Address by Michel Camdessus Chairman of the Executive Board and Managing Director of the IMF to the Board of Governors of the Fund

IMF News, September 28, 1999

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Published: September 28, 1999

Opening and context

Delivered at the Annual Meetings, Washington, D.C., September 28, 1999.
Emphasizes that the global economy "has passed through a great ordeal" and that "the storm is abating and the horizon is brightening, even though some risks remain."
Attributes the recovery to:
- the efforts of crisis-affected countries (examples: Korea, Thailand, the Philippines, Brazil);
- efforts by countries at risk from contagion to bolster defenses;
- solidarity of financial and trading partners;
- efforts of major industrial countries (flexible monetary policy in the United States and Europe; Japan's determination to revive its economy);
- efforts of international institutions and IMF staff.

International monetary and financial reform

Progress noted: adoption of the Code of Good Practices on Transparency in Monetary and Financial Policies; creation of new facilities (contingent credit lines, the Y2K facility); emphasis on prevention, transparency, and financial sector stability.
Surveillance: central role of the Fund; priority in allocating human and budgetary resources; early detection of emerging problems; primary focus on monetary stability, balance of payments sustainability, and growth-oriented economic policies.
Key unresolved issues (listed as four areas where consensus slower to emerge):

1. Scope and focus of surveillance

Need to decide how to integrate concerns outside traditional IMF mandate (securities markets, accounting, auditing, insurance, corporate governance) into surveillance.
Use arrangements with other agencies to share dissemination and monitoring of standards.
Ongoing cooperation with the World Bank and BIS on assessing financial sector soundness and banking supervision principles.

2. Private sector involvement in crisis prevention and resolution

Promote mature creditor–sovereign relationships to dampen volatility of private capital flows.
Distill principles from recent cases for "ex ante" approaches to crisis resolution.
Proposal to permit a temporary stay of litigation via amendment or interpretation of Article VIII(2b) of the IMF—acknowledged as controversial.

3. Liberalization of capital movements versus exchange controls

Core messages: liberal arrangements for capital movements are beneficial long term; liberalization should be orderly and country-specific.
Recent proposal: gradual, country-specific approach to liberalization; Governors urged to lend personal attention to complete support for an amendment to the purposes of the Fund and to extend jurisdiction as needed.

4. Exchange rate regimes

Diversity of regimes will continue; greater capital mobility makes maintaining fixed exchange rates more demanding.
Encouraging signs: recognition of the role of sound economic fundamentals; "the remarkable success of the introduction of the euro with its potential to become a strong player in an orderly multipolar system."

Humanizing globalization — the war on poverty

Moral imperative invoked by the message found on the bodies of Guinean teenagers Yaguine Koita and Fode Tounkara: "we suffer enormously in Africa. Help us..."
Two dimensions of poverty reduction:
- National: responsibility rests at home; need to generate high-quality growth through stable macroeconomic environment, open efficient markets, private investment, transparency, financial sector soundness, robust institutions, respect for the rule of law, and independent judiciary.
- International: indispensable contribution from international community—trade, aid, debt relief, and coordinated donor action.
IMF role: though not a development institution, IMF programs have for years incorporated social policies; past decade saw increases in education and health care in real per capita terms in most program countries.
Institutional reforms and initiatives:
- Transformation of the ESAF to the Poverty Reduction and Growth Facility (PRGF) to incorporate lessons of more than ten years' experience, deepen cooperation with the World Bank, new steps for debt reduction, and explicit link with poverty reduction.
- Formulation by countries of Poverty Reduction Strategy Papers (PRSPs) after open discussion with civil society; World Bank to base IDA operations on the same Papers to create synergy.
- Emphasis on expeditious implementation of the new HIPC initiative.
Debt relief and IMF contribution:
- Preliminary count: 88 countries have pledged contributions (the large majority are developing or transition countries, including several ESAF users).
- IMF to "almost triple from 5 million ounces to as much as 14 million ounces" the stock of gold it will utilize to generate earnings through off-market transactions to complete its contribution.
- The IMF regards its pledges (once ratified by members) as completing the Fund contribution to the HIPC initiative—a one-time truly exceptional operation.
Trade, aid, and development targets:
- Calls for industrial countries to open economies to exports of the poorest countries and to reverse the trend decline in official development assistance.
- Reminds Governors of the Copenhagen Declaration pledge: reduce by half the level of extreme poverty by the year 2015.
- Notes six additional targets to be realized in the next 15 years: universal primary education, two-thirds reduction in infant and child mortality, three-fourths reduction in maternal mortality, universal access to reproductive health services, elimination of gender disparities in primary and secondary education by 2005.
- Urges monitoring indicators, developed with OECD Development Assistance Committee and other institutions, to check progress annually.

Seven pledges on sustainable development (as attached)

Reducing extreme poverty: "The proportion of people living in extreme poverty in developing countries should be reduced by at least one half by 2015.(Copenhagen)"
Universal primary education: "There should be universal primary education in all countries by 2015. (Jomtien, Copenhagen, Beijing)"
Gender equality: "Progress towards gender equality and the empowerment of women should be demonstrated by eliminating gender disparity in primary and secondary education by 2005. (Cairo, Copenhagen, Beijing)"
Infant and child mortality: "The death rates for infants and children under the age of five years should be reduced in each developing country by two-thirds the 1990 level by 2015. (Cairo)"
Maternal mortality: "The rate of maternal mortality should be reduced by three-fourths between 1990 and 2015. (Cairo, Beijing)"
Reproductive health: "Access should be available through the primary health-care system to reproductive health services for all individuals of appropriate ages, no later than 2015. (Cairo)"
Environment: "There should be a current national strategy for sustainable development, in the process of implementation, in every country by 2005, so as to ensure that current trends in the loss of environmental resources are effectively reversed at both global and national levels by 2015. (Rio)"

Security, post-conflict, and military expenditure recommendations

Calls for proactive responses to post-conflict situations and initiatives for peace.
Suggestions to restrain arms trade and military expenditures:
- restraining the sales of military equipment to sensitive regions;
- abolishing the provision of export credit for military purposes;
- adopting national maximum levels for military expenditure that should not exceed 1.5 percent of GDP in Africa, and might often be much lower;
- cooperating in interdiction of smuggling of raw materials and natural resources to finance armed conflict;
- broadening the UN register to involve more countries and to cover small arms and ammunition.

Immediate priorities and closing calls to action

Urgent tasks highlighted:
- Industrial countries: take advantage of the recovery to achieve more balanced growth, introduce flexibility to structures and markets, and consolidate public finances.
- Countries emerging from crisis: forge ahead with major reforms still needed.
- HIPC countries: adopt policies needed to be counted among those reaching the decision point before the end of 2000.
- All countries: proceed with possibly difficult budgetary choices entailed in implementing the seven pledges on sustainable development.
- Governors: modernize the Fund to match markets and make it more responsive, human-centered, and a better place for broader world citizenship.
Measures of the Fund's ongoing engagement:
- Positive results noted in the handful of countries at the center of the crisis, in more than 50 other countries implementing IMF-supported programs, and in another 125 members served through surveillance, technical assistance and training.
Final imperative: "Times of respite can be dangerous times"—a call not to delay reforms and poverty-eradication efforts: "It is time for action. Let us go forward."

Address by Michel Camdessus, Chairman of the Executive Board and Managing Director of the International Monetary Fund, to the Board of Governors of the Fund, Washington, D.C., September 28, 1999.