Press Release No. Press Release<a name="P15_70"></a> 05/113

Mr. Rodrigo de Rato, Managing Director of the International Monetary Fund (IMF), issued the following statement today in Benin following bilateral discussions in Benin and his participation at a conference on cotton-sector issues in West and Central Africa:

"I have had the privilege of meeting President Mathieu Kérékou, as well as several of Benin's ministers, including the Senior Minister for Planning and Development Mr. Zul Kifl Salami, and the Minister of Finance Mr. Cosme Sehlin. I would like to thank them all for their warm welcome to Benin and for the chance to discuss issues critical to this country and to the region.

"The President and I discussed the historic challenges Benin has faced in reducing poverty. In this regard, the President explained the need for external resources. I responded that Benin's considerable progress toward macroeconomic stabilization, together with the implementation of a strong structural reform program in the period ahead, will lay the basis for sustained strong growth to reduce poverty significantly, and for attracting such external support. I assured the President that the IMF stood ready to support Benin in these efforts.

"Later today, I will have the opportunity to visit the Institut des Filles Marie Auxiliatrice, an important center that gives at risk-girls the chance of a brighter future.

"I also participated in a regional conference on cotton-sector issues in Western and Central Africa. The conference brought together ministers from Benin, Burkina Faso, Chad, and Mali; cotton producers and ginners from the region; as well as representatives from the European Union, France, Japan, the United States, and from the World Bank and the World Trade Organization.

"All conference participants recognized the important economic role of the cotton sector for many of the countries in the region, and that the large decline in world prices over the past year poses exceptional challenges, including for the fight against poverty. While prices have rebounded somewhat since the beginning of the year, world production, especially in developing countries in Asia and Latin America, is growing rapidly and this makes it likely that there will be continuing downward pressure on world cotton prices.

"Conference participants agreed that earlier reforms in the countries in the region had already made the sector more resilient to world price shocks. Nevertheless, further steps are called for, especially in those countries where the reforms have not proceeded as far as elsewhere in the region, and conference participants stressed the need for a multi-pronged regional response to the common challenges. In particular, we agreed that the response should focus on:

• Maintaining macroeconomic stability. Domestic prices need to reflect developments in world market prices in order to preserve fiscal stability. A stable macroeconomy is fundamental for any strategy to reduce poverty and reach the Millennium Development Goals. At the same time, in light of the importance of cotton production for livelihoods throughout the region, we recognize the need for measures to protect the poorest from the sudden impact of large price declines while further structural reforms are being implemented in the cotton sector. This may include limited and temporary support through producer prices, where alternative means of delivering more targeted assistance are being developed.

• Raising cotton sector efficiency. Cotton sector productivity in the region still lags well behind the most efficient producers in other developing countries. Fully exploiting the room for structural reforms in all countries, facilitating cross-border trade in the region, and advancing the use of higher yield seeds and improved production methods would all strengthen the cotton sector's resilience and its contribution to the development of the regional economies.

• Addressing trade-distorting policies within the context of ongoing multilateral negotiations. Conference participants called for a successful and speedy conclusion of the ongoing discussions under the auspices of the World Trade Organization. Let me add, as Managing Director of the IMF, that trade policies in rich countries which create impediments to the trade of developing countries-including trade-distorting cotton subsidies-are counterproductive to our common goal of reducing poverty and achieving the Millennium Development Goals.

• Mobilizing donor support. Conference participants were pleased about the willingness of some donor countries to provide financial resources to support structural reforms in the cotton sector in Africa. They called on all donors to consider ways of helping to protect the most vulnerable and of creating income opportunities as rural communities adjust to lower cotton prices.

"Finally, let me also stress that the IMF is prepared to augment financial support to the countries in the region under its Poverty Reduction and Growth Facility if cotton price developments or other terms of trade shocks were to result in additional, temporary external financing requirements."

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