Communiqué

COMMUNIQUÉ OF
THE MINISTERS AND GOVERNORS
OF THE GROUP OF TEN

Washington D.C., 21 April 2002

The Finance Ministers and Central Bank Governors of the countries of the Group of Ten met in Washington D.C. on 21 April 2002. The meeting was chaired by Mr. Didier Reynders, the Minister of Finance of Belgium and the current Chairman of the Group of Ten. Ministers and Governors took note of reports from Mr. Henk Brouwer, Chairman of the Deputies of the Group of Ten, Mr. Mervyn King, Chairman of WP3 of the OECD, and Mr. Andrew Crockett, General Manager of the BIS.

Ministers and Governors discussed efforts to strengthen the operation of the international financial system and in particular actions that will help prevent, manage and resolve international financial crises. In that context they considered the question of debt sustainability and sovereign debt resolution procedures and noted its importance in the context of on-going work in crisis prevention. They agreed that going forward, improved assessment of debt sustainability was essential for developing a more rigorous analytic basis for making key judgements. In that context they noted that assessments of debt sustainability had to be forward-looking and dynamic, and needed to take account of factors such as economic policies, public and private sector deficits, interest rates, and economic growth. They underscored the importance of the credibility and coherence of the underlying economic policies including the choice of an appropriate exchange regime. Ministers and Governors looked forward to further discussion of these issues in relevant fora.

In discussing debt resolution procedures, Ministers and Governors re-affirmed the principle that debt contracts should be honoured on time and in full. Nevertheless, circumstances may arise where this may not possible. They noted that the development of mechanisms for a predictable and orderly restructuring of debt would help strengthen the international financial system. Such mechanisms should in particular address problems that can delay and prolong restructuring, eroding the value of the claim and increasing the hardships of debtors. Ministers and Governors agreed that they would be prepared to limit official sector lending to normal access levels except when circumstances justify an exception. They noted the importance of creating other appropriate incentives to use debt workout procedures, and recognized the contribution that such reforms could make to the accurate pricing of risk. In this context, they welcomed the efforts now under way to improve crisis resolution procedures.

The G10 will initiate in-depth work on sovereign debt resolution mechanisms. This work will be carried out in an open fashion, in cooperation with other fora working on these issues, focussing on contractual issues, in particular collective action clauses. To enhance the efficiency of the approach of the G10, a dialogue with market participants is foreseen. The G10 will revisit this item during their autumn meeting.