Transcript of a Press Conference of the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development
September 27, 2002
Transcript of a Press Conference of the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development
Thursday, September 27, 2002
Mallam Adamu CIROMA, Minister of Finance of Nigeria, G-24 Chairman
Fouad SINIORA, Minister of Finance from Lebanon, First Vice Chair and incoming Chairman
Ewart WILLIAMS, Governor of the Central Bank of Trinidad and Tobago, Second Vice Chair of the G-24.
Thelma IREMIREN, Permanent Secretary of the Minister of Finance in Nigeria, Chairman of the G-24 Deputies
Mr. BUIRA, G-24 Secretariat
Lucie Mboto FOUDA, External Relations Department, IMF
Ms. FOUDA: Good afternoon. I'm Lucie Mboto FOUDA from the External Relations Department of the IMF. I would like to welcome all of you to this press conference of the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development. To my far right is Mr. Ewart WILLIAMS, Governor of the Central Bank of Trinidad and Tobago. He is the Second Vice Chair of the Group. Next to him is Ms. Thelma IREMIREN, Permanent Secretary of the Minister of Finance in Nigeria. She is Chairman of the Deputies of the Group. Close to her is Mr. Mallam Adamu CIROMA, that you all know. Mr. CIROMA is the Minister of Finance of Nigeria, and he is the Chairman of this Group until October 1st. Then close to Mr. CIROMA is Mr. Fouad SINIORA. Mr. SINIORA is the Minister of Finance from Lebanon and he is the First Vice Chair of this Group and the incoming Chairman. Close to me is Mr. BUIRA, from the Secretariat of the G-24.
Mr. CIROMA, could I ask you to offer your opening remarks, and then we will take questions in the room. I would like to ask you to identify yourself and your affiliation before asking your questions. Thank you.
Mr. Minister, you have the floor.
Mr. CIROMA: Distinguished ladies and gentlemen, the last time I had a press conference here I didn't have to read any statement. The communiqué was circulated and I merely asked for questions that we might react to. Today, the system has reimposed itself on me. I therefore have a statement to make, generally summarizing what is contained in the communiqué.
The G-24 Ministers met today to consider issues pressing international concern. The Group was addressed, as usual, by the Managing Director of the IMF, the President of the World Bank, and other distinguished officials. The conclusions of these deliberations are contained in the communiqué before you. I would like to highlight some of the main points.
Ministers expressed concern about the deterioration in the world economy, and noted that risks to the outlook remained on the downside. In particular, there was much concern about the fragility in investor confidence and the decline in the equity markets, which has been due in part to problems in corporate governance in industrial countries.
Ministers discussed the sharp tightening of financing conditions in emerging market economies, which has resulted in a reversal in capital flows in a number of countries. This problem is particularly acute in Latin America while the difficulties in Argentina have spilled over. In this context, Ministers supported the Argentine government's efforts to regain market confidence and expeditiously conclude a program that can be supported by the Fund.
Ministers noted with concern the continued depressed level of commodity prices and the ongoing protectionist practices in industrial countries, which have worsened economic and social problems in the developing world. They also urged prompt and effective liberalization of barriers to developing countries' exports and the elimination of agricultural subsidies, in particular.
Ministers urged the IMF to strengthen its ability to address crises, in particular those related to the volatility of capital market movements. They expressed a preference for voluntary approaches to sovereign debt restructuring, but remained skeptical of a statutory approach. On the issue of implementing the Monterrey Consensus and the Johannesburg agreements, Ministers urged that these be integrated into the work of the IMF and the World Bank and that progress in implementing the Millennium Development Goals be monitored in collaboration with the UN.
Ministers expressed disappointment at the continued low level of official development assistance, noting that agricultural subsidies in the OECD are more than six times greater than the current ODA level. The slow pace of implementing the HIPC Initiative was widely discussed. Substantially, more resources will be needed to address HIPC-to-HIPC debt, to top up current debt relief, and to meet the financing gap in the HIPC Trust Fund. While the extension of the sunset clause was welcomed, Ministers called for more realistic projections of export growth and debt sustainability.
In looking ahead, Ministers urged consideration of debt relief beyond the HIPC Initiative, including by linking debt relief to the Millennium Development Goals. The progress in implementing poverty reduction strategies was welcomed, but Ministers urged all stakeholders to develop an appropriate framework to address the remaining challenges, including ensuring that all stakeholders are involved in the development of poverty reduction strategies, which should take into consideration the unique conditions facing each country.
Ministers noted the decline in the size of the IMF relative to the world output, trade and capital movements, and reiterated that the Twelfth General Review of Quotas should result in a substantial increase in the Fund's financial resources to strengthen its role in crisis prevention and resolution. Ministers believed that the formulas used to calculate members' quotas result in an underestimation of the size of developing country economies, and considered that quotas should better reflect the relative economic positions of member countries and recent developments in the world economy. They stressed that, while quotas have increased over 36-fold, basic votes per member have remained unaltered since 1944, thus altering the political balance among members. Thus, they urged that basic votes be substantially increased.
The revision of quota formulas and the increase in basic votes should result in greater participation of developing countries in the decision-making structures of the Bretton Woods institutions. Ministers reiterate their call for a new allocation of SDRs, which should help restore confidence, counteract negative capital flows to developing countries, and assist the recovery of the world economy. They also urged that those countries that have not done so promptly ratify the equity SDR allocation under the Fourth Amendment of IMF's Articles of Agreement.
Ministers welcomed the recently revised guidelines on IMF conditionality, which should lead to streamlining and help strengthen national ownership of economic programs. They also welcomed the ongoing work at the World Bank in this area, and noted that further collaboration between the Bank and the Fund is required to reduce overlap and avoid cross conditionality.
Finally, the Chairmanship of the Group, that is the G-24, will be transferred from Nigeria to Lebanon beginning on the 1st of October 2002. Trinidad and Tobago will be the First Chairman. In fact, at today's meeting, I did hand over to my colleague, the Honorable Minister SINIORA from Lebanon, and I think that the few days' grace will enable him to settle into his new job. All of us wish him the best in this heavy weight which has been thrust on his shoulders.
Ladies and gentlemen of the press, this is a brief summary of some of the main points of our communiqué which has been circulated. We will now be pleased to answer your questions, if any.
QUESTION: One aspect in the summary that was not mentioned, rather in the communiqué, is the importance that the Ministers placed on the Middle East conflict, what is going on in the Palestinian territories. It leaves the impression that if this isn't resolved, this will lead to greater catastrophe on the economic outlook and will impede any further progress in debt reduction and the sustainability effort. I would like to hear some commentary on that.
Secondly, the HIPC Initiative, Mr. Wolfensohn alluded to yesterday that there is a roughly $800 million gap and that the rich nations are being asked to fill that gap and they made a commitment of close to a billion dollars to do so. The question I have is how much should we depend on that, particularly Africa and these lower-income nations, because the way that most of the rich nations became rich, they became rich on the exploitation of Africa in terms of the resources, the materials, and through the Caribbean. So, many are asking why should we be even made to pay a debt that we did not construct. The HIPC Initiative, I know, was created in light of helping to alleviate some of those things, and reduction and forgiving debt, things of that nature. But, with only 6 of 38 reaching that goal and with this gap being handled they qualify coming in to 2003 with practically no funding to facilitate for them, how effective could this be? Really, do we think that the nations that got rich off the exploitation, do we think they even have the desire to fill the gap and help to correct some of those things in terms of poverty reduction and debt relief?
Mr. CIROMA: Your first question is clearly in the field of foreign affairs. Still, I will react to it, although my successor is pre-eminently more qualified to comment on this than myself. But I will definitely say, and I am being very careful, that unless the Middle East situation is properly handled, it has got very serious repercussions and consequences, which I think is being underrated. The fact is that the issue of fairness and justice in treating problems have now become so clear that they have got repercussions, and they affect people everywhere when problems erupt.
I think all of us now live with the issues of terrorism, safety, and a lot of fear. In my own view, a lot of them all flowing from what is happening in the Middle East. The possible consequences in regards to the price of oil and other things which will affect other economies are there for all to see. It is these ramifications which should lead everybody else in working to see that justice and fairness is re-established as the basis for dealing with the problems of the Middle East.
As for HIPC, I think HIPC falls as part of the general recognition that it is in the interest of all countries and all concerned that a situation is created whereby the weight of debt is lifted, these economies are given room to grow, and their growth is in the interest of everybody. It is not just a matter of charity. But I am an outgoing Chairman of the G-24. The new Chairman is the one you should listen to, and I quickly hand it over to him.
Mr. SINIORA: I tend to disagree with my colleague that these matters do not really concern the Ministers of Finance. Everything do concern Ministers of Finance and all Ministers regarding matters that touch on politics. I believe in spite of what he said, he very correctly and very profoundly answered the question about the impact of such uncertainties in the region, in the Middle East region, starting with what is happening in Palestine and the grave situation and the loss of lives and the destruction that is taking place, that is not really helping toward finding a solution for that area and that is not helping in terms of promoting the situation toward a solution and toward moderation. To the contrary, it is helping toward more extremism. This is not the way that we are after, everybody is after. As his Excellency said, we are after justice and fairness, and these are the matters that would have to be looked at.
On the other hand, the overall uncertainly about situation in the Middle East is not really helpful; it does not help the world economy and does not help the overall situation in terms of growth in the world. I concur with what his Excellency said. I think all of our efforts should be directed toward promoting moderation and helping moderation in the world, and helping solving problems in the right and fair manner for all people. Knowing that the issues that were discussed in the communiqué today are of importance to the countries of the G-24, but they are important for all other countries. The world is becoming very near to each other. The theory of the connected vessels are there. If things don't go well, they are contagious to all countries.
If we do help the developing countries, then in fact we are helping the developed countries. There is a real interest for them to give a hand to the developing countries on the one hand, and to allow them to take ownership for the structural reforms that they are having. In this sense, we will be contributing toward real growth in the world economy. But, if we maintain the situation to be uncertain politically and, we do not extend the necessary support to these countries, I think it will not really help the world economy to get out of its present situation.
I just want to really thank you very much, Your Excellency, for the remarks that you have mentioned that are really profound and correct.
Mr. WILLIAMS: Just one comment on what you said. Any and all factors that affect uncertainty or that provoke uncertainty would certainly have an effect on global growth, the extent to which the Middle East situation also affects the oil price would have a bearing on global growth and the welfare of the developing countries. It is difficult not to agree with you that the resolution of the Middle East issue in an acceptable way would help global welfare.
QUESTION: The other day I asked Mr. Wolfensohn if the rich countries should have or do have an incentive to bring economic development to the poor countries and if the G-24 finds itself under pressure, albeit in a growing world economy that is showing some signs of fatigue right now. Are there incentives for the rich countries to bring development to the poor countries? Let me just illustrate this point with the Middle East. The rich countries exploit the oil resources of the Middle East, but do they have an incentive to strengthen the countries in the Middle East economically when they use these resources to their benefit? My question is about the incentives, and I would like to hear all the views on this.
Mr. CIROMA: I know that Monterrey has made the point which has been repeated times without number that the benefit of cooperation between the developed and the developing countries is for the mutual benefit of all. It is not charity; it is not a one-sided flow in the final analysis. So, it is obvious that there is a commonality of interest that development reaches all, that the benefits will in the end be shared. It is true that sometimes countries will look at issues from their own narrow point of view, but I am hoping that Monterrey, Johannesburg, and other agreements reawake the international community in terms of the commonality of these interests. Issues, for example, of oil supply obviously are of interest to everybody. I know that oil-producing countries are more interested in the stability of oil prices rather than kind of seizing developments which we saw in 1980 or thereabouts, when oil prices went, I think, beyond $41 per barrel. This is not something which anyone is looking forward to.
Both the oil producers and the oil consumers have a common interest to ensure that there is growth, that there is stability. I believe that this issue of commonality of interest, even though at points in time people will look at their individual interests, it is very important to keep this commonality well in view so that joint common interests will be served. I don't know whether what I have said has contributed to answering your question but, if it has not, I would ask him, too.
Mr. SINIORA: I think what you have mentioned is rather a very shortsighted attitude pertaining to old or probably new colonialism. I don't think that this is helpful to the rich countries, and neither is it good for the developing countries, nor definitely is good for the oil-producing countries. I think what is really being proven one time after the other is that the more that we can really try to demolish the barriers that reduces cooperation and trade relations between countries, the more it is going to really help the rich and the developing countries at the same time.
I think the case of trade barriers and things that have to do with subsidies has not really helped at all. To the contrary, it is giving some sort of harm to the developing countries on the one hand, and to the rich countries in terms of the value of subsidies that they have to undergo. Besides that, on the political scene, I would say that the real solution for these problems is two-fold: one has to really be very firm with extremism but, at the same time, one has to really look at the roots of the problems and try to really find a solution and the real cure for extremism, and solving social problems and helping these countries to overcome their economic problems, and to get out of the debt trap and see how to encourage their markets, and to reduce the problem of the cost of borrowing that they are really having, which, because of risks and uncertainties, is creating an increased spread on their borrowings, which is definitely a real major problem for these countries.
I believe that the communiqué that was made today has touched on very important topics that should be the order of the matters that should be discussed over the coming year. Real cooperation, at all levels, should be made by all countries and by the international organizations in order to really create a more conducive environment for cooperation among the rich and the developing countries on the one hand, and with the international organizations to improve the capacity of these countries, to improve their economies to become more market economies. This will be helpful by expanding the markets of these countries that will be helpful to the rich countries. If they are not going to really help these countries, and they constitute an increasing number of the population, then we are helping extremism in these regions. It is not going to really be of any benefit to anybody.
QUESTION: I feel quite happy that the Ministers did note the persistence of protectionist tendencies or practices in industrial countries against commodities and other products from developing countries. I want to find out or I want to ask what are the Ministers doing in specific times to stop this practice. I ask this question, because I feel quite concerned that while the developed countries are building these protectionist walls against commodities from the developing world, they are busy preaching liberalization, free trade to the developing world. My question is, what are you doing in specific times to stop this?
Mr. CIROMA: Well, the recognition of a problem is the first step of dealing with it. The fact that there has been so much reference to protectionist policies to be a question of access, especially in terms of agriculture to the markets of the developed countries, has been trying to define precisely what the issues are. We all know that, for example, the subsidy given in support of the cows of Europe is higher than the amount which, for example, a Nigerian earns a day. Without coming face to face with such realities, these issues will not be solved. I think that both the advanced countries as well as the developing countries have recognized that this is an area where, if you agree that development and growth should be promoted, then these protectionist measures should be dealt with.
When you talk about practical steps, you are saying now, today, or yesterday, what did you do about it? Did you ask one market to accept goods from another—it doesn't work that way; you know that. But the fact that everybody has agreed that this is a problem that has to be reversed is in fact the beginning of the solution. I believe that within the next year, two years, three years, we look forward to the application of these principles which are being promoted now.
I should ask the Governor to maybe comment on this matter. I will also ask the Chairperson of the Deputies to comment.
Mr. WILLIAMS: You answer these questions so well that you leave very little for other people to say. I think you are right. I am not sure that developing countries have much by way of sanction against the industrial countries. I am not sure there is much they can do in order to force industrial countries to open up their markets. I should note, however, that the multilateral institutions have really been doing a very good job in bringing their legitimacy to bear on the issue and in serving as a bully pulpit, as it were, in urging the industrial countries to open up their markets. I think it is the most effective means; I think moral suasion is likely to prove the most effective means of getting industrial countries to take steps to open up their markets to the exports of the developing world. I think the industrial world is coming around to believe or to understand and acknowledge that helping the developing world reduce poverty is not only morally right, but is also in their enlightened self-interest.
Ms. IREMIREN: The important thing is to recognize there is a problem. At every forum, the developing nations have tried to draw attention to this problem, both at the World Bank, G-77, ECOWAS, and will continue to talk about it. Like you said, there is no ready answer, but we keep drawing attention to the matter in the hope that, with persistent pressure, things will change over time.
Ms. FOUDA: We will take two last questions in the room, one from the gentleman over there and one from you. I should be grateful if colleagues would keep those brief so that we can take full advantage of the Ministers being here tonight
QUESTION: Since the G-7 is concerned about justice and fairness, what is its view about the barbaric behavior of the Zimbabwean government, which has succeeded in destroying the agricultural sector and has thrown nearly 2 million people to below the poverty line.
Mr. CIROMA: The issue of Zimbabwe is not as easy as is reflected in this question. The historical antecedents of this problem has been acute in some form or another for a long time. In a way, it is just a matter of coincidence that I read history and African history was one of the issues which I studied. I remember the issues regarding allocation of land, in those days when allocation of land to the white colonists was regarded as the main problem of Zimbabwe until one of the commissions which the British government set up recognized that, in fact, that was a reverse of the situation. It has got a long history, and you cannot dismiss it easily like that.
But the fact is that the President of my own country, the Prime Minister of Australia, and the President of South Africa have been handling this matter in such a way as to create the least harmful development in this problem. So far, there are people who have seen this problem as being just a matter of interest of the white landowners or people who have seen it as a matter of interest only to the Zimbabwean landless Africans, and to take it in either of these views is to simplify the issue. We were talking earlier about justice and fairness. In the circumstances, you must recognize that the white farmers have got interests in Zimbabwe that their affairs must be handled with fairness and justice.
You also have to look at the problems which the government of Zimbabwe has in dealing with the landless Africans who had been in colonial times dispossessed of their land. I, coming from Nigeria, cannot easily refer to these issues as if they were simple, as if I can solve them from far away in another country. I think that we have to have sympathy for the Zimbabweans, both white and black, and think about these issues and suggest to them ways of dealing with these issues justly instead of being in a condemnatory manner, as sometimes people tend to do.
Now, I will not ask you to answer.
Mr. SINIORA: No, in this respect, I will leave it to you. I think it is enough.
QUESTION: For the last few years we have been chanting like a mantra a demand for special drawing rights while it is getting nowhere. Is there any nearer solution of a general allocation, a nearer solution this year than in the past? Secondly, what are the prospects of greater trade among the developing countries themselves, because at this time most of the trade is from a developing country to a former? metropolitan country. What are the possibilities of greater trade among developing countries themselves?
Mr. CIROMA: I will not answer, but I know who will answer. Mr. BUIRA.
Mr. BUIRA: The SDRs are a creation of international liquidity. We have a system where the benefits of the creation of international liquidity accrue to a very few, maybe mainly to one country. We feel that it would be equitable for all to benefit in the creation of international liquidity, especially the poorer countries, who have to reduce their imports to accumulate reserves while others can simply issue IOUs that are circulating in the world and accepting this money.
But there are other issues, too. There is a current situation in the world economy that, while industrial countries can expand, can pursue expansionary monetary and fiscal policies, most developing countries could not. They would trigger a crisis. But it would make sense in terms of the situation, the fairly depressed situation of economic activity to increase international liquidity. This could stimulate trade, give confidence to people, favor investment, and so forth. This is the sort of anti-cyclical policy followed by all industrial countries. It could also be followed at an international level.
But we also must keep the SDR alive. It has not been issued for over 20 years, but it must not be forgotten. If some of the holders, very large holders of international reserves, and there are countries that hold over 300 billion, say China, Japan, several others who hold a hundred billion or more, if for some reason the growth of the U.S. economy were to slow down further and were to become less attractive a place for investment, the value of the dollar might fall and then people would not want to hold dollars. People who hold huge amounts of dollars might wish to switch to other currencies. It would be very helpful to have the SDR available in those conditions, even as a safety net for the system.
Now, let me just note very quickly on the second part of your question, trade among developing countries has been increasing very fast. Developing countries now account for some 45 percent of world trade. This is a huge proportion, and it is growing faster than trade among developed countries. These free trade agreements, regional agreements, and so forth, help promote this. I don't know if this satisfies your question.
Ms. FOUDA: I would like to beg for your indulgence and take one very final question from the room, if we would like to avoid a real agenda problem here tonight.
QUESTION: I would like to ask the Finance Minister for Nigeria what could be, if it continues, the ongoing crisis of Africa, on the economics of that region of Africa.
Mr. CIROMA: I think it would be fair to say that Nigeria, being a member of ECOWAS and situated in the west coast of Africa, has a lot of concern as to peace and stability in the region. As you can see from historical development, whether the problems were in Liberia, or in Sierra Leone, or in other places, because of our position in the region, we always tended to get involved. Our involvement is to assist, establish peace for the benefit of the member countries of our region and the rest of the world.
So, we in practical terms wish to take every step possible to assist the return of normality to our neighbor and sister country. Anywhere you see such instability taking place had the effect of affecting other members of the region. We have already developed the attitude and the capacity to help our neighbors, and definitely we take the same attitude toward our friendly neighbor, the Ivory Coast, and we would like to see a return of peace and stability in the shortest possible time.
I think that is being the last question. It gives me the chance to thank all of you for being here and for asking us questions which we can answer.
Ms. FOUDA: Thank you, Mr. Chairman. Thank you, ladies and gentlemen.
Mr. SINIORA: On behalf of everybody in here, I would like to really thank you very much for your sound Chairmanship during the last year. With all the support that we could get this morning from all the Ministers of the G-24, I hope that we will be able to tackle all the problems that we will be facing in the coming year. I really look forward to seeing you next year here.
Ms. FOUDA: Thank you.