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Statement by the G7 Finance Ministers and Central Bank Governors

Washington DC, October 3, 1998

  1. We, the Finance Ministers and Central Bank Governors of the G-7 countries, met today to review recent developments in the world economy and financial markets. President Willem Duisenberg of the new European Central Bank participated for the first time in part of the discussions. We were also joined for parts of the meeting by the Managing Director of the International Monetary Fund, Michel Camdessus, and by World Bank President James Wolfensohn.

Developments in the World Economy

  1. We discussed developments and prospects in our own economies and in the rest of the world. Financial market conditions have deteriorated in many parts of the world, leading to a further weakening of growth prospects especially in most emerging market countries, and also more generally. In this context, we reaffirmed our view that the balance of risks on a global basis has shifted. We agreed that in today's integrated world economy and financial markets, developments in our economies, while being affected importantly by economic and financial developments elsewhere, have a significant impact on the rest of the world. More broadly, we reaffirmed the key importance going forward of each country in the global economy doing its part to promote recovery and financial stability. We must continue our efforts to strengthen the open world trading system, with free trade flows and open capital markets.

G-7 Economies

  1. Inflation in G-7 countries as a whole is low and in some countries has declined further in recent months. Although growth so far has been sustained in our countries taken as a whole, the weakening in Asia and some other markets poses increasing downside risks to economic activity. We reemphasized our commitment to create or sustain conditions for strong domestic-demand led growth and financial stability in each of our economies. In this context, we noted the importance of intensified cooperation among us at this juncture. We also agreed that the challenges that face each of our economies differ.

Debt

  1. We also discussed the problems of the poorest countries. We endorse the need to sustain the momentum of the HIPC initiative. We shall also encourage the IMF and the World Bank to move forward quickly on further proposals which recognize the special needs of poor post-conflict countries, especially those with arrears to the IFIs.

Strengthening the International Financial System

  1. Looking ahead, we agreed on the importance of adapting the IMF to ongoing changes in the world economy. This includes a focus on increasing its transparency, the design of appropriate reform programs, and effective use of IMF resources. We expect further progress in these areas in the near future.
  2. We agreed on the need to build upon the work done to date and extend the reach of international discussions to ensure that the system is equipped to meet the challenges posed by the increasingly integrated global economy and financial markets. We committed to work together within the G-7, and with other industrial and key emerging market economies and with the international financial institutions, to develop approaches to strengthen the system in the following key areas:
  3. The G-7 welcomed the reports of the working groups of the G-7 and key emerging market economies, and we agreed to work together to implement recommendations in the key areas of transparency, strengthening financial systems and managing crisis with an appropriate private-sector role, as a matter of urgency. We look forward to a productive discussion of these and other issues in the Interim and Development Committees and other meetings, including the meeting with finance ministers and central bank governors from key emerging markets. We also called on our deputies to consult in a systematic way to complete a more detailed work plan, based on the agenda above, and report to us at a meeting of G-7 Finance Ministers and Central Bank Governors as soon as the work is completed. We have asked Mr. Tietmeyer, a member of our group who is also the Chairman of the G-10 Central Bank Governors, to consult with other appropriate bodies and to consider with them the arrangements for cooperation and coordination between the various international financial regulatory and supervisory bodies and the international financial institutions interested in such matters, and to put to us expeditiously recommendations for any new structures and arrangements that may be required.

Source: US Department of Treasury web site


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