Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund

IMF News, October 11, 2008

Source details

Canonical URL

Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund

Other formats

• Markdown version
• Structured JSON version
• Bundle manifest

Bibliographic details

• Published: October 11, 2008

Meeting overview and principal messages

• The International Monetary and Financial Committee held its eighteenth meeting in Washington, D.C. on October 11, 2008 under the Chairmanship of Dr. Youssef Boutros-Ghali.
• The Committee welcomes Dr. Boutros-Ghali as the new IMFC Chairman and expresses deep gratitude to Mr. Tommaso Padoa-Schioppa for his prior role.
• The Committee strongly endorsed the G-7 plan of action agreed on October 10, 2008 and called for exceptional vigilance, coordination, and readiness to take bold action in response to the depth and systemic nature of the crisis.
• The Committee underscores that the Fund has a critical mandate to foster multilateral cooperation to restore and safeguard international monetary and financial stability and stands ready—using its emergency procedures—to quickly make available substantial resources to help member countries cover financing needs.
• The Committee asks the IMF to take the lead in drawing policy lessons from the crisis, to engage intensively across the membership and with the FSF, the G-20, and others, and to report to the IMFC at the latest at its next meeting.

G-7 plan of action (as agreed October 10)

• "Take decisive action and use all available tools to support systemically important financial institutions and prevent their failure.
• Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.
• Ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.
• Ensure that our respective national deposit insurance and guarantee programs are robust and consistent so that our retail depositors will continue to have confidence in the safety of their deposits.
• Take action, where appropriate, to restart the secondary markets for mortgages and other securitized assets. Accurate valuation and transparent disclosure of assets and consistent implementation of high quality accounting standards are necessary.

The actions should be taken in ways that protect taxpayers and avoid potentially damaging effects on other countries. We will use macroeconomic policy tools as necessary and appropriate. We strongly support the IMF's critical role in assisting countries affected by this turmoil. We will accelerate full implementation of the Financial Stability Forum recommendations and we are committed to the pressing need for reform of the financial system. We will strengthen further our cooperation and work with others to accomplish this plan."

• The IMFC strongly endorsed these commitments.

Supporting growth and addressing global challenges

• Advanced economies:
  • Macroeconomic policies need to provide essential stimulus to counter the risk of a pronounced economic downturn while confidence in the financial system is restored.
  • Coordinated monetary policy actions by several central banks are welcomed; fiscal policy has provided timely support in a number of economies.
  • Further fiscal initiatives should consider medium-term consolidation objectives and give priority to dealing with financial problems.
• Emerging market and developing economies:
  • Risk of a marked slowdown owing to financial market strains and sluggish export markets is a primary concern.
  • It is critically important that collaborative action be coordinated between advanced and emerging economies.
  • The IMF is called on to stand ready to assist members to prepare timely, effective, and appropriate policy responses to alleviate negative spillovers.
• Low-income countries:
  • Progress in macroeconomic stability, growth, and poverty reduction is being undermined by the adverse global environment; many have been severely hit by higher food and fuel prices.
  • The Committee calls on low-income countries to pursue strengthened adjustment efforts with increased donor assistance, in particular grants, to limit effects on real income and poverty.
  • The Committee welcomes reforms to the Exogenous Shocks Facility to allow quicker and more adequate use.
• Commodity price shifts:
  • Recommend passing shifts in international food and fuel prices through to domestic markets, backed by targeted measures and adequate safety nets to protect the poor and taking into account country-specific circumstances.
• Trade and global imbalances:
  • Calls on members to resist protectionist pressures and reiterates strong support for a prompt and ambitious conclusion of the Doha Development Round.
  • Emphasizes guarding against global imbalances; the multilateral strategy remains relevant even as short-term measures focus on stabilizing financial markets.

Advancing the IMF’s surveillance agenda

• The Committee underscores the central role of Fund surveillance in providing clear, advance warning of risks, promoting understanding of interdependence, and promoting globally consistent policy responses.
• Endorses the Fund's first Statement of Surveillance Priorities and calls on all members to cooperate with the Fund toward achieving its economic and operational objectives.
• Calls for:
  • Enhanced early warning of risks and vulnerabilities, including enhanced financial sector liaison, analysis of macro-financial linkages, and scenario analysis.
  • Completion of the extension of the vulnerability exercise to advanced economies.
  • Concise, authoritative, and timely communication of risks and vulnerabilities, including through an enhanced World Economic Outlook and Global Financial Stability Report.
  • Work toward a reshaped Financial Sector Assessment Program better integrated with surveillance and embracing regional perspectives.
• Requests regular reporting by the Managing Director on progress against surveillance priorities.

Reviewing the Fund’s lending role

• The Committee stresses that Fund financing plays a critical role in giving confidence to members—subject to adequate safeguards—helping them cope with globalization and the current financial crisis.
• Emphasizes readiness to use flexibility already embodied in lending instruments, particularly emergency procedures and provisions for exceptional access.
• Supports ongoing review of the Fund's lending role and advancing work in five areas:
  • (i) reviewing the analytical framework for Fund lending and its coherence, including scope for innovation and streamlining of lending instruments, and exploring new modalities for Fund financing;
  • (ii) creating a new liquidity instrument;
  • (iii) re-examining Fund conditionality;
  • (iv) reviewing the Fund's lending facilities for low-income members; and
  • (v) increasing access limits and financing terms for using Fund resources.
• Urges the Executive Board to take this agenda forward expeditiously and recommends accelerated decisions where there is strong consensus and particular urgency—such as the establishment of a new liquidity instrument—and on the full range of issues by the time of the 2009 Annual Meetings.

Sovereign Wealth Funds and the Santiago Principles

• The Committee welcomes development of the Santiago Principles by the International Working Group of Sovereign Wealth Funds (SWFs) as a comprehensive voluntary framework to enhance understanding of SWF operations.
• Notes that adoption on a voluntary basis signals strong commitment, and implementation should enhance the stabilizing role of SWFs and help maintain the free flow of cross-border investment.
• Welcomes the International Working Group’s intention to consider establishing a Standing Group to review the Principles and explore collecting and disseminating aggregated information on SWF operations.
• Emphasizes that continued Fund support, if requested, should be consistent with budgetary constraints and stresses the importance of clear and nondiscriminatory policies by recipient countries toward SWF investments.

Governance, quotas, and SDR allocation

• Welcomes Board of Governors' approval of the Resolution on quota and voice reforms, including amendment of the Fund's Articles of Agreement to enhance voice and participation.
• Notes these realignments are expected to increase the quota shares of dynamic economies and the share of emerging market and developing economies as a whole.
• Looks forward to further Executive Board work on improving elements of the new quota formula before future use.
• Welcomes approval of the amendment broadening the Fund's investment authority as part of the new income model and calls on all members to work toward early completion of domestic legislative steps required to make quota and voice reforms and the Fund's new income model effective.
• Recommends members' acceptance of the amendment of the Articles of Agreement for a special one-time allocation of SDRs.
• Welcomes ongoing re-assessment of the Fund's governance, including follow-up to the IEO Evaluation of Aspects of IMF Corporate Governance, work by the committee of eminent persons on IMF governance reform chaired by Mr. Trevor Manuel, and engagement with civil society. Looks forward to a progress report at the next meeting.

Annex — Surveillance priorities for the IMF, 2008-2011

• Economic priorities (interrelated policy objectives):
  • Resolve financial market distress: restore stability and minimize adverse impact on the real economy.
  • Strengthen the global financial system by upgrading domestic and cross-border regulation and supervision, especially in major financial centers, and avoid exposing capital-importing countries, including low-income countries, to excessive risks.
  • Adjust to sharp changes in commodity prices, reacting in domestically appropriate and globally consistent ways, with emphasis on keeping inflationary pressures in check in boom phases and minimizing risks when prices fall.
  • Promote orderly reduction of global imbalances while minimizing adverse real and financial repercussions.
• Operational priorities:
  • Risk assessment: refine tools for clear early warnings and systematic analysis of major risks to baseline projections (including high-cost tail risks where appropriate).
  • Financial sector surveillance and real-financial linkages: improve financial stability analysis, deepen understanding of linkages between markets and institutions, and ensure adequate discussion in surveillance reports.
  • Multilateral perspective: ensure bilateral surveillance is informed by analysis of inward spillovers, outward spillovers (where relevant), and cross-country knowledge.
  • Analysis of exchange rates and external stability risks: integrate clearer and more robust exchange rate analysis underpinned by strengthened methodologies into assessment of the overall policy mix.
• The Executive Board set these priorities to guide IMF management and staff through 2011, subject to revision if circumstances warrant. The Managing Director will report: (i) regularly on actions toward priorities and readily visible results; and (ii) at the time of the next Triennial Surveillance Review on progress in attaining these priorities, management's and staff's contributions, and factors that impeded progress.
• Note: The Annex is titled "SURVEILLANCE PRIORITIES FOR THE INTERNATIONAL MONETARY FUND, 2008-2011" and was adopted by the IMF Executive Board on October 7, 2008.

International Monetary and Financial Committee attendance (selected)

• Chairman: Youssef Boutros-Ghali
• Managing Director: Dominique Strauss-Kahn
• Members or Alternates include:
  • Ibrahim A. Al-Assaf, Minister of Finance, Saudi Arabia
  • Sultan N. Al-Suwaidi, Governor, United Arab Emirates Central Bank (Alternate for Obaid Humaid Al Tayer, Minister of State for Financial Affairs, United Arab Emirates)
  • Stefan Ingves, Governor, Sveriges Riksbank, Sweden (Alternate for Anders Borg, Minister of Finance, Sweden)
  • Wouter Bos, Minister of Finance, Netherlands
  • Duvvuri Subbarao, Governor, Reserve Bank of India (Alternate for Palaniappan Chidambaram, Minister of Finance, India)
  • Alistair Darling, Chancellor of the Exchequer, United Kingdom
  • Carlos Fernández, Minister of Economy and Production, Argentina
  • James Michael Flaherty, Minister of Finance, Canada
  • Aleksei Kudrin, Deputy Prime Minister and Minister of Finance, Russian Federation
  • Christine Lagarde, Minister of Economy, Industry and Employment, France
  • Mohammed Laksaci, Governor, Banque d'Algérie
  • Hervé Nzé Nong, National Director, Bank of Central African States, Gabon (Alternate for Blaise Louembe, Minister of Economy, Finance, Budget and Privatization, Gabon)
  • Guido Mantega, Minister of Finance, Brazil
  • Tito Mboweni, Governor, South African Reserve Bank
  • Jean-Pierre Roth, Chairman of the Governing Board, Swiss National Bank (Alternate for Hans-Rudolf Merz, Minister of Finance, Switzerland)
  • Shoichi Nakagawa, Minister of Finance, Japan
  • Henry M. Paulson, Jr., Secretary of the Treasury, United States
  • Bernard Clerfayt, Secretary of State, Belgium (Alternate for Didier Reynders, Deputy Prime Minister and Minister of Finance, Belgium)
  • Floria María Caricote Lovera, Director of Public Credit, Ministry of Finance, Venezuela (Alternate for Alí Rodríguez Araque, Minister of Finance, República Bolivariana de Venezuela)
  • Peer Steinbrück, Minister of Finance, Germany
  • Wayne Swan, Treasurer of the Commonwealth of Australia
  • Giulio Tremonti, Minister of Economy and Finance, Italy
  • Tarisa Watanagase, Governor, Bank of Thailand
  • YI Gang, Deputy Governor, People's Bank of China (Alternate for ZHOU Xiaochuan, Governor, People's Bank of China)
• Observers included representatives from OPEC, the European Commission, the Joint Development Committee, the Financial Stability Forum, UNCTAD, OECD, BIS, UN, ILO, ECB, and the World Bank Group among others.

Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund, October 11, 2008.

References

• República Bolivariana de Venezuela and the IMF
• United Arab Emirates and the IMF
• Communiqués
• PRESS CENTER
• http://www.imf.org/external/np/pdr/surv/2008/index.htm
• https://www.imf.org/en/home