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Finance Ministers' Meetings

Statement of G7 Finance Ministers and Central Bank Governors

April 15, 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.

Developments in the World Economy

G-7 Economies

2) Together with the Managing Director of the International Monetary Fund, Michel Camdessus, we reviewed recent developments in our economies and other economies around the world.

3) Strong growth has continued in North America and the United Kingdom. It is important that the policy framework continue to be directed at a sustainable expansion in these countries and at increasing national savings in the United States.

4) In France, Germany and Italy, economic growth gained momentum in 1997 and is expected to strengthen further this year. It is important that recovery on the Continent be increasingly based on sustained growth of domestic demand. Continuing structural reforms will also be needed to combat persistent high unemployment and provide a sound basis for growth.

5) The challenges facing Japan are serious and have intensified in recent months. We welcomed the recent announcement of an economic policy program directed at spurring a substantial strengthening of domestic demand and reviving business and consumer confidence. What is crucial is to implement quickly a strong program of effective fiscal measures and structural reforms. We also welcomed the progress Japan is making in implementing its Big Bang financial liberalization initiative and encouraged the Japanese authorities to move forward to address the problems in the financial system.

6) Inflation pressures in the G-7 economies remain under control, with Italy showing particular improvement. But vigilance will, as always, remain necessary to stay on a non-inflationary path, particularly in the United States and the United Kingdom, so that sustainable growth can be maintained.

European Economic and Monetary Union

7) We look forward to a successful launch of European Economic and Monetary Union (EMU) that contributes to the stability of the international monetary system. Strong commitment to the fiscal requirements of EMU membership, and to efforts to fight high structural unemployment, are key to ensuring a stable and successful EMU. We agreed on the importance of examining these issues further together.

Exchange rates

8) We discussed developments in our exchange and financial markets. We reaffirmed our view that exchange rates should reflect economic fundamentals and that excess volatility and significant deviations from fundamentals are undesirable. We emphasized that it is important to avoid excessive depreciation where this could exacerbate large external imbalances. In light of this, we support appropriate steps by Japan aimed at stimulating domestic demand led growth and reducing external imbalances, thus also correcting the excessive depreciation of the yen. We will continue to monitor developments in exchange markets and to cooperate as appropriate.

Emerging Markets

9) We welcomed progress toward restoration of financial stability in Asia. We are particularly encouraged by an early return to the capital markets by some countries, the efforts being made toward strengthening financial systems and the recent strengthening of regional currencies.

10) Despite this progress, substantial challenges lie ahead, and we agreed that this is no time for complacency. A strong and enduring recovery requires a substantial commitment to the macroeconomic and structural reform necessary to restore confidence, with program support from the IFIs. The international community has a strong interest in seeing recovery in Asia, and we are committed to working with the IFIs toward this goal. In this context, our export credit agencies continue to provide trade finance to countries in this region. We also agreed on the importance of building a social consensus for reform in Asia, which requires action to limit the impact of the crisis on the poor.

11) We welcomed Indonesia's renewed commitment to economic and structural reform and its agreement with the IMF on a new reform program. We urge the Indonesian government to implement its program fully and vigorously as this is necessary to restore confidence.

12) We reviewed potential risks in broad range of emerging markets. We welcomed increased differentiation by the markets of the prospects of emerging economies and noted that preemptive policy measures in key cases have helped to contain contagion. We believe that an open global trading system is essential for broad-based prosperity. We encourage emerging and transition economies to pursue strong macroeconomic policies, improved governance and structural reform programs to reduce their vulnerability to contagion, and urged the IFIs to play an active role in supporting these efforts. In this regard, we reiterated the urgent need to approve the proposed New Arrangements to Borrow and quota increase, so that the Fund has the necessary resources to perform its mission at this very critical time.

Development Issues & Africa

13) We noted the economic progress in those developing countries where sound macroeconomic policies, good governance and market reforms have been pursued vigorously. We reiterated our commitment to support these countries' efforts to integrate into the global economic system. This support includes our efforts, both bilaterally and through the IFIs. In this context, we stressed the importance of appropriate funding for IDA XII, the ESAF and the African Development Bank Group. We also welcomed the progress that has been made toward strengthening the capital structure and governance of the African Development Bank, providing a more solid basis for deeper partnership in the future.

14) We welcomed the progress made in implementing the HIPC debt initiative and note commitments have now been made to provide HIPC debt relief to a number of countries. We applauded Uganda as the first country to receive final HIPC debt relief, reflecting its strong record of reform. We also welcomed the special efforts by the Paris Club, the Bretton Woods institutions and individual countries in reaching a final decision on Mozambique. We encourage all heavily indebted poor countries to take all the steps necessary to embark by the year 2000 on the process of a sustainable exit from their debt problems. We also continue to urge all creditors to provide interim relief to help buttress debtor countries' reform efforts.

15) In order to help countries fight corruption and bribery, we urged that the MDBs should establish uniform procurement rules and documents of the highest standard, and that the members of the OECD and other signatories to the Convention on Combating Bribery should submit the convention for ratification to their legislative bodies -- where necessary -- and should pass any necessary implementing legislation criminalizing the payment of bribes to foreign officials in international business transactions, with a view to the entry of the convention into force and, in that context, elimination of the tax deductibility of such bribes by the end of the year.

Strengthening the International Financial System

16) We reaffirmed our commitment to exploring ways to strengthen the architecture of the international financial system. We welcomed the work going on in a variety of other fora toward this objective, including the APEC Finance Ministers, ASEM, the Manila Group, the G-10, the Special Meeting of 22 countries and the IFIs, including this week's Interim and Development Committee meetings. This work can help build a consensus for action in the key areas we identified at our February 21st meeting in London:

17) We are looking forward to discussion of these issues with representatives of emerging market countries at meetings later this week. We confirm our intention to produce a progress report on these issues for the meeting of our Heads of State at the Birmingham Summit in May.

18) We applaud the progress made by the OECD with respect to harmful tax competition, and we look forward to receiving their report before the next G-7 Ministerial prior to the Birmingham Summit.

19) We discussed this and other work leading up to the Birmingham Summit and plans for the pre-Summit meeting of finance ministers on May 8th and 9th.

Source: United States, The Department of the Treasury

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