Communiqué

Washington D.C.
April 16, 1998

1. The Finance Ministers and Central Bank Governors of the countries of the Group of Ten met in Washington on April 16, 1998, under the Chairmanship of Mr. Gordon Brown, Chancellor of the Exchequer of the United Kingdom. They took note of reports from Mr. Mario Draghi, Chairman of the Deputies of the Group of Ten, Mr. Michel Camdessus, Managing Director of the IMF, Mr. Lawrence Summers, Chairman of Working Party III of the OECD, and Mr. Andrew Crockett, General Manager of the BIS.

2. The Ministers and Governors considered the potentially profound macroeconomic and financial implications of ageing populations assessed in a report prepared under their aegis. They underscored the need for early action in order to minimise the burden of adjustment. They noted that strengthened policy efforts were needed to contain the potentially adverse effects of population ageing on future living standards and budget positions that could arise under current pension and health benefit policies. They stressed the importance of appropriately timed fiscal consolidation and of finding means to raise national savings rates. Acknowledging that the choice of how retirement income and health care are provided will depend on national circumstances, they supported the use of mixed approaches based on financially sustainable public pension and health care systems, and increased reliance on private pensions and other forms of private savings as the most promising ways to alleviate demographic pressures arising from ageing. Moreover, recognising the need to foster the efficient allocation of savings both at home and across borders, they also underscored the importance of strengthening financial infrastructures, encouraging financial transparency, enhancing financial supervision and eliminating barriers to international capital flows. In view of the expected rise in the number of consumers relative to producers, they emphasised the importance of labour market efficiency and noted the need to remove disincentives to continued participation in the labour force.

3. Ministers and Governors noted that the crisis in Asia had underscored the importance of strengthening financial systems in emerging market economies. They urged the rapid and effective implementation of the concerted strategy to promote financial stability in these economies. They noted the need to work with emerging market economies in taking concrete actions to (i) create a macroeconomic and institutional setting favourable to sound credit cultures and the efficient and continued operation of markets, (ii) promote effective stakeholder oversight and good governance of financial institutions, and (iii) institute sound regulatory and supervisory arrangements that support and complement market discipline. In particular, they noted the importance of transparency and disclosure, and recommended that greater attention be given to financial stability in multilateral and regional surveillance.

4. Ministers and Governors indicated their continued interest in improving crisis prevention and management. They agreed that the IMF should continue to play a central role in both. They stressed the urgency of finding innovative approaches to achieving closer and faster involvement of the private sector in crisis management and resolution to help contain the risk of moral hazard.

5. Ministers and Governors noted the importance of progress towards capital account convertibility and the contribution that the strengthening of financial systems can make to achieving this objective. They reiterated their view that capital account liberalisation, which should be undertaken in an orderly manner, ought to be brought within the purview of the IMF, with its Articles being amended accordingly.