Annual Meetings (World Bank and International Monetary Fund) (Hansard, 31 October 1995)

§ Mr. Kenneth Clarke

I attended meetings of the International Monetary Fund and World bank in Washington on 8 and 9 October, where progress was made on several issues of importance for the world economy and for developing countries. I also attended the Commonwealth Finance Ministers' meeting in Kingston, Jamaica on 4–5 October.

In Kingston, Ministers endorsed a report on measures against money laundering, following my proposals at last year's meeting in Valletta. This matter will now be considered by Commonwealth Heads of Government in Auckland in November.

I emphasised the desirability of an effective UN, and the need for reform of UN economic and social bodies. I hoped that the Commonwealth would give further impetus to the many UN reform activities under way.

I gained further support for my initiative to relieve the burden of multilateral debt on a small group of the poorest countries, as well as reiterating the need for full implementation of the Naples and Trinidad terms for official bilateral debt.

There was further discussion of multilateral debt at the interim and development committees of the World bank and IMF. The bank and fund will continue their work and report with proposals to the spring meetings in Washington next April. I am pleased to report that, one year on from the launch of my initiative, there is now an emerging consensus that this issue must be solved.

As usual, the IMF and World bank meetings were preceded by meetings of G7 and G10 Finance Ministers and central bank governors.

In the G7, we reviewed global economic and financial conditions, concluding that in most countries the conditions for continued growth and employment gains are in place and inflation well under control. We agreed that policies should continue to aim at sustaining non-inflationary growth.

I joined other Ministers in urging the IMF and World bank to carry out an early, thorough assessment of needs for the reconstruction of Bosnia following a peace settlement. We had a useful discussion of the Russian economy with representatives of the Russian Government, led by First Deputy Prime Minister Chubais.

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The G10 endorsed the conclusions of a study on savings, investment and real interest rates, commissioned at my suggestion last year. These are that reducing fiscal deficits would be the swiftest and surest way to reverse the decline in national saving rates and the increase in average interest rates over the last 35 years.

We agreed that it would be desirable to develop new parallel financing arrangements complementary to the general arrangements to borrow. Discussions will take place with potential participants, with the objective of agreement by next April.

At the IMF interim committee I emphasised the need for flexible labour markets and a favourable business environment at a time of increasing technological change and international competition.

Further progress was made in responding to the lessons of the Mexican crisis, as envisaged at the Halifax summit in June. This includes exceptional procedures for the IMF to respond promptly and prudently in the event of serious financial crises. I strongly supported conclusions on the need for regular and timely provision of comprehensive and good quality data to the fund and the establishment of standards for data publication. I welcomed fund efforts to make the surveillance of members' economies franker and more selective. I also urged the fund to develop effective ways of evaluating its own performance. Work is continuing on the 11th review of quotas, although the fund's liquidity is currently adequate.

I took the opportunity of the development committee meeting to welcome the new president of the World bank, Mr. Jim Wolfensohn, and expressed my support for his leadership. In a discussion of ways to reduce poverty, I emphasised the need for sound economic policies. The committee agreed on the importance of a significant replenishment of IDA. I stressed that donor countries should each shoulder a fair share of the burden.

Copies of my speeches to the Commonwealth Finance Ministers meeting, the interim committee and the development committee, and of the communiques of those meetings and the G7 and G10 Finance Ministers' meetings have been placed in the Library of the House.