International Monetary Fund (Hansard, 30 April 1996)

§ Mr. Kenneth Clarke

I attended meetings of the IMF's interim committee and the IMF/World Bank development committee in Washington on 22 and 23 April, where progress was made on several issues of importance for the world economy and for developing countries. As usual, the IMF and World Bank meetings were preceded by meetings of the G7 and G10 Finance Ministers and central bank governors.

The G7, the interim committee and the development committee all discussed the joint IMF/World Bank proposals on the multilateral debt of the poorest, most indebted countries which was one of my top priorities for the meetings. I first launched this initiative at Valletta 18 months ago, and good progress is now being made. In Washington, all agreed that there is a problem which must be tackled. A substantial number of countries now agree with us that, as the managing director has now proposed, the IMF should sell a small part of its gold and invest it to produce commercial returns, which could be used for contributing to the ongoing enhanced structural adjustment facility. The G7 countries all agreed that the resources of the international financial institutions themselves must be mobilised for the purpose of relieving multilateral debt.

With the support of other Ministers, I asked the IMF and World Bank last autumn to produce proposals by the spring. These were delivered in outline form and, last week, we agreed on the principles and a framework for action. We have now called on the IMF and World Bank, in co-operation with the regional development banks, swiftly to put forward more specific proposals, making the fullest use of their own resources to finance them. Our aim is to take final decisions by the time of the annual meetings which will be held from 29 September to 3 October.

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At the G7 meeting, we reviewed economic and financial market developments in the world economy and assessed the outlook for the G7 economies, concluding that, despite the recent pause in growth in some countries, the underlying fundamentals in the G7 were promising, particularly in light of progress in reducing inflation. We agreed that policies should continue to be directed at sustaining non-inflationary growth and, where necessary and appropriate, at strengthening recovery. We welcomed the call from the Lille employment conference for continued reduction of structural obstacles to jobs growth. We had a useful discussion of the Russian economy with the Finance Minister and central bank chairman of Russia. We welcomed their 1996 economic reform programme and encouraged the authorities to continue with its full implementation.

We reviewed the progress achieved and the considerable work underway to implement the initiatives arising from the Halifax summit last June, and this discussion was continued in the G10 and interim committee.

The G10 commended the report of the working party on the resolution of sovereign liquidity crises, and agreed that the report should be released to the public. A copy of the executive summary containing the conclusions of the report, which has not been released, has been placed in the Library of the House. It contains some important messages about the handling of future crises of the kind that occurred in Mexico.

We discussed the work being done by the Basle committee on banking supervision, the International Organisation of Securities Commissions and other bodies to improve the soundness of financial institutions and markets, and welcomed the efforts to increase co-operation among supervision authorities which will provide a good basis for the further work to be done in this important area.

Further progress has been made in developing new financing arrangements which would double the resources currently available to the IMF under the general arrangements to borrow, and we urged the discussions to come to a successful conclusion as soon as possible. I stressed the importance in this work involving a wider range of countries, including some of the emerging market economies, recognising their interest in the stability of the international financial system.

At the IMF interim committee, I strongly supported the recent publication of the IMF's special data dissemination standard, and I am delighted to say that the UK was the first country to subscribe to this demanding standard.

In the development committee, in addition to the discussion of multilateral debt, I welcomed the good outcome of the International Development Association replenishment, which was achieved in difficult circumstances. The committee also commended the report of the task force on multilateral development banks.

Copies of my speeches to the interim and development committees, and the communiqués of those meetings and the G10 Finance Ministers' meeting, have been placed in the Library of the House. The G7 did not on this occasion issue a communiqué.