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Spring Meetings 2003

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

United Kingdom and the IMF

Iraq and the IMF

Mexico and the IMF

Proposals for a Sovereign Debt Restructuring Mechanism (SDRM) -- A Factsheet

The IMF and the World Trade Organization -- A Factsheet

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Transcript of a Press Conference following the International Monetary and Financial Committee Meeting
Washington, D.C.
Saturday, April 12, 2003

View this press conference using Media Player

Participants:

Gordon BROWN, Chancellor of the Exchequer (United Kingdom) and Chairman, International Monetary and Financial Committee

Horst KÖHLER, Managing Director of the International Monetary Fund

Thomas DAWSON, Director IMF External Relations Department (Moderator)

Proceedings:

External Relations Department Director Thomas DAWSON: Good evening and welcome to the closing press conference for the IMFC meeting. The chairman of the committee, Chancellor of the Exchequer of the United Kingdom, Mr. Gordon Brown, will have an opening statement and Mr. Köhler, the Managing Director, will have a statement, and then we'll take your questions. Please identify yourself and your institutional affiliation at this point.

IMFC Chairman Gordon BROWN: We have been meeting at a time of economic uncertainty and faced by the challenge posed by the uncertainties in Iraq. It is a mark of the commitment of all that even in these challenging and difficult times we have been able to look beyond the here and now in examining all the long-term issues that the world economy faces.

As we addressed these long-term challenges we did so in the spirit of cooperation, with the same shared purpose and common endeavor that was present at the creation of the institution of the IMF and World Bank in 1945.

Firstly, on Iraq, it is in this spirit of cooperation and looking to the future that we noted in the communiqué the significant challenges posed by the current situation, the urgent need to restore security to relieve human suffering and to promote economic growth. We are all agreed on the need for a further Security Council resolution and on the engagement by the Bretton Woods institutions, the IMF and the World Bank, and they stand ready to play the normal role in Iraq's redevelopment at the appropriate time.

The Fund and Bank will also monitor closely the impact of the conflict on all the members and stand ready to help and support those adversely affected. And we were also agreed today on the importance of addressing the debt issue, and we look forward to the early engagement of the Paris Club on Iraqi debt.

I believe it is in the same spirit of cooperation that we stood ready today to build on the sound fundamentals that exist in the world economy; to examine and to highlight the potential for renewed growth.

At this time of risk, we must remain vigilant, with each of us asking what contribution we can make to greater stability and growth, and what contribution we can make to support growth and prosperity in developing countries in emerging markets. In the advanced countries, with policies consistent with a sound medium-term fiscal position in the U.S., accelerated labor and product market reforms in Europe, further steps to strengthen banking and corporate reform in Japan, sound fundamentals and policies should deliver stronger growth in the second half of the year, emerging market countries will need to strengthen their policies for macroeconomic stability and structural reform, while the prospects for growth in low-income countries should be supported by improved economic policies, stronger institutions, progress in resolving regional conflicts, and increased donor resources, including through debt relief under the HIPC Initiative.

On trade, we benefited from the views of the Director-General of the WTO who spoke to the IMFC this morning. We agreed on the urgency of concrete progress toward multilateral trade liberalization under the Doha Round. This will be critical in our view in supporting higher economic growth, and in supporting poverty reduction, especially in the developing countries, and you will see that in our communiqué we stressed the urgency of all governments pushing forward the trade initiative so that we can make progress in Cancun in Mexico and meet the timetables set for 2005.

We discussed new mechanisms for crisis prevention and crisis resolution. We welcomed the progress made with the codes and standards process. We support the Fund's continued efforts to make surveillance more comprehensive and accountable. We welcome the inclusion of collective action clauses by several countries in international sovereign bond issues; most recently in Mexico. We look forward to the inclusion of CACs becoming standard market policy. We welcome the work of the Fund to develop a concrete proposal to an SDRM. We agreed that the Fund will report on progress at the committee's next meeting and we look forward to discussions with the private sector on the proposed code of conduct.

In our communiqué we refer to the need for a new partnership between developed and developing countries. We agree in our communiqué that we want a report from the Fund and Bank on debt sustainability, the position of the HIPC countries on points of completion by the autumn. We also reviewed and discussed new proposals including for the international finance facility, and proposals to achieve this are being considered. The committee looks forward to progress on these by its next meeting.

So you can see that as we approach the issues facing the world today, there was a common approach. It was based on shared values. It is highlighted by the desire for there to be extensive international cooperation on the world economy, on trade, on measures for crisis resolution and prevention, on Iraq, and on that new partnership that we seek between developed and developing countries, and I'm pleased by the outcome of the meeting today.

IMF Managing Director Horst KÖHLER: I'm pleased about the outcome as well. When we met Thursday this week, I told you that I have the feeling from preparing the meeting that the spirit of cooperation in the IMF is intact and strong, and this was indeed strongly confirmed through the outcome of this meeting and I am very grateful for the chairman, Gordon Brown, who led the discussion so ably and so creatively that we have this wonderful outcome.

I think the most important things are this confirmation that growth and growth policy have to be in the midst of the economic policy concept. And here, again, the advanced countries have a particular responsibility to boost their growth, particularly through structural reforms. What the Chancellor already said, I want to associate myself to this: Trade and the urgency that the Doha Round will come to a successful conclusion is another milestone from this meeting for the future. And I was particularly pleased that the finance ministers now go back to their capitals and are advocating for a [inaudible] outcome of the Doha Round.

Last but not least, from my outlined three-pillar concept for a strategy for growth and confidence, there was unanimity that the Fund should stay strongly engaged in low-income countries, and should, together with the World Bank, implement the initiatives taken in the last years. And the Chancellor has outlined where we should focus on new elements and I think this will contribute to a positive outlook regarding the global economy. I am much more optimistic now than I have been two or three weeks ago, not only because we can now assume the war will be short, but in particular because of this confirmation that the spirit of cooperation in this membership of 184 members of the IMF is strong and intact. This gives me a lot of confidence, and optimism for the future.

QUESTIONER: Two questions, actually. I don't really understand what the term "normal role" means, in terms of the IMF or the World Bank's role in Iraq. Does that mean that you are ready to send an assessment team as soon as security allows without any other interim step or something else required? And secondly, what is your view on debt forgiveness for Iraq as opposed to debt restructuring?

Mr. KÖHLER: Regarding the normal role, this is a kind of technical description of our proceedings in crisis countries or post-conflict countries, like Kosovo, Afghanistan, East Timor, together with the World Bank, to build a task force. The task force structures the items which have to be looked at in the post-conflict countries, and at the appropriate time we send, indeed, a fact-finding mission, as a first step of a process to the post-conflict country, and this first step can only be when there is physical security. Insofar as to the possible timing of sending the mission, it is premature to decide that, but there is understanding that the World Bank and the IMF should prepare themselves and should take up this task, and, of course, and this was possibly to the surprise of many, there was total unanimity that whatever we do, the framework for that is based on a new United Nations resolution.

Debt forgiveness regarding Iraq, for me, this is a bit premature to judge, but it is more in the hands of creditors to discuss it. I think before we talk about debt forgiveness, we should know what the amount of the debt is, what the contribution of debt forgiveness is through a comprehensive concept to rebuild Iraq, and bring it on the track of growth, job creation, and improving living standards, but certainly it will be an element of a more comprehensive concept.

Mr. BROWN: Just to add to that, there will be questions about how much debt is actually involved, as Mr. Köhler has said. And that is why we say in our communiqué, it is important to address the debt issue, we look forward to early engagement by the Paris Club, the first step being that they would want to do is data collection, to establish what the debt is. And that is why we think this will move at some stage to the Paris Club.

As far as the discussion on Iraq itself, and the role of the international institutions, this was a discussion that proceeded by consensus an enormous will to cooperate and to work together to find a way forward. Everybody was unanimous in supporting there being a further United Nations Security Council resolution on these matters, and everybody wanted to see involvement by the World Bank and the IMF. And, I draw your attention to that paragraph 6, that we further note that engagement by the international community including the Bretton Woods Institutions, would be essential for sustained economic and social developments in Iraq, recognizing that the Iraqi people have the responsibility to implement the right policies and build their own future. So this was an enormously positive step forward, people agreed on this way forward, but I do emphasize these two things, the support which was unanimous for a further UN Security Council resolution and the wish that the two international financial institutions, the World Bank and the IMF, be involved constructively while recognizing the Iraqi people have the responsibility to build their own future.

QUESTIONER: What would that UN resolution have to say to satisfy your requirements to be part of the reconstruction?

Mr. BROWN: The debate this afternoon was not on the contents of the resolution itself. That is a matter for discussion at the United Nations. What there was unanimity was that there should be a fourth resolution and what there was also unanimity as I repeat was that there would be a role for the IMF and the World Bank in the development of Iraq. But, we were not trying to write an UN resolution, as members of the international monetary finance committee, he were expressing our wish, which was unanimous amongst all countries, after what was a consensual discussion, that there be a further resolution.

QUESTIONER: Is there anything that, to rephrase that, is there anything that has to be in the resolution, because on previous resolutions there was a discussion that because it is military occupation, there are international laws that have to be considered, there are parts of your charters that would require certain things, so that would the UN resolution have to resolve some of those issues.

Mr. BROWN: People understand that a UN resolution in these matters has got to deal with unfreezing of assets. We hold assets, for example, as the U.K. government that we have frozen in London, the assets that were assets of the previous regime in Iraq, assets that we would want unfrozen but only unfrozen by a UN resolution. There is the further question of sanctions against Iraq. That has to be dealt with by a UN resolution on these matters, so there are many issues, including what the international financial institutions might do, that could be the subject of that resolution, but I do repeat, it wasn't the job of the IMFC today, as a committee, to either draw up a resolution, or to anticipate what would be in that resolution. What, however, showed the consensus to be absolutely unanimous was the need that people expressed for there to be a resolution, and their wish to see the international economic institutions play a part in the redevelopment of Iraq.

QUESTIONER: The communiqué is quite weak when it comes to the question of voice, I'm referring to paragraph 19. You just state there that an adequate voice and representation in institutions. Would you consider at all increasing, for instance, a suggestion which has been made a basic point, for all member states, would you consider, or did you discuss considering increasing the number of Executive Directors for a fairer and more equal representation at the Board?

Mr. BROWN: I think you should look also to the Development Committee meeting tomorrow where these matters are going to be discussed in some detail.

What we refer to in paragraph 19 is the steps that have been taken to strengthen the capacity of the African constituencies and that is extra resources that have been made available there. And, to reports that we're going to receive at the 2003 annual meetings. So these issues are all being discussed, there is a determination that there should be an adequate voice and representation in the institution by all countries, and we are particularly interested in strengthening both the capacity and the voice of the African constituencies as we say, but I think you will find this discussed tomorrow in more detail in the Development Committee.

As far as the issues concerning the constituencies that you mention, I do draw your attention to what was a very positive discussion, first of all about the need to progress debt relief, and there are many issues that remain to be dealt with and we will have the report at the meeting in 2003 in September, to deal with these issues of debt sustainability; and secondly, a recognition that if we are going to tackle the problems of illiteracy and disease, the problems that require us to meet the MDGs by 2015, that every child has primary education, we cut infant mortality by two thirds, maternal mortality by three quarters. Then there is a recognition in this communiqué that extra resources will be required, and that progress must be made on this, and we say in our communiqué that we are going to look at the new initiatives including the international finance facility that the United Kingdom has put forward and we look forward to progress in the coming months. In other words, we recognize that we have responsibilities to meet that that partnership between developed and developing countries will lie on the changes not only in the developing countries they are making in the way they run their countries, but also our responsibility to find extra resources and I accept that as the responsibility that we will have to look at again and discharge as we look forward to our September meetings later this year.

QUESTIONER: On the question of Iraq, even before a World Bank and IMF team goes in, there is going to be a need for an urgent look at the currency situation in Iraq, a currency and payments system to make their economy work. Are you satisfied the measures are being taken to put that into place even before the Bretton Woods Institutions go in?
Secondly, on the question of sovereign debt restructuring mechanism, are you unhappy as a result of American opposition that seems to have been put into as long a draft as it possibly could go?

Mr. KÖHLER: The first question was on how Iraq will come to a solid currency. I think the IMF can contribute to this issue, and to the plan and the concept to build up a solid currency. The U.S. obviously has made already preliminary considerations. We are now after this meeting in a position that we come very rapidly together, and compare notes, and then define how we move forward from here to later.

Mr. BROWN: On the SDRM, I think when you look at paragraphs 14 and 15, there has been enormous progress now on the CACs, including countries now wishing to move ahead and use them in a way they didn't before. Equally, the proposals that now exist for a new code of conduct, about restructuring, are proposals going to be moved forward quickly of the next few weeks and months, and move forward also in consultation with the private sector.

And it is on that basis, the growth of the CACs and the new code of conduct that will be introduced, that the committee said that while it recognized it wasn't feasible to move forward to establish the sovereign debt restructuring mechanism, agreed that further work, work should continue on issues raised in its development, and these issues include inter-creditor equity considerations enhancing transparency and disclosure and aggregation issues, the IMF will report on progress at the committee's next meeting. So, there is a great deal of work still being done on these issues, and we look forward to progress on CACs, and on the code of conduct, but there is a work program set out in paragraph 15 that shows that these issues will continue to be looked at in some detail.

QUESTIONER: The Brazilian finance minister a couple hours ago said that one of the principal objectives was to get the IMF to use its clout to pressure the U.S. and Europe to eliminate bad subsidies ahead of the WTO talks and that is a critical issue that needs to be resolved in order for these countries to sell the only goods they can really sell and develop their agriculture. What kind of steps do you think the IMF will take to move that issue along.

Mr. KÖHLER: The first step is that we indeed prepare the analysis and the data for the case of making markets more open, not just for Brazil, but as a multilateral system of trade liberalization. It's mainly that we make this analysis and the data available for this discussion. We will also undertake further research on trade issues. And the third step is that we are advocates for the political objective that this Doha Round should not only come to its agreed objective, but also this agreed objective within the set timetable.

Mr. BROWN: There are four issues that I have got to move forward quickly on the WTO talks; agriculture, pharmaceutical, services, and help for developing countries. These are issues that are not moving forward on the timetable we expected, and what we said today is that we are looking for urgent progress and we mentioned particularly on agriculture, as we run up to the talks in Cancun in September. In other words, there is a great deal of work to be done. We said there is a political commitment on the part of finance ministers to move this process forward. I think everybody agrees that in the present world downturn, trade which even in the recession of the early 1990s was moving forward at 5 or 6 percent a year, one year it was negative, it was stalled. And while it was moving forward this year, not so badly in the first six months of last year, has been slowing in the period from about six to nine months ago, so there is a great premium on moving forward with trade liberalization, to speed up the growth of trade around the world. And that is why for economic reasons, as well as for immediate economic reasons as well, for long-term economic reasons, we put great premium on the WTO talks. And I believe if we have the same cooperation as we move toward September in Cancun, in Mexico, that we have seen today in resolving issues that some people thought we could not make progress on, if we had that same cooperation, then we can see the progress that all of us want to see in Mexico. We have made progress today on crisis prevention and crisis resolution on the issue of Iraq, on the shared views about the future of the world economy, on debt relief and on international development. I hope we can see the same progress in the talks on agriculture, pharmaceuticals, services and access for developing countries in the trade round.

[Whereupon the press conference ends.]




IMF EXTERNAL RELATIONS DEPARTMENT

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