1. The Finance Ministers and Central Bank Governors of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States met on 25 January in New York and agreed to intensify their cooperative efforts to strengthen world economic growth. Ministers and Governors reviewed world economic developments with the Managing Director of the IMF as part of their ongoing economic policy coordination process and the situation in the former Soviet Union.
2. The Ministers and Governors expressed their concern that economic activity had weakened since their last meeting. In some countries, early signs of recovery had not been sustained, while other countries were experiencing a deceleration from high rates of growth, jeopardising gains in employment achieved during the last decade and raising the danger of renewed protectionism. Consumer and business confidence has remained weak, thus delaying a resumption of economic activity.
3. The Ministers and Governors are convinced, however, that the forces that have been inhibiting economic activity in many countries are dissipating and that the conditions for improved global growth exist. Inflation expectations have eased considerably and, with the exception of some countries, wage and price pressures have been declining markedly. Long term interest rates have fallen in all countries and, in some cases, substantially. Oil prices have remained stable.
4. In order to reinforce the recovery process, the Ministers and Governors agreed that in present circumstances there was a need to intensify their cooperative efforts to improve the conditions for non-inflationary growth in their economies, thereby strengthening the world economy. Ministers and Governors accordingly agreed that a stable policy framework should be provided which creates an environment for renewed economic confidence. They believe strongly that the appropriate framework is one of fiscal and monetary policies geared to sustainable growth with price stability over the medium term. These are the essential conditions for lower interest rates and productive investment that will support the recovery and lead to a reduction in unemployment.
5. Ministers and Governors reconfirmed their commitment to the policy coordination process which has contributed to the good performance of the world economy in the 1980s. They reaffirmed the need to raise world savings. They insisted strongly on the necessity of maintaining open and efficient global markets to assist the economies of both industrial and developing countries. They stressed that a satisfactory conclusion of the Uruguay Round would enhance private sector confidence and make an essential contribution to global economic growth. It was acknowledged that the completion of the internal market of the EC at the end of this year and the recent decisions in Maastricht would further strengthen fundamentals for economic growth in Europe.
6. As to economic policies in their respective countries, Ministers and Governors agreed that each country would implement fiscal, monetary and structural policies to promote the conditions for sustainable growth with price stability. The specific mix of policies would vary depending on the circumstances in each country. On fiscal policy, Ministers and Governors noted that in some countries public expenditure could be reallocated through targeted measures designed to improve confidence and to enhance productivity. They emphasised the need, however, for countries with large fiscal deficits and high public debt to continue medium term efforts at fiscal consolidation as a means of improving national savings and reducing real interest rates.
7. On monetary policy, Ministers and Governors acknowledged the improvement in inflation performance in many countries over the past year. Monetary policies should be directed to preserving the gains that have been achieved in reducing inflation while providing adequate scope to finance sustainable growth. Those countries which in the future experience better than expected inflation performance may have a basis for an easing of monetary conditions and interest rates without jeopardising the commitment to price stability and exchange rate objectives.
8. Ministers and Governors welcomed ongoing German efforts to lower public sector borrowing requirements and expressed the hope for wage moderation, thereby helping to mitigate price pressures in that country.
9. On structural policies, Ministers and Governors emphasized the need to continue reforms in order to reduce rigidities, to strengthen market forces, and to improve the efficiency of their economies and the world economy generally.
10. The Ministers and Governors reviewed their economic policies in light of these developments and objectives:
11. The Ministers and Governors also reviewed developments in foreign exchange markets. In the context of economic policy coordination, they noted that their efforts in recent years had contributed to more stable currency markets. They agreed to continue to monitor market developments and reaffirmed their commitment to cooperate closely in exchange markets, thus contributing to favorable conditions for stable exchange markets and economic recovery.
12. The Ministers and Governors discussed the situation in the former Soviet Union and the reform measures recently implemented in some of the independent states. They welcomed that the reform process had evolved peacefully while recognising that the transformation of the former Soviet economy would be a difficult and prolonged process. It can only succeed if the independent states of the former Soviet Union cooperate with each other, maintain free trade and create efficient administrative structures. Economic reforms should be formulated and implemented in close cooperation with the IMF. In addition, adherence to the MOU signed in November 1991 between the G7 and 8 Republics, including continued payment of debt service obligations that had not been deferred, would be a precondition for maintaining creditworthiness and for further financial assistance.
13. The Ministers and Governors noted the application for IMF membership by the Baltic States, Russia, Azerbaidzhan, Ukraine, Kazakhstan and Armenia. They requested the IMF to act expeditiously to finalize by the spring meetings the arrangements needed to complete membership procedures for those states with applications under consideration which are able to meet the conditions for membership.
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