At its inaugural meeting in Washington on April 16, the International Monetary and Financial Committee (IMFC) strongly reaffirmed the benefits of a broader sharing of the opportunities of an open world economy and its strong support for the IMF’s unique role as the cornerstone of the international monetary financial system. At the same time, the IMFC recognized that more needs to be done and pledged in its communiqué “to continue to work toward making the IMF more effective, transparent, and accountable.” (For the text of the IMFC communiqué, see page 119.) The 24-member IMFC, which comprises finance ministers, central bank governors, and other officials of comparable rank and is representative of the entire IMF membership, replaced the Interim Committee in September 1999 (see IMF Survey, October 11, 1999, page 317).
Role of IMF
The meeting took place against the background of street demonstrations in downtown Washington and, as the Committee noted, “a growing public debate about the directions in which the IMF and the international financial system should evolve to adapt to a rapidly changing economic environment.”
Spring Meetings 2000 online
The IMF’s website (www.imf.org) offers the full texts of official communiqués and statements, the transcripts of press conferences, and other materials related to the IMF-World Bank Spring Meetings 2000.
The IMFC’s chair, Gordon Brown, the U.K. Chancellor of the Exchequer, speaking at a joint press conference with Stanley Fischer, Acting Managing Director of the IMF, said the meeting reaffirmed the high ideals that gave birth to the IMF and the World Bank more than fifty years ago: “the belief that prosperity around the world was indivisible; our belief that prosperity, to be sustained, has to be shared; and our belief that the way forward is not to turn the clock back on globalization or to retreat from global economic cooperation but to strengthen international economic coordination with one aim—that coordination and cooperation involving all can achieve prosperity for all.”
IMF financial operations
The IMFC agreed that the IMF’s financial operations should continue to adapt to changes in the world economy, including the rapid growth and integration of capital markets. It endorsed the Executive Board’s decision to simplify the range of IMF facilities by eliminating the Currency Stabilization Fund, support for commercial bank debt and debt-service reduction, the Buffer Stock Financing Facility, and the contingency element of the Compensatory and Contingency Financing Facility. It also asked the IMF Board to consider policies on existing facilities and, in particular, ways to enhance the effectiveness of the Contingent Credit Lines without compromising the initial eligibility criteria and to avoid unduly prolonged use of resources provided under Stand-By Arrangements and the Extended Fund Facility.
In framing the principles that should underlie IMF financial support, Brown told the press conference that these should include “the need to preserve the IMF’s ability to provide financial support to all member countries, the need to encourage countries to adopt strong measures to prevent crises, the importance of having countries respond quickly and effectively to crises, and, where balance of payments difficulties are expected to be of a longer-term nature, supporting reforms that deal with structural problems.”
Safeguards and misreporting
While recognizing that there had been only a few episodes of misreporting of information to the IMF or allegations of misuse of IMF resources, the IMFC stressed that “such incidents are nonetheless extremely serious and undermine the trust that binds the IMF and its members, as well as public confidence in the IMF.” It welcomed the Board’s adoption of a strengthened framework to safeguard the use of IMF resources (see page 134) and stressed that “the forceful application of the strengthened framework is critical to enhancing the integrity of the IMF’s financial operations.”
The IMFC also welcomed the Board’s decision to conduct safeguards assessments and the requirement that all countries making use of IMF resources should publish central bank statements that are audited in accordance with internationally accepted standards.
Private sector involvement
“We agreed on the importance of prevention as the first line of defense against economic crises,” Brown said, “and noted that countries participating in international capital markets should seek to establish a strong and continuous dialogue with their private creditors.” At the same time, it was agreed that the IMF has an important part to play in crisis resolution. In some cases, the IMFC said, a combination of official financing and policy adjustment should allow a country to regain full market access quickly. In some cases, emphasis should be placed on encouraging voluntary approaches. In other cases, a broader spectrum of actions by private creditors may be warranted.
In those cases where debt restructuring or debt reduction may be necessary, the IMFC agreed that “IMF-supported programs should put strong emphasis on medium-term sustainability and should strike an appropriate balance between the contributions of the private external creditors and the official external creditors, in light of financing provided by international financial institutions.”
In welcoming the recent internal review of IMF surveillance, the IMFC noted that “progress is being made in adapting surveillance to changing global realities and to strengthening it in key areas, including financial sector issues and external debt and capital account developments.” It also welcomed “the sharper focus on exchange rate policies and their consistency with underlying macroeconomic and other policies, and institutional arrangements.”
The IMFC stressed the importance of countries adhering to international standards and codes of good practice in reducing their economic and financial vulnerabilities and recognized that the IMF’s Article IV surveillance process was the appropriate framework within which to organize and discuss these issues. The communiqué observed that “IMF surveillance will be the principal mechanism through which the results of many initiatives under way in the IMF and elsewhere to strengthen the international monetary system will come together, including in the areas of standards and codes, financial system assessments, data provision, and transparency.” In this regard, it welcomed the work done in the IMF, in collaboration with the World Bank and other entities, to encourage the adoption of standards and codes.
The IMFC reiterated the importance it attached to greater transparency and accountability in policymaking, which, Brown noted, have “an important part to play in the functioning of national economies.” The Committee welcomed progress in the widespread release of Public Information Notices following Article IV consultations; the voluntary participation of 60 countries in the pilot program for the release of Article IV staff reports; the expanded publication of information on the IMF’s liquidity position and members’ accounts with the IMF; the publication of a wide range of policy documents; the publication, under a pilot study, of Reports on the Observance of Standards and Codes; and the release of the Board’s Work Program.
Poverty reduction and HIPC
Brown stressed that, while the IMFC had noted the recent progress in implementing the enhanced Initiative for the Heavily Indebted Poor Countries (HIPC Initiative), “we urged all those with a stake in the debt initiative to work for faster and effective implementation, and for HIPC to be given the highest priority to ensure that as many countries as possible can reach decision points by the end of the year.” In this connection, he said the Committee welcomed the setting up of a joint IMF–World Bank committee to facilitate implementation of the initiative and the poverty reduction strategies for the poorest countries.
“We urged all countries involved to move ahead as quickly as possible with the preparation of their poverty reduction strategies,” Brown said. “In this way, the richest countries, to whom much has been given, have joined with the poorest countries, whose needs are the greatest, in this alliance to free millions of people from poverty.”
The enhanced HIPC Initiative was also strongly supported by the Group of 24, representatives of the developing countries, which met on April 15. In its communiqué (see page 129), the group expressed its “deep concern at the insufficiency of bilateral contributions from donor countries for the HIPC Trust Fund.” The group also called for a lowering of trade barriers to developing country exports and for full access to be granted for all exports from the least developed countries.
The Development Committee, chaired by Tarrin Nimmanahaeminda, Finance Minister of Thailand, met on April 17. In its communiqué (see page 124), the Committee noted that so far five countries had reached their decision points under the enhanced HIPC framework, bringing total committed debt relief to over $14 billion; up to 15 additional cases were likely to be considered this year by the Boards of the IMF and the World Bank. The Committee also noted progress in the poverty reduction strategy approach and urged the IMF and the Bank to work collaboratively with member countries and other development partners to develop full poverty reduction strategies. It called on developing countries to adopt outward-oriented reforms that would permit trade expansion to promote development and poverty reduction.
The Committee endorsed the timely initiation of multilateral trade negotiations under the World Trade Organization that would address issues of most concern to developing countries. It emphasized that countries should ensure their efforts to expand trade are integrated into a comprehensive framework of development.
Addressing what it called“a severe danger to development progress itself,” the Development Committee called for a“rapid intensification of international action on the global HIV/AIDS crisis.” It encouraged “each actor in the international system to focus on its comparative strength”and called on the Bank and the IMF to take full account of HIV/AIDS in their support for poverty reduction strategies and the HIPC Initiative.阄
Köhler to take office on May 1
In its communiqué, the International Monetary and Finance Committee warmly welcomed the appointment of Horst Köhler as the new Managing Director of the IMF. It also expressed its deep gratitude to Acting Managing Director Stanley Fischer for his stewardship of the IMF in the interim.
Köhler has been serving as President of the European Bank for Reconstruction and Development. He will take office as IMF Managing Director on May 1.