Transcript

April 24, 1997, 9:00 a.m.
Meeting Hall A, IMF Headquarters Building
Washington, D.C.

Mr. ANJARIA: Good morning, ladies and gentlemen of the press. I would like to welcome you to the opening press conference of the Managing Director of the IMF, Mr. Michel Camdessus. Seated to his right is Mr. Stanley Fischer, First Deputy Managing Director.

Before opening the floor for questions, I would like to ask the Managing Director if he would like to make a few introductory remarks.

MR. CAMDESSUS: Thank you very much. Thank you for being here at this early hour of the day. As usual, I might tell you what is the agenda that we will suggest the Ministers and Governors adopt next Monday at the Interim Committee. You will not have surprises. First, we will discuss the World Economic Outlook. Of course, many of you yesterday attended the press conference of Michael Mussa, and you know not only our general perspective, but also the focus we would like to give to this meeting of the Interim Committee in discussing a few important aspects of globalization, a point to which I will come back later. In addition to discussing the World Economic Outlook in the morning session, Ministers will also review our progress in strengthening surveillance and our progress on the standards for dissemination of economic and financial data. You know how much effort we have put into that recently, and we will report to the Ministers and Governors on that. Of course, I hope we will get some applause. I cannot guarantee that.

Then, we will discuss more specific IMF questions. One of paramount importance to me is our proposal to amend our Articles of Agreement to give the IMF the mandate to promote capital account liberalization, and another is our progress toward a general review of our quotas--the quota increase. We will also, I hope, finalize our work on the special allocation of SDRs for equity purposes. We will report to the Interim Committee on the highly indebted poor countries and ESAF initiatives, and here we have some good news to give the world financial leaders.

I think there are good reasons for us to be in a state of rational exuberance, because you have seen the key forecasts for the next 18 months. They are good. They are rosy, according to what the press reported this morning. In general, the IMF is depicted as a house of gloom. This time, well, a little bit like the building itself with these pink azaleas--which make the IMF look more like a maternity clinic than an austere institution--our forecasts are, yes, extremely positive. I will not repeat what Mike Mussa told you yesterday, but you have there numbers you have not seen for more than 30 years in terms of growth for the entire world. Growth is not only being maintained at a high level, but will be a little bit higher, perhaps, next year, with the progress in developing countries, which have maintained for three years their rate of growth around 6.5 percent, and with continuous progress in the countries in transition, where growth will be about 3 percent on average this year, but going toward 4.8 percent next year. This is indeed good news. Simultaneously, this expansion of the world is accompanied not by renewed inflationary tensions, but by a steady reduction in inflation. If you take the advanced economies, the rate of increase in the first CPI is expected to remain steady at about 2.5 percent a year during 1996-98. For developing countries, inflation in 1997 and 1998 will be below 10 percent, and in countries in transition, taken together, it is going down to 11 or 12 percent. These are, indeed, very positive trends, which should give the idea that this rapid development toward globalization is a positive feature of the present time.

But we have observed that, whatever the evidence given by figures, there are a lot of people who still believe that globalization is bad or is a kind of zero-sum game, where a few are gaining at the expense of others. More precisely, that globalization is a phenomenon which would explain the declining share of employment in manufacturing, particularly in industrial countries; a phenomenon which would explain the pressures on wages and employment of low-skilled workers; a phenomenon which would dramatically limit the autonomy of policymakers at the national level. As a result, you have uncertainty and a lot of discussion about how to react. We hope--and we have put very precise questions to them on these issues--that the Ministers and Governors will decisively clarify these points or at least help significantly in clarifying them.

Needless to say, as those who have read the World Economic Outlook have seen, we have made a considerable effort to bring clarity to the analysis of these three questions in particular. It is not that simple, because you have two or three phenomena taking place at the same time. You have the globalization of trade and financial flows, but you also have a very significant change in technology. In addition, you have the fact that, during the 1980s and 1990s, due to very bad fiscal policies, you had high real interest rates in the world. How can we disentangle all of these influences? It is what we have tried to do. We have put forward very clear responses to the three questions. We hope that our leaders will take this opportunity to send a positive message to their people, not to say that globalization will solve the problems, but at least that it is a challenge and that there are a lot of opportunities to be seized. Indeed, we would like very much to tell them that it is time to clarify that. It is time now, not for muddling through or hesitation, but for clear choices, bold choices. It is time to take the high road. Of course, to take the high road in such an environment is also to take decisions not only at national levels--and for national levels you remember that in September we offered them a strategy with 11 excellent commandments--but at the global level, where there are important things to do. And the first of these is to utilize international institutions better to help countries seize these opportunities. As far as the IMF is concerned, there is, I think, unanimity in the membership to give us the mandate to promote capital account liberalization, so adding a chapter to the uncompleted work of Bretton Woods. You remember that Bretton Woods gave us the long-term mandate to bring the world from exchange controls to current account convertibility. It took us 50 years to do that, and we have not totally completed the work, but we are quite advanced in the process. And the process was well organized, going from the so-called Article XIV to the Article VIII regime, which means current account convertibility. Now we are seeking a mandate to do a similar thing--I hope in a shorter period of time--for capital account transactions. This is one of the bold choices we are inviting our leaders to take, and we are quite certain that they will do that because many of them have asked us to go in this direction.

The second bold thing they must do to help us and to help themselves to seize the opportunities of globalization is to have here a very strong, solidly based institution to reduce the financial risks globalization can bring about. This means taking decisions on membersÕ capital subscriptions; it means also strengthening our ability to address the problems of the poorest countries. You know that globalization has nice aspects; but it also has a dangerous feature, which is that countries that are not able to integrate themselves in the world economy are left aside and can be marginalized. We need to have instruments and means to avoid this kind of marginalization. This means our continued ESAF must be financed properly; this means the HIPC initiative. On all these points, we need to go further. As you see, globalization will be the common thread of our work.

Let me add that globalization has not been the only center of interest of our work during recent months. We have worked on many, many issues with many, many countries. I would like to tell you, as I do frequently, that we are involved in an intense effort to help countries in their adjustment programs. At this very hour, 74 countries out of 181 member countries have programs with us or are negotiating them. Among these 74 countries, 35 have programs under the ESAF, namely, our instrument for the poorest countries. And, in general, these programs are producing a lot of good. You are familiar, of course, with the fact that these programs reduce inflation, strengthen the budget, and promote growth. But it is frequently said that countries pay tremendous social costs. And there are still people saying that this economic progress is made at the expense of the poorest. Let me give you the most recent data I have received. Some time ago, I gave you figures from a sample of 17 countries to show how social expenditures were doing under Fund-supported programs. We have since broadened the sample to 27 countries to make sure that we cover all forms of countries, and I recently received the results of this analysis.

I am talking about ESAF countries. Since the start of their programs with us, these 27 countries, much more than half of the total, have seen spending on education not stagnate, but grow on average by 38 percent in real terms. Thirty-eight percent in real terms. Health spending has been increased by 50 percent in real terms. If you are interested, I could tell you also by how much military expenditures have been reduced during the same period. It is not for the IMF or the World Bank to take credit for that, or if we do deserve some credit, it is limited. Rather, this progress is due to the effort of the governments of these countries, which now understand where their priorities should be. But it gives you a different picture of the world from the one which is often so casually given out. And even if I do not take for the IMF full credit for this progress, it is quite important for our staff here--who are working so intensely on these issues--to observe that, during the course of the programs, illiteracy rates in these countries declined by 3 percent a year on average; primary and secondary school enrollment increased year after year; infant mortality declined by 2 percent a year; and life expectancy increased, while access to health care and to safe water improved by 10 percent and over 5 percent a year, respectively.

I tell you that for you to know what this institution is doing and to put what I was telling you about the agenda of the Interim Committee into perspective.

QUESTION: [Interpreted] I would like to refer to Argentina. You spoke in recent months about the fact that the Fund was going to follow the current three-year program with another three-year program at the end of this period, but the minister of Argentina said this was not possible because it was not possible to undertake the structural reform, labor reform, provincial reforms, and judicial reform, and suggested that this second three-year program will not take place even though it is important for the Fund to accompany Argentina into the twenty-first century. Could you offer some comments on behalf of the Fund on this subject?

MR. CAMDESSUS: [Interpreted] I had not personally heard this from the Argentine authorities. We are currently supporting a program which will conclude in January of 1998. It is producing good results, despite the recession in Argentina after the Mexico crisis. Now, inflation is close to zero, growth was about 4.5 percent in 1996, and will continue, I think, in the right direction in 1997. Our program targets at end-1996 were met. And now, what for the future? When we end a program of this kind, we say to the government that we can continue to help you, and that there are various ways of doing this. One is a formal program. Another is a staff- or IMF-monitored program. Another is simply the dialogue we conduct with our members, accompanying them in their efforts to identify the best policies and to give them, if they need it, technical assistance and financing. I do not know what the decision of the government is going to be. I do not know if the measures which might be included in a program would be sufficient or not for our Board to approve such a program. We have not discussed this yet. We will see. I think that we will have an opportunity in May to visit Buenos Aires and discuss these issues further, and hopefully then I will be able to give you more information about the matter of concern here. But I can tell you now, with or without a program, because of the magnificent efforts of Argentina in recent years, I am very confident in the future of that country.

QUESTION: [Interpreted] I, too, would like to ask you a very localized question. In your assessment, what is the result of the Venezuelan agenda? What are the challenges being faced, and what are the priorities? And I would also like to know if the Fund is prepared to extend the stand-by program it has with Venezuela.

MR. CAMDESSUS: [Interpreted] Yes. Even though not everything is perfect, Venezuela’s program seems to me an undeniable success. Confidence has reappeared, inflation has declined--although not enough--privatizations have started again, the banking system has strengthened, and many distortions which had paralyzed the economy have been eliminated. So, I personally see with great pleasure what has happened, and seeing the determination of the government to continue, I can say that we are prepared to continue. There are many things to be done to consolidate the stabilization. We need to deepen the structural reform, and I see that the political consensus for this is growing. For example, there was an agreement in reforming the social security system, to change the severance payments. All this is significant, but I also see that there is excessive wage pressure; and that creates difficulties in implementing the program. Venezuela still has much to do to strengthen its economy and its institutions. The institutions in Venezuela, as in many other countries, have major problems to be resolved after so many years of paternalism, of populism--all these kinds of state intervention. Institutions have been discredited, and the government is trying to reconstruct them, to make them creditworthy, and we are here to help.

QUESTION: Mr. Camdessus, I would like to ask you a question on globalization.

The World Economic Outlook points out that during this 10 to 15 years of world economic integration, there has been a trend toward more income inequality, on average, between rich and poor countries, and even within the industrialized world. Now, globalization is about freedom of movement for capital. But we know also that regarding the other factor of production, which is labor, there is not such a good climate for freedom of movement there. I would like to ask you, how can a system that has so far produced more inequality than equality among countries and that has as a basis two totally different treatments, I believe, or that has been the practice, for the two factors of production--freedom for capital, not much freedom for labor movement--how can prosperity be shared in such a system? How sustainable is that in the long run?

MR. CAMDESSUS: Thank you for this extremely important question. I must tell you that I would like to spend one hour to answer that, as it really embraces key elements of the strategy for the future. I would like to tell you that we see it as important enough to have organized a special press seminar on globalization with the relevant staff of the Fund on Monday at 11:00.

We in the Fund are extremely concerned by income inequality. As you know, two years ago we brought here the best scholars on the issue to discuss and see how we could do better, how the world could do better in this domain. It is true that trends in income distribution at this stage of the globalization process have been disappointing. But, nevertheless, take it at the level of country-to-country comparisons. When you have in the world the developing countries growing on average by 6.6 percent continuously, and advanced countries growing at 2.5 percent on average, the process entails some catching up down the road. But the problem is centrally at the national decision-making level, where governments must try to utilize much better than they have so far the dividends of globalization for social purposes, in particular for education. Our studies of the seminar two years ago--and I hope these studies will be put in your hands-- have clearly demonstrated that in the longer run, it is through the quality of the education system that you reduce income disparities. There is a lot to be done in that area, together with the sound policies which will allow the centers of expansion of the world to shift more toward developing countries. Indeed, good policies have a very strong payoff for that, while bad policies do the opposite. Frequently, the aggravation of inequalities is related to poor policies, where preference is given to unproductive spending, military expenditures, and all of that.

QUESTION: Mr. Camdessus, there have been reports that the French government might offer you as a candidate for the presidency of the European Central Bank. Is there any chance that you will be a candidate?

MR. CAMDESSUS: You call it reports. I call it press speculation. As you know, the IMF does not like to feed speculation. I do not comment on press speculation.

QUESTION: Mr. Camdessus, do you see anywhere in the world the potential threat of a new financial crisis similar to the one we had a few years ago with Mexico? In that context, some people have talked about Japan, South Korea, Thailand, maybe even Brazil.

MR. CAMDESSUS: Well, the key feature of major shocks à la Mexico, is that in general they are unpredicted. As you know, in the Fund we have very significantly increased our surveillance capacity and, selectively, our surveillance of the potential hot spots on the planet. This is in place. We have put our best minds on that. But here I will possibly disappoint you, as I have just disappointed your Dutch colleague. Even if I have somewhere a list of the hot spots, I will not add to the speculation about hot spots by saying that one country is on the list and another is not.

Nevertheless, as I was surprised to see that you put Japan on this list, I will tell you that we are in close contact with the Japanese government and are discussing with the authorities the strong efforts to put their financial sector in order, to ascertain that the incipient recovery gains momentum, and we do not see any reason for alarm there.

You also mentioned South Korea and Thailand. We see with satisfaction the way in which South Korea has managed the difficult coexistence of several tensions recently. And we are confident that the authorities will continue to keep the economy growing and will reduce the current account deficit, which they see as too high and which we see, also, as a little bit on the high side. The measures they are taking should bring it down to more reasonable levels soon.

We are also closely monitoring what the Thai authorities are doing. They have already taken a few significant steps. They continue working on strengthening their financial sector and on reducing demand pressure in order to bring their current account deficit into a more acceptable range. We are pressing them to take additional steps, and they are considering doing that. We are hopeful that they will continue acting this way.

The fourth country on your list? Yes, Brazil. I would not say that everything is perfect in Brazil. But with the real program continuing to exert its positive effects, with the government of President Cardoso continuing to act to make sounder the financial position of the states and to strengthen the financial sector, a cooling of the economy should normally reduce somewhat the negative developments in the trade area. Here, also, I would be very surprised if we were to have a major shock in the next few months.

QUESTION: Could you comment on the situation in Haiti, please, where the questions today are actually not just economic but political, as well? The tough demands of the IMF and other IFIs have created an ongoing political crisis in Haiti, a form of political paralysis. The economy is still in a very desperate condition. Your critics, particularly in the nongovernmental organization community, would say that the IMF and other IFIs, by being so tough with Haiti, are pushing the country back toward political collapse. What good is the structural adjustment program if it leads to conditions that could ultimately destroy Haiti's fragile democracy?

MR. CAMDESSUS: Thank you very much for your question, sir, but let me tell you that it has a few grains of paradox in it, because nobody in this room could believe that the IMF and the World Bank and other international institutions have created the fragility of the political situation in Haiti. Lamentably enough, the fragility of the political situation in Haiti has much more to do with the rivalries between individuals and factions than with the demands of the international community, whose only aim is to make sure that this poor country can soon share in the prosperity of all those who have accepted to apply progressive, but steadily implemented, programs of structural adjustment.

If there is a scandal in Haiti today, it is that so much money is available to be spent, but is not spent because the parliament of Haiti, due to its factional disputes, has not yet been able to pass the necessary legislation to allow the money to be spent. I say that with a degree of vehemence, because I have put a lot of my personal conviction and energy to trying to put together with our colleagues of the Inter-American Development Bank and the World Bank a solid, credible program for Haiti. We have even tried to find from around the world high quality Haitians who would be ready to sacrifice a little bit of their high salaries to go back to Haiti and serve their country now, at a time when the country must be rebuilt. We have done that and we continue our efforts. We have put together a very credible, but not too demanding program to help rebuild the country. But if we are to do something good for this country, it will not be through what we are doing with the World Bank--and we had a very constructive consultative group recently in Port-au-Prince--but we also need to urge the Haitians to forget their past quarrels and to join forces to rebuild the country.

QUESTION: Do you have any schedule in mind for capital account convertibility? You have already mentioned that, even after 50 years, current account convertibility is not complete. Secondly, how can you have true globalization when there are such wide disparities in wages, interest rates, inflation, and income? The latest report shows that if it continues growing at the present rate, India will take more than 70 years to close even half the gap. Do we have that much time?

MR. CAMDESSUS: No, sir, you do not have the time. And this is why we are gently pressing your government to take steps, which are clearly known, which could shorten this time for reducing the income gap with other countries.

You know possibly that I have visited your country recently, not only Delhi, but many places in your huge and beautiful and fascinating country. I went to several states precisely because we know that the problems are with the states. And before leaving India, I was extremely clear in summarizing my conversation with the prime minister at that time, and the government of that time, on what India needs. It is not enough stay at the satisfactory level of growth of 7 percent a year, which has been maintained for three years. The IMF is quite satisfied to see that this relatively high rate of growth follows the changes suggested by us and by the World Bank a few years ago. But India must do more and can do more. And to do so, it must put its fiscal situation in order--not only at the central level, where you still have a government deficit of 4.5 percent for 1997/98, but also at the state level. If you put together all the elements of the deficit, you have an overall public sector borrowing requirement for the country of 9 percent, which is unsustainable and totally incompatible with your legitimate ambition, which I share, to bring your country much more quickly to a more acceptable income level.

Now, you had another important question, which was how long it will take to liberalize capital movement. Well, I hope it will not take 50 years. But we will have a mandate for capital account convertibility, I hope, and we will, during the summer months, define the process that will enable us to accompany the countries as they move in this direction. Here, we do not want to precipitate the process, because nothing is worse than to be obliged to backpedal after having taken dramatic steps toward liberty. We want to accompany countries in their efforts to strengthen their macroeconomic and financial foundation, in order to do it safely. So we are considering a process, a dialogue, with countries to accompany them. It will take years. Not for India. India is quite advanced in this direction, but I speak in general. And the only thing that we are attached to is that countries do not feel obliged to go on a path of progress they cannot sustain. But of course, we would like them to play ball and not to drag their feet when, in the interest of their people, they could go ahead.

QUESTION: Mr. Camdessus, how soon do you expect the IMF to resume payments to Russia, and does Russia actually need IMF money now?

MR. CAMDESSUS: Well, following my recent visit to Moscow, a mission is presently in Moscow to finalize the details of an arrangement with Russia. You know this is always a complicated thing. You must fill out a lot of tables and double-check everything, and the Russian authorities are very serious about that; they do not want, as we do not, to enter into any kind of vague arrangement. We are working very seriously with them on that, particularly on strengthening the revenue side of the budget and tax administration. This takes some time, but I hope--and I am reasonably certain--that we could submit the program, the second tranche of our three-year program, for the approval of our Executive Board in May, hopefully mid-May. The disbursement would restart immediately afterward. Immediately means in the five following days.

QUESTION: How big a disbursement?

MR. CAMDESSUS: We are discussing the phasing of it with the authorities. I am confident enough about their efforts to have proposed some added flexibility in our system of disbursement, which is extremely tight and rigid now. They are considering these offers, and the discussions have not been finalized, but I do not see difficulties in this domain.

QUESTION: Mr. Managing Director, when Chairman Greenspan made his now famous comments about the level of the U.S. stock market, he took a lot of criticism for hurting share prices. Mr. Mussa did not get the same market reaction when he said yesterday that the U.S. stock market appeared to him to be a little on the rich side, but I am wondering whether you agree with his assessment, and also whether you think it is appropriate for the IMF to be commenting on the level of individual nations’ stock markets.

MR. CAMDESSUS: Well, as yourself, sir, and all your colleagues here know, the IMF is very transparent and would like very much to answer all the questions of the reporters except when they are about speculation. But what Mr. Mussa has said is something which is obvious to all analysts who are looking at price-earnings ratios and all the aspects of the appreciation of the relative level of the price of shares in key places of the world. I am not surprised that the appropriate remark of Mike Mussa yesterday did not have a very significant impact on the markets. It shows that the markets have reacted properly to the warning of Alan Greenspan, and that a remark which could have had a strong impact three months ago is now part of, let's say, a kind of conventional wisdom about market developments.

To be a little more serious, I would tell you that the way in which the Federal Reserve is proceeding, with a progressive monetary tightening, has certainly sent the message to the financial markets of the world that, well, they should think about abandoning themselves too much to exuberance, and that they should know that the monetary policy in this great country will be conducted with prudence, having in mind the necessity of not upsetting normal developments in the stock markets.

QUESTION: [Interpreted] Mr. Camdessus, in the positive picture that the IMF is presenting to us for the coming years, one of the concerns mentioned is the financial systems. My specific question is how do you read the present situation of the banking system in Mexico, and can you make a comment on the problem of poverty in Latin America? The international institutions have recently been saying that, although the region is growing, it is not growing enough to overcome this problem. The gap between the rich and the poor is ever increasing.

MR. CAMDESSUS: [Interpreted] I will start with your last question on the level of poverty and growth. It is true that Latin America is not growing enough to reduce poverty in a decisive fashion. It can and should grow more, but this does not mean anything more than that effort, continued effort is needed in its policies, as well as better distribution of resources, improved public expenditure, and improved tax payments by those who are continuing to evade paying taxes. This fiscal stringency is needed in many countries. I think that Latin America is increasingly directing itself toward the second generation of structural adjustment. Until now we have been working very much with your governments to reconstruct a credible macroeconomic basis, to stabilize the economy, to put in motion again the locomotives of growth. But we see very well that other obstacles to reducing poverty are still there. Among these are the tremendous problems of governance--the fact that governments still do not really have the priorities they say they have in combating poverty. If we are to be sincere in our desire to reduce poverty, then we must accelerate privatization to make the economy more efficient. We must accept more openness and accept competition. We have to change the role of the state for it to do better what it alone can do. Governments have to combat corruption, make institutions credible again, put more effort into education and the social areas. Many are making efforts in this direction, but fresh impetus has to be brought to the subject in the coming years.

I now turn to your first question. You know full well that I have said a lot about the risk of the weaknesses in the financial system, not just in Latin America, but particularly in Latin America; and many countries have paid dearly for these weaknesses. Think of Venezuela. Think of Chile. Think also of Mexico. Mexico has been able to start consolidating its banking system. A lot has been done and is still being done to restructure the Mexican banking system. This should continue along these lines, and this is part of our cooperation with your government. The program we are supporting in Mexico is functioning very well in terms of reducing inflation and of stimulating growth. But growth of about 5 percent is still insufficient. More needs to be done. To do this, you must turn to the new generation of structural adjustment which will free up all the potential of your country.

QUESTION: Mr. Camdessus, three weeks ago you visited Russia, so what are your impressions from this visit and how can you define the actual stage of relations between the IMF and Russia?

MR. CAMDESSUS: First, the actual state of relations between the IMF and Russia. Russia is a member of this institution. Russia is a country with which we are used to working for many years now. We can say that we have developed a mature relationship. I speak of maturity, which means that we understand perfectly each other’s concerns. It is a relationship--friendship, as a matter of fact--made of frankness, not complacency, and mutual understanding. I am certain that the Russian authorities know pretty well that we understand the magnitude of the formidable challenges which are confronting them, the tremendous difficulty of running the country in the context of such a difficult revenue crisis. You know possibly that I went to your Moscow Institute of International Affairs to make crystal clear and public my views about that. I have said that a prolongation of this crisis would mean a major risk of anarchy in the country. Not the traditional diplomatic language you might expect this institution to use, but the language of a mature relationship between friends. But I see also that, in spite of this problem, in spite of all the suffering and the length of the process of correcting such deeply rooted disequilibria, there is a renewed determination on the part of the government to address these issues squarely.

I was very impressed, I must tell you, not only by the determination of the President himself, but by the quality of the new government of Viktor Stepanovic [Chernomyrdin], and with his new deputy prime ministers, Mr. Nemstov and Mr. Chubais. I have discussed with all of them in detail the next steps to be taken, and it is quite refreshing to see such a strong determination to address squarely the basic issues. I must tell you that on this basis I am not hesitating to invite the Executive Board of the Fund and all institutions which follow us in these endeavors to continue our support of Russia. And believe me, if this program is continued, as it is expected it will be until the end of this century, Russia will enter the next millennium with a good, solid, sustained base for growth and improvement of the living standard of the population.

QUESTION: Can I just ask you about yesterday's agreement on a debt relief package for Uganda under the HIPC initiative. In particular, could you explain the rationale behind timing the completion point for April of next year, and especially could you deal with the criticism that was voiced at the Board that perhaps the gap of only one year between the decision point and the completion point for Uganda would send the wrong signal to other countries hoping to receive debt relief about the kind of performance that they would need to demonstrate?

MR. CAMDESSUS: You are well informed. Yesterday the Executive Board took for the first time the effective decisions to apply to a given country, Uganda, the benefit of this facility. On the basis of these decisions, Uganda is expected to receive around $340 million in April 1998, which represents a reduction in Uganda's debt of 20 percent. The resulting total reduction in Uganda's nominal debt service is likely to be much higher because, as you know, the Paris Club and other creditors are invited to make a parallel effort, and the total relief should be around $700 million. The Fund assistance will take the form of a grant--it is probably the first time in history that the IMF will make a grant--into an escrow account. We have not yet decided on the precise formula for the timing of the disbursement of our assistance. But these payments will be made to cover debt service payments to the Fund, and we think that, in actual dollars, our contribution will roughly cover payments in an amount of $90 million spread over nine years.

Why was April 1998 set as the completion point? You know that normally we require the completion of two consecutive ESAF or equivalent programs to be able to make disbursements. Well, the HIPC initiative provides for some flexibility to allow the Executive Boards of the Bank and the Fund to take into due consideration the progress already achieved by the country in its structural adjustment. This is particularly the case for Uganda, which has already made a lot of progress, but where a lot still remains to be done for the country to be placed credibly on the path of sustainable growth that this facility must help to establish. As it happens, the Executive Board wished to have a new program in place for Uganda and to complete a first review under that program. This is why we came to this decision.

On the signal given to the rest of the world, I am certain that this will be an extremely positive signal, and I was happy to hear that the Ugandan Minister of Planning and Economic Development, Mr. Richard Kaijuka, reacted immediately to this decision by warmly welcoming this package of debt relief. Of course, he would have preferred to see the package even more front-loaded, but he knows perfectly what are the constraints under this procedure, and he well understands the magnitude and the exceptionality of this effort. Having discussed this myself with President Museveni, I can tell you that he is extremely appreciative of what we are doing. What gives me even more a sense of optimism is that the President told me that, in addition to appreciating our efforts, the policies we are trying to promote in Uganda are so much the policies Uganda needs, that he would implement them even without our money.

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