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We met today at a time in which the world economy faces many challenges. In this light, we reaffirm our commitment to multilateral cooperation.
Growth in most of our economies has been subdued, though uncertainties have diminished. A strong and lasting recovery is essential for our own countries and for the world. To this end, we each commit to pursue sound macroeconomic policies that support sustained growth. In a low inflation, low interest rate environment, there is potential for higher growth through productivity-enhancing structural reforms, and to buttress investor confidence through continued improvements in corporate governance practices, market discipline, and transparency. We will respond as needed to developments in the economic environment. We will continue to monitor exchange markets closely and cooperate as appropriate. We underscore the importance to global growth and poverty reduction of successful trade liberalization through the timely implementation of the Doha Development Agenda, notably in financial services.
We encourage all emerging market countries to pursue sound policies and to enhance their investment climates. These policies will help attract financial flows, importantly including foreign direct investment, to reduce external vulnerabilities, and to support sustained growth. We welcome the strong macroeconomic policies and ambitious structural reforms that Brazil's authorities are implementing.
We reiterate our commitment to strengthen crisis prevention and resolution measures. We are pleased to see progress being made on each element of our Action Plan of last April, as detailed in the accompanying update. We will continue to work to further implementation in this area.
We reaffirm our strong commitment to combat terrorist financing and pledge to maintain the momentum we have achieved thus far. We will work with the Financial Action Task Force, the UN, and the International Financial Institutions to implement the work plan that we endorsed in February. We welcome the Action Plan of the IMF and World Bank, and are encouraged by the progress of the Pilot Program agreed with FATF; we urge them to successfully carry forward this important initiative. We look forward to revised FATF recommendations by June, establishing an enhanced standard in the fight against financial crime.
We reaffirm our February commitment to address the challenge of global poverty and our support for the Millennium Development Goals and the Monterrey consensus. Achieving these will require mobilization of greater financial resources by developed and developing countries. We will continue to focus on the goals and their financing, including facilities, with a view to progress by Evian. Aid is most effective in countries with sound policies, good governance, and an environment conducive to private sector-led growth. We reiterate our support for NEPAD principles. We will develop an approach for dealing with non-IDA countries within the Paris Club for consideration at our May meeting. We also encourage developing countries, working with the World Bank, to integrate trade objectives as key elements of their PRSPs and CAS lending programs.
We recognize the need for a multilateral effort to help Iraq. We support a further UN Security Council resolution. The IMF and the World Bank should play their normal role in rebuilding and developing Iraq, recognizing that the Iraqi people have the ultimate responsibility to implement the right policies and build their own future. It is important to address the debt issue and we are looking forward to the early engagement of the Paris Club.
G-7 Action Plan Implementation,
In April 2002, we adopted an integrated Action Plan to strengthen crisis prevention and resolution measures designed to promote conditions for sustained growth of private investment in emerging markets. The progress made on each element of the Action Plan is set out below.
Surveillance and Crisis Prevention – Better information is key to sound economic analysis and improved pricing of risk, with a view to promoting more stable capital flows. In this regard, the IMF has made progress in deepening its surveillance capacity, including through the development of more robust debt sustainability analyses and greater focus on national balance sheets. The IMF and its Independent Evaluation Office (IEO) have identified areas for further progress to make surveillance more comprehensive, independent and accountable, including a fresh perspective in program countries and improved analysis of vulnerabilities. We urge the Fund to intensify its work in these and other critical areas, including currency mismatches, reporting progress to the 2003 Annual Meetings. To complement these measures, we support the presumption of publication of Article IV reports, Public Information Notices (PINs) of relevant Board discussions, program documents, and reports on the observance of standards and codes (ROSCs), especially for countries with IMF programs, while taking into account its impact on deletion and correction policy. Program documents for cases of exceptional access should always be published.
Access Limits - Consistent with the need for greater discipline in the provision of official finance in crisis situations, we support the IMF Board’s decision that normal access should be limited to 100 per cent of quota in any one year and a cumulative total of 300 per cent of quota. Lending under any facility, or combination of facilities, above these limits will be considered exceptional. Over the past year, the IMF has set out criteria and procedures to inform decisions and judgements for cases where exceptional access is contemplated. These stronger procedures, including early Board involvement and a separate report evaluating the case for exceptional lending, will be applied to any exceptional lending, even where the member is not experiencing a capital account crisis. We welcome the recent establishment of a strong presumption that only the SRF will be used for any exceptional lending to address significant balance of payment pressures on the capital account. We also welcome the progress made in clarifying the Fund’s policy for lending in cases where members are in arrears to their private creditors.
Code of Conduct – In the light of growing interest in exploring a voluntary "code of good conduct", and since good investor relations are key to timely, orderly debt restructurings, we have instructed our officials to prepare a report, in consultation with issuers and the private sector, on these issues by our Fall meeting. We note that the Fund has already started to examine the concept and we look forward to a progress report on its work.
Collective Action Clauses (CACs) – We remain committed to promoting the early and widespread adoption of CACs. To date, experts from the private and official sector have made progress toward developing model clauses for use in sovereign bond contracts. We expect that G-7 countries will continue their leadership by adopting CACs in their own bonds governed by the laws of a foreign jurisdiction. Consistent with the policy of the European Union to introduce these clauses in new foreign bond issues, some EU members will start issuing bonds with such clauses this year. We welcome the leadership that Mexico has shown by including CACs in its successful bond issues under New York law.
Sovereign Debt Restructuring Mechanism (SDRM) – The extensive analysis and consultations undertaken in the course of the Fund’s development of a concrete SDRM proposal have promoted a better understanding of the issues to be addressed in the more orderly resolution of sovereign debt crises. In view of the experience gained through the implementation of CACs and the interest in a code of conduct, and recognizing that it is not feasible now to implement the SDRM proposal, work should continue on issues raised in the SDRM discussions, such as aggregation, scope of debt, and inter-creditor equity that are of general relevance to the orderly resolution of financial crises.
Source: Department of Finance Canada
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