Transcript of Press Conference of the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development (G-24), 2005 Annual Meetings, Washington, DC
September 23, 2005Transcript of Press Conference of the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development (Group of 24)
Washington, D.C., September 23, 2005
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Participants: Mr. Paul Toungui, Minister of State, Finance, Economy, Budget and Privatization, Gabon; Mr. Philibert Andzembe, National Director for Gabon of the Bank of Central African States; Mr. Hector Torres, IMF Executive Director for Argentina; and Mr. Ariel Buira, Director of the G24 Secretariat
MS. BHATT: Good afternoon, ladies and gentlemen. I'm Gita Bhatt from the IMF External Relations Department. Welcome to the Press Conference of the Chairman of the Ministers of the Group of 24.Let me introduce the head table. The Chairman of the Ministers of the G-24 at the center is Mr. Paul Toungui, Minister of State and Minister of Economy, Finance, Budget and Privatization of Gabon. The Chairman of the Deputies of the G-24 is Mr. Philibert Andzembe, the National Director for Gabon at the Bank of Central African States. Sitting in for the Second Vice Chairman is Mr. Hector Torres, IMF Executive Director for Argentina, and the Director of the G-24 Secretariat is Mr. Ariel Buira who is at my right. We do have simultaneous translation. English is on Channel 4, Spanish on Channel 2 and French on Channel 3. Before we open the floor to questions, Mr. Toungui will make some opening remarks. Mr. Toungui, please.
MR. TOUNGUI: [Interpreted from French.] We, the Ministers of the Group of 24, held our 74th meeting this morning, and the conclusion of our deliberations are to be found in the Communiqué that was made public. The Ministers welcome the continued expansion of the global economy which reflected support of macroeconomic policies and financial market conditions. Deputies expected global economic conditions to remain favorable, but they consider the downside risk had intensified as a result of rising global imbalances and high oil prices and this could increase the risk of sharp movements in exchange rates in major currencies and interest rates.
There is a concerted and coordinated international effort to eliminate the major sources of risk. In reaction to the mobilization of the international community this year on the MDGs, Ministers stressed the need for concrete action without delay to ensure that it would be possible to rise to the challenge and the first act would be the implementation or the adoption by donors of their time tables to keep the commitment of devoting 0.7 percent of GNI to this end.
The G-24 Ministers also welcomed the other innovative financing proposals, the promising source of funds for the achievement of the MDGs, in particular the International Finance Facility and global taxes as a solidarity contribution on their tickets.
Turning to the debt burden of the developing countries, Ministers noted with satisfaction the G-8 proposal to cancel the debt of the HIPC countries. They hoped that a rapid consensus will emerge on the spending issues so that a proposal can be applied as soon as possible. They call also for mechanisms for debt conversion which would enable the financing of economic and social projects in low and middle income countries.
As to the strategic role of the International Monetary Fund and the World Bank, Ministers consider that these institutions should continue to ensure stability of the international monetary systems and promote sound economic policies aiming at higher levels of economic growth and employment. As concerns in particular the IMF, Ministers are of the view that these resources must meet the potential needs of the members.
Moreover, the IMF should promote country ownership of programs and delving further into alternative scenarios and measures in advice and financial assistance. Ministers called on the World Bank to review its medium term strategy in light of the findings of the 2004 Annual Review of Development Effectiveness.
Ministers stressed that it's important to analyze the interaction between growth and social impact of poverty reduction in implementation of domestic poverty reduction policies. Ministers welcomed the adoption of the Africa Action Plan which would be geared to leading the challenges of the African continent.
They encourage, as well, the World Bank Group to step up its assistance to the developing countries by supporting private sector growth and scaling up FDI. On the issue of international growth, Ministers stress the need to conclude the Doha Round in the interest of all parties. They call upon the Bretton Woods Institutions to support these negotiations.
And lastly, Ministers once again stress the need for reform of these institutions to remedy the under-representation of developing countries within their executive boards and on staff positions as well. A new quota formula is necessary to faithfully reflect the current relative economic weight of developing countries in the world economy.
At the conclusion of our work, Ministers expressed to the government and people of the United States their sincere condolences and sympathy for the human and material loss caused by the Katrina cyclone and they welcome the solidarity which was demonstrated by the international community to come to the assistance of the victims. Thank you very much.
MS. BHATT: Thank you, Mr. Toungui. We'll now open the floor to questions. Please introduce yourself and your affiliation. Yes, sir.
QUESTION: Regarding the issue of votes and the reform, I understand there is a proposal by the IMF management on this issue. I wonder if you could give a reaction to that, and also I don't know if there is something similar at the World Bank or what is the process there?
MR. TOUNGUI: [Interpreted from French.] Thank you very much for your question. We have listened very carefully to both the President of the World Bank and the Managing Director of the IMF, but they didn't make any specific proposal. They said that they took due note and they would like to see the institutions make progress towards this end, but there was no specific proposal that was put forward.
QUESTION: In paragraph 20, you emphasized that IMF surveillance should focus on the implementation of trade policies in both industrial and developing countries. Two things. First, is that new? Secondly, the IMF Managing Director this morning made the point that the IMF cannot actually dictate to countries what they do. So are you hopeful that can have any real impact? My second question is on paragraph six, they call upon the IMF and the World Bank to ensure that debt sustainability analyses are based on realistic assumptions. Can you say what you're driving at there?
MR. TOUNGUI: [Interpreted from French.] Thank you. As concerns surveillance, this is not in disagreement with the Articles of Agreement of the IMF and what we're calling for is what is included in the Articles of Agreement, namely that there should be not too much of imbalance aside from monetary aspects, so I don't think this is a demand of the G-24 countries because it's actually in the Articles of Agreement.
As to taking into account the actual situation of each country, and the debt sustainability issue, I think there are a number of different influences. You'll see that in the Communiqué, we also refer to countries subject to exogenous shocks, we talk about the situation of some countries which have embarked upon reforms, but they haven't been compensated to the extent they had hoped for. We talk about HIPC countries, which have reached the completion point regarding their debt situation, and, nonetheless, they still have a high debt stock. And we would like to have all of these things considered and reviewed when debt sustainability is considered for each country. That is the thrust of what we're saying here. Now perhaps other people at the rostrum would like to comment as well.
MR. BUIRA: Mr. Minister, just on the last point of the question on debt sustainability analysis and realistic assumptions, we have seen in the past a number of countries, in fact, virtually all countries, that undertook the HIPC programs and the purpose of these programs was to ensure the attainment of debt sustainability. They were going to be given debt relief. Now what happened often was that, in fact, in virtually all cases, at the completion of the program, debt sustainability had not been attained, and this resulted from excessively optimistic assumptions as to the crisis in the volumes of exports and the growth and also as to the growth of the GDP of the country which would permit higher fiscal revenues and higher payments capacity on the part of the government.
So, what the countries are saying is we think the concept of debt sustainability is a very valid one, but we would like you to apply it using realistic assumptions.If you are overly optimistic, you need less debt relief. And this is the potential issue at stake.
MR. TORRES: Thank you. I guess that in your question on paragraph 20, you asked, if we were saying something new that we haven't said before. I would point out that in asking the Fund and the World Bank to assess impact of trade restrictions on debt sustainability, we're pointing to a very important issue for developing countries, particularly those countries that are highly dependent on the export of commodities.
As you know, debt, Fund debt, has to be served with hard currency. And the way to obtain that hard currency apart from borrowing or FDI is basically by exporting goods, generating trade surpluses. What we're pointing out is that certain trade practices such as subsidies attempt against the capacity of developing countries to obtain hard currency that is necessary to service its debt. So we want an assessment of the impact of those trade policies on debt sustainability. Thank you.
QUESTION: On paragraph seven, there is a suggestion which is that debt cancellation of sustainable should be extended to include all low income countries. How many countries will be covered under this formula and what will be the financial impact?
MR. TOUNGUI: [Interpreted from French] Thank you. When the G-24 meets, it speaks on behalf of all the developing countries and there is a principle which is enshrined in the international organizations which is that of equal treatment. There are a number of countries which have already had debt cancellation and we would like it to be extended to all those countries. As to the impact, this will be determined during the exchange to be carried out as to determine what this will represent.
For example, if there have been 14 countries who have had debt cancellation, we can't just stop there and say congratulations; there are other countries which face the same difficulties and would like to benefit from this same treatment for their difficulties. So we're speaking on behalf of all our developing countries and we all have great needs as to the evaluation that will be made.
There hasn't yet been an assessment thereof. And those who are to make that first analysis will carry this out and will have to look at what this would entail for all the other countries as well. Now, I can express my personal view that given conditionality, not all the countries will be coming up to the new window that might be set up, but it is the principle that must be accepted that all of these countries should be eligible for this debt cancellation process.
QUESTION: [Interpreted from French.] I have two questions. One which has to do with the French initiative on a tax on air tickets. Are you not worried that this might replace ODA and are you going to be vigilant about that? Moreover, concerning the reform of the financial institutions, have you received official support from some countries for a better representation in particular of Africa?
MR. TOUNGUI: [Interpreted from French] Thank you for that question. As to the tax on air tickets, like all other new innovative financing mechanisms, which have come up here and there, our position is that this should be additional. There should be a net addition. It's not as if one could replace the other because the resources have to be considerable.
And it is by adding up all these different new initiatives that it should be possible to make it possible to compensate for the fact that there is not enough concessional assistance.
As to the second aspect, I haven't heard any specific information about this, but perhaps Mr. Torres or Mr. Buira would like to comment on it.
MR. BUIRA: This issue has been under discussion for some time. It was one of the agreements that came out in the Monterrey Consensus. The developing countries have been rather frustrated to see that very little progress has been made to date. But I think the picture is changing.
The position of some major industrial countries, in particular the United States, appears to be now to recognize that change is necessary. And this may be due to the fact that the institutions are losing relevance. You see Europe walked away from the IMF 27 years ago. It has in 27 years it has not come to the IMF.
Asia resorted to the IMF in '97-98, didn't like the way things turned out, and decided to build up reserves to avoid coming back to the IMF. Several countries in Latin America seem to be embarking along the same path as Asia, and why is this? Because of two reasons. The resources available to assist them in times of crisis are rather limited, as Fund resources have dwindled over time, and secondly, because they feel that they are not adequately represented, that we have a situation in which there is a small group of countries which control the institutions, who make the rules, and there is the large group of countries who are subject to these rules.
It is no longer a cooperative institution as it was at the outset in which everybody contributed and everybody borrowed. Now, this changed the nature of the institution. As the nature of the institution changed, countries started walking away, and you have a diminution in resources and increasing conditionality, higher rate of program failure, and people walking away.
Now, if you want the institution to remain relevant, legitimate, and you wish to retain an international multilateral international system more of monetary cooperation, you need reform. Some of the major countries have now come to realize this, and I think they are changing their attitude and their position and clearly this is a case of the U.S., if you look at the statements by the Secretary of the Treasury. So I think this is a hopeful opening. This is a process. It will take some time, but maybe there is a better chance today than there was one or two years ago.
QUESTION: But, Mr. Buira, the issue here is that stepped up effort to try and change the situation enough at the moment for those countries to stop walking away? I mean is there enough being done to prevent that from happening, and also what does Singapore mean--next year's Annual Meetings will be in Singapore. What sort of advancement would you want to see by then?
MR. BUIRA: Well, clearly it's not enough because the process is only beginning, but we hope that it will go far. We don't know. Singapore may be the deadline in some sense because there is considerable progress towards regional monetary cooperation in Asia, and Asia has enormous reserves, several times more resources than the IMF, more reserves than all industrial countries put together just in Asia.
Now, this means they can set up an Asian Monetary Fund very easily. And if they don't feel that they are getting adequate representation and sufficient influence here, which means, of course, greater quotas for them and making greater contributions, they are likely to continue developing their own arrangements.
You know they have already gone a long way in establishing the Changmai Initiative. They started with small network of bilateral swaps, and now it's been multilateralized. The total resources are well over 70 billion, and this is an ongoing process. They are also developing their own Asian bond market, so not to have to resort to the currencies of major Western countries and borrowing their own currencies and so forth. So this is a very important evolution, and this must be one of the factors that's spurring the institutions and the major Western powers to move on this.
MR. TORRES: Just a few words basically to reinforce what Ariel has just said. I would say that it speaks about a failure of the multilateral institutions to see such an impressive amount of reserves being accumulated in Asia that are not or cannot be partially at least channeled into the multilateral financing institutions. That to me speaks about the failure of multilateralism to absorb those reserves. In order to do that, of course, we need to change voting and quota representation. So that's my additional comment. Thank you.
QUESTION: Really sort of connected with that, this business of one part of the world accumulating reserves much faster than any other is a very, very serious imbalance. And of course, if it were to continue, which is shows no sign of stopping, there will be a fracture or a fragmentation of the international cooperative system. Is this not true?
MR. BUIRA: Well, you have the concern over this expressed in the first paragraph or the first two paragraphs of the Communiqué that speak of global economic prospects and the concern over the risks, growing risks, posed by large global imbalances. So yes, this is a risk. And we would like to see a Fund that is more effective in tackling this risk, and countries respond in a more constructive and cooperative fashion to address the world problem.
QUESTION: Paragraph 11, in the reservations over the Fund, you know, acting as a confidential advisor, and are you suggesting that real damage is being done to certain countries by virtue of the IMF becoming a more transparent institution?
MR. TORRES: I'm not sure I understood your question in reading the paragraph. Basically there is a sort of tension between transparency and being an opportune and confidential advisor. So we're trying to deal with that there.Could you repeat your question? I'm not very sure I got the sense of it.
QUESTION: I just simply wondered why you feel the need to stress this point? I mean the IMF is moving towards greater transparency as you know of course and it was emphasized again this morning by Mr. de Rato, and you are stressing on the contrary the need for it to act as a confidential advisor. You mentioned the tension. Can you be a bit more specific about where this could endanger the interests of the client countries, if you like, of the IMF?
MR. TORRES: Well, if the IMF gets, I would say, first-hand information from a government and engages in very candid discussion with the government, it can provide timely and opportune, I would say, advice to the country. Of course, if a government understands that information that they are providing to the IMF in the discussions would be provided I would say rather than to the IMF as a confidential advisor to an institution that is going to be discussing this publicly, those governments may be more reluctant to share this information with the IMF. So that is the tension that I referred to. So definitely it has to be handled with very much care. That's it.
QUESTION: I just wondered whether any thoughts on making the institutions, both the World Bank and the IMF, more democratic by changing the system, which is really a hangover from World War II, by which the World Bank president is always chosen by the president of the United States and the Europeans choose the IMF head? I don't see any reference to that here. I was wondering whether this was discussed and whether you have any thoughts on that?
MR. TOUNGUI: [Interpreted from French.] Thank you very much. Maybe there is no specific mention or use of the word "democracy," but if you look at the various requests made by developing countries having to do with either quotas or representation in the various institutions, behind that is the democratic context. Mr. Buira said awhile ago that apparently the organization would be controlled by a small number of countries, that most of the countries in the world are there like simple observers. So there is no contradiction between what we've said and what you're saying. It was an underlying thought.