we can go to the Fund to take up that issue. That is where we are presently.
QUESTION: I have a question to His Excellency, the Chairman of Ministers, about his response to what is raised in the demonstrations. What is the response of the group?
MR. SAKR: [Interpreted from French.] Regarding the demonstrators, we represent the Third World. We are the G-24, and we are here to defend the interests of our countries, the developing countries. So, all of our efforts are in that direction. So, there is no contradiction between our position and the position of the people who are demonstrating.
QUESTION: Do you have any assessment of the recent summit meeting that was held in Havana, how much of it was in league with the current trend or outreach of the G-24?
MR. SUAREZ: [Interpreted from Spanish.] I was not invited by the G-77 in Havana.
QUESTION: This question is for Mr. Ebi, the First Vice-Chairman. My question to you is about the protest outside and what is your impression of the protests and whether there is any sense of solidarity?
MR. EBI: I think I would toe the line of the World Bank President in his remarks to the G-24 Ministers this morning, that I would not say there is solidarity, but I think there is a message in what is going on out there, and it shows some dissatisfaction with the role of the Fund or whatever, but it is just for us to be sensitive to that.
I guess there has to be a lot of education on the role of the Fund and a lot of corrections to make. Basically, that is the way I would see it. I would not call it outright solidarity, but I think I tend to associate myself with the remarks of the World Bank President that it shows some dissatisfaction, and it is important that we listen to the voice, where there are amendments to be made, so it should be, and then, of course, in the area of education to educate the people comprehensively on the roles of the Fund.
A QUESTIONER: In paragraph 11 of the communique, you say that the developing countries are inadequately represented in international financial fora. What fora are you talking about?
MR. SUAREZ: [Interpreted from Spanish.] Yes, this reference in paragraph 11 has to do with the G-7 Commitment on Financial Stability and also to a number of Basle committees that have to do with bank supervision on the international level that affect the banking systems of all countries.
And it seems to me that it is important for all countries to participate in preparing these measures. Some countries are consulted; their views are asked for. But the problem here is that we need a permanent mechanism so that all countries will participate through their representatives at these meetings or individually—sometimes individually is not possible—so that the standards that are approved by that committee on banking regulation and surveillance are applied in all countries in a voluntary manner, that they be accepted in a voluntary manner for the sake of a better management of the financial system, and also to improve relations with countries from which credits come.
And these banking standards should be applied even more intensely in industrialized countries themselves and especially in the banking system.
A QUESTIONER: Thank you. My name is Peter Ingardi [ph] with Business Week Magazine.
A year-and-a-half ago when the U.S. and other Western countries sharply started lowering interest rates, that was seen as helping calm the liquidity crisis in the emerging markets. Now we have seen rather significant increases in interest rates in the United States and more may be on the way.
Is there any concern that this is going to have a big negative impact for the developing world in terms of how that is going to translate.
The second question is has this come up in your meeting today and do you have any sense that the U.S. is taking this into account at all?
MR. SUAREZ: [Interpreted from Spanish.] First of all, it is quite clear. I am a central banker. I am the head of the Central Bank of Peru and we believe that there should not be conditions leading up to inflation in general terms. When these measures are taken, they help stabilize economies and they force excessive demand for goods and services in a specific country.
Now you can turn to monetary policy as fiscal policy or a combination of both monetary and fiscal policies. But if you really focus on interest rates only, then the cost of credit will rise for countries turning to the U.S. market for their funds and even interest rates in the European market might go up. We don't know that.
So, it is sort of an amber light. We have got to be vigilant and watchful and whatever coordinations are necessary at the level of the G-7 will be very important when it comes to this possibility.
QUESTION: Thank you very much.
Buenos tardes. More than macroeconomic figures, I would like you please to tell us when are we reporters, researchers going to see the actual studies and analyses on fiscal policies on whatever you are entitled to receive? But not always our Ministers tell to the public for the general opinion what are these studies that you get from the think tanks or from the people, researchers of the IMF, transparency. When are we going to get these very studies that you discuss in the Council of Governors of the IMF?
MR. SUAREZ: [Interpreted from Spanish.] Well, I am talking here on behalf of the G-24, the Intergovernmental Group that makes up the group of twenty-four developing countries. Now we have a technical group and within that technical group there are papers that are drafted on topics such as poverty, on improving and increasing the effectiveness of the International Monetary Fund and the World Bank and other such documents.
I understand that those papers are disseminated. Now maybe that could be coordinated in a better way for the public to receive those papers. I see no problems with having these papers disseminated because they are of interest to all of us.
QUESTION: Buenos tardes. Christa Wesge [ph], On-Line.
I just wanted to know whether or not as a follow-up to the representational question whether the G-24 had any proposals to break with the tradition that the IMF is run by a European and the World Bank is run by an American, whether or not you are going to be pushing for that in any way.
MR. SUAREZ: [Interpreted from Spanish.] In our communique, we indicate that in the case of vacancies at the IMF or in the World Bank some fundamental principles of transparency should be followed, and the best candidate should be picked.
And that is what we point out in the communique.
QUESTION: Thank you.
Mr. Suarez, Helen Freeman again. I just wanted to follow-up on my question. I appreciated your answer saying that, yes, the communique could go to the Committee on Agriculture of the WTO. Does that mean it definitely will go to the Committee on Agriculture?
MR. SUAREZ: [Interpreted from Spanish.] Well, to answer that question, I would have to discuss this issue with the other members of the G-24.
QUESTION: Thank you. Corey Goldman with CCN FN.
Just number 14 when you talk about international codes, standards and best practices. You say in the communique that the surveillance should be extended to cover the observance of such standards and codes but should remain a voluntary choice by each member. Can you elaborate on that? I mean, does that mean basically you are going to follow standards and then decide on your own whether or not to actually tell people you are following the standards?
MR. SUAREZ: [Interpreted from Spanish.] What we are attempting to say is that the standards and codes that have been established and are being developed within the IMF should be taken by the countries in a voluntary manner. To include them as part of the Fund's supervision might subsequently lead to additional conditionalities if these countries happen to need financing from the International Monetary Fund.
So, what is fundamental is that countries in general should accept this on a voluntary basis and apply these standards as soon as possible, but certain countries will need technical assistance, they will need more time.
And while that happens, they may need financing from the IMF or the World Bank and there may be an additional conditionality because of the supervision issue.
QUESTION: My question is to Mr. Ebi. Since Nigeria did not qualify, what policy measures will your government now adopt to reduce the level of debt stock in Nigeria? And what is the Bank's or the Fund's recommendation to this effect?
My second question is: What is Nigeria's short-term economic recovery plan, particularly in terms of easing away from total dependency on oil to other resources such as agriculture?
MR. EBI: Thank you.
Basically, I will start with your last question on the economic reforms being pursued by the country. I think since the new administration, which is about ten months old now, came into office, they have done a lot in that direction of reform; i.e., today we have a deregulated interest rate regime in the country, and a liberalized foreign exchange market. So, we have moved away from controls to market-determined exchange rates, and also we have the privatization program going on, and a lot of subsidies like in petroleum and so on have been deregulated.
So, I think in the area of reform we have been working very, very closely with the Fund in that area and all the performance benchmarks agreed have been met satisfactorily. What we are waiting for now is the standby agreement to enable us to approach the Paris Club for debt relief or debt reduction.
We are almost there, except for the teething problem of our budget which is still pending with our National Assembly. We hope in the next fortnight or so that issue should be resolved and we will be ready to approach the Paris Club.
Then, on the issue of debt, our President has made it very clear that we need some democracy dividends, because there is no way with that debt overhang we are going to be able to deal squarely with the issue of poverty reduction. Where are you going to find the money?
So, these are things that we expect to come from the debt relief to enable the government to do a lot of work in the area of poverty reduction and so on.
QUESTION: I have a question to the Chairman and any others. A central criticism that is being made by the folks in the street is that the Bank and the IMF have become hostages of or agents of huge multi-national corporations, that the policies of the two are serving the interests of the profits of the large corporations and that in the process the people, the resources of poor and developing nations are being exploited.
Could you comment on the extent to which this is true? Is this something that has happened occasionally? What?
MR. SUAREZ: [Interpreted from Spanish.] The developing countries in general have a low rate of domestic savings and, if we are to grow rapidly or more rapidly, we need external savings. And that is the major part of direct foreign investment in our countries, in the private sector of the industrial countries.
Now this capital flow, including foreign direct investment, which is part of the balance of payments deficit, without it, there will be much more limited access to growth and would negatively impact on growth and employment.
QUESTION: Paul Dennesey [ph], WCL Labor Market Magazine.
In light of the fact that the NGOs on the streets are very critical of the World Bank and the IMF precisely because of their sympathy or their solidarity with the poor, and right now in Havana at the end of this G-77 conference, all the leaders there are extremely critical of the IMF and the World Bank. At the UN, they do the same thing.
What is it exactly the G-24 does here in the World Bank and the IMF that outside people have to make criticisms and your voices are not heard?
MR. SUAREZ: [Interpreted from Spanish.] There is probably a problem of communication. If you look again at the communique of the G-24, you will find that we emphasize what should be done to reduce poverty in developing countries, and that this poverty reduction must be equitable and not be a burden on the middle-income countries or poor countries that are not the poorest of the poor countries.
So, in this process of rising from poverty, we have established facilities such as the HIPC Initiative, the Enhanced HIPC Initiative, and we agree with this and a way of rehabilitating the poorest countries and we support this initiative, but we also realize and say that it is important to consider equitable financing for this aid.
Consequently, the G-7, which initially approved this initiative, must increase its contribution, its bilateral contributions, because for the burden to fall on other countries which are less poor than the poorest or on regional banks may affect the poor countries themselves and not meet the objectives that have been set.
Now we, the developing country members at this meeting, look closely at all the problems of our countries and we try to find solutions that are as quick as possible, as quick a solution to the poverty problem, but there are structural problems in our countries, and we need to work on reforming the economic infrastructure of our countries to bring in, to attract more investment so that the products of the developing countries can be easily exportable to the industrial countries.
And I think that there is basically here a problem of communication.
QUESTION: Thank you. Christopher Storie [ph], International Currency Review.
It seems to me that this meeting has so far failed to address really the most staggering competitive devaluation, which has taken place in world history, namely the devaluation or the depreciation of the Euro, the collective currency.
Now for the size of this economy, this has to be the biggest competitive devaluation since we came into existence. What is your view on this? I know it is not your direct subject, but it has got to be a very serious matter of concern, surely, even in your group.
MR. SUAREZ: [Interpreted from Spanish.] Undoubtedly, at some point in the communique we refer to exchange rate volatilities in the major industrial countries which are the U.S., Japan and the European Union. And these devaluations, of course, affect trade from the industrial countries.
I am optimistic in that the countries involved are going to handle the situation in the best way possible, handle this volatility in exchange rates in light of our experience a couple of years ago when there were financial crises in various parts of the world.
We are all concerned to avoid this kind of financial crisis. And to this end, I think the necessary coordination of macroeconomic policies have got to be carried out to improve stabilization of exchange rates.
QUESTION: When you talk about the need to reform the structure, economic structure of our countries, there is also a debate that what is needed is to reform the political structure of our countries, because one of the critics is that the IMF and the World Bank are concentrating resources on a very small group of people who run the countries and the actual system makes a tremendous concentration of will.
So, the question is: What about the political reform of our countries?
MR. SUAREZ: [Interpreted from Spanish.] The funds provided by the multilateral institutions go to such sectors as education, agriculture, health, infrastructure, which are products which help distribute income and provide better possibilities for private investment. Domestic investment as well can be targeted.
So, we are only seeing part of the issue here. The situation is that in this area of the demonstrations outside, as you say, the G-24 was created to deal with monetary and financial matters and development in our countries. But standards on trade and environment, on financing under the HIPC Initiative is not in the hands of the G-24, but it is in the hands of the major developed countries.
QUESTION: Aaron Betrix [ph], Trade and Financial Review.
Mr. Chairman, can you give an assessment of the performance of James Wolfensohn, the head of the World Bank, in that role?
MR. SUAREZ: [Interpreted from Spanish.] The World Bank is doing its work well. Three years ago it started the reform to improve its productivity and efficiency. And it should continue along this line. I attended many meetings in the past decade and I have seen the concern and the effervescence and the dynamism of the President of the World Bank in his leadership of the World Bank.
QUESTION: Mr. Chairman, WCL Labor Magazine.
Can you name in these 29 years one single reform that the Group of Twenty-Four has been able to effect within the World Bank and the IMF in order to deal with the problem of poverty effectively in the G-77 countries?
MR. SUAREZ: [Interpreted from Spanish.] There are a number of facilities that have been created over these 29 years. First, there was a facility to counterbalance the negative effects of commodity price variations and fluctuations. We had a facility created in the World Bank. And there are other credit lines which help countries, developing countries to undertake structural reforms, because initially the Fund only provided balance of payments loans, to finance balance of payments.
But underpinning all these problems was the problem of structural matters. And the result was that they created, we created an external fund, the EFF, and the World Bank helped with other credit lines, focusing on these situations and the need to reform the economic infrastructure of countries.
So, all these facilities that have been created have been the result of dialogue, of declarations, of participation of the Executive Directors, including the Executive Directors of the World Bank and the IMF and the regional credit institutions.
So, it is very generic. It is not entirely accurate to say that the G-24 has not done anything per se.
QUESTION: I think there is a bit of a contradiction between some of the things that some of you are saying up there. A few of you have said that you actually agree with some of the things the protestors are saying, although you haven't specified what. And then, on the other hand, you disagree with their criticisms that the World Bank and the IMF are serving the interests of big corporations.
So, I am trying to figure out where developing country officials stand.
MR. SUAREZ: [Interpreted from Spanish.] There is no contradiction whatever. Some are protesting because they see poverty continuing in some developing countries, including in developed countries. So, it is welcome, but we understand the concern of these people.
Also, the financial aid provided by the Bank and the Fund is used to help gradually reduce poverty in our countries.
MR. BAKER: Thank you.
MR. SUAREZ: [Interpreted from Spanish.] Thank you very much everybody.
[Whereupon, at 4:50 p.m., the press conference was concluded.]
IMF EXTERNAL RELATIONS DEPARTMENT