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G8 Finance Ministers' Meetings

Statement by U.S. Treasury Secretary John Snow
following the G7 Finance Ministers' Meeting
Washington, DC
April 24, 2004

Good morning. I was very pleased to host fellow G7 Ministers and Governors here in Washington.

The unifying theme of our discussions was economic growth. The strengthening global recovery provided an upbeat backdrop. The United States is leading the way, thanks to President Bush’s jobs and growth tax relief program. Last month, 308,000 jobs were created. Growth accelerated to 6.2 percent in the second half of 2003 – the fastest in almost 20 years.

Business investment posted double-digit increases in the same period. Manufacturing activity is increasing. Productivity growth remains exceptionally high. Homeownership is at an all-time high, the economy is generating jobs, and unemployment has declined.

Growth in the first quarter of this year is expected to be in the 4 to 5% range, according to private sector estimates. What’s more, in my view, there is still a lot of headroom for this economy to grow and expand in a non-inflationary way.

Beyond the United States, there is also good news. Japan has turned in several good quarters, as has the United Kingdom. In continental Europe, there are some encouraging initial signs of an upturn, but growth still lags in too many areas and thus needs to be more broad-based.

We all agreed today that now is the time to redouble our efforts to strengthen and broaden growth for the future. We reviewed the progress made under the Agenda for Growth, including, key steps on tax reform, and labor markets flexibility. But we also agreed that additional pro-growth reforms are essential to boost employment and raise incomes. We focused in particular on the importance of low marginal tax rates in encouraging job creation and income growth.

Of course, sound fiscal policies are also fundamental to sustained growth, and we underscored the need for fiscal consolidation during times of expansion. In the United States, we are operating with an unwelcome, but manageable and understandable, short-term deficit which we are taking action to reduce dramatically. I reiterated President Bush’s commitment to deficit reduction, which will cut the deficit in half over five years, restoring it to a level below the 40-year average in terms of the size of our economy.

Economic fundamentals are also strengthening in many emerging markets countries and higher global growth will reinforce the gains from stronger policies. Countries should take advantage of current favorable circumstances to implement reforms that will help achieve lasting stability.

Turning to development, the Bush Administration has consistently emphasized the powerful role that the private sector can play in promoting growth.

This was a key driver of discussions over the last two days. We urged the MDBs to step up their efforts to and promote more financing for small businesses – which can play a key role in creating jobs and growth. And we took the unprecedented step, along with other members of the Development

Committee, of meeting with entrepreneurs from developing countries. Their stories were compelling and should help inform work in this area going forward.

We also stepped up our work on remittances. Remittance flows, at nearly $100 billion globally, exceed total official development assistance and are critical sources of income for millions of households in many developing countries. Yet, many barriers exist that make sending money expensive and limit the potential development impact of the funds. We are each working to address these barriers in our own countries. Today, we committed together to work with other governments, the private sector, and the MDBs to broaden access to financial services in developing countries. This means facilitating greater competition in remittance services, encouraging increased participation in the formal financial system, and promoting financial deepening in the recipient economies.

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As part of our Strategic Review of the international financial institutions, we agreed this weekend to build on recent reforms – including collective action clauses, transparent limits on large scale assistance, and the increased use of grants by the World Bank – and to explore new directions toward a modern international financial policy framework. This includes improving IMF assessments of economic policies and potential risks and refocusing the IMF and World Bank on their core mandates. We want institutions that deliver results based on modern management principles and that contribute to stronger growth and higher incomes for people throughout the world. We will develop these themes further as we prepare for Sea Island.

I had a very positive and constructive meeting with the Finance Minister of Iraq, Kamel al-Kaylani, and Central Bank Governor Sinan Al-Shabibi yesterday. They are making considerable progress – enacting a new central bank law based on international best practices and liberalizing interest rates. Significant progress has also been made on licensing foreign banks and they are working on a T-bill market. Both Iraqi officials reported that economic progress continues to take place in their country and I was pleased to hear about the ongoing economic and financial reconstruction. Our commitment to support Iraq is unwavering.

The recent tragic events in Madrid and Riyadh underscore that combating the financing of terrorism remains a priority. Ministers and Governors met with senior officials from key countries, the World Bank, the IMF, the European Commission, and the Financial Action Task Force to discuss how to improve our asset freezing regimes, stop cross-border transfers of cash to terrorists, and provide attractive alternatives to underground money transfers. We strongly welcomed the IMF/World Bank commitment to comprehensive assessments of the entire anti-money laundering and terrorist financing standard.

The economic challenges in the greater Middle East are a key focus. Regional ministers will join us for dinner this evening to discuss economic reform – notably how to work together to advance financial sector reform and private sector growth. I expect strong support for economic reform efforts in the region, as well as for the needs of Iraq and Afghanistan.

The G7 Action Plan released in February demonstrated the international community’s stalwart commitment to Afghanistan. The recent donors’ conference in Berlin, which raised pledges of $8.2 billion over three years, further stressed that commitment. The Afghan authorities have entered into a staff-monitored program with the IMF, providing a detailed framework for their policies.

Source: U.S. Treasury Department

See also:
Joint Statement on Combating Terrorist Financing, April 23, 2004
Statement of G7 Finance Ministers and Central Bank Governors, April 24, 2004

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