Communiqué of the Thirty-Fifth Meeting of the IMFC

April 22, 2017

Chaired by Mr. Agustín Carstens, Governor of the Bank of Mexico

Global economy

The global economic recovery is gaining momentum, commodity prices have firmed up, and deflation risks are receding. While the outlook is improving, growth is still modest and subject to heightened political and policy uncertainties. Crisis legacies, high debt levels, weak productivity growth, and demographic trends remain challenging headwinds in advanced economies; while domestic imbalances, sharper-than-expected financial tightening, and negative spillovers from global uncertainty pose challenges for some emerging market and developing countries.

Trade, financial integration, and technological innovation have brought significant benefits, improving living standards, and lifting hundreds of millions out of poverty. However, the prolonged period of low growth has brought to the fore the concerns of those who have been left behind. It is important to ensure that everyone has the opportunity to benefit from global economic integration and technological progress.

We reinforce our commitment to achieve strong, sustainable, balanced, inclusive, and job-rich growth. To this end, we will use all policy tools—monetary and fiscal policies, and structural reforms—both individually and collectively. We reaffirm our commitment to communicate policy stances clearly, avoid inward-looking policies, and preserve global financial stability. We recognize that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will refrain from competitive devaluations, and will not target our exchange rates for competitive purposes. We will also work together to reduce excessive global imbalances by pursuing appropriate policies. We are working to strengthen the contribution of trade to our economies. Our priorities include:

Accommodative monetary policy: In economies where inflation is still below target and output gaps remain negative, monetary policy should remain accommodative, consistent with central banks’ mandates, mindful of financial stability risks, and underpinned by credible policy frameworks. Monetary policy by itself cannot achieve sustainable and balanced growth, and hence must be accompanied by other supportive policies. Monetary policy normalization, where warranted, should continue to be well-communicated, also to mitigate potential cross-border spillover effects.

Growth-friendly fiscal policy: Fiscal policy should be used flexibly and be growth-friendly, prioritize high-quality investment, and support reforms that boost productivity, provide opportunities for all, and promote inclusiveness, while enhancing resilience and ensuring that public debt as a share of GDP is on a sustainable path.

Tailored, prioritized, and sequenced structural reforms: We will advance structural reforms to lift growth and productivity and enhance resilience, while assisting those bearing the cost of adjustment. The design, prioritization, and sequencing of reforms should reflect country circumstances; aim to boost investments in infrastructure, human capital development, and innovation; promote competition and market entry; and raise employment rates.

Safeguarding financial stability: We will further strengthen the resilience of the financial sector to continue to support growth and development. This requires sustained efforts to address remaining crisis legacies in some advanced economies and vulnerabilities in some emerging market economies, as well as monitoring potential financial risks associated with prolonged low or negative interest rates and with systemic market liquidity shifts. We stress the importance of timely, full, and consistent implementation of the agreed financial sector reform agenda, as well as finalizing remaining elements of the regulatory framework as soon as possible.

A more inclusive global economy: We will implement policies that promote opportunities for all within our countries, sustainability over time, and cooperation across countries. We will implement domestic policies that develop an adaptable and skilled workforce, assist those adversely affected by technological progress and economic integration, and work together to ensure that future generations are not left to pay for the actions of the current one. Recognizing that every country benefits from cooperation through a collaborative framework that evolves to meet the changing needs of the global economy, we will work to tackle common challenges, support efforts toward the 2030 Sustainable Development Goals (SDGs), and ensure the orderly functioning of the international monetary system (IMS). We will support countries dealing with the consequences of conflicts, refugee and humanitarian crises, or natural disasters. We will work to promote a level playing field in international trade and taxation; tackle the sources and channels of terrorist financing, corruption, and other illicit financial flows; and address correspondent banking relationship withdrawal.

IMF operations

We welcome the Managing Director’s Global Policy Agenda. The IMF has a key role in supporting the membership at this challenging time to:

Sustain the recovery: Based on the three-pronged approach—with monetary, fiscal, and structural policies—we welcome the IMF providing country-specific advice on the policy mix to sustain the ongoing recovery and address excessive global imbalances. We support the work on fiscal rules and medium-term frameworks and the application of the fiscal space framework in bilateral surveillance. We support work to review the Public Investment Management Assessment framework, expand the Infrastructure Policy Support Initiative, and explore reforms toward growth-friendly, sustainable, and equitable fiscal policy. We also support further work on how fiscal policy could better mitigate short-term costs and enhance long-term benefits of structural reforms.

Lift productivity and tackle vulnerabilities: We welcome the recent work on the causes behind weak productivity growth and the new toolkit to identify structural policy gaps, and look forward to the IMF’s further work and specific recommendations for high-priority structural reforms to boost productivity, investment, and resilience to economic shocks. We look forward to further work on tackling debt overhangs and reducing financial sector vulnerabilities, and on the measurement challenges of the digital economy. We support a continued active role for the IMF to help countries address the decline in correspondent banking relationships.

We call on the IMF to promote policies that will:

Expand opportunities: We support the work to sharpen the understanding of macroeconomic and distributional effects of technological progress, trade, and capital flows. We welcome the work of the IMF, along with other international organizations, to help improve governance, fight corruption, upgrade the business environment, and promote competition. We look forward to the forthcoming review of the Guidance Note on the Role of the Fund in Governance Issues.

Facilitate multilateral solutions to meet global challenges: We support the IMF’s increased efforts to provide a rigorous and candid assessment of excessive global imbalances and their causes, and of exchange rates in both Article IV consultations and the External Sector Report. We reiterate the importance of ensuring effective and consistent implementation of the Institutional View on capital flows, paying greater attention to capital flow management measures and taking a clear position based on country circumstances on whether they are warranted, while exploring the role of macroprudential policies to increase resilience to large and volatile capital flows. We support the strengthened analysis of spillovers from domestic policies to the global economy. We welcome the IMF’s analysis of macrofinancial linkages in bilateral surveillance. We also welcome the IMF’s collaboration with other multilateral institutions in pursuit of shared objectives. We welcome the IMF’s work with international standard setters to support the global financial regulatory reform agenda and to address data gaps. We also support the IMF’s role in addressing international taxation issues, including through the Platform for Collaboration on Tax; assisting jurisdictions to enhance financial sector integrity and AML/CFT regimes; and helping countries strengthen their institutions to tackle illicit financial flows. We call on the IMF to continue to assist countries in dealing with macroeconomic problems arising from shocks, including those shouldering the burden of conflicts, refugee crises, or natural disasters.

Strengthen the IMS: Strong domestic policies, supported by effective IMF surveillance, are the keystone of crisis prevention. We will explore options for further strengthening the global financial safety net (GFSN), including by collaborating with regional financing arrangements, and examine the possible broader use of the SDR. To further enhance the effectiveness of the IMF’s lending toolkit, we support the scheduled review of precautionary instruments and the ongoing work to develop proposals for a possible new short-term liquidity facility and a non-financial policy instrument to provide monitoring and signaling of member policies. We welcome the ongoing work to examine the current debtor-creditor engagement framework in sovereign debt restructurings and the recent study of state-contingent debt instruments.

Assist low-income countries (LICs), commodity exporters, and small and fragile states: We welcome the IMF’s continued support, in cooperation with other relevant international organizations, of the 2030 SDGs, including the Financing for Development agenda, by helping fragile states and supporting LICs and small states to strengthen domestic revenue mobilization and public financial management systems and to deepen financial markets. We also welcome the IMF’s help, including through financial support and technical assistance, strengthening policy frameworks, and supporting economic diversification and adjustment strategies in LICs and commodity exporters. We welcome the IMF’s recent clarification of access to the resources of the General Resources Account for those members also eligible for the Poverty Reduction and Growth Trust (PRGT). We look forward to the review of the LIC debt sustainability framework, and welcome the IMF’s support of the G-20 Compact with Africa initiative to foster private sector investment. We look forward to the forthcoming discussions on social safeguards and program design in PRGT- and PSI-supported programs. We welcome the pledges totaling SDR 11.8 billion received from 16 members, including by new contributors, to mobilize additional loan resources for the PRGT, and call for broad participation of the membership to support these efforts.

Promote sustainable policies over time: We look forward to the review of experiences with debt management strategies, and encourage the IMF to continue its work on the sustainability of pension systems. We continue to support integrating in surveillance the analysis of other challenges facing members, where macro-critical.

Integrate capacity development with surveillance : We welcome the IMF’s focus on providing technical assistance and training to complement policy analysis, especially supporting LICs as well as fragile and small states.

We reaffirm our commitment to a strong, quota-based, and adequately resourced IMF to preserve its role at the center of the GFSN. We are committed to concluding the 15th General Review of Quotas and agreeing on a new quota formula as a basis for a realignment of quota shares to result in increased shares for dynamic economies in line with their relative positions in the world economy and hence likely in the share of emerging market and developing countries as a whole, while protecting the voice and representation of the poorest members. We call on the Executive Board to work expeditiously toward the completion of the 15 th General Review of Quotas in line with the above goals by the Spring Meetings of 2019 and no later than the Annual Meetings of 2019. We look forward to a report on progress toward this goal by the time of our next meeting. We call for full implementation of the 2010 reforms.

We welcome the bilateral agreements and commitments of about SDR 300 billion (US$ 400 billion) received from 35 members to ensure the IMF’s continued access to bilateral borrowing under the strengthened governance framework approved by the Executive Board and call for broad participation of the IMF membership including through new agreements. We also welcome the renewal of the decision on the New Arrangements to Borrow.

We reiterate the importance of maintaining the high quality and improving the diversity of the IMF’s staff. We also support promoting gender diversity in the Executive Board.

Our next meeting will be held in Washington, D.C., on October 14, 2017.

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