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India and the IMF

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Transcript of a Press Conference by
The International Monetary and Financial Committee of the IMF
And the Development Committee of the World Bank
Sunday, September 24, 2000
Prague

Gordon Brown, Chancellor of the Exchequer (United Kingdom) and Chairman, International Monetary and Financial Committee of the IMF
Yashwant Sinha, Finance Minister (India) and Chairman, Development Committee of the World Bank
Stanley Fischer, First Deputy Managing Director, IMF
Sven Sandstrom, Managing Director, World Bank
Thomas C. Dawson, Director, External Relations Department, IMF

MR. DAWSON: This is a press conference to review the outcome of this evening's joint meeting of the International Monetary Fund's International Monetary and Financial Committee and the World Bank's Development Committee. I would like to introduce Yashwant Sinha, the Finance Minister of India and the new Chairman of the Development Committee; and the United Kingdom Chancellor of the Exchequer and Chairman of the IMFC, Gordon Brown. To his right is Sven Sandstrom, a World Bank Managing Director; and to his right is Stanley Fischer, the First Deputy Managing Director of the IMF.

I believe the two chairmen have introductory statements and then we will take questions.

MR. BROWN: I welcome the chance to work with Mr. Sinha from India and I congratulate him on becoming the new chairman. These joint meetings reflected our shared concern that debt relief should lead to poverty reduction and our recognition of the need to act with the new measures to make possible further progress for debt relief.

It was to welcome the determination of the World Bank and the Managing Director of the IMF to do everything possible to bring 20 countries to the HIPC decision point by the end of 2000. That is within the next three months. We have over the summer worked together to remove the barriers to the implementation of debt relief and poverty reduction.

The first step that we have had to identify and deal with has been the number of countries, particularly countries within Africa. There are 11 countries that we have had to identify that have disqualified themselves from the debt relief we want to give. We have money for it but it will not lead to poverty reduction as long as there is conflict and as long as there is civil war.

So it is not because of the lack of money. It is because of the lack of peace in these countries that debt relief has been impossible in these areas. We look at how the units of the World Bank and IMF help countries cure the debt they have. We are going to see debt reduction lead to poverty reduction.

So there will now be greater flexibility in time. There will now be clearer poverty reduction and a process for achieving that. The Joint Implementation Committee of the World Bank and the IMF will, as they have reported to us, be meeting on a very regular basis to look at individual countries and how progress can be achieved.

The third area we discussed this evening was, of course, the effect of the oil price rise. And we noted that the International Monetary and Financial Committee had in its communique stated that the Fund may need to respond flexibly to the needs of members that arise from this sustained period of high oil prices. The implication is that for the HIPC debt relief process that will have to be examined.

This, of course, will be a matter for the Development Committee tomorrow following the remarks of the president of the World Bank.

So in these three areas--how we can get conflict countries out of conflict and into debt reduction; how we can move forward the process so that more countries, without removing conditionality, can achieve debt relief through greater flexibility; and dealing with the effects or potential effects of a sustained period of high oil prices--we are moving the debt relief process forward in a way that we have pledged to do over these last few months.

Our way to the end is debt reduction leading to poverty reduction leading to economic development. No one should be in any doubt that the measures necessary for economic development are measures that go beyond those that are there for debt relief today. But it does represent the historic commitment that we made last year that those countries with the most should do more for those countries who have the least.

And I believe that the measures we have heard about and agreed on today will, as the Managing Director of the IMF and President of the World Bank have said, get to the 20 countries that we want to be through the process and will lead us into further efforts in the coming year, remembering that our aim is debt relief, poverty reduction and economic development.

MR. SINHA: Ladies and gentlemen, this was the second joint meeting of the Development Committee and the IMFC. The first meeting was held last September at the time of the 1999 Annual Meetings, thanks to the initiative taken by the chairman of the IMFC, Gordon Brown, and the then chairman of the Development Committee. At this time, when I took over the chairmanship of the Development Committee, we discussed this matter and we decided that we should hold this joint meeting once again in order to achieve two objectives.

The first was to demonstrate the political commitment of the international community, through this program of poverty reduction, that not only the two institutions but all the governments were committed to this course of action.

The second was to bring the two institutions and the two committees together in a sector where there is a certain overlap of the functioning of the two institutions, because this is where the poverty reduction strategies and the good strategies of the two institutions coincide. And we noted that last year's joint meeting was very useful and, therefore, it was felt that we should repeat that experience and have this meeting once again.

Gordon Brown has just mentioned to you the achievements of today's meetings, the direction it was given. The joint communique which has been adopted is now in your hands. Let me tell you that this joint communique has been adopted by the meeting unanimously. That further goes to prove the commitment of the international community to the objectives that Gordon Brown has so dutifully put before you just now.

I would like to take this opportunity to assure you on behalf of the Development Committee which I head now that we continue to work in the same spirit of collaboration and with the same zeal to achieve poverty reduction and the general well-being of the people in the poorest of the poor countries.

Thank you.

MR. DAWSON: Now we can take questions.

QUESTIONER: What was the reaction of the committee members to the Canadian proposal for a moratorium on HIPC debt payments and the details of that?

MR. BROWN: The Canadian proposal, as I understand it from Mr. Martin, is that relief is given before we reach decision points. In other words, there is a moratorium. I believe we are answering that proposal today with the speed we're now moving at to get the necessary--the World Bank initiative....(Inaudible).... Mr. Martin's proposal is this moratorium for a period of time, and he did put it at the meeting. The answer to it is actually the speed with which we want to move through the next group of countries. It is the equivalent, of course, of us getting debt relief. If we can get debt relief quickly in the next two or three months, then we have met exactly what he wants to achieve. So there are two ways of achieving his proposal.

One is to move quickly from ten to twenty countries, which we believe we can do. The other is to expect that there's going to be a long delay and then put a moratorium on. We believe that the proposals that we've agreed this evening will allow us to move from ten to twenty countries within three months. So we are achieving the spirit of what Mr. Martin wants to achieve by the actions we're taking.

QUESTIONER: How do you plan to be more flexible in time regarding the HIPC Initiative? I want you to explain, also, the sunset clause that you mentioned in the communique.

MR. BROWN: The sunset clause is an extension for two more years to allow countries to enter the process. That is a good decision that allows us to do more.

As far as the flexibility, the track record that required previously a longer period of time will now require, if necessary, a shorter period of time. So it is flexibility in time without removing the requirement for conditionality. And I think that is very good progress which will allow some countries that have not built up the track record in time, but it is absolutely clear that there is a track record in existence.

MR. FISCHER: And then there is the fact that interim debt relief starts as soon as the country gets the decision point. So it means you get the decision point very quickly, which is what the changes make possible when the interim debt relief starts immediately. So the whole thing is accelerated in terms of provision of debt relief relative to what it would have been before.

QUESTIONER: You will be aware of the concerns that Uganda has over whether, even after reaching the completion point, they have received enough debt relief. There are proposals that the calculations for debt sustainability based on export ratios are perhaps not sufficient and you should look also at fiscal revenue. Was there any discussion in the joint meeting as to any kind of review in the future on whether countries, once they do reach a completion point, have actually received enough debt relief to meet their poverty reduction targets?

MR. BROWN: I can only answer in more general terms because I'm not dealing as the Bank and Fund are with a specific case. If this is a question to me, let me say two things.

One is in certain cases, such as the case of Zambia where we see the figures, we recognize that there has got to be something done; in other words, that the debt payments have got to be looked at given the way their flow is going to come over a number of years.

As far as Uganda and individual countries are concerned, the whole purpose of the Joint Implementation Committee is to look at the specific problems and the specific barriers that have arisen and see what can be done. But it is not the case that today was the time to discuss new conditions on sustainability or on fiscal terms.

Today was looking at how, as Stan said, we can use the track records of countries to accelerate the process so that countries that might not have gotten through the process this year can actually get through that process now and they can achieve their interim debt relief, and they can achieve it quickly. That was the purpose of today's meeting. And I believe that these measures which have been agreed and the need to finance them do move the process forward.

MR. SANDSTROM: In the case of the Uganda, the relevant relief has been provided according to the enhanced framework. And we have gone through the numbers again and verified that they have received what should be provided.

Uganda also has very good growth prospects. We expect Uganda to remain sustainable and we will, of course, be looking at Uganda's situation over time in terms of requirements for financing, and that's being dealt with them in the future outside of the HIPC framework. So it's not only the HIPC framework that is used to provide support for countries.

QUESTIONER: A question for the Chancellor. The arch of history has it that sooner or later the accusers become the accused. And the Bank and the Fund have been preaching good governance to developing countries as the foundation for development for quite some time now.

The recent review of voting reform within the Fund, the so-called Cooper Report, came up with a rather interesting conclusion that the way to reform the Fund was to give the U.S. more votes and Africa less.

I wonder how it's possible to defend a situation within the Bank and the Fund, which are essentially universal organizations, where a tiny minority of countries have effectively paid for the majority of the votes on the Boards of the Bank and the Fund?

MR. BROWN: These are wider issues than we're discussing this evening. This is a continuing debate about both membership votes and quotas. This debate will obviously continue. I really don't think that this is the time to make new statements on that. We're here for a quite specific purpose and that is to look at how we can achieve debt relief and poverty reduction.

QUESTIONER: Apart from debt relief and poverty reduction, the communique is completely silent on asking the industrialized countries to provide duty free, quota free market access to the exports of the least developed countries that face a great burden in the international trading system. Is there any plan to ask these countries to provide market access for their exports?

MR. BROWN: The IMFC communique issued earlier is not silent on these issues. It raises these issues. And, of course, these are issues that are subject to debate in the WTO and in other organizations.

MR. FISCHER: I'm not sure whether anybody will ask the right question. So let me just mention that the Fund got very good news today about our ability to finance part of the HIPC Initiative. There was a need borrow money from some of our members so that we could lend it in the HIPC Initiative and in the PRGF. And we today were told by both Germany and France each that they would each be willing to provide a billion SDR's, which means we have two billion out of the total four billion as the loan resources for the PRGF.

These very generous contributions are loans in which SDR interest rates will be paid. Nonetheless they are very critical contributions to the success of the PRGF. And I think everybody who supports the cause of debt relief should be grateful to them for what they have done.

QUESTIONER: Can you say something about the problem of funding from another large country, the United States, whether that's likely to be overcome soon and whether that's inhibited any future proposals for extending the debt relief initiative?

MR. BROWN: I think Mr. Summers has made it clear that this is one of the priorities for the President, that is, secure the funding for the initiative from Congress.

It is also the case that the trust fund has $2.6 billion that countries have promised to it. That money is coming in. And, as I say, in relation to, for example, conflict countries, it is not the lack of money that is the issue here. It is the lack of peace in these countries.

But Mr. Summers will be able to say more about this. But he certainly told us that this is--I mean, it's right because I've heard the President himself say this--that President Clinton regards this as a priority in the next few months of his administration.

QUESTIONER: Just a point of clarification. In the communique you talk about welcoming steps to accelerate the process, flexibility in accessing a country's track record which should bring forward--which should help to bring forward countries originally expected next year. Does that mean that by January 2001 you expect more than twenty countries to have received debt relief under HIPC; in other words, over the twenty, No. 1?

And, No. 2, for Mr. Brown, to what extent do the developing countries--the poorer developing countries who are suffering right now under the increased price of oil--have truckers and farmers and fishermen in the U.K., France, Germany, Spain, Netherlands, and Sweden to thank for pushing oil to the top of the agenda here over?

MR. BROWN: Were both questions for me or just the second one?

The first question on the number of countries, the Joint Implementation Committee, the World Bank and IMF have a list of countries who may be eligible. The list is greater than twenty. But what they're saying is that they expect to and hope to get twenty through by the end of the year. So there may be more countries but they would have to meet the terms.

The reason that we talk about flexibility in the track record is, as I say, that the time that people have to meet that track record has been interpreted more flexibly and that is the change that is being made there.

As far as the question of oil is concerned, I'm sure this will be part of the discussion of the Development Committee tomorrow. I think all of us actually share the presentation we had from IMF Economic Counsellor Michael Mussa this morning that the consequences of the oil price rise, if it were to be sustained, for the poorest countries, for developing countries is such that we cannot stand back and say nothing about that.

So it is true to say that the consequences for many countries in terms of the cost that they will have to meet is devastating. And that is why for these countries it was important to record that as a problem in the communique. And we would have done that in my view whatever the events in other parts of the world.

MR. DAWSON: If this hole has run dry, then I will call the press conference to an end.


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