Annual Meetings 2003

2003 Annual Meetings: News Releases, Speeches, Committee Papers, Documents and Background Information

Statements Given on the Occasion of the IMFC Meeting
September 21, 2003

Documents Related to the September 21, 2003 IMFC Meeting

Austria and the IMF

Belgium and the IMF

Germany and the IMF

Denmark and the IMF

Spain and the IMF

Finland and the IMF

France and the IMF

United Kingdom and the IMF

Greece and the IMF

Ireland and the IMF

Italy and the IMF

Luxembourg and the IMF

Kingdom of the Netherlands-Netherlands and the IMF

Portugal and the IMF

Sweden and the IMF

Statement by Minister G. Tremonti, in his capacity as Chairman of the EU Council of Economic and Finance Ministers, to the IMFC Autumn 2003 meeting

Brussels, 16 September 2003

1 - I submit, in my capacity as Chairman of the EU Council of Economic and Finance Ministers, this statement which focuses on : the world economy; crisis prevention and resolution in Emerging Market Economies (EMEs); the financing of the HIPC Initiative; and the fight against the abuses of the international financial system, including terrorist financing.

Pursuing the adjustment and correcting the imbalances of the world economy

2 - The global economy has been going through a period of sluggish growth and disinflation, partly as a consequence of the underlying process of adjustment to existing imbalances and to a series of adverse shocks. Growth should pick up noticeably on the back of favourable economic conditions such as the reduction of geopolitical tensions, generally improved financial market conditions, and accommodative macro-economic policies in G7 economies.

3 - This also applies to the EU. Real GDP growth, after gradually decelerating in 2002 practically stagnated in the first half of 2003. The recovery, which should start in the course of the second half of this year, is expected to gradually gather momentum. The delay in the resumption of growth will translate into a weak annual growth figure for 2003, but growth is expected to strengthen during the course of 2004. Several indicators already point to an improvement. Overall conditions seem in place, including lower inflation and low interest rates. The improvement of the geopolitical environment should be helpful. Lower and stable oil prices would also contribute to the global recovery. The current monetary policy stance in the euro area lends support to economic activity and helps to safeguard against downside risks to economic growth. Also, important steps have been taken in terms of structural reforms to foster the flexibility and the growth potential of our economies.

4 - The key economic challenge to policy-makers is twofold:

- supporting and consolidating a sustainable recovery over the short and medium terms through sound macro-economic and structural policies. Budgetary policies, especially in advanced economies, have a central role to play to make the recovery sustainable. This is the case in all major zones. In the euro area, automatic stabilisers have to a large extent operated and therefore cushioned the slowdown in economic activity, and will, within the agreed framework, continue to do so. At the same time, authorities in countries where budgetary positions of close to balance or in surplus throughout the economic cycle have not yet been achieved should ensure an annual improvement in the cyclically-adjusted budget position of at least 0.5% of GDP. Greater attention will also be paid to the longer-term sustainability of public finances, as part of the determined pursuit of the strategy to meet the challenges of ageing populations.

- supporting an orderly correction of imbalances, including through smooth and regionally balanced exchange rate adjustments that reflect fundamentals. In the current context it is important that all economic areas play their part to contribute to the adjustment of global imbalances. Allowing exchange rates to adjust would be beneficial for all economic areas. In this regard, the IMF should provide the IMFC with an analysis of current exchange rates, taking full account of the economic situation and the regional context. Exchange rates should reflect economic fundamentals and be consistent at regional and global levels. Exchange rate regimes which are increasingly perceived as unsustainable, excessive current account imbalances and related changes in levels of foreign exchange reserves should be avoided, and  adjustments in exchange rates should be smooth, progressive, orderly and fairly shared.

Crisis prevention, including surveillance

5 - We welcome the progress made by the Fund to improve crisis prevention. The Fund should pursue its efforts to improve the surveillance framework. In particular, it should:

· complement the existing analytical framework with a balance sheet approach, and pay particular attention to exchange rate policies and regimes, currency and maturity mismatches, financial vulnerabilities, and regional aspects of surveillance;

· pilot the balance sheet approach in a number of advanced, developing and transition countries in the context of Article IV consultations;

· strengthen further its framework for debt sustainability analysis (DSA) and increasingly integrate DSA's in the staff's analysis of economic developments (including in Art. IV reports);

· bring about a fresh perspective in program countries in order to provide an opportunity for reassessment of program strategy so as to ensure a clear distinction between the processes of surveillance and program design;

· increase the candor and transparency of staff appraisals and Board discussions;

· strengthen the traction of surveillance in non-program countries by factoring into program decisions the extent to which countries have not followed up on appropriate earlier Fund advice;

· improve the effectiveness of its policy advice including. through substantial progress in publication of staff and Board documents—with a specific emphasis on those related to exceptional access to Fund's credits—and monitor implementation of previous advice;

· improve the realism of IMF growth forecasts as suggested by the IEO report and make alternative growth forecasts a standard element of its analysis.

6 - Progress achieved with implementing international standards and codes, including ROSCs and FSAPs, is encouraging. However, the effort to enhance transparency should be further increased, to enable the private sector to better take into account the result of the exercises.

7 - We welcome the presumption of publication of Article IV reports, PINs, and program approval and reviews reports (UFR), starting July 1, 2004. We also welcome the general recommendation of the Managing Director to the Board not to approve a program or completion of a review in exceptional access cases unless the authorities in question consent to the publication of the associated staff report , from July 1, 2004, with a grandfathering for existing programs.

Crisis resolution

8 -Work on improving crisis resolution still needs to be continued and strengthened. In particular, it will be crucial to ensure that the IMF exceptional access policy is strictly implemented in practice.

9 - We welcome the progress achieved so far on the use of collective action clauses (CACs) in international sovereign bonds. In line with the EU's commitment, since last Spring Italy started to issue bonds with CACs under the New York law and the UK revised the CACs it uses to reflect the recommendations of the G10 Working Group on Contractual Clauses, thereby supporting the efforts made by some Emerging Market Countries such as Mexico, Brazil, Uruguay, Korea and South Africa. We encourage those countries that have not yet committed to include CACs in their international sovereign bonds to do so. We also welcome the discussions that have taken place between the private and official sector on developing a Code of Conduct for creditor-debtor relations.

10 - However, further substantial work on a sovereign debt restructuring mechanism relevant to the resolution of crisis is needed, including on issues related to a statutory approach such as the aggregation of claims, the treatment of debt stock and the incompleteness and asymmetry of information.

The HIPC initiative

11 - Since its launch, in 1999, the enhanced HIPC Initiative has achieved substantial progress, as 27 countries have passed the decision point, of which 8 countries have reached the completion point. However, the full financing of the Initiative still needs to be secured, in spite of progress achieved in the financing of the HIPC Trust Fund so far.

12 - The EU has provided more than half the financing of the HIPC initiative. In addition, all EU Countries have announced their intention to go beyond HIPC targets by providing officially 100% bilateral pre-COD debt relief for all claims on HIPC countries.

13 - We urge all creditors and donors that have not yet done so to provide their share of bilateral debt relief and multilateral financing to the HIPC initiative. The IMF and the World Bank should regularly report the compliance of their member countries with the HIPC commitments, in particular in Article IV surveillance. Official bilateral debt restructuring in the Paris Club should also consider the compliance by debtor countries with their HIPC commitments as creditors.

14 - We are ready to discuss with the IFIs and other donors possible changes in the method to calculate the topping up requirement at the completion point for those HIPC countries were the debt is deemed unsustainable at that time due to severe exogenous shocks and ways to fill the financing gap while ensuring a fair burden sharing.


15 - On the financing of the Millennium Development Goals, and the proposal for an International Finance Facility, while some EU member states have difficulty with the proposal, the IMF and the World Bank should do further work on the value for money and aid absorption issues, and on the details of the mechanism. Developing and emerging market countries should also be asked to examine the proposal and give their views.

The abuses of the international financial system

16 - We endorse the revised Forty Recommendations on Money Laundering approved by the Financial Action Task Force (FATF) at its Berlin meeting, which provide a renewed and strong international base to combat the abuse of the financial system. We commit to take quick steps towards complying with this revised standard, including through the transposition and implementation of the second EU anti money laundering Directive. At the same time, we will provide expertise and training facilities to help third countries in need of technical assistance to implement the FATF standard, and call on other countries to join us.

17 - We welcome the fact that a large number of countries worldwide have chosen to endorse the Eight FATF Special Recommendations on Terrorist Financing. We commend the IMF and the World Bank for their extensive work in this area. We welcome in particular the progress under the IMF/WB/FATF pilot program, and look forward to the incorporation of the revised Forty Recommendations on Money Laundering into the common AML/CFT methodology. We also encourage countries to make resources available for the pilot program and to ensure the most effective use of the provided technical assistance.