Ministerial Meetings (Hansard, 21 May 1998)

§ Mr. Gordon Brown

On 16 April, I attended the IMF's Interim Committee meeting. I also attended the IMF/World Bank Development Committee meeting with the Secretary of State for Development on 17 April.

One of the key issues we discussed was how to strengthen the architecture of the international system in the light of the Asian crisis. In my speech to the Interim Committee, I placed particular emphasis on the importance of greater openness and transparency to long-term economic stability, and I identified six themes.

First, enhancing transparency of data. I noted that we need to tighten up and enforce the IMF's Special Data Dissemination Standards (SDDS).

Secondly, promoting openness in policy making. I welcomed the progress made in agreeing the Code of Good Practice on Fiscal Transparency and recommended that it be supplemented by a manual to provide more guidance on how to construct and present fiscal policies. I also proposed that the IMF should, in consultation with the World Bank and the BIS, prepare a code of Good Practice on Financial and Monetary policy.

Thirdly, greater transparency by the IMF in providing advice on member countries. I proposed that we should do more to encourage countries to publish the outcome of their Article IV's through Press Information Notices (PINS).

Fourthly, exploring ways to improve the IMF's own accountability. I noted that it is essential for the IMF to perform its responsibilities in an open and transparent way that enhances public confidence. I proposed that we should look again at the option of establishing a new full-time evaluation unit which would report on the IMF's performance both to the Fund's shareholders and to the public.

Fifthly, strengthening surveillance of national financial systems. I noted that the IMF's surveillance function should extend beyond its traditional role of looking at macro-economic policy and in particular it should look at the vulnerability of national financial systems. This will involve looking at financial sector regulation, corporate governance and legal issues. The Fund will need to cooperate closely with the World Bank, the Regional Development Banks and the Basle Committee in this area.

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Sixthly, enhancing the role of the International Financial Institutions and cooperation between them. I proposed that consideration should be given to the creation of a new joint department of the IMF and World Bank to deal with financial sector issues in all member countries. This Department would need to work closely with other international agencies and groups. Its tasks would be to help the IMF in its regular surveillance, to support the Bank in its analyses of countries' structural policies and to support both the Fund and the Bank in the advice they give to countries on financial sector restructuring.

We also discussed Capital Account Liberalisation. I noted that free capital flows can bring benefits to all countries in terms of increased productivity and growth. However, capital account liberalisation needs to be backed by measures designed to put the appropriate supervisory and regulatory practices in place. It must also be properly sequenced.

I noted that the IMF is the organisation best placed to oversee orderly and sustainable capital account liberalisation and that we should press ahead with the Amendment to the IMF's Articles of Agreement to give it jurisdiction over the capital account.

The discussions in Washington at the Interim and Development Committees on these themes contributed to the G7 report on Strengthening the Architecture of the Global Financial System, which was published at the Birmingham Summit.

Additionally, we discussed at the Interim Committee the need to take action at an international level to promote fairness and relieve poverty. I stressed that we should not allow our discussion of Asia to obscure the important work that is still needed in the poorer countries. I welcomed the Fund's recognition of the need to promote high quality growth that results in a permanent reduction in poverty, greater equality of economic opportunity, and respects the environment. In this context, I welcomed the completion of the external evaluators' review of the Fund's ESAF programme and agreed with the external evaluator's view that IMF programmes cannot be viewed in isolation from the rest of the development process.

There has been some significant and commendable progress with the Mauritius Mandate for the HIPC Debt Initiative which I launched a year ago. I emphasised to the international community the importance of ensuring that progress is maintained so that the Mauritius Mandate targets are met and we have met our objectives by the millennium.

Copies of my speeches and the Communiques of these meetings have been put in the Library of the House.

The issues discussed at the Development Committee meeting were outlined in a Parliamentary Question answered by the Secretary of State for International Development, on 29 April 1998, Official Report, column 153.