Text: IMF's Policy-Making Interim Committee Communique
(Cites need for caution as world economy improves) (3560)
Global economic and financial conditions have substantially improved since the beginning of 1999, but both major
industrial countries and emerging economies must take steps to keep the economic momentum moving forward, said the
communique of the International Monetary Fund's policy-making Interim Committee.
The Interim Committee "welcomes the continued strong performance of the U.S. economy that has been critical in
supporting global activity," said the communique, released September 26. The communique, released after the Interim
Committee meeting, added that U.S. policies should "continue to be directed at sustaining growth on a long-term basis by
maintaining a strong fiscal position and increasing national savings."
The committee also praised the pickup in growth in Europe and Japan, noting that this was needed to "achieve a more
balanced pattern of growth among the major industrial countries."
Among the emerging market economies and developing countries, lasting increased growth rates will depend on key
structural reforms in the countries themselves and on sustained growth in the industrial countries, the communique said.
The crisis-stricken countries in Asia, Russia and Brazil all need to continue the reform process, which in most cases is
moving ahead with the assistance of the IMF.
The communique urged the heavily indebted sub-Saharan African countries to "take full and prompt advantage of the
opportunities offered by debt relief" under the enhanced Heavily Indebted Poor Countries (HIPC) initiative.
The Interim Committee endorsed the proposed replacement of the Enhanced Structural Adjustment Facility (ESAF) with the
new Poverty Reduction and Growth Facility. The new facility "aims at making poverty reduction efforts among low-income
members a key and more explicit element of a renewed growth-oriented economic strategy."
Following is the text of the Interim Committee communique.
Communiqué of the Interim Committee of the Board of Governors of the International Monetary Fund September 26, 1999
Communique of the Interim Committee of the Board of Governors of the International Monetary Fund
1. The Interim Committee held its fifty-third meeting in Washington, D.C. on September 26, 1999, under the Chairmanship
of Mr. Gordon Brown, Chancellor of the Exchequer of the United Kingdom. The Committee expresses its appreciation to the
outgoing Chairman, Mr. Carlo Azeglio Ciampi, formerly Minister of the Treasury of Italy and currently President of
Italy, for his invaluable contribution to the Committee's work.
Global Economic and Financial Conditions
2. The Committee welcomes the improvement in global economic and financial conditions since the beginning of this year.
It has reviewed the challenges required to ensure that the recovery is sustained.
In many emerging market economies and developing countries, raising growth rates on a lasting basis will require not
only sustained growth in industrial countries, but also key structural reforms. These include banking reform, corporate
restructuring, tax reform and tax administration, establishment of effective legal systems, protection of property
rights, and improved governance.
-- Recovery is taking hold in crisis-affected countries in Asia, aided by supportive fiscal policies, accommodative
monetary policies, and a return of financial market confidence. Financial sector restructuring is generally moving
ahead, but further efforts are needed to complete the task. In addition, corporate restructuring and institutional
reforms should be accelerated. Indonesia's recovery has been interrupted by structural and political problems that will
need to be resolved speedily in order for economic recovery and reform to resume. China and India have weathered the
crisis relatively well and economic performance has been sustained, but significant challenges in some areas remain to
-- In Russia, the Committee welcomes the efforts of the IMF to work with the Russian authorities to encourage
macroeconomic stabilization, the continuation of reforms, and the further integration of Russia into the global economy.
While acknowledging the recentinitial measures to restructure the banking system, strengthen the integrity of financial
policies and institutions, and improve governance and transparency, the Committee stresses the urgent need for further
progress. It calls on the IMF to work with the Russian authorities to strengthen reforms in these and other areas that
are important for economic growth.
-- In Brazil, strict implementation of the Fund-supported program has restored confidence, and the outlook for some
other countries in Latin America has also improved. In many other countries in this region, adjustment and reform
efforts still require further strengthening.
-- In the Middle East and Africa, countries that have benefited from the improvement in commodity prices, particularly
for oil, have a renewed opportunity to accelerate progress on fiscal consolidation and diversification of their
-- Heavily-indebted sub-Saharan African countries should take full and prompt advantage of the opportunity offered by
debt relief under the enhanced HIPC Initiative to intensify and press ahead with reforms, including allocating
additional resources for, and improving the efficiency of, spending aimed at poverty reduction. Outward-oriented
strategies and peaceful resolution of armed conflicts are critical for sustaining economic development and higher
-- The tragic events that took place in Kosovo this year have had severe negative economic effects on other countries in
the region. Coherent stabilization and reform policies supported by the international financial institutions are
important for further economic development in the region. Therefore the Committee calls upon the IMF to continue its
strengthened support in the form of programs and technical assistance to the countries involved.
A sustained pickup in domestic demand in Europe and Japan, together with medium-term growth in the U.S. in line with
potential, will help to achieve a more balanced pattern of growth among the major industrial countries.
The Committee welcomes the continued strong performance of the U.S. economy that has been critical in supporting global
activity. Policies should continue to be directed to sustaining growth on a long-term basis by maintaining a strong
fiscal position and increasing national saving.
The Committee welcomes the growth of the Japanese economy in the first two quarters of 1999, which was supported by a
rebound in consumer demand. Given that the prospect for continuing recovery in private demand remains uncertain,
however, it urges the authorities to maintain a supportive stance of fiscal and monetary policies through a
supplementarybudget of appropriate size while, in the context of their zero interest rate policy, providing ample
liquidity until deflationary concerns are dispelled. It is also critical to continue efforts to strengthen the banking
system and foster corporate restructuring in order to achieve sustained growth in Japan, which should facilitate needed
medium-term fiscal consolidation.
The Committee is also encouraged by the pickup in growth in Europe in the context of price stability. While monetary
conditions in the euro area are accommodative and should remain supportive, further efforts toward fiscal consolidation
and structural reform, especially regarding the tax system and the labor and product markets, would improve prospects
for sustained growth and a further reduction in unemployment.
3. The Committee emphasizes the importance of open and competitive markets as a key component of efforts to sustain
growth and stability in the global economy. The proposed launch of new trade negotiations in Seattle later this year is
an important opportunity to make further progress in this direction. Further broad-based liberalization in a
strengthened rules-based multilateral trading system will help underpin global growth and stability. To ensure that the
benefits of liberalized trade and investment are fully realized and shared, the Committee encourages the Fund to work
with the Bank and the WTO to strengthen their programs of work to achieve better coherence in global policy making. It
recognizes that coordinated programs of support for developing countries, including targeted technical assistance and
policy advice, will support them in meeting WTO commitments and implementing current agreements.
4. The Committee notes that, in fostering economic growth through appropriate macroeconomic policies and structural
reforms, the IMF in close cooperation with the World Bank and consistent with their mandates, must also take into
account the direct social consequences of adjustment and reform efforts as well as the complementarity of macroeconomic
and social policies for long-term growth and improved social indicators.
Poverty Reduction Initiatives
5. The Committee endorses the proposed replacement of the Enhanced Structural Adjustment Facility (ESAF) by the new
Poverty Reduction and Growth Facility, which aims at making poverty reduction efforts among low-income members a key and
more explicit element of a renewed growth-oriented economic strategy. The cornerstones of the new approach, which should
continue to be based on sound macroeconomic policies, are as follows:
-- A comprehensive Poverty Reduction Strategy Paper (PRSP) will be prepared by each country, with assistance from the
World Bank and the IMF, and with strong country ownership based on public partnership, to guide the design of programs;
the PRSP will need the approval of both Bank and Fund Boards.
-- Social and sectoral programs aimed at poverty reduction will be taken fully into account in the design of economic
policies for promoting faster sustainable growth.
-- Greater emphasis will be accorded to good governance, in particular in all government activities, through greater
transparency, effective monitoring procedures, anti-corruption initiatives, accountability, and the involvement of all
sectors of society.
High priority will be accorded to key reform measures critical to achieving governments' social goals.
6. The Committee takes note of the crucial role to be played by the World Bank and other relevant international
organizations in helping governments develop and monitor the implementation of their poverty reduction strategies. It
endorses the proposal that PRSPs, as they are developed, provide the basis for all IDA and Poverty Reduction and Growth
Facility lending operations and closer Bank-IMF collaboration.
7. The Committee welcomes the joint meeting of the Interim and Development Committees, held earlier today, on the
enhanced HIPC Initiative. The proposals made by the Bank and the IMF to this end, which build upon wide-ranging comments
from civil society and the international community, are aimed at providing faster, deeper, and broader debt relief and
strengthening the link between debt relief and poverty reduction.
8. The Committee welcomes the agreement on the financing of the IMF's participation in the HIPC Initiative and continued
concessional lending by the IMF for growth and poverty reduction in its low income member countries. It highly
appreciates the financial support provided by a wide cross-section of the IMF's membership through bilateral
contributions and endorses the decision adopted by the Executive Board for the Fund's participation. The Committee
considers that the off-market transactions of up to 14 million ounces of fine gold by the IMF that are envisaged will be
a one-time operation of a highly exceptional nature. This is part of a broader financing package to allow the IMF to
contribute to the resolution of the debt problems of the HIPCs at the turn of the millennium and to the continuation of
concessional operations to support countries' efforts to achieve sustained growth and poverty reduction. The Committee
endorses the Executive Board's recommendation that the Board of Governors adopt a Resolution to this effect.
9. The Committee welcomes the progressive translation of broad principles into concrete actions in developing and
monitoring standards of importance to the international monetary and financial system.
-- The Committee encourages the IMF to continue its collaborative efforts with the World Bank and other relevant
organizations to complete work on the Financial Stability Forum's compendium of standards.
-- The Committee urges all 47 Special Data Dissemination Standard (SDDS) subscribers to continue to enhance their
statistical practices, and to report data on international reserves and related liabilities according to the agreed
reserves template by March 2000. It encourages further work by the Fund on the SDDS, including on strengthening external
debt data and developing macro-prudential indicators. It looks forward to the launch of the operational phase of the
General Data Dissemination System (GDDS) early next year. The Committee also urges the IMF and member countries to press
ahead with efforts to improve the timeliness and comprehensiveness of data on capital flows. The IMF should provide
technical assistance to enhance the quality and timeliness of data. Country authorities and relevant international
organizations should also take urgent action to improve data on social spending and social indicators.
The Committee adopts the attached Code of Good Practices on Transparency in Monetary and Financial Policies: Declaration
of Principles as a guide for members to increase transparency in the conduct of these policies. The Committee urges all
members to implement the new Code as well as the previously agreed Code of Good Practices on Fiscal Transparency.
The Committee welcomes the assessments of the implementation of the Basel Core Principles that have been made in the
course of IMF surveillance and technical assistance, and urges that these be embedded into regular surveillance
activities. It notes the work under way by the Basel Committee on Banking Supervision to review the 1988 Capital Accord
and urges the Basle Committee to complete that review. It encourages the IMF to continue to support this process.
10. The Committee encourages the IMF, in cooperation with other standard-setting bodies, to continue to experiment with
assessments of members' observance of international standards and codes of good practice and invites the Executive Board
to consider whether to integrate such assessments into the surveillance process.
11. The Committee reiterates the importance of greater transparency in policy-making. With respect to IMF practices and
members' policies, it strongly welcomes the steps taken:
-- The widespread release of Public Information Notices (PINs), for which there is an agreement on presumption of
publication; the public release of many IMF policy papers and the associated summaries of Board discussions; and the
release of the external evaluators' reports on IMF surveillance and economic research activities;
-- The decisions of 46 countries that have already volunteered to participate in the pilot program for the release of
Article IV reports, with 15 reports already available on the IMF Website;
-- The agreement to establish a presumption in favor of publication of Letters of Intent, Memoranda of Economic and
Financial Policies, and Policy Framework Papers, and the widespread release of documents that has occurred since the
policy of greater transparency was adopted; and
-- The efforts to ascertain the views of the private sector on the experimental transparency reports.
12. The Committee encourages further actions to make IMF practices and members' policies more transparent without
compromising the IMF's role as confidential advisor.
13. Experience in a few cases has highlighted the importance of promoting transparency and accountability especially
when IMF resources are being used. In this connection, the Committee notes that the implications of corruption and money
laundering raise important issues for the credibility and effectiveness of IMF programs, and calls on the IMF to perform
an authoritative review of its procedures and controls to identify ways to strengthen safeguards on the use of its funds
and to report at its next meeting. The Committee considers that further actions for strengthening governance at the
national and international levels are crucial. In the financial area, governments must maintain strong internal
financial controls and tighten supervision and regulation of domestic financial institutions and off-shore banking
centers, including measures to deter money laundering. The Committee urges the IMF to enhance its support for members'
efforts in these areas, building on its guidelines and other international standards for fostering good governance and
transparency in all member countries, including through the application of the codes of good practice that the
membership has established in the fiscal and monetary areas.
14. The Committee welcomes the progress made in financial sector reform and banking system restructuring in the context
of IMF surveillance, technical assistance, and programs. It looks forward to the continued collaborative work of the
IMF, the World Bank, and other institutions, including on the pilot Financial Sector Assessment Program that should
facilitate early detection of financial system weaknesses and support a better coordinated dialogue with national
authorities. The Committee encourages countries that have not done so to participate in the pilot program.
15. The Committee welcomes the recent independent, external evaluation of IMF surveillance and research activities, and
encourages the Executive Board to examine the recommendations of the former further in the context of the next internal
review in late 1999. The Committee also reaffirms the importance of independent evaluations of the Fund's operations and
16. The Committee reiterates the importance of ongoing efforts to involve the private sector in forestalling and
resolving financial crises, and notes the progress achieved in securing the involvement of the private sector in
individual cases. In this connection, the Committee considered that the balance of the various considerations reflected
in the report by G-7 Finance Ministers to the Koln Economic Summit provides a helpful framework within which the
international community can work to address individual cases that may arise. The Committee asks the Executive Board to
build on this framework and to report at the Committee's next meeting on the ways in which the broad principles have
17. The Committee considers that increased mobility of capital has raised the requirements, in terms of both policy
adaptability and institutional preparedness, for maintaining a fixed exchange rate regime. That said, members should be
able to choose a regime that is appropriate to their particular circumstances and longer-term strategy. The choice of
exchange rate regime and the implementation of supporting policies are critical for countries' economic development and
financial stability, and in some cases potentially for the world economy. In all cases, IMF programs and surveillance
should further focus on consistency between macroeconomic and other policies and institutional arrangements with the
chosen exchange rate regime. The IMF should assist members to adapt to a world of global financial flows. The Committee
encourages the Executive Board to continue to consider these matters, and to report to the Committee on its work.
18. Persistent and sizeable capital inflows can be highly destabilizing particularly if they are intermediated by poorly
regulated and unsupervised financial institutions. In this context, the Committee welcomes the IMF's recent work on the
appropriate pace and sequencing of capital account opening, which has led to a fuller understanding of the conditions
for orderly and sustainable liberalization, and has broadly confirmed earlier conclusions that, over the long term, open
capital flows accompanied by appropriate prudential measure will benefit the world economy. The Committee encourages the
IMF to build on its examination of individual countries' use and liberalization of controls, paying particular attention
to the relationship between capital account liberalization and financial sector stability.
19. The Committee calls on the IMF and World Bank to work together, in cooperation with national debt management
experts, to develop a set of best practices in public debt management by the spring to assist countries in their efforts
to reduce vulnerability.
20. The Committee encourages all members to continue to work on preventive action and to put in place millennium
contingency plans, noting that, although business, financial institutions, and government agencies around the world have
made considerable progress in preparing computer systems, a risk remains that Y2K problems will be anticipated or will
arise, with potential negative consequences for growth, international trade, and international capital flows. To help
forestall, and if necessary resolve, possible balance of payments problems related to the Y2K phenomenon, the Committee
endorses the Executive Board's decision to introduce atemporary new facility for providing outright short-term access to
IMF resources to members facing identifiable Y2K-related balance of payments needs.
21. The Committee endorses the Executive Board's recommendation that the Board of Governors adopt a Resolution
transforming the Interim Committee into the International Monetary and Financial Committee and strengthening its role as
the advisory committee of the Board of Governors.
22. The next meeting of the Committee will be held in Washington, D.C. on April 16, 2000.
xINTERIM COMMITTEE ATTENDANCE September 26, 1999
Chairman Gordon Brown
Managing Director Michel Camdessus
Members or Alternates
Ibrahim A. Al-Assaf, Minister of Finance and National Economy, Saudi Arabia Giuliano Amato, Minister of the Treasury,
Budget, and Economic Planning, Italy Eddie George, Governor, Bank of England Alternate for Gordon Brown, Chancellor of
the Exchequer, United Kingdom) Antonio Casas González, President, Banco Central de Venezuela Peter Costello, Treasurer,
Australia Dai Xianglong, Governor, People's Bank of China Emile Doumba, Minister of Finance, Economy, Budget and
Privatization, Gabon Hans Eichel, Minister of Finance, Germany Roque B. Fernández, Minister of Economy and Public Works
and Services, Argentina Viktor Gerashchenko, Chairman, Central Bank of the Russian Federation Marianne Jelved, Minister
of Economic Affairs, Denmark Abdelouahab Keramane, Governor, Banque d'Algérie Sultan Bin Nasser Al-Suwaidi, Governor,
United Arab Emirates Central Bank (Alternate for Mohammed K. Khirbash, Minister of State for Finance and Industry,United
Arab Emirates) Pedro Sampaio Malan, Minister of Finance, Brazil Trevor A. Manuel, Minister of Finance, South Africa Paul
Martin, Minister of Finance, Canada Kiichi Miyazawa, Minister of Finance, Japan Didier Reynders, Minister of Finance,
Belgium Syahril Sabirin, Governor, Bank Indonesia Yashwant Sinha, Minister of Finance, India Dominique Strauss-Kahn,
Minister of Economy, Finance and Industry, France Lawrence H. Summers, Secretary of the Treasury, United States Kaspar
Villiger, Minister of Finance, Switzerland Gerrit Zalm, Minister of Finance, Netherlands
Yilmaz Akyuz, Chief, Macro-Economics and Development Policies Branch, UNCTAD Andrew D. Crockett, Chairman, Financial
Stability Forum Willem F. Duisenberg, President, ECB Andre Icard, Assistant General Manager, BIS Donald J. Johnston,
Secretary-General, OECD Ian Kinniburgh, Director, Development Policy Analysis Division, UN Michael Moore,
Director-General, WTO Pedro Solbes Mira, Commissioner in charge of Economic and Monetary Affairs, European Commission
Juan Somavia, Director-General, ILO Tarrin Nimmanahaeminda, Chairman, Joint Development Committee James D. Wolfensohn,
President, World Bank
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