Manuel: It is traditional that the closing press conference be held at about this time on the Thursday of the Annual Meetings. This year is no different. The plenary meetings concluded a bit early yesterday, and they concluded in the same spirit that has prevailed at Annual Meetings anywhere. Any country that asked for permission to speak had the opportunity to speak. And the number of speeches was the same as it has been over many, many years.
Köhler: Let me first sincerely thank the Czech authorities for the excellent organization of these Annual Meetings. Everything worked very well, and everyone felt the Czech authorities took care in the best sense. I would particularly like to thank the police and security forces who showed such composed restraint. All of this demonstrates strongly the process that has taken place here in the Czech Republic to create a democratic and humane society. Prague and the Czech Republic can be proud of this meeting, how it was conducted, and the outcome. I have no doubt it will strengthen the stature and the reputation of this city.
We should strongly deplore the acts of violence of a small group of people who have not come to Prague for dialogue but for destruction. Jim Wolfensohn and I are open to dialogue and discussion, but we reject violence and pressure in this way because it will not contribute to improved policy or operations or a better world. Fortunately, these violent forces did not distract us from our work, which is to find ways to make globalization work for the benefit of all.
The IMF and the World Bank leave Prague clearly strengthened. The entire membership gave the IMF the strongest support for its mandate and work. Our 182 member countries urged us to continue our work and the process of reforms in the IMF, but also urged us to stay strongly engaged in the poor countries. The main guidance from the membership was for the IMF to be focused. This focus should strive to promote strong economic growth that benefits all people, and particularly open markets to get products and services from the developing world to the industrial countries.
The membership urged the IMF to be the center of competence in providing for the stability of the international financial system. This stability is a global public good. Further progress in ensuring a stable international financial system will be the most important contribution to strong growth and the creation of an environment where the huge pool of savings in the world will also be available for poor and emerging market countries.
The membership also urged the IMF to be an open institution and work with other institutions in a complementary fashion to provide global public goods. I was personally heartened by the membership’s strong endorsement of my vision of the future role of the IMF. I want to include in this endorsement—and express my gratitude to—my management colleagues and the staff of the IMF, because they have worked with me on structuring a concept for the future role of the IMF that will contribute to a better world and make a difference in poor countries.
I also feel a new spirit of cooperation between the World Bank and the IMF. I am grateful for Jim Wolfensohn’s openness, cooperation, ideas, and creativity. Close cooperation between the World Bank and the IMF based on their respective focuses should be a strong asset in this continuous work to make globalization work for the benefit of all.
We had an intensive and important discussion, particularly in the IMFC [International Monetary and Financial Committee] but also in the plenary meetings, about the outlook for the global economy. We are concerned about the oil prices. We know about the risks, the global imbalances between exchange rates, and the growth cycle of the economies. But clearly there is a broadly shared conviction that the outlook is positive and will remain positive if there is a good policy management behind it. And this meeting, particularly the IMFC meeting, where multilateral surveillance was in the foreground of our discussions, will help us to secure this good policy management. So I am optimistic that the world economy will stay on track with growth and job creation. Wolfensohn: Let me thank Trevor Manuel for his chairmanship and say that I reciprocate the warm feelings Horst [Köhler] has expressed about the dialogue that he and I have had and the ever-growing partnership between the IMF and the Bank. I think all our shareholders were delighted with the progress we have made and the clarity with which we have set forth the respective roles of the institutions. This is a remarkable start, and I want to congratulate Horst on an absolutely first-class first meeting.
Let me also express my thanks to the Czech authorities for a remarkable event under very difficult circumstances. There could have been no better preparations for the meetings, nor better execution. I think I speak for all the delegates in saying that we’re full of admiration and gratitude, particularly to the police. They carried out their responsibilities remarkably and with great prudence. Last night we visited some of the policemen at the hospital. All three of us personally expressed our thanks to those who were victims of the violence, which we deplore.
We have been looking for discussion, not destruction. Throughout the week we have had extensive—and, I think, productive—dialogues with many members of civil society who came here to vigorously express and exchange views. There was not always agreement, but there was, I think, an identification of the objectives that the Bank, the IMF, and many members of civil society share.
Our Governors have endorsed the Bank’s policy, which is firmly rooted in the issues of poverty reduction and structural reform and making societies able to function and develop. They were acutely conscious, as was I, of the challenge that we have in the next 25 years when 2 billion people will be added to the developing world. All of us recognize that we will be able to meet this challenge only if we can have a partnership—not just between the Bank and the IMF but with all participants.
I want to pay tribute to [Czech] President Havel for the arrangements he made at the castle for dialogue and for setting the tone at our meeting. He focused on perhaps the most important issue of all—the issue of values and of common humanity, which is the issue of compassion. This is fundamental to our being able to do a job that will affect our fellow citizens of the world.
Two other points came out in our meetings. HIV/AIDS is not just another health problem; it is a problem of existence. It is a challenge of enormous proportions, most notably in Africa. I was delighted that so many of our Governors were concerned with this and the importance we should attach to it. We are also in a new age in which communication becomes critical. Technology and Internet technology are perhaps the most visible symbols of globalization. People who organize rallies use it; we use it; and countries in development should use it.
All in all, this was a highly successful meeting, marred only by the violence. We were able to achieve a lot, and I am very grateful to all Czech citizens for making it possible.
Questions: This meeting marks 10 years of reform in the transition economies of Russia and other countries of the former Soviet Union. What are your thoughts?
Köhler: The transition economies played a prominent role in our discussions. Our conclusion was that tremendous progress had been made in the transition to democracy and market economies, but there is still poverty in a lot of the transition countries, and a lot remains to be done in terms of structural reforms, so these countries must stay the course. My personal conclusion is that transition countries should speak up to the industrial countries and accelerate their structural reforms. This path is a win-win situation for both sides.
Wolfensohn: On the new age of communications, I must tell you that virtual meetings will never replace actually coming together because of the enormous number of personal interactions that occur at the formal and informal sessions. But I do agree that the size and scale of these meetings require a look, and my guess is that we will take a look.
The world faith and development dialogue started two years ago when the Archbishop of Canterbury and I convened a meeting of faith leaders. It was important to bring the religions together with the development institutions because religions, apart from their moral and ethical strength, have the best distribution network of any NGO [nongovernmental organization] in the world. They are in all the villages.
Köhler: Getting concrete results in terms of better market access and more official development aid starts with greater public awareness. I am grateful that public discussions about poverty have heightened awareness in industrial countries about the interrelation between the poor world and the rich world. My objective—my dream—is that industrial country parliaments will more carefully discuss these issues and conclude that poverty can no longer be ignored if we hope to sustain prosperity in the rich countries. I have spoken up, and it is part of the IMF’s multilateral surveillance mandate to promote global economic growth. In terms of a more concrete paper on market access, I think, Jim, we should prepare this paper and discuss it with the WTO and the OECD.
My philosophy in terms of private sector involvement is clear, and it was endorsed. We have to work with the private sector. It has the capital in terms of volume, creativity, and sophistication. It would be a mistake not to use this potential, but the private capital markets need to know the rules of the game, and we are working on this. The principle is also clear on how we get a predictable framework for private sector involvement. For as long and as far as possible, there should be a voluntary approach; we are in the process of refining this framework. I am quite optimistic about a good outcome.
Wolfensohn: On the misery question, no, I do not think that the Bank and the IMF are responsible for the misery in the world. Actually, the Bank and the IMF have done quite a lot to address the questions of poverty and, in fact, to advance both governance and equity. It is very difficult to measure what the world would have been like without the Bank and the IMF, anymore than it is easy for critics to say that what we have done has damaged the globe. I am conscious of the criticism of some Bank projects, but the overwhelming image I have is of having improved the human condition. If I thought that we were damaging the world, I would have long since stopped this job. I, like anyone else here, am actually trying to make things better.
We are cooperating with more and more NGOs. We have something to learn from them, but from time to time, we have something to teach. The combination of the Bank with civil society and the IMF with civil society is unbeatable. My hope is that with the dialogue—admittedly very sharp at times—we can find areas of mutual advantage. What you don’t hear about are the hundreds of interactions with NGOs that are positive.
Köhler: The Asian crisis was a banking crisis, a crisis of exchange rate regimes, a crisis of overinvestment, and maybe also a crisis of not enough attention to the countries. The conclusion is certainly that the IMF will have to pay more attention to exchange rate regimes and policies so that this kind of crisis does not happen again. This includes very ambitious work on crisis prevention, building up through our work on transparency, vulnerability analysis, standards and codes, our financial sector assessment programs, and stronger robust financial sectors that can absorb shocks better than in the past.
On the question of the euro, the ECB [European Central Bank] was right to intervene. Interventions are no panacea, but the intervention demonstrated the maturity of the ECB as an institution. This should make it clear to markets that there is an institution in command of the euro, and this should diminish the risk for the global economy. The future external value of the euro will depend, nevertheless, on further steps taken in Europe to accelerate structural change, make growth stronger, and, on this basis, convince markets that it is worthwhile to go into the euro.
On the voting rights, we should be realistic. The IMF should change. It should work on its efficiency, but its efficiency is also based on the absence of doubt about the substance of its foundation. It is a financial institution based on capital submissions. And this principle should be accepted. But having said this, there is a process for reviewing the quota formula. We have the Cooper Report [Report to the IMF Executive Board of the Quota Formula Review Group]. We have had a first discussion in the IMF’s Board of Directors, which urged all participants to be systematic in the discussion and clearly indicated, as I see it, that no one has a desire to, for instance, reduce the African share.
Another element is the spirit of cooperation, and here we have made tremendous progress, not least in the context of reviewing the facilities. The outcome is a consensus on how we had streamlined and sharpened the facilities. I see some other possibilities to give the developing countries a stronger voice in the discussions and decision-making process in the IMF. I am working on this and hope we can deliver after some time.
Wolfensohn: There were high expectations for deeper debt relief, but our own expectations were to advance the implementation of the second-round program of the enhanced HIPC facilities. Between now and the end of the year, we want to implement the enhanced HIPC Initiative for as many countries as possible. We are very hopeful that we will reach a target of 20 countries by the end of this year, at which point debt relief will be operative.
The middle-income country question was the first item on the agenda of the Development Committee, because it was very clear that more than a billion people were still living in poverty in middle-income countries. We are in the midst of an overall review with the Board and management, which will result in a report by the end of the year on greater support that can be given to the middle-income countries. I would also hope for a greater degree of parallelism between our activities and the IMF’s—something we already have for the poorer countries.
Köhler: A lot of initiatives have been launched to strengthen the international financial system, particularly in terms of data and policy transparency. The most important part is getting people better informed and enabling them to make better decisions, including improving the private sector’s risk assessment. An important part of this is our work on guidelines for sound debt management for all countries. There is already a lot of improvement of awareness, of maturity, in the developing world, and this will pay off. It may seem a bit strange coming from a finance man, but to make globalization work for the benefit of all, we must also be aware of and work for certain moral standards worldwide. A world economy needs a world ethic.
Questions: Don’t you feel the early conclusion of the meetings will be claimed as a victory by the antiglobalization groups?
In light of continuing upward pressure on oil prices, would you invoke special facilities to help developing countries? And if so, when?
Mr. Köhler, are you trying to reestablish the centrality of the IMF in the debate on all exchange rates, including the three major currencies? Wolfensohn: There was no victory in the streets. The legitimate voices of people who were concerned and who came here to engage in dialogue were enormously damaged by the groups that sought violence. What happened in the streets was tragic, because the dialogue was helpful.
As to the oil price question, we will stand ready to assist countries if, as, and when there is an issue of the effect of oil prices. Another issue is the impact of lower commodity prices for exports. We will respond on a case-by-case basis and stand ready to be supportive if there is a need.
Köhler: The violent groups clearly lost sympathy and were strongly rejected by the Czech citizens. I would like sometimes to see a bit clearer comment from some NGOs to distance themselves from violent activities.
On oil, I don’t think it is the time to think about a new compensating facility. Neither oil consumers nor oil producers should have and could have an interest in the excessive prices that exist today. There is a dialogue, and we should and could expect the oil price to come down. But in the discussions in the IMFC and in the plenary meetings, there was the idea—and I responded positively—that the IMF should look at whether it could be flexible in the coming months about the impact of high oil prices on poor countries.
Exchange rate discussions are a part of the IMF’s multilateral surveillance mandate. And the membership endorsed a strengthening of multilateral surveillance that includes the discussion about balances between the major currencies. But the IMF is not going to become the superbureaucracy for exchange rate policies. It’s up to the central banks to do their job and governments to decide on the regimes.
Manuel: Let me go back to the question about “victory.” We come to the meetings as representatives mandated by our peoples, as members of the Bank and the IMF, as part of global governance. We should not cede that ground at any point. In South Africa, where I come from, we’ve had a hard struggle to reach sovereignty. As a country and as a people, we are not about to give it up. Part of taking responsibility for democracy is engaging globally with other countries to ensure that we can deal with what we need to be doing and ensure that there is better equity in the world.
What emerges from these Annual Meetings is a very strong renewed mandate to the Bank and the IMF to recognize the inequities and find the mechanisms to respond in a complex environment, in a difficult set of institutions. But the mandate is abundantly clear. It supports a vision that was brought in by Mr. Wolfensohn and Mr. Köhler. We must support them to transform the institutions so that life for the poor in the world can get better. And the poor need to continue to be represented by democratic governments.