World Bank and IMF Meeting (Hansard, 19 October 1994)

§ Mr. Kenneth Clarke

I attended the annual meetings of the International Monetary Fund and World bank in Madrid from 30 September to 4 October. I also attended the Commonwealth Finance Ministers' meeting in Valletta from 27 to 28 September which discussed several issues also discussed at the IMF/World bank meetings. Following on from the meeting in Valletta, I was able to make some progress, on behalf of the United Kingdom, on a number of issues of importance for the world economy, for developing countries and for the economies in transition.

At the meeting of Commonwealth Finance Ministers I set out new United Kingdom proposals for helping very poor countries with unsustainable burdens of multilateral debt. These proposals complement those we have been pressing for over the last four years to reduce the burden of bilateral debt for the poorest countries by full implementation of Trinidad terms debt relief. My new proposal for the IMF involves use of the income from investment of the proceeds of a modest and phased sale of part of the IMF's gold reserves to support more and longer-term concessional lending to highly indebted countries with significant debt to the IMF and which are following IMF programmes of economic reform. I also called on the other international financial institutions to consider further what they could do to assist their poorest most indebted members. The proposals received strong support from other Commonwealth Finance Ministers. They also supported my proposals to take forward action on international money laundering agreed at last year's Commonwealth Heads of Government meeting.

In Madrid, my proposals on multilateral debt received support in the development and interim committees of the World bank and the IMF, and will now be considered further by the boards of the World bank and the IMF.

As is usual, the IMF/World bank annual meetings were preceded by a meeting of G7 Finance Ministers and Central bank governors. We agreed, both in the G7 and in the. IMF interim committee, that the outlook for the world economy is good; and that we must ensure the sustainability of the recovery by remaining vigilant against inflation, and by making further progress in reducing budget deficits and in structural reform to improve the flexibility of our labour markets and economies. G7 Ministers and Governors also met with Russian and Ukrainian Ministers, to discuss progress in economic reform in those countries.

In the IMF's interim committee I spoke about the development of the world capital markets and the implications for policy. I stressed the benefits of the free international flow of capital. I also highlighted the special responsibility of the countries with the world's major trading currencies and financial markets to follow sensible and credible economic policies, as the way to foster greater world financial market stability. I also raised the question of a possible connection between lower levels of 272W world savings and high real interest rates. I am pleased that G10 Ministers and governors have agreed to my proposal to examine this important issue in more detail.

I was also very pleased we were able to reach agreement in the interim committee to an increase in access limits for the IMF's standby arrangement and extended financing facilities. The United Kingdom has been pressing for this: extra financial assistance in support of good economic policies is the best form of help the IMF can give to member countries with economic difficulties. I was disappointed that we were unable to agree to a renewal of, and an increase in, access under the fund's systemic transformation facility, which is of particular assistance to the former communist countries trying to create market economies. I also regret the failure to reach agreement on the long-standing issue of an SDR allocation. The proposals put forward jointly by the United Kingdom and United States on this remain on the table, and I very much hope that agreement will be possible on this basis over the months ahead.

The joint IMF/World bank development committee took aid effectiveness as its main theme. I stressed the need for market-friendly policies which allow private enterprise to flourish, and the need to ensure fuller participation by the people directly affected by World bank projects. I also welcomed World bank president Preston's vision of a leaner, more cost-effective, and more agile World bank.

This year's meetings of the World bank and IMF marked the 50th anniversary of their founding conference, and were preceded by a special conference, which I attended, to discuss their future directions. There was broad agreement among participants from developing countries, industrial countries and countries in transition on many aspects of the future role of the institutions, and also on the economic policies they should be encouraging their members to pursue.

Copies of my speeches to the Commonwealth Finance Ministers meeting, the interim committee, the development committee and the IMF/World bank annual meetings and the communiques issued following the meetings of the Commonwealth Finance Ministers, the interim committee and the development committee will be placed in the Library of the House.