- We, the Finance Ministers and Central Bank Governors of the G-7 countries, and the President of the European Central Bank met today with the
Managing Director of the International Monetary Fund to review recent developments in the world economy. Ministers and Governors also discussed
international financial architecture issues.
Developments in the World Economy
- We discussed developments in our own economies and in the rest of the world. In recent months, there have been improvements in some areas,
reflecting both signs of better performance in some emerging market economies and the policy response in G-7 countries to the shift in the risks that we
called attention to last year. A number of serious challenges remain, however, that will take time to resolve.
- Open and competitive international trade markets continue to be an important underpinning for world growth, prosperity, and stability. We remain
committed to achieving further trade liberalization and market transparency through the launch of a new round of multilateral trade negotiations in
November which is responsive to the concerns of citizens throughout the world.
- We remain committed to a growth strategy based on strengthening domestic demand that contributes to achieving more balanced growth among our
countries to reduce external imbalances and continue to support recovery in emerging market economies. The favorable outlook for continued price
stability in our countries remains.
- In view of the challenges facing each of our economies we pledge ourselves to continued efforts to work cooperatively to strengthen conditions for
financial stability and to improve the economic outlook.
- The United States and Canada have continued to enjoy strong growth and job creation, and prospects are favorable for another year of strong
economic activity. In these countries policies should be directed to sustaining growth over the long term.
- In the United Kingdom growth and inflation pressures weakened over the course of 1998. Interest rates have continued to fall. Growth is forecast to
be lower this year than last, before strengthening into 2000. Under these conditions economic policies should continue to aim at fostering
non-inflationary growth, supported by continued adherence to the symmetric inflation target.
- In the euro area, growth prospects have weakened, although to a differing extent across countries. We agreed on the importance of pursuing an
appropriate mix of macroeconomic policies and structural measures aimed at strengthening prospects for improved growth and higher employment
over the medium term.
- Japan has taken important steps in response to its economic difficulties. Despite some improvement, short-term prospects remain uncertain. It is
therefore essential that Japan implement stimulus measures until growth is restored, using all available tools to support strong domestic-demand-led
growth. It is also recognized that structural measures to enhance the economy's efficiency and competitiveness in both financial and non-financial
sectors, including by encouraging banks to dispose more actively of non-performing assets, are crucial at this stage.
The international monetary system and exchange rates
- We reaffirmed that we will maintain strong cooperation to promote stability of the international monetary system and exchange rates among major
currencies that are in line with fundamentals.
- We discussed developments in our exchange and financial markets since our last meeting. We reaffirmed our view on the importance of pursuing
policies to promote sound economic fundamentals and more balanced growth among key economies and thereby help avoid excess volatility and
significant misalignments of exchange rates of major economies. We will continue to monitor developments in exchange markets and cooperate as
Emerging Market Countries
- We discussed financial and economic developments in emerging markets. We welcome the return of more stable conditions and early signs of
economic growth in many Asian nations. We support the shift in macroeconomic focus toward fostering economic recovery while fully implementing
reforms in the financial and corporate sectors to promote a resumption of strong sustainable growth. In other regions, notably Latin America, the
outlook for growth has deteriorated since last fall while the external financing environment, though improved in some countries, still presents some
difficulties. It is crucial for the countries in the region to pursue appropriate policies, including institutional, structural, macroeconomic and exchange rate
policies, such as by reinforcing existing economic programs, as the best way to respond to financial markets pressure.
- We welcomed the commitment of the Brazilian authorities to a strengthened economic program, including measures to control inflation and a strong
program of fiscal adjustment. Recent developments relating to inflation, the exchange rate, and international capital flows offer grounds for
encouragement. It is essential that Brazil persevere with the implementation of its adjustment program in order to ensure that the positive momentum
continues and to promote investor confidence. We also urge the Brazilian authorities to pay due attention to social needs. We reaffirm our commitment
to bilateral and multilateral support for a strong reform program and to the importance of a strong involvement of private sector creditors in restoring
financial stability in Brazil.
- We met with representatives of the Russian Federation to discuss recent developments in Russia. We remain concerned about the country's
ongoing financial and macroeconomic instability. Russia's return to macroeconomic stability and growth is possible only in the context of a viable fiscal
program, significant improvement in government revenues, and progress in institutional and structural reforms. We welcomed the progress Russia has
made in its dialogue with the IMF, and we urge the Russian authorities to take all necessary steps to reach agreement on, and effectively implement, a
credible economic program. We reiterated that such an IMF agreement is a precondition for Paris Club consideration of any rescheduling of Russia's
Debt of the Poorest
- We agreed on the need further to implement and develop the Heavily Indebted Poor Country (HIPC) initiative to provide enhanced debt relief so
as to promote the objective supporting permanent exit from unsustainable debt and support poverty alleviation. We reviewed the proposals made by a
number of G-7 partners to improve the HIPC debt initiative with a view to reaching a consensus by the time of the Köln Summit in June. We agreed
that creditors should make greater efforts to reward reform. We also recognized the need for appropriate burden-sharing among creditors. We urged
all bilateral creditors to make future official development assistance primarily in the form of grants to HIPCs to ensure they do not face new debt
problems in the future. We reaffirmed the call at Birmingham for all eligible countries to embark on the process as soon as possible, and to take steps
to ensure that all can be in the process by the year 2000.
Strengthening the international financial and monetary system
- We reviewed the ongoing work on strengthening the international financial architecture as we work towards agreement on further specific
proposals that we will present to the G-7 heads of state or government for their consideration at the Köln summit in June. Since we last met in February
there has been significant progress in a number of areas, including agreement on the IMF's Contingent Credit Line, measures to promote greater
transparency, codes and standards of best practice, and the establishment of the Financial Stability Forum. They are noted in detail at the attached
- We will continue to work to ensure implementation of all the reforms which we agreed in our Declaration of October 30, 1998. Our work between
now and the Köln summit will continue to focus on the scope for strengthened prudential regulation and supervision in industrial countries; further
strengthening financial systems in emerging market economies; sustainable exchange rate regimes in emerging market economies; crises prevention and
response through, when appropriate, the use of the new IMF's Contingent Credit Line and greater participation by the private sector in crisis
containment and resolution; proposals for ways to improve the IMF programs and procedures in crisis prevention and resolution, and appropriate
institutional reforms, including of the Interim and Development Committees; and minimizing the human cost of as well as improving the social policy
response to financial crisis.
Year 2000 Problem
- We agreed that governments, central banks, regulatory bodies and private sectors need to continue to press forward with renovating and testing
their computer systems in preparation for the Year 2000. Moreover, with the century date change now less than one year away, efforts should also be
directed toward planning for any contingencies that may arise. The public and private sectors are also encouraged to disclose the status of their
preparations for the Year 2000. The Ministers and Governors requested that each G-7 country prepare a short statement for the Economic Summit in
June reporting on the status of renovation, testing, and contingency arrangements of its critical sectors.
- We noted with satisfaction the increased attention being given in key international organizations to governance and corruption issues . We agree
that corruption is a serious impediment to effective macroeconomic policy and economic development and growth. We will strengthen our efforts both
through our domestic policies and through the IFIs, OECD, World Customs Organization (WCO) and WTO to combat corruption, including the
financial channels of bribery, and improve governance.
- We remain concerned about the threat that money laundering and financial crime more broadly pose to the integrity and stability of global financial
systems and markets. We will ensure that our financial crime experts stay abreast of and coordinate our ongoing efforts to fight these problems. In
particular, we commend the efforts of the Financial Action Task Force to broaden adherence to the FATF 40 Recommendations, and we urge it to
identify countries or territories, including offshore financial centers as appropriate, that fail to cooperate in the fight against money laundering and take
action as necessary to remedy these obstacles.
Harmful Tax Competition and International Tax Evasion
- We welcome the establishment of the OECD's Forum on harmful tax competition and the actual start of implementing the guidelines and
recommendations adopted by the OECD with respect to the harmful effects of unfair tax practices. We strongly endorse the current work program of
the Forum, in particular the efforts to identify tax havens. We also support the Forum's intention to engage in a dialogue with jurisdictions identified
through this process. We urge that this work be given a high priority. We also note the ongoing work to implement the code of conduct within the EU.
We welcome the progress made by the OECD's Fiscal Committee and the FATF to explore further the links between tax evasion and avoidance and
money laundering, and in particular to ensure the effective flow of information to tax authorities without undermining the effectiveness of anti-money
laundering systems. We encourage each group to continue working on their respective responsibilities.
We urge the OECD to continue to address the barriers limiting effective exchange of information between tax authorities, in particular those which arise
from excessive bank secrecy rules.
Countries Affected by the Kosovo Crisis
- The brutal violence against the ethnic Albanians of Kosovo and their expulsion have caused an enormous human tragedy, an overwhelming flow of
refugees, and serious economic consequences for the neighboring countries. Bilateral and multilateral donors are responding to the humanitarian crisis.
The international community must also help the affected countries address the damage done to their economies and sustain the economic reform efforts
which are vital to their long-term economic prospects. The international financial institutions (the IMF, the World Bank, and the EBRD) will play a
critical role in this effort. We call upon the international financial institutions to develop a comprehensive assessment of the economic and financial
effects of the conflict, to formulate strategies for dealing with both the immediate and longer-term economic challenges facing the countries in this
region, and to participate actively in the common effort to help these countries as they address these challenges.
G-7 Finance Ministers and Central Bank Governors took stock of progress made so far on the broad agenda outlined by Leaders last October and
agreed the following:
Transparency and Disclosure
- We welcome the IMF's adoption of a comprehensive format for disclosure of full information on reserves as part of the strengthening of its Special
Data Dissemination Standard (SDDS). This enhanced reporting of reserves and related liabilities on a monthly basis with a lag of no more than a month
will go into effect on April 1, 2000. Disclosure of this information on a weekly basis with a lag of no more than a week is encouraged, though not
required, under the SDDS. To strengthen the SDDS further, we call on the IMF to enhance the requirements for disclosure of external debt data and
for release of information on financial sector soundness. These steps should be taken by the end of this year, when the third review of the SDDS takes
- We welcome the steps taken by the IMF to become a more open and transparent institution. In particular, we value the decisions to create a strong
presumption in favor of the release of Letters of Intent, undertake a pilot project for the voluntary release of Article IV staff reports, release a short
Chairman's statement when programs are discussed and approved, and adopt procedures for release as appropriate of a summary of Board
discussions of major policy changes. We call on the IMF to maintain the momentum it has built in implementing a presumption in favor of the release of
information. We encourage the IMF to continue undertaking systematic evaluation, both internal and external, of the effectiveness of selected
operations, programs, policies and procedures.
Strengthened Prudential Systems
- We encouraged the Basle Committee on Banking Supervision to finalize quickly and publish its work on reviewing the Basle Capital Accord so that
it better reflects risk. We discussed and endorsed the recommendations by the Basle Committee on Banking Supervision on how to mitigate risks
involved in dealing with Highly-Leveraged Institutions (HLIs) including hedge funds. We agreed with the Basle Committee that adequate risk
management by financial institutions is particularly important when they deal with HLIs. We also look forward to reviewing the IOSCO report on HLIs,
along with other work by public and private sector bodies studying issues related to HLIs.
- We welcomed the first meeting of the Financial Stability Forum earlier this month, which among other things will provide a vehicle for the regular
exchange of information on systemic vulnerabilities in the financial system. We look forward to results of the working groups it is forming on highly
leveraged institutions, to address implications from their role as both lender and borrower; offshore financial centers and short-term capital flows' effect
on global financial stability. It will be important that this work include representation from a broad range of relevant countries.
Internationally-agreed standards and codes
- We support work being undertaken at the IMF and in various fora including the Basle Committee, IOSCO, and IAIS to develop codes and
standards of best principles and practices and of greater transparency. We urge the Fund to undertake wide consultations on the Code of Good
Practices on Transparency in Monetary and Financial Policies so that it can be approved and adopted by the Interim Committee at the Annual
Meetings. Ministers welcomed the completion of the work of the OECD task force on corporate governance, and support adoption of the set of core
principles on corporate governance. We encourage the World Bank to continue to work with the OECD and other international institutions to
encourage the broadest possible adoption and implementation of the OECD principles in emerging market and industrial countries. We encourage
countries to work to meet these new and existing standards and call on the IMF and World Bank to support their efforts to do so, in conjunction with
relevant experts from other institutions.
- We encourage the Fund to develop a system for surveillance of all relevant codes and standards, centered on the IMF Article IV process, but
involving close collaboration with other standard setting bodies. In this respect, we welcome the completion and publication of the pilot IMF
transparency reports and encourage the Fund to make them a part of its surveillance.
Crisis Prevention and Response
- We reaffirm our commitment to promote cooperation between countries, the private sector and the international financial institutions aimed at
enhanced crisis prevention and resolution. We encourage all emerging market economies to maintain appropriate communication with their private
creditors. We support wider use of market-based contingent financing mechanisms and collective action clauses in bond contracts. We remain
committed to involving the private sector, as appropriate, in the prevention and resolution of financial crises. Some constructive proposals have been
discussed in a number of international fora. We urge all parties concerned to come forward with concrete recommendations in this area by the time of
the next annual meetings.
- We welcomed the Board's agreement to establish a contingency credit line, which will help countries with sound policies insulate themselves from
contagion. We believe that this measure will help to encourage prompt and effective measures to ward off contagion, with appropriate private-sector
involvement, and promote adoption of sound policies in areas that we see as crucial for avoiding susceptibility to crisis, notably, debt management,
sustainable exchange rate regimes, transparency, a strong financial sector, and adherence to the internationally agreed codes and standards.
Institutional Issues and Coordination
- We agree that the international financial institutions must play a prominent role in facilitating cooperation among all countries, especially in the area of
macroeconomic and monetary issues that are at the center of the IMF's mandate as stated in Article 1 of its Articles of Agreement. We welcomed the
continued discussions on institutional issues, including possible reform of the Interim and Development Committees. We welcome the initiative taken by
the Chairman of the Interim Committee, Mr. Ciampi, to hold a meeting of Deputies on April 13, given the particular importance and complexity of the
work at this juncture. We call on the international financial institutions to continue their deliberations on ways to enhance their operations and, in
particular, coordination and cooperation between them, especially in the financial sector. As a first step to reduce overlap between the two
Committees, while improving mutual information, we welcome the decision to give the President of the World Bank a greater role in the deliberations of
the Interim Committee.
- Our Deputies held two seminars, on March 11 and on April 25, to exchange ideas on economic architecture issues with a diverse group of
economies. Representatives of 33 governments and central banks participated in the discussions, at which we discussed a broad range of ideas and
initiatives. We agreed that these seminars have been of great value and emphasized the need for inclusive dialogue and broad consultation on issues of
- Recent events have emphasized the important link between economic and social development. We welcome the World Bank's progress in distilling
a set of general principles of good practice in social policy that are relevant to its core competencies. These principles aim to promote social cohesion,
make economies more robust and provide a structure to make countries more resilient to financial crisis. We encourage the World Bank to take
forward its work, in cooperation with the IMF, to develop a set of policies and practices that can be drawn upon, by donors and borrowers alike, in
the design of adjustment programs to ensure protection of the most vulnerable, particularly during crisis periods. To support this effort, we urged
strengthened collaboration between the World Bank and IMF on public expenditure work which analyzes the impacts of fiscal choices.
Source: US Department of Treasweb site.
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