Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund
IMF News, April 24, 2004
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- Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund
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Bibliographic details
- Published: April 24, 2004
Meeting information
- The International Monetary and Financial Committee held its ninth meeting in Washington, D.C. on April 24, 2004 under the Chairmanship of Mr. Gordon Brown, Chancellor of the Exchequer of the United Kingdom.
- Transcript of a Press Conference following the International Monetary and Financial Committee Meeting and related documents were produced for the Spring Meetings 2004.
- The next meeting of the IMFC will be held in Washington, D.C. on October 2, 2004.
The global economy and financial markets — sustaining the recovery
Findings
- The Committee welcomes the strengthening of the global economic recovery since its meeting last September: industrial production and global trade have picked up sharply, and improved prospects in most regions point to stronger global growth going forward.
- Risks identified include: large global imbalances; medium-term fiscal challenges in many countries; implications of the eventual transition to a higher interest rate environment; continuing geopolitical uncertainties; and developments in oil markets.
Policy priorities and recommendations
- Implement macroeconomic and structural policy measures to achieve a robust, balanced, and sustainable recovery.
- Structural reform priorities: medium-term fiscal consolidation; reforms of pension and health care systems; better functioning labor and product markets; reduce vulnerabilities in banking and corporate sectors.
- Call for all countries and regions to cooperate in addressing global imbalances.
- Monetary policy guidance: remain consistent with price stability and support the recovery; in many countries where growth is strengthening, interest rates will over time need to rise to more neutral levels; communicate policy intentions clearly.
- Regional priorities called out:
- United States: medium-term fiscal consolidation.
- Euro area: acceleration of structural reforms; fiscal consolidation needed.
- Japan: continued banking and corporate reforms; fiscal consolidation needed.
- Emerging market and developing countries: continue to strengthen fiscal positions, improve structure and sustainability of debt, pursue sustained and broad-ranging structural reforms, and in some cases move toward more exchange rate flexibility.
- Argentina: welcomes improvement in macroeconomic performance; calls for full implementation of economic recovery program and negotiations aimed at reaching a sustainable debt restructuring through a collaborative agreement with creditors.
- Low-income countries: underscore stronger domestic institutions, sound economic policies, trade integration, and less burdensome regulation; call for additional and coordinated international assistance including technical assistance, policy advice, increased and more effective aid including grants, debt relief, and greater access to industrial country markets.
Trade
- The Committee reiterates critical importance of open markets and calls for constructive efforts to achieve early progress with the Doha Round, focusing on open markets, fair access, and reduction of trade-distorting subsidies, notably in agriculture.
- Supports IMF role in advocating trade liberalization and welcomes IMF decision to establish a Trade Integration Mechanism as a temporary policy to address concerns associated with the current round of multilateral trade negotiations.
Crisis prevention and IMF surveillance across the membership: priorities, tools, and modalities
Findings
- Effective and evenhanded IMF surveillance is essential for crisis prevention, financial stability, and sustained growth.
- Increased focus of surveillance welcomed on: financial sector and capital market issues (including Financial Sector Assessment Program, Reports on the Observance of Standards and Codes, and Offshore Financial Center assessments); economic developments and policies in countries of systemic or regional importance; early identification of potential vulnerabilities; and institutional foundations of growth.
- Welcomes work and proposed pilots on treatment of public investment in IMF advice and arrangements to protect infrastructure investment consistent with macroeconomic stability and debt sustainability.
Recommendations and ongoing work
- Strengthen objectivity of surveillance (including through debt sustainability analysis).
- Explore ways to support countries' own economic efforts when the IMF is not providing financial assistance.
- Biennial review of surveillance forthcoming; expected to assess and propose ways to enhance focus, quality, persuasiveness, impact, and overall effectiveness.
- Surveillance should focus on: improving debt sustainability; reducing balance sheet vulnerabilities; making progress on structural reform and sustainable medium-term fiscal frameworks; policies to facilitate adjustment of global imbalances; pay attention to political risks and vulnerabilities to exchange rate and interest rate movements.
- Further work on ways to reduce vulnerabilities and provide support for members with strong policies dealing with external financial developments; upcoming discussion of precautionary arrangements and their potential roles.
Debt and crisis resolution tools
- Welcomes increased inclusion of collective action clauses (CACs) in international sovereign bonds and convergence toward a market standard; calls on IMF to promote progress.
- Encourages sovereign debtors and private creditors to continue work on a voluntary Code of Conduct.
- Takes note of Executive Board's ongoing review of the framework and application of procedures for exceptional access to IMF resources; calls on IMF to continue reviewing implementation of its lending into arrears policy.
Enhancing IMF support to low-income members; IMF-World Bank collaboration; promoting debt sustainability
Findings
- Reiterates IMF role—alongside multilateral development banks and donors—in assisting low-income members with policy advice, financing, and technical assistance to achieve high and sustained growth and poverty reduction.
- Welcomes progress on tailoring IMF assistance to differing financing and policy needs of low-income countries.
- Emphasizes importance of improving macroeconomic design of PRGF-supported programs, including social impact, and maintaining an adequate PRGF financing capacity.
Recommendations and ongoing work
- Strengthen surveillance process for countries where IMF is not providing financing to enhance signaling role and promote country ownership.
- Calls for further discussions on financing a self-sustained PRGF; notes that some countries have indicated willingness to provide additional resources.
- Endorses Monterrey Consensus and PRSP approach as framework for engagement with low-income countries and participation in global efforts toward achieving the MDGs.
- Encourages sharpening focus of PRSPs and PRGF-supported programs to link to MDGs and improve operational usefulness for policy choices and donor coordination.
- Looks forward to reviewing joint work with the World Bank on aid effectiveness, absorptive capacity, results-based measurement mechanisms, and financing mechanisms (such as an international financing facility and other options); welcomes consultation with emerging markets and developing countries.
- Welcomes recent review of IMF-World Bank collaboration and supports plans for improved coordination.
- Debt relief and sustainability:
- Welcomes progress under the enhanced HIPC Initiative, with a further five countries reaching their completion point since the Annual Meetings.
- Looks forward to continued progress toward full implementation and notes work on options for addressing the sunset clause.
- Urges all creditors that have not yet done so to deliver debt relief in full.
- Welcomes development by IMF and World Bank of a debt sustainability framework for low-income countries and looks forward to making it operational.
Other issues
- Emphasizes importance of IMF technical assistance in building institutional capacities and implementing sound economic policies and financial systems to underpin growth and poverty reduction.
- Money laundering and terrorism financing:
- Underscores importance of further action by international community.
- Welcomes progress under 12-month IMF/World Bank pilot program of AML/CFT assessments.
- Endorses Executive Board decision to make the scope of IMF involvement in AML/CFT assessments comprehensive and a regular part of IMF work.
- Encourages international organizations to work closely in assessments and technical assistance delivery.
- Urges all members to adopt and implement the revised FATF 40 + 8 Recommendations as the accepted international standard.
- Voice and representation:
- IMF effectiveness depends on all members having appropriate voice and representation.
- Calls on Executive Board to continue work on IMF quotas, voice and representation; looks forward to a report on progress at its next meeting.
- Recommends completion of the ratification of the Fourth Amendment.
- Liquidity:
- States IMF's liquidity is adequate to meet the near-term projected needs of its members although continued monitoring will be important.
- Evaluation and governance:
- Welcomes high-quality work of the Independent Evaluation Office and looks forward to reports on PRSP/PRGFs, technical assistance, and the role of the IMF in Argentina from 1991 to 2002.
- Personnel acknowledgments:
- Pays tribute to Mr. Horst Köhler for his leadership as Managing Director during the past four years and acknowledges contributions described in the Communiqué.
- Acknowledges the contribution of Mr. Jacques J. Polak through 57 years of service to the IMF.
Membership, alternates, and observers (as listed)
- Chairman: Gordon Brown
- Acting Managing Director: Anne O. Krueger
- Members or Alternates include: Ibrahim A. Al-Assaf; Mervyn King (Alternate for Gordon Brown); Peter Costello; M.R. Pridiyathorn Devakula; Hans Eichel; Per-Kristian Foss; Francisco Gil-Díaz; Ralph Goodale; Mohammed K. Khirbash; Aleksei Kudrin; Mohamed Laksaci; Roberto Lavagna; Lesetja Kganyago (Alternate for Trevor Manuel); Jean-Pierre Roth (Alternate for Hans-Rudolf Merz); Antonio Palocci; Didier Reynders; Nicolas Sarkozy; Yaga V. Reddy (Alternate for Jaswant Singh); Alan Greenspan (Alternate for John W. Snow); Sadakazu Tanigaki; Paul Toungui; Giulio Tremonti; Gerrit Zalm; Zhou Xiaochuan.
- Observers include: Roger W. Ferguson, Jr.; Donald J. Johnston; Malcolm D. Knight; Jan Kregel; Eddy Lee; José Antonio Ocampo; Ngozi N. Okonjo-Iweala; Klaus P. Regling; Panitchpakdi Supachai; Jean-Claude Trichet; James D. Wolfensohn.
Source: Communiqué of the International Monetary and Financial Committee, April 24, 2004.