Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund

IMF News, April 12, 2003

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Published: April 12, 2003

Meeting overview

The International Monetary and Financial Committee held its seventh meeting in Washington, D.C. on April 12, 2003, under the Chairmanship of Mr. Gordon Brown, Chancellor of the Exchequer of the United Kingdom.
Next IMFC meeting: Dubai, on September 21, 2003.
Chairman: Gordon Brown. Managing Director: Horst Köhler.

Global Economic Outlook

Reaffirms commitment to close international cooperation to strengthen confidence and support the global recovery; underscores the importance of continued vigilance.
Emphasizes readiness to adjust policies and determination for further structural action to strengthen growth and prosperity.
Multilateral trade liberalization is a key priority with full political commitment of Ministers.
Advanced economies:
- Expectation of stronger growth in the second half of the year.
- With inflationary pressures well contained, monetary policies should remain accommodative; many countries have room to ease further if needed.
- Fiscal policy: automatic stabilizers should be generally allowed to operate; action needed in many countries to address medium-term fiscal pressures, including those arising from ageing populations.
- Shared responsibility to implement structural reforms to enhance prospects for sustained broad-based world recovery and to help correct global imbalances.
- Country-specific notes:
- United States: policies consistent with a sound medium-term fiscal position remain important.
- Europe: labor and product market reforms need acceleration.
- Japan: further steps needed to strengthen the banking and corporate sectors and end deflation, accompanied by a start toward strengthening the medium-term fiscal position.
Emerging market countries:
- Need to strengthen policies for macroeconomic stability and structural reforms to enhance resilience to adverse global developments.
- In countries facing external financing constraints, sustaining macroeconomic stability is key to restoring confidence.
- IMF has a key role in supporting these efforts.
Low-income countries:
- Prospects for stronger growth should be supported by improved economic policies, stronger institutions, progress in resolving regional conflicts, and increased donor resources, including through debt relief under the HIPC Initiative.
- Sustained implementation of sound policies, strong ownership, and the Monterrey Consensus remain key to reducing poverty and meeting the Millennium Development Goals (MDGs).
- African countries urged to pursue reforms embedded in NEPAD to improve institutions and ensure peace and security.
- Calls for urgent mobilization of additional assistance to address the serious food shortage in Africa.
Iraq:
- Notes present situation poses significant challenges; urgent need to restore security, relieve human suffering and promote economic growth and poverty reduction.
- Supports a further UN Security Council resolution; engagement by international community including Bretton Woods institutions is essential for sustained development.
- IMF and World Bank stand ready to play their normal role in Iraq's re-development at the appropriate time and will monitor conflict impacts on members.
- Importance of addressing the debt issue and early engagement of the Paris Club.

Trade and multilateral engagement

Underscores urgency of concrete progress toward multilateral trade liberalization under the Doha Round; critical for higher growth and poverty reduction.
Calls on industrial, emerging, and developing countries to address obstacles ahead of the ministerial meeting of the World Trade Organization in Cancún next September.
Urgent progress needed in areas including agriculture: better market access and lower trade-distorting subsidies are particularly important for developing countries.
IMF stands ready, in collaboration with other institutions, to support members' closer regional cooperation and deeper integration into world markets.
Notes benefit from views of Dr. Supachai Panitchpakdi, Director-General of the WTO.

Strengthening crisis prevention

Reiterates importance of strengthening IMF crisis prevention capacity; welcomes steps to improve economic resilience and financial stability but notes further improvement possible.
Calls for sustained implementation of strengthened bilateral, regional, and multilateral surveillance to assess crisis vulnerabilities, debt sustainability, currency mismatches, balance sheet and capital account developments, and data provision and dissemination.
Welcomes progress with standards and codes process and the Financial Sector Assessment Program (FSAP); calls for continued movement to strengthen members' institutions, policy frameworks, and financial sectors, including through technical assistance.
Stresses need to enhance quality and effectiveness of standards and codes assessments; calls for quick implementation of agreed measures to strengthen prioritization, technical assistance, and follow up of FSAP and ROSC assessments.
Looks forward to work by the Financial Stability Forum and standard-setting bodies on strengthening standards in accounting, auditing, corporate governance, and improving transparency and financial disclosure.
Supports efforts to make surveillance more comprehensive and accountable:
- Strengthen IMF policy advice on reducing vulnerabilities.
- Greater attention to spillovers from policies in countries of systemic or regional importance.
- More effective use of IMF cross-country experience.
- Enhanced awareness of political economy factors.
- Fresh perspective in surveillance of program countries.
Welcomes increase in voluntary publication of country staff reports but notes uneven publication rates; looks forward to progress through the forthcoming review of the IMF's transparency policy and stresses preservation of candor in IMF analysis and advice.
Emphasizes support for objectives of the Contingent Credit Lines (CCL) and looks forward to a report following conclusion of the review of the facility.

Improving the capacity to resolve financial crises

Effective crisis resolution mechanisms contribute to crisis prevention by promoting sound policies and better functioning capital markets.
Welcomes strengthened framework on access to IMF resources, including:
- Substantive criteria for exceptional access in capital account crises.
- Strengthened procedures such as early involvement of the Executive Board and a separate report evaluating the case for exceptional access.
- Consistent implementation to provide clarity and predictability about IMF decisions in crises.
Collective action clauses (CACs):
- Welcomes inclusion of CACs by several countries, most recently Mexico.
- Welcomes announcement that, by June of this year, EU countries issuing bonds under foreign jurisdictions will include CACs.
- Looks forward to CACs becoming standard market practice and calls on the IMF to promote voluntary inclusion of CACs in surveillance.
Supports initiatives to formulate a voluntary code of conduct for debtors and creditors to improve restructuring processes; encourages IMF contribution.
Statutory sovereign debt restructuring mechanism (SDRM):
- Welcomes IMF work developing a concrete SDRM proposal and appreciates management and staff efforts.
- Recognizes extensive analysis and consultation advanced understanding of orderly crisis resolution issues.
- Notes Managing Director's report sets out the current position.
- While not feasible now to establish the SDRM, agrees that work should continue on issues of general relevance: inter-creditor equity considerations, enhancing transparency and disclosure, and aggregation issues.
- IMF will report on progress at the Committee's next meeting.

Implementing initiatives to support low-income countries

Recognizes urgent need to address the challenge of meeting the Millennium Development Goals; IMF has an important role in assisting low-income countries.
Calls for enhanced efforts by developing and developed countries working in partnership; stresses sound macroeconomic policies and strong public expenditure and financial management systems.
Urgent need to enhance market access and increase level and effectiveness of donor resources for developing countries; proposals including facilities are being considered.
Encourages IMF to work with low-income countries to strengthen alignment of the PRGF, domestic budgets, and the PRSP approach, building on poverty reduction strategy papers (PRSPs):
- Facilitate through more realistic economic projections, systematic analysis of sources of growth, effective Bank-Fund collaboration, and flexibility in program design, including to accommodate higher aid inflows.
Encourages donors to coordinate and harmonize assistance in line with PRSP priorities and to provide technical assistance to build capacity for PRSP strategies and improve public expenditure management.
Endorses further work on linkages between growth and poverty reduction, including the role of the private sector.
Looks forward to the review of the role of the IMF in low-income countries over the medium term and its paper on helping low-income countries to deal with shocks.
HIPC Initiative:
- Welcomes further progress in implementing the HIPC Initiative but notes delays for some countries in reaching completion point and obstacles for other eligible countries.
- Looks forward to a review at its next meeting.
- Reaffirms commitment to full financing of the Initiative and urges all creditors to participate fully.
- Encourages Bank-Fund efforts to address HIPC-to-HIPC debt relief and creditor litigation issues.
- Emphasizes need to ensure lasting debt sustainability through full implementation and financing of the Initiative and continued sound economic policies, good governance, and prudent debt management.
- Welcomes efforts by some countries to provide additional debt relief beyond HIPC terms.
- Supports joint Bank-Fund work to improve assessments of longer-term debt sustainability for heavily indebted poor countries and looks forward to a progress report at the next meeting.

Other issues

Anti–money laundering and combating the financing of terrorism (AML/CFT):
- Welcomes further actions by members and progress with the 12-month pilot program of AML/CFT assessments.
- Underscores importance of continued close cooperation between the IMF, the World Bank, the FATF, and regional bodies to complete the pilot successfully and enhance delivery of technical assistance.
- Encourages all members to adopt AML/CFT laws and practices consistent with agreed international standards and looks forward to a full report at conclusion of the pilot program.
Governance, quotas, and voice:
- Considers it important that all members have adequate voice and representation, as pointed out in the Monterrey Consensus.
- Welcomes administrative steps to strengthen capacity of African constituencies.
- Notes that the Twelfth General Review of Quotas has been concluded and that the IMF is well positioned to meet projected needs of its members.
- Looks forward to a status report by the 2003 Annual Meetings on adequacy of IMF resources, distribution of quotas, and measures to strengthen IMF governance in the context of the Thirteenth General Review of Quotas.
- Recommends completion of the ratification of the Fourth Amendment.
Independent Evaluation Office:
- Welcomes thorough follow up to the first IEO report on prolonged use of IMF resources and looks forward to future IEO reports to enhance the listening and learning culture within the IMF.
Personnel:
- Expresses appreciation of the work of Eduardo Aninat as Deputy Managing Director.

Attendance and participation

Members or Alternates: lists Ministers, Governors, Deputy Ministers, and alternates from a wide range of countries and institutions (e.g., Hamad Al-Sayari; Edward George; Felipe Pérez Martí; Ian Campbell; Job Graca; Hans Eichel; Geir Hilmar Haarde; A.H.E.M. Wellink; Jamaludin Mohd Jarjis; Mohammed K. Khirbash; Aleksei Kudrin; Mohammed Laksaci; Roberto Lavagna; John Manley; Francis Mer; Antonio Palocci; Guy Quaden; Masajuro Shiokawa; Bimal Jalan; John W. Snow; Paul Toungui; Giulio Tremonti; Kaspar Villiger; Li Ruogu).
Observers include representatives from the UN, ECB, UNCTAD, OECD, BIS, FSF, ILO, Joint Development Committee, European Commission, WTO, and World Bank (specific names listed in the communiqué).

Communiqué of the International Monetary and Financial Committee — April 12, 2003.

References

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