Transcript

Transcript of a Press Conference by UK Chancellor of the Exchequer Gordon Brown, Chairman of the IMF's International Monetary and Financial Committee, and Rodrigo de Rato, Managing Director of the IMF, with Masood Ahmed, Director of the IMF's External Relations Department

September 17, 2006

MR. AHMED: Good afternoon. This is our traditional IMFC press conference. To my right, Gordon Brown, Chairman of the IMFC, and to his right, Rodrigo de Rato, the Managing Director of the IMF. Both the Chairman and the Managing Director will have some opening remarks and then they will take questions. So, with that, Gordon.

MR. BROWN: Thank you very much, and thank you for being so patient. We met today as an International Monetary and Finance Committee at a time of global economic challenge, with world growth strong not least because of continued expansion here in Asia. It is a time of opportunity, but there are also heightened global risks. Global economic imbalances persist and the threat of their unwinding remains. Global inflation is rising, with upward revisions to over half of all country forecasts in the World Economic Outlook. Further sustained rises in oil and energy prices since our Spring Meetings have created risks to world growth. Perhaps the most worrying for the long term, worrying for growth in all areas of the world, is the stalling of the Doha Round of world trade talks. The Committee discussed all these issues today. Our discussions were productive and I want to set out in detail our conclusions.

First, on trade, we heard this morning from Pascal Lamy of the World Trade Organization, and we discussed the protectionist sentiment that has been rising in almost every continent of the world. The IMFC Committee was united in expressing our deep disappointment, and these are the words in our communiqué, that the trade negotiations had been suspended, but we went on to urge all nations and all members of the World Trade Organization to resist protectionist calls. The Committee went on to call, and I quote, for leadership from major trading nations to work urgently toward an early resumption of the negotiations. We urged them to work urgently toward an ambitious successful outcome by the end of this year based on a commitment to a comprehensive package on agriculture, industrial products and services, to which we said all countries will need to contribute.

As a result of our meeting, and what we heard from different continents, I am more optimistic now that there is a way forward, that there is a basis for a deal, that countries are now seized of both the importance of a deal and the urgency of achieving one. I believe that the prospects of such a deal are enhanced by the pledges of more than $4 billion a year that have been made by the richest countries to the developing world to aid trade for infrastructure development, money that will be of benefit to reforming the infrastructure communications transport, of developing economies. We have been considering prospects for the global economy, notwithstanding the medium-term risks of not securing such a trade deal. We welcomed the strong and broad-based economic expansion, now running at 5.1 percent a year for the world economy, which we expect to remain robust in the year 2007. For the advanced economies, we have concluded that monetary policy will need to continue to anchor inflation expectations and balance price stability and growth. We will have to manage the inflationary risks of energy price increases and we called on all governments to continue to take forward structural reforms to drive productivity growth. Growth in emerging market economies has been underpinned by improved fundamentals, we say, and in particular in Asia, by market reforms to open up trade and competition. We are agreed on the need across the major economies to continue to implement the agreed strategy to underpin an orderly market-led unwinding of global imbalances through improvements in U.S. savings rates, structural reforms in Europe, measures to boost domestic demand in parts of Asia, and greater exchange rate flexibility in surplus countries. We are concerned and remain concerned about high and volatile prices in world energy markets. This, we believe, will require further action to tackle supply and demand imbalances, including the need for further new investment and production and refining capacity, closer dialogue between oil producers and oil consumers, improve quality and transparency of oil data, and of course the consideration of new incentives to encourage energy conservation and alternative sources of energy.

The IMFC also agreed that the IMF should focus its work on low-income countries on sustainable growth backed by macroeconomic reforms that support the achievement of the important Millennium Development Goals. We welcome the progress that has been made on debt relief and, once again, I congratulate the Managing Director of the IMF and the President of the World Bank for moving this forward. We emphasize the importance of this new debt sustainability framework to avoid the accumulation of future debts by these countries.

Now, ladies and gentlemen, this was a reform summit to create the IMF for the future. We are grateful to Mr. de Rato, the Managing Director of the IMF, for putting to the meeting proposals that involve substantial and continuing research of the International Monetary Fund. The new global challenges that we have been considering require more than ever the IMF to keep pace with the global and multilateral nature of today's economies. Subject to agreement on Stage 1 of quota reforms, quota reforms will be implemented after tomorrow, this would involve increases in quotas for China, Korea, Mexico, and Turkey. This package, when implemented, will make significant progress in realigning quota shares with members' relative positions in the world economy. We welcome today's agreement to a comprehensive reform package for quotas, which, if it moved forward, we want to be completed no later than the 2008 Annual Meetings. These reforms, we agreed, should also enhance the participation and voice of low-income countries in the International Monetary Fund. This will be the biggest reform to the governance of the International Monetary Fund for 60 years and we have asked the Managing Director to report back to us on progress of these reforms at our next meeting.

The focus of the International Monetary Fund in future is not just crisis resolution, but also crisis prevention and the vehicle will be the multilateral surveillance mechanisms. There will be a report in April on the next stage of multilateral surveillance for the IMF. The Committee also welcomed the ongoing review, with a view to updating the 1977 surveillance decision to restate members' obligations to clarify the foundations of IMF surveillance and secure a common understanding of its scope. We also looked at what was scope for further multilateral work, and Mr. de Rato proposed that he will report in April about what might be done for the future. Under consideration is a review of issues of financial stability, but an analysis country by country in the World Economic Outlook of the impact of oil and energy price rises and the first- and second-round effects is also part of ongoing work. And following our successful conference today with business leaders about the dangers and risks of protectionism, we plan to update this process with a further conference on globalization, trade, and protectionism that would include representation from business at our April meetings.

I said in April that this would be a reform summit. We have agreed a path for major reforms for the future. Tomorrow the quota vote will be announced, but what is also interesting is that, while we have considered the future governance of the IMF and its ability to meet the challenges of the future, we have also today emphasized, and I stress, the urgency for the sake of the world economy of moving forward with the trade talks so that we can remove the risks of protectionism in the world economy and we are seized by the importance of reaching a trade deal as soon as possible.

MR. AHMED: Let me turn to the Managing Director for his opening remarks.

MR. DE RATO: Good afternoon. Once again, thank you for joining us. I want to thank, once again, the people of this city and government for their efforts in staging these meetings, and the warm welcome we have received. Chancellor Brown has very well described today's substantive discussions among the IMFC members. I just want to recall that after our Spring Meetings in Washington we had proposed that these Annual Meetings would be a reform summit, as Governor Brown has very well phrased it, and I think today's discussion shows that we are well on the way to delivering on those expectations. I can also think there is probably no better place to talk about the reform summit than in Singapore, here in Asia.

As Gordon Brown has noted, the IMFC discussed the outlook of the world economy this morning. I think there is broad agreement that growth is expected to remain robust in 2007, notwithstanding tightening financial conditions. The question is does downside risk arise from the possibility of further build-up of inflationary pressures, a sharper than expected slowdown in the housing markets, and the continued and volatile energy prices. Certainly, the question of protectionism has been on the table all day. We have been discussing it from different points of view with the private sector this among and then with the Ministers along the works of the discussion in the IMFC Committee.

Let me just remind you that the view of the Fund regarding how to face this risk and at the same time continue the global expansion is for advanced economies, in terms of monetary policy, to manage the relative risk to inflation and growth, and ensure that recent increases in energy prices do not feed into inflationary expectations. Certainly, the current favorable economic environment provides opportunities for more ambitious fiscal consolidation and fiscal consolidation in emerging economies, in industrialized economies is going to be a challenge because of many of the consequences of the aging population and health costs, and certainly structural reform in Japan and in Europe have paved the way for the actual good performance of both areas. We see the need for further structural reforms in Japan and in Europe.

Regarding emerging markets and other developing countries, improved fundamentals have underpinned the resilience of growth to high oil prices and that of global financial conditions, and this is the moment to address the vulnerabilities and strengthen policy frameworks. Growth in poor countries overall, including Sub-Saharan Africa, remains strong. The Committee emphasized the importance of further efforts to accelerate growth to underpin strong partnership between poor countries and donors for achieving the Millennium Development Goals.

I want to say that I am very grateful for the support of the membership expressed today at the Committee on an ongoing work to implement the medium-term strategy in many areas, crisis prevention, surveillance, and governance. I am particularly encouraged by the welcome the Committee has given to progress made in the reform of our surveillance framework. As you will see in the communiqué, we held wide-ranging discussions aimed at improving the effectiveness of our bilateral and multilateral surveillance. As Mr. Brown has said, next spring we will have the chance to discuss future multilateral consultations, probably in the financial stability area, and also look at issues in a broader way, in a global way regarding trade and oil.

You will note, too, that the Committee supports the strengthening of IMF policies to better assist our emerging market members. In this regard, we will continue our work on possible new instruments that will be able to respond in a more effective way to future financial crises aimed at supporting emerging countries with strong macroeconomic frameworks, but still with vulnerabilities.

Today until tomorrow afternoon, the membership is voting on a package of reform regarding quotas and governance. We all will have to wait until tomorrow afternoon to know the outcome. I am very encouraged for what I have heard at the Committee. In any respect, I see there is a broad consensus to move ahead in reform of the quota and governance of the institution. Thank you very much again for your presence.

MR. BROWN: Can I just add my thanks also to the Singaporean authorities and to the Prime Minister, who hosted a dinner for many members of the IMF last night, and to his government for their hospitality and the excellent organization of this meeting.

MR. AHMED: Let me open the floor for questions for the Chairman and Managing Director now.

QUESTION: There have been many [inaudible] in these trade talks, the latest of them in St. Petersburg only a couple of months ago. What makes you so confident that it is different this time and that there will actually be a deal before the fast track authority runs out in the U.S. in the spring of next year?

MR. BROWN: I am more optimistic, as I said, as a result of the discussions we had over this weekend, first of all because we have put in place the most ambitious package of aid for trade. We were asked by Mr. Lamy to bring together countries who would contribute to a package of resources available for infrastructure development in the developing countries, in the low-income countries. We can now say that between all the potential donors, $4 billion a year has been pledged. That means it is possible to say to the developing countries that they will have the additional benefit of that from a successful conclusion to the trade round. I think the second thing that gives me hope that we are moving forward is the determination on behalf of the members, on the part of the members today. I have never seen a discussion in all the years I have been at the IMF meetings that was so determined that we bring the trade talks to a conclusion, so aware of the risks that have come from rising protectionist pressures, and so determined that they actually say in the communiqué that not only do they want an early resumption of the negotiations, but an ambitious, successful outcome by the end of the year and a commitment to a comprehensive package on agriculture, industrial products, and services, to which all countries will need to contribute. You may have seen the speech by Mr. Paulson, the new American Treasury Secretary, saying how much he put emphasis on a premium on getting a successful conclusion to the trade round. A similar set of feelings was expressed by European Ministers around the table. You may know that we had a group of business leaders from around the world who met with the Committee for breakfast this morning and the consensus between business and governments about the important signal that a successful conclusion to the trade round would send is another reason why I think there is additional pressure on all negotiators to reach a conclusion.

I believe that Lamy, the head of the World Trade Organization, is doing under difficult circumstances an excellent job and I believe that he will be in a position, with the enthusiasm but also the determination expressed today, to move negotiations forward. So, the aid for trade announcement, the determination of America, the statements made by European Ministers, the communiqué that says that we want a successful outcome by the end of the year, shows that we are fired up as a group in wanting both a conclusion to the trade round and the successful outcome, and I believe that that is sending a message right across the world.

QUESTION: Chancellor, you mentioned the risks of higher inflation. Is it the view of the Committee that the central banks have done enough to contain this risk, or are you expecting further action?

MR. BROWN: Well, what we say, and I think it is only fair to read out the communiqué on this, where it is absolutely clear about the importance that it attaches both to dealing with inflation and on maintaining growth. In the advanced economies, monetary policy will need to continue solidly anchoring inflation expectations and to balance the relative risk to price stability and growth. In other words, we are aware that an inflation problem has been developing. We know that growth is higher than people expected. We are determined to maintain levels of growth, but we are asking countries to be both vigilant about inflation and be aware about second-round effects of energy price rises.

QUESTION: Sir, a few countries like India, Brazil, Argentina, and Egypt have expressed unhappiness over the IMF reform package as it stands now, and expressed some dissent as well. The Finance Minister of India today proposed GDP based on PPP as a new formula for IMF reform in respect of quotas and voting rights. What has been the response, if any, of the IMF to these new views from the Indian side?

MR. DE RATO: First of all, I want to say that regarding the position of different countries, all of them have all my respect. I understand the different positions. I understand that there are some countries who are expressing reservations about future discussions, but I have heard all of them expressing their backing to, first, the ad hoc increase for very underrepresented economies; second, the need for low-income countries to be protected and enhance their voice; and third, the need for the Fund to reform its governance and quotas and voice, and to review the actual formula. So, in that respect, I think there is a consensus of what to do; there is a consensus of some of the measures that have been voted right now. There are some different positions regarding the future, for instance the discussion of the formula. As you know, many Ministers have this morning expressed views about what should be the components of the new formula regarding GDP, how to measure GDP, regarding openness, how to measure openness, the new role of the financial issues in the openness of the economies, variability, and many other questions. All of that will be part of the discussions that we will start, pending on the vote tomorrow, in the next few weeks. Certainly, we will try to reach the maximum consensus possible.

MR. BROWN: Just to add about the Committee itself, first of all we have been grateful to Mr. de Rato, who has piloted through the proposals for change and done a huge amount of work in the last few months to bring people together. Although there were views expressed on both sides about the vote that is taking place tomorrow, the discussion that took place at the Committee involved, I think, 20 countries speaking, but the communiqué is unanimous in saying that the package of reforms, when implemented, would make significant progress in realigning quota shares with members' relative positions in the world economy, and equally important, enhance the participation and voice of low-income countries in the IMF. Now, that is a unanimous statement made by the member countries as a result of our discussion.

QUESTION: Chancellor, there have been various calls here for the industrial countries to exercise self-restraint, I think is the word, in terms of demanding shares commensurate at the IMF with the size of their own economies. Do you think that industrial countries are prepared to do that in the second phase, and particularly in Europe?

MR. BROWN: We have agreed on that principle set out in the communiqué. I think the next stage is the detailed consideration of the varied items about the shares themselves that you are raising. I believe that countries that are major shareholders in the IMF will approach this in a statesman-like way because we do wish to move the institution forward. We do wish to bring it up to date and, of course, the reform of the structure of the IMF makes possible also a greater engagement by members in the new work of crisis prevention. So, I am confident that the next stage of reforms will be approached in a statesman-like way by all countries wishing to see a positive outcome that recognizes the changing nature of the global economy and the size of members' economies, but also is aware that we need to do something to protect and enhance the participation and voice of low-income countries in the IMF as well.

QUESTION: My concern is that there has been talk that the IMF is the wrong institution in the wrong place, in the wrong time in Africa and in most developing economies. What is your comment on that, and what do you expect to do to change the situation?

MR. DE RATO: Well, I do not know what you mean by there have been talks. I do not know exactly what that means. Is it your view or is it somebody else's view? Anyway, addressing the issue, I think our work in low-income countries in general and Africa in particular, is very intense. We devote to Africa the bigger part, the area of the world where we have the biggest contribution of human resources and programs. I think we are engaged in very detailed poverty reduction programs that are based on home-grown proposals by governments and societies of those countries. Certainly, the effort done by the institution in debt relief has been substantial. I want to remind you that a very substantial part of that effort is going to Africa. As I said yesterday or the day before here, the package of reforms that are put forward under the institution is voting, the membership is voting today and tomorrow, makes a significant change in the governance of this institution by recognizing that, together with economic weight, however you measure economic weight, the voice of low-income countries has to be enhanced in this institution. I think that is a very, and I would even say historical change in the way the countries perceive the governance of the IMF. Even on other issues there are different views. On the issue regarding the need to protect low-income countries' votes, I think there is almost unanimity. So, in that respect, I think the institution is becoming more and more aware of the need to reflect the situation of low-income countries, and I think the combination of instruments that we have put forward in recent years regarding poverty reduction and involvement in low-income countries is very important. I am very happy to stress once again that in capacity-building, for instance, certainly Africa is the area in which we are making bigger effort.

MR. BROWN: I think your question omits the fact that when the International Monetary Fund was set up alongside the World Bank in the 1940s, the objective was not simply to provide for stability and growth, which is, of course, essential, but to show that growth, to be sustained, had to be shared across the world. I think what we are doing in new circumstances is trying to revive and enhance that objective of the International Monetary Fund, with its responsibilities to all continents of the world. I think the work that is being done on transparency, on codes and standards, on fiscal policy, monetary policy, corporate standards, will, in my view, be of great assistance to the very countries that you are talking about, and that is combined with the work that has been done in the last year on removing the burden of debt from many of the low-income countries in Africa and elsewhere. So, we are making the IMF fit for a purpose for a world in which we recognize the greater interdependence of countries and, therefore, new rules, new systems, new reforms, and new structures of government are going to be necessary. But in my view, the working out of these reforms are going to be of great benefit to developing countries.

QUESTION: The Brazilian Finance Minister yesterday said that the Fund is in the process of sclerosis. He used this word to characterize the way it is taking the process of quota reforms. I would like to ask you, Mr. de Rato, if you think that this reform can lead to a loss of representativeness of the Fund, not in the quota way but in the way that members express themselves during this reform.

MR. DE RATO: What do you mean?

QUESTION: What I mean is that you are trying to make reform to change the Fund to be more representative, but on the way there is a Minister that is a member of the Fund that says that the Fund is in a sclerosis process because they are not taking the views that the four big countries and their regions are taking. That is the question.

MR. DE RATO: As you know, the reform will only be possible if at least 85 percent of the voting power backs it. Eighty-five percent is a very substantial position in any institution. At the same time, I understand perfectly that there are different analyses and, as I said before, how Ministers have expressed themselves, specifically the Minister from Brazil, Mr. Mantega, is that he agrees with the ad hoc increase for four countries. He agrees with the need to enhance and ring-fence voting power for low-income countries. He agrees on the importance of the quota reform. He has some very understandable positions regarding how the quotas should be defined, which positions that are coincidental with others or not with everybody, and I think that is going to be the question of discussion. I want to thank Minister Mantega for his words this morning at the IMFC in which he clearly said that, as the discussions will evolve upon the vote of tomorrow, of course, he will be very willing to change his position if his actual views are satisfied.

MR. BROWN: Some people say we have been moving too fast and some people say we have been moving too slowly. I suppose sclerosis means you are not moving at all. The one thing you cannot say is that there is no change. Change is happening. Reforms have been put in place. The purpose of the IMF is changing. It is about crisis prevention as much as crisis resolution. The vehicle it is using is changing multilateral surveillance, is absolutely central to the work of the IMF. The structure of government is changing. I think when people look back on the history of the International Monetary Fund, they will say that the biggest reforms in 60 years are being brought in now and we are at the start of a process of change that will continue over the next few years.

QUESTION: Managing Director, I think both of you said that now is the time of global challenge with a threat coming from global imbalances. Can you tell me in what ways, in what tangible ways that the multilateral surveillance process is actually reducing those threats at the moment?

MR. DE RATO: Well, I think that engaging five economies in discussing global imbalances in a multilateral institution like the IMF is already a very important step in addressing how to resolve those issues. As you are very aware, global imbalances of savings and investment are not something that can be resolved overnight and it is probably not even desirable that that will happen, but it has to be resolved over changes in rebalancing of demand in many countries, rebalancing demand, rebalancing saving patterns and structural reforms. The fact that five economies, two of them emerging economies like China and Saudi Arabia, are willing to engage in those discussions with us, I think is a very important step forward and a positive one. As Mr. Brown said, the fact that the constituency of the Fund is willing to see global surveillance as a very important new instrument to enhance good macroeconomic governments in the world will take us to do more work in this global surveillance, probably the next one on financial issues. I think that the discussions on global imbalances, as I said, I think the fact that we are having them is already positive. I think that it will take some time to arrive to a conclusions. At the same time, I am sure that there is a growing recognition by the membership and by those five economies in particular that global imbalances pose a threat to the world economy and that we need not only to let and to believe that the private markets will solve them, but also that policymakers will have also an attitude and an implementation of policies that will allow the not an orderly--would allow an orderly resolution of those imbalances.

MR. BROWN: Can I just add that the very process of multilateral surveillance and multilateral consultations is now moving both the IMF and the Committee itself to look at other areas where these consultations and surveillance is necessary. Mr. de Rato mentioned financial issues as perhaps a future subject of that. I mentioned in my remarks that we are seized of the importance of the impact of oil on the economy and we are now doing further work than that. Obviously, the discussions that we have had on trade and protectionism and globalization generally lead us to support further business to government consultations which will take place at the April meetings of the IMF, so this focus on surveillance at a multilateral level is continuing at a number of different levels, and involves the issues of oil, trade, financial stability, as well as current account imbalances. I think that just shows how the world is changing in the way that we look at these issues for the future.

QUESTION: Mr. de Rato, it seems up until this conference the Chinese government has not been as enthusiastic as expected toward this proposed reform. Ministers have stressed that there should not be a trade-off in a sense that China may get more voting power but at the same time more exposed to pressure from other members. I just wonder in your mind what will be expected of China with increased voting power, specifically in terms of monetary, financial policies, exchange rate policies?

MR. DE RATO: First of all, I would like to say that China has backed this reform publicly more than once and certainly in all the official interventions at the Board and the IMFC. So, I do not know why you characterize the position of China as not engaged in this reform, because it is not true. They are engaged and they have expressed that more than once. Second, think that the fact that the international community recognizes that China has increased its role in the world economy is due and it is necessary because it is true. Nobody can argue with that. That, of course, I think gives legitimacy to the institution and the same we can say about Korea, Turkey, or Mexico and other economies. I do not think the fact of having a role and maybe a bigger role in the institution makes you subject to more pressures. I do not think so. You have a bigger voice in the governance of the institution. Of course, that would allow you to express your views but, of course, you will listen to the views of others and that happens to the first shareholder and to the last shareholder. So I do not see a linear view at all in what you are implying, which is that recognizing a very clear fact that China has a bigger role in the world economy means that there have been more pressures. Why? No, there are no pressures. But China, as any member country of the IMF, is subject to surveillance and we expressed through the independent view of the staff what is the view of the IMF regarding the challenges that the Chinese economy is facing, like we do with the rest of the economies that are members of this institution, because every member of this institution is subject to surveillance of the institution. In fact, in the case of China, if I am not mistaken, the Article IV of China was made public a week ago. I want to commend the Chinese authorities for the transparency in that respect. There, in that Article IV, you can read very clearly what is the view of the Board and the staff of the Fund regarding what are the challenges facing the Chinese society and the Chinese economy.

QUESTION: Going back to the issue of the reform, we have those four countries who said that they are going to vote against it: Argentina, Brazil, India, and Egypt and also apparently also most of the countries in Latin America, at least according to them. They do not have enough votes for the rejection of the resolution but, of course, that is the problem. They do not have enough votes. Do you not think that their opposition diminishes the legitimacy of the process, and also can you assure countries like Argentina that their voting share will not be diminished with the process?

MR. DE RATO: In any democratic institution, you have more votes or less votes. It depends. It is just a fact of reality. What we are trying to address here is that the votes are correlated to two principles. One is economic weight in the world and there is a discussion on how you measure that, and the other is to protect low-income countries. I personally do not think that there is any alternative to that. In fact, many of the countries that have expressed misgivings regarding the specifics of this reform agree that that is important, and I want to read the communiqués that have been approved by unanimity says it very clear: This package of reform, when implemented, would make significant progress in realigning quota shares with members' relative positions in the world economy and equally important in enhancing the participation and voice of low-income countries in the IMF. That is what all the members of the IMFC have endorsed.

QUESTION: Mr. de Rato, Mr. Brown, you see the Bundesbank in the history of the Fund and its major shareholders have a traditional role sometimes to be a sort of a check-and-balance leader for the original Group of 10 to calm down either American aspirations vis-à-vis the Bretton Woods institutions, also now emerging markets, and the head of the Bundesbank in the old tradition, he proposed this morning to convince you, the G7 and the head of the IMF to put the medium-term strategy top-down. In other words, his argument is from a Bundesbank view that your whole medium-term reform proposals is flawed, basically flawed, because you have excluded the whole area of clarifying the mandate of the Fund for the next ten years, meaning in the lesson of surveillance, and you have also omitted to include the whole area of reform for the institution, maybe cutting half of their expenses and then defining what the role of the Fund should be. In other words, they made the point that the IMF traditionally is the only institution that is above any reforms, institutional reform, while all the Finance Ministers that provide the money for you and all the institutions are also reforming and where is the reform for the medium term that you come up with, maybe cutting off expenses?

MR. BROWN: You are right on your first point only, that the Bundesbank does hold the share for Germany in the IMF. Every other part of your comment seems to me to be wrong. The IMF is making changes both in its structure of government and in its purpose and in its mandate and in its remits, and I would just point out to you that the Bundesbank, as a shareholder of the IMF, supported the reforms at the meeting today.

QUESTION: Mr. de Rato, you mentioned China's Article IV consultation document in the context of multilateral surveillance. Are you suggesting that each--

MR. DE RATO: No, no, no, no. I mentioned it in the context of the question of your colleague regarding what was the view of the Fund regarding China. And I expressed and hung reference to pressures. I expressed that China, like any other member of the institution of 184 members, is subject to bilateral surveillance.

QUESTION: You are not going to publish the results of this multilateral surveillance in lengthy documents like Article IV publications?

MR. DE RATO: That will depend on the willingness, like in Article IVs. Not all Article IVs are published. It depends on the willingness of the participants. That is why I commended the Chinese authorities for making it public. It is too soon to answer that question, because I think that the Executive Board will have to reflect on how we apply our usual roles to a multilateral consultation in which more than one country is involved. So, your question I cannot answer today. I am sure that the participants will have a lot to say on that.

QUESTION: I have a question on the income of the Fund. The mandate of the Fund is expanding and the income appears to be contracting. I know that the Managing Director set up a special Committee under Andrew Crockett, but I wonder whether perhaps the Chancellor could also comment on this on ways in which the Fund is going to be financed in the future, given that there is a decreasing number of borrowers at the present time.

MR. BROWN: I think you can again see in the communiqué that we heard from the Managing Director, we looked forward to the development of proposals for more predictable and stable sources of finance, that that is in the context of the budgetary position of the IMF where there are strict controls and disciplines on the spending of the IMF. We do await the recommendations from Andrew Crockett and his group. I do not think, until we have these recommendations, that we are in a position to speculate about the changes that would be made. But the IMF is subject to the same discipline about its spending as any other organization that is involved in finance.

MR. DE RATO: Let me add there that already the Board has approved a budgetary framework in which not only nominal reductions but real reductions are going to take place in the next two years. So, there is already a very, I think, effective budgetary framework. Of course, we will keep making all the efforts to make the institutions more effective in the use of public resources.

MR. AHMED: I want to thank you all for the questions. I know others have questions, but I am afraid that is all the time we have got today.

MR. BROWN: Thank you very much.

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