HC Deb 08 July 1999 vol 334 cc605-6W
Mr. Kidney

To ask the Chancellor of the Exchequer what is the United Kingdom's position as regards the responsibility of the private sector in the response to international financial crises. [87881]

Ms Hewitt

We are working with our G7 partners to shape expectations so that private-sector creditors know that they will be expected to bear the consequences of the risks they take. There are several ways in which this can be achieved. First, there needs to be a greater use of market-based tools to involve the private sector in forestalling and managing crises, for example through a broader use of collective action clauses in sovereign debt contracts. Second, efforts should be made to ensure there is better communication and co-operation between emerging market countries and their creditors. Third, the G7 countries have agreed that a broad framework for involving the private sector in crisis resolution should be drawn up, which sets out in advance principles, considerations and a broad range of tools.

Mr. Kidney

To ask the Chancellor of the Exchequer what progress has been made on the reassessment of the objectives of IMF policy in responding to financial crises. [87880]

Ms Hewitt

At last week's summit in Cologne, G7 leaders announced a six-point plan for strengthening the international financial system. This included measures to increase the effectiveness of the IMF and the other international financial institutions; proposals to promote transparency and best practice, with the IMF monitoring compliance with new codes and standards; a new framework for involving the private sector in crisis prevention and management; steps to strengthen financial regulation in industrialized countries, and macroeconomic policies and financial systems in emerging markets where the IMF will work with the World Bank in providing advice and assistance; and promoting social policies to protect the poor and most vulnerable to ensure that they are better protected from the burden of adjustment at times of crisis.

Taken together these recommendations represent a significant strengthening of the international financial system which will help reduce the risk of financial crises and make it easier for the international financial community, especially the IMF, to manage future crises effectively. We are working closely with the IMF to see that these initiatives and reforms are implemented successfully.