Ministerial and Other Meetings
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Finance Ministers' Meetings

Excerpts from the G-7 Finance Ministers and Central Bank Governors Statement

from the meeting in Toronto on February 3-4, 1995.

We are all very pleased by the continued improvement of our economies and the performance since we met last October. Out put growth has been robust in most countries. Job creation has been improving and widespread. The unemployment rate is falling in most of our economies.

Also gratifying is the fact inflation is currently moderate and even falling in some of our economies, and underlying inflationary pressures appear to be modest in most of our economies. The challenge now is to ensure that we sustain growth and share prosperity in job creation that comes with it.

We understand this objective requires sound public finances in a noninflationary environment. On this point, we also understand there is absolutely no room for complacency. We are in total agreement on the fundamental need for continued fiscal consolidation well beyond the current fiscal windfall which is produced by the current cyclical rebound in economic activity.

G-7 finance ministers all reaffirm today their government's commitment to reducing fiscal deficits, thereby ensuring that public finances are sustainable over the medium term. In fact, we see the need for more intensified efforts in this direction in some of our economies.

Our discussions also emphasized the importance of structural reform, to eliminate impediments to sustained, noninflationary growth. To this end, labour market reform to reduce disincentive to work is essential. At the same time, continued effort to get a vigorous new World Trade Organization up and running is crucial for further trade liberalization. As a further condition for sustaining growth and job creation, we also reaffirm the necessity to adjust monetary conditions where warranted in order to prevent the reemergence of inflationary pressures. We also reaffirm our commitment to coordinate closely in exchange markets.

Our Japanese colleagues explained the loss and the damage caused by the recent Kansai earthquake and their determination to make utmost efforts for the reconstruction of the affected region. We believe the Japanese economy has sufficient capacity to provide the required resources and funds for the reconstruction without significantly affecting international financial markets. We also expressed our sympathy to the Japanese people and our great admiration to the courage they are showing through this terrible, terrible event.

The G-7 ministers and governors also expressed their total satisfaction with international efforts to assist Mexico that would help ease its financial crisis. We agreed that Mexico must pursue vigorously its economic program, which the IMF has described as strong, coherent and credible. The decision by the International Monetary Fund to join the international package assembled recently with an exceptionally large standby agreement for Mexico of up to some 17.8 billion dollars represents an important source of support. The great stride that the Mexican economy has made in recent years provides a sound basis for our confidence in the ability of the Mexican authorities to fulfil their commitments under the new economic program. We also reviewed the broader implications of volatility in Mexico's financial markets.

We agree on the importance of containing the repercussions of our international financial system and welcome the favourable response of the financial markets to the extraordinary measures that have been put together with multilateral institutions.

We also discussed the contribution which finance ministers might make to a review commissioned by the Naples summit on the system of international institutions to ensure that they are able to meet present-day and future challenges.

We are in full agreement of the important contribution that Bretton Woods institutions have made to the world economy over the past 50 years. Nevertheless, given the changing needs of many countries and the emergence of new players, the roles and responsibilities of those and other international institutions were in close examination by finance ministers in the context of preparations for the Halifax summit. In particular, we agreed to explore possible measures to enhance the ability of international financial institutions to monitor and, when warranted, to respond to financial and economic instability.

We also reviewed recent economic developments in Russia. We welcome the stated commitment of the Russian government to economic reform. We noted with concern the recent rebound in inflation and a substantial risk for the budget, which has been heightened by the situation in Chechnya.

The G-7 strongly encouraged the Russian government to remain on the path to a market economy, an objective that can only be furthered by a timely agreement with the IMF for a standby agreement for Russia. Further debt rescheduling for Russia will depend on the introduction of a comprehensive reform program that will merit IMF support. We are looking forward to discussing these matters further with the Russian authorities at the time of our next meeting in April in Washington.

We also discussed the situation in the Ukraine and welcome that government's successful implementation of all of its fiscal reforms since our last meeting. We express the hope that Ukraine and the IMF will continue to work closely to reach an agreement on a full standby program as rapidly as possible.

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Revised: June 5, 1995

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