Conditions in the global economy are encouraging, and prospects for continued economic growth are generally favorable. Nonetheless, poverty remains the single greatest challenge of the century. Speaking at the plenary sessions of the 2000 Annual Meetings of the IMF and the World Bank, held on September 26–28 in Prague, Czech Republic, the governors representing the IMF’s 182 members acknowledged that, although globalization has brought opportunities for growth and development to both rich and poor countries, not everyone has been able to take advantage of the opportunities. The task facing the international community, the governors agreed, is to build a successful, truly global economy that works well for all people and addresses the widespread poverty that remains “the unacceptable face of the global economic situation,” according to Yannos Papantoniou, Minister of National Economy and Finance of Greece.
In addition to poverty reduction—a dominant message of the 2000 meetings—governors addressed a number of interrelated topics. These included the current high price of oil—and the implications for, in particular, developing countries that depend on imported oil; support for the goal of bringing debt relief to 20 heavily indebted poor countries by the end of the year; the need for a further strengthening of the international financial architecture; and various issues related to reforms of the Bretton Woods institutions and the division of labor between the IMF and the World Bank.
Growth of the world economy
At the 1999 Annual Meetings, the general opinion among governors was that the worst of the international financial crisis was already over. “We were correct then,” said Rodrigo de Rato Figaredo, Second Vice President and Minister of Economy of Spain, “but we were far from realizing that we would now find ourselves in a global economic boom.” This boom is expected to carry over to 2001 in all geographical regions of the world. Robust growth in the United States is contributing to this performance, he noted, as is growth in Europe and much of Asia. After recovering from their recent financial crisis, the Latin American economies are expected to join in that growth.
CHEA Chan To, Governor of the National Bank of Cambodia, and KEAT Chhon, Cambodia’s Senior Minister of Economy and Finance, noted that the underlying fundamentals of the world economy have strengthened and a more sustainable pattern of growth has been created. They applauded the countries for their successful performances and praised the international community for helping countries implement the necessary reforms in their financial, corporate, and government sectors.
Several governors, however, cautioned that the task ahead would be to make this growth more sustainable and to spread its benefits more widely. For example, if oil prices were to continue to rise, said de Rato Figaredo, the rosy outlook for world growth could be jeopardized. Didier Reynders, Minister of Finance of Belgium, agreed. “It is in our collective interests,” he said, “including those of the oil producing countries, to prevent a slump in world growth; it is therefore essential to ensure that the market is supplied in a manner more in line with economic circumstances.” A number of governors, supporting this position, called on the oil producing countries to increase oil production to bring prices down. However, Mohsen Nourbakhsh, Governor of the Central Bank of the Islamic Republic of Iran, characterized the present attempts to shift responsibility to oil producers as “patently unfair.” When the price of oil collapses, he said, producers are asked to adjust their economic policies to offset lower prices. When prices recover, the industrial countries do not adjust their economic policies, but attempt to push producers to adjust oil production.
Paraguay’s Minister of Finance, Federico Zayas Chirife, also spoke of the risks of globalization, which he said poses an increasingly serious challenge to the ingenuity and creativity of IMF and World Bank members. He hoped that the industrial countries would help to “achieve global economic growth that is truly beneficial to all nations of the world” by opening their markets, providing more aid, and providing debt relief to the poorest countries.
Rod Kemp, Assistant Treasurer of the Commonwealth of Australia, noted that sustained growth required sound domestic policies and institutions, better lending and investment assessments, and better performance from the international institutions. He, too, argued that the industrial countries could boost the prospects of the poorest economies by lowering trade barriers.
DAI Xianglong, Governor of the People’s Bank of China, called for “a win-win globalization characterized by equality.” He said it was therefore necessary to create a fair and reasonable world economic order involving all countries—to the extent possible and on an equal basis—in international economic decision making and rule setting, and establishing a new and fair international financial and trading system.
Strengthening the monetary system
Governors generally welcomed the IMF’s recent efforts to strengthen the international financial system, including the formulation of standards and codes, measures to improve surveillance, and efforts to increase transparency. Bangladeshi Minister of Finance Shah A.M.S. Kibria emphasized, however, that to be sustainable, the new financial architecture had to be based on equity, “where both developing and industrial countries have equal opportunity for participation.” Dato’ Shafie Mohd. Salleh, Malaysia’s Deputy Minister of Finance, suggested that IMF surveillance had to be more evenhanded. Surveillance would be more effective, he explained, if the IMF focused more attention on developments in the major industrial countries, which have systemic implications for the rest of the world. Pavel Mertlik, Deputy Prime Minister and Minister of Finance of the Czech Republic, characterized the need for transparency as particularly important in transition economies. “The lack of transparency,” he said, “increases the costs of transition and slows down economic growth.”
Support for HIPC
Poverty can more easily be addressed during times of strong economic performance, according to Papan-toniou, who emphasized that the international community should take advantage of the present favorable conditions. Along with the majority of governors who spoke, he expressed support for the Poverty Reduction and Growth Facility and the Heavily Indebted Poor Countries (HIPC) Initiative. “The developed world,” he said, “should intensify its efforts to combat poverty through the systematic application of relief and assistance policies.”
Kemp welcomed the progress made in bringing 10 heavily indebted countries to their “decision points,” but warned against complacency. He urged the IMF and the World Bank to maintain their current efforts and continue to collaborate closely “to get a further 10 countries to this point by the end of the year.” The heavily indebted poor countries themselves, he said, must address circumstances that prevent an early delivery of relief, including armed conflicts in some countries. Prijadi Praptosuhardjo, Minister of Finance of Indonesia, was also encouraged by the progress achieved in implementing the HIPC Initiative but expressed concern that its financing remained unresolved. He urged all bilateral and multilateral donors to “provide the necessary financial supports to avoid setbacks in providing debt relief to poor countries.”
Bretton Woods institutions
Cooperation emerged as a catchword of this year’s meetings, arising, notably, in discussions of the roles of the IMF and the World Bank. Several governors exhorted the two institutions to reinforce their partnership with each other as well as to coordinate their activities with regional financial institutions, such as the Chiang Mai Initiative, which several Asian governors described as a further step toward economic cooperation in the Asian region.
Igor Mityukov, Ukraine’s Minister of Finance, urged the IMF and the World Bank not to “sideline their core responsibilities in promoting sound development policies, strengthening the international monetary and financial system, and helping to sustain momentum for the acceleration of international trade.” He stressed the importance of preserving the cooperative nature of the international financial institutions at the turn of the century of the information revolution.
Another issue that attracted a considerable amount of attention from governors was the IMF’s quota formula and revisions that would reflect the changing circumstances of the global economy. Several governors for developing countries—including Kinikinilau Tutoatasi Fakafanua, Tongan Minister of Finance; Dato Haji Selamat Haji Munap, Deputy Minister of Finance of Brunei Darussalam; and Tantely R.G. Andrianarivo, Prime Minister and Minister of Finance and Economy of Madagascar on behalf of the Joint African Group—said they felt that their countries should have a greater say in defining development priorities, especially in light of the new emphasis on country ownership of programs. Nyum Jin, Minister of Finance and Economy of Korea, agreed that the IMF’s quota and representation systems needed to be adjusted. In his view, “the IMF’s current policy does not properly weigh the economic influence of Asian emerging economies,” including that of Korea. Kemp concurred but said he would not want to see the representation of smaller developing countries reduced. Australia, he said, supports a simplification of the current quota formula system, “which lacks both logic and transparency.”