These have been a truly productive few days. You have conveyed a striking unity in your assessment of the current economic prospects and of the priorities for economic policy in terms of what needs to be done to strengthen the present recovery. You have offered overwhelming endorsement for our efforts to deal with the crisis of the past two years and for the work that we have been doing to strengthen the international monetary and financial system. And above all, the enhancement of the HIPC [Heavily Indebted Poor Countries] Initiative, the launching of our Poverty Reduction and Growth Facility, and all that goes with these steps have created a strong new impetus to the war on poverty. For the staff and management of the IMF, the fact that more than 90 countries, including 58 developing countries, have contributed to financing the IMF’s share in the HIPC Initiative is the clearest possible vote of confidence.
Meetings emphasize action, avoiding complacency
In our discussions, I have detected three key themes. The first is a determination to avoid complacency. The atmosphere surrounding these meetings could hardly be more different than one year ago. Many governors have sounded a note of relief, perhaps even of surprise, that the recovery has become evident so soon. But, almost unanimously, governors have sounded a cautionary note, no one more clearly than the Governor for Canada in saying that “we will be making a grave error if we let the return of relative calm in financial markets and the improvement in world growth prospects lead us to believe that further reforms are not necessary.” Equally, in your assessment of the work that has been done in the area of the financial architecture, I have heard notes of satisfaction, but even more forcefully, the recognition that a tremendous task lies ahead of us.
If more stable global conditions prevail, it has allowed renewed attention to be paid to the huge variety of challenges that confront so many members.
- We were reminded of the tremendous challenges of development around the world. The Governor for Madagascar spoke of the challenge for all Africa of “financing development and poverty reduction in the face of declining resource flows, the high instability of Africa’s export earnings, the debt burden, Africa’s marginal role in the international financial system, the threat of the HIV/AIDS epidemic, and weak human and institutional capacity.”
- We have been reminded of the vulnerability of countries at all levels of development to the natural disasters of the past year: hurricanes in Central America and the Caribbean and the recent devastating earthquakes in Turkey, Greece, and Taiwan Province of China.
- We have also been reminded of the consequences of military conflicts in many parts of the world, including many that are too of ten overlooked by the global community. But foremost on the minds of many governors was the sad situation in East Timor. The IMF is ready to do its part to assist in the urgent, demanding task of reconstruction.
The urgency of the second theme is captured in recurring key words: action and implementation. There is a desire for further progress on what has been initiated to minimize the effects of the lingering risks in our current situation. The immediate agenda consists of the two broad areas that have dominated our discussions: the global financial architecture and poverty reduction.
With respect to international monetary and financial reform, I perceived a degree of impatience for advancing reforms that are pending: issues of exchange rate regimes, involving the private sector in preventing and resolving crises, and the liberalization of capital movements. These will be high on the agenda of the Executive Board in the coming months.
Increasingly, the international institutions and national agencies will be caught up in the implementation of what has already been agreed. Governors have also supported our work on transparency and standards and have warmly welcomed the work the IMF has been doing in the area of financial sector assessments, in close collaboration with the World Bank. But as we proceed, we must heed the note of caution as to how far the IMF should become engaged in the details of implementation. And one of the most severe constraints may be human resources. Many countries will need technical assistance for many years from many sources—the international standard-setting agencies and the bilateral countries—but these sources may become too stretched to meet the demand in some critical areas. Providing technical assistance in a coordinated and efficient manner will be one of the key issues in the coming months and years.
All of these issues have a bearing on the role of the IMF’s surveillance. The IMF’s energies will be primarily and energetically focused on the macroeconomic policies and balance of payments issues that are our traditional mandate. But we live in an era of rapid, of ten volatile, capital movements and where balance of payments crises may be triggered by factors outside the traditional boundaries of surveillance. Therefore, we must try to avoid eroding the effectiveness of early warning signals by too narrow a focus in our surveillance.
These meetings have resulted in a clear mandate for the IMF to integrate the objectives of poverty reduction and growth more fully into its operations. We will do so through our participation in the enhanced HIPC Initiative, through an Enhanced Structural Adjustment Facility transformed into a Poverty Reduction and Growth Facility, and through a closer link between debt relief and poverty reduction. We will also continue to consider how to include a social dimension in our policy dialogue with our wider membership. The incidence of poverty extends far beyond the poorest countries. Although we have concentrated at these meetings on the poorest people in the poorest, most debt-ridden countries, the need extends to poor people in all countries. As the Governor for Japan reminded us with reference to East Asia: “Those who had received the smallest fruits of economic growth are now being left behind.” The Chairman spoke of his own country, Nepal, which is not a participant in the HIPC Initiative, but has pervasive poverty. Our policy dialogue and advice will be attentive to such cases and will continue to be based on the basic premise that the best route out of poverty is strong, sustainable, high-quality growth.
All our work in this area hinges critically on our partnership with the World Bank. As the Governor for the Netherlands reminded us, “better quality and depth of the Bank’s poverty analysis should help the IMF to adequately sequence and fine-tune macroeconomic stabilization policies.” The challenge that faces both our institutions is how to implement, across a wide range of countries, at ground level, the broad principles that have been agreed between us over the past few weeks and months. And the agenda Jim Wolfensohn mapped out at the opening session points to the enormity of the task that awaits us.
As we consider the issues that should be high on our agenda for the year ahead, let me reassert the importance for development and for sustainable growth of an open, competitive trading system. To this end, I warmly welcome U.S. President Bill Clinton’s call yesterday for a new trade round, to be launched later this year, that would focus strongly on products of interest to the developing countries. Let us work as hard as possible to complete this round expeditiously.
Finally, the third theme arises from the expectation that, this time, the international community and national governments will deliver what has been promised. We have an obligation to deliver.
The Governor for Norway, in his remarks, reminded us that “closing the gap between the haves and have-nots within developing countries as well as between countries is a question of mindsets, morals, and ethics. It is very much a question of solidarity.” I believe these meetings have given substance and full recognition to the social pillar as an integral part of the new global architecture. Specifically, we have firmly established poverty as a permanent, pressingly urgent matter on the agenda of the international financial community, no longer an issue to be consigned to an afterthought in communiqués or policy papers. We have brought these concerns to the heart of our operations. And, equally, we have recognized that poverty and social justice are key ingredients of the framework for national policy formulation.