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Weapons of Mass Destruction (WMD)

Washington File

12 April 2003

Transcript: G-7 Finance Ministers Urge World Bank/IMF Involvement in Iraq

(They say cooperation needed to find, freeze regime's assets) (2390)
Finance ministers and central bankers from the Group of 7 (G-7)
industrialized nations April 12 agreed that the international
financial institutions should conduct a preliminary needs assessment
of Iraq and provide the country with technical assistance as soon as
possible, says U. S. Treasury Secretary John Snow.
Briefing reporters at the end of two days of meetings in Washington of
ministers and bankers from Canada, France, Germany, Italy, Japan, the
United Kingdom and the United States, Snow said the group also agreed
that international cooperation is needed to "find, freeze and marshal"
the assets of Saddam Hussein's regime.
"We recognize the need for a multilateral effort to help Iraq," the
group said in a post-meeting communiqué issued the same day. "We
support a further U.N. Security Council resolution [regarding an
independent Iraq]. The IMF [International Monetary Fund] and the World
Bank should play their normal role in rebuilding and developing Iraq,
recognizing that the Iraqi people have the ultimate responsibility to
implement the right policies and build their own future," the
communiqué said.
The group reiterated that fighting terrorist financing remains a key
priority, said Snow, who chaired the meetings. The ministers and
bankers also repeated their commitment to strengthening national
financial crisis prevention and resolution measures, he said.
The group also agreed that foreign aid works best in countries with
good governance and environments conducive to private-sector economic
growth, Snow stressed. He said the group underscored the importance of
trade liberalization, especially in agriculture and financial
services, for global economic growth and reduction of poverty.
The G-7 remains committed to the Millennium Development Goals -- which
have broad international support -- to halve global poverty from 2000
to 2015, according to the group's communiqué.
The group will develop an approach for helping countries not eligible
for assistance from the World Bank's lending arm, the International
Development Association (IDA), the communiqué added. The approach will
be discussed at the G-7 meeting in May in France, it said.
In a separate April 12 statement of progress on an action plan adopted
in April 2002, the G-7 urged the IMF to intensify efforts to make
surveillance of its members' economies "more comprehensive,
independent and accountable."
The statement said the G-7 supports the promotion of early collective
action clauses for sovereign bond contracts. It added that the
sovereign debt restructuring mechanism proposed by the IMF needs
further discussions on topics such as aggregation, scope of debt and
inter-creditor equity.
Snow said he also met separately with finance ministers of several G-7
and non-G-7 countries, including those of Central American nations,
Brazil, South Africa, France, Russia and Japan.
He said all G-7 members pledged to pursue domestic economic policies
that would strengthen investor confidence.
He added that the basic U.S. economy "continues to perform well" and
that the budget deficit is "manageable."
Following are the texts of Snow's statement, the G-7 communiqué and
the G-7 action plan:
(begin transcript)
(begin Snow statement)
Statement by Treasury Secretary John Snow after meetings with the G-7
Finance Ministers and Central Bank Governors
Good afternoon. I was very pleased to host my fellow G-7 Finance
Ministers and Central Bank Governors over the last two days to discuss
developments in the world economy and the challenges that confront us.
I appreciated the opportunity to engage on some very important issues
with my colleagues.
One important issue is the future of Iraq. During our bilateral
discussions and in the G-7 meetings we began substantive discussions
about how our nations and the international institutions can work
together to help the Iraqi people recover -- not just from 25 days of
conflict, but from 25 years of economic misrule. We agreed that the
international financial institutions should provide technical
assistance and expertise in Iraq and undertake a preliminary needs
study. I noted the importance the United States attaches to
international cooperation as the people of Iraq claim their liberty.
Cooperation is necessary in the efforts underway to find, freeze and
marshal the assets of the Saddam regime and there was broad agreement
on that subject as well.
And again we recognized that cooperation is vital for providing
humanitarian assistance and for the challenges of reconstruction
ahead. We had useful discussions about how to proceed with the Iraqi
debt -- recognizing that the Iraqi people cannot bear the burden of
current debt levels -- and we recognize the need of the Paris Club to
begin to address this issue.
We shared the view that growth in our economies is not as strong as it
needs to be -- both because of geopolitical uncertainties and other
underlying weaknesses. A reduction of geopolitical uncertainty will
help a global recovery, but this alone will not bring about the strong
and lasting growth essential for our countries and for the world. Each
of us pledged to pursue economic policies at home that support strong
growth with low inflation, to raise potential growth through
productivity-enhancing structural reforms, and to strengthen investor
confidence through continued improvements in corporate governance
practices, market discipline, and transparency.
Here in the United States, President Bush's jobs and growth plan will
enhance growth potential over the long term. I underscored the need
for structural reform in Europe and Japan so that all are contributing
to global growth.
Terrorism financing continues as a key priority. We reiterated our
commitment to implement the work plan we laid out in February and
thereby keep our financial institutions and systems safe from abuse by
terrorists. We reiterated our commitment to wage war against terrorist
financing.
We also reiterated our commitment to strengthen crisis prevention and
resolution measures as reflected in the communiqué. We also adopted an
action plan which documents the progress made last year and charts a
course for future activity.
As for crisis resolution, we welcomed the strong leadership that
Mexico has shown, and there was broad agreement on the need to move
forward with clauses to promote an orderly restructuring process.
We reaffirmed our support that aid is most effective in countries with
sound policies, good governance, and an environment conducive to
private sector-led growth.
Finally, we underscored the importance of trade liberalization to
global growth and poverty reduction. Successful implementation of the
Doha Development Agenda, in particular the agricultural and financial
services agendas, offers potential benefits for all countries.
(end Snow statement)
(begin G-7 communiqué)
Statement of G-7 Finance Ministers and Central Bank Governors 
April 2003
We met today at a time in which the world economy faces many
challenges. In this light, we reaffirm our commitment to multilateral
cooperation.
Growth in most of our economies has been subdued, though uncertainties
have diminished. A strong and lasting recovery is essential for our
own countries and for the world. To this end, we each commit to pursue
sound macroeconomic policies that support sustained growth. In a low
inflation, low interest rate environment, there is potential for
higher growth through productivity-enhancing structural reforms, and
to buttress investor confidence through continued improvements in
corporate governance practices, market discipline, and transparency.
We will respond as needed to developments in the economic environment.
We will continue to monitor exchange markets closely and cooperate as
appropriate. We underscore the importance to global growth and poverty
reduction of successful trade liberalization through the timely
implementation of the Doha Development Agenda, notably in financial
services.
We encourage all emerging market countries to pursue sound policies
and to enhance their investment climates. These policies will help
attract financial flows, importantly including foreign direct
investment, to reduce external vulnerabilities, and to support
sustained growth. We welcome the strong macroeconomic policies and
ambitious structural reforms that Brazil's authorities are
implementing.
We reiterate our commitment to strengthen crisis prevention and
resolution measures. We are pleased to see progress being made on each
element of our Action Plan of last April, as detailed in the
accompanying update. We will continue to work to further
implementation in this area.
We reaffirm our strong commitment to combat terrorist financing and
pledge to maintain the momentum we have achieved thus far. We will
work with the Financial Action Task Force [FATF], the U.N., and the
International Financial Institutions to implement the work plan that
we endorsed in February. We welcome the Action Plan of the IMF and
World Bank, and are encouraged by the progress of the Pilot Program
agreed with FATF; we urge them to successfully carry forward this
important initiative. We look forward to revised FATF recommendations
by June, establishing an enhanced standard in the fight against
financial crime.
We reaffirm our February commitment to address the challenge of global
poverty and our support for the Millennium Development Goals and the
Monterrey consensus. Achieving these will require mobilization of
greater financial resources by developed and developing countries. We
will continue to focus on the goals and their financing, including
facilities, with a view to progress by Evian. Aid is most effective in
countries with sound policies, good governance, and an environment
conducive to private sector-led growth. We reiterate our support for
NEPAD [New Partnership for Africa's Development] principles. We will
develop an approach for dealing with non-IDA [World Bank's
International Development Association] countries within the Paris Club
for consideration at our May meeting. We also encourage developing
countries, working with the World Bank, to integrate trade objectives
as key elements of their PRSPs [poverty reduction strategy papers] and
CAS [country assistance strategy] lending programs.
We recognize the need for a multilateral effort to help Iraq. We
support a further U.N. Security Council resolution. The IMF and the
World Bank should play their normal role in rebuilding and developing
Iraq, recognizing that the Iraqi people have the ultimate
responsibility to implement the right policies and build their own
future. It is important to address the debt issue and we are looking
forward to the early engagement of the Paris Club [informal group of
official creditors].
(end G-7 communiqué)
(begin G-7 action plan)
G-7 Action Plan Implementation
April 2003
In April 2002, we adopted an integrated Action Plan to strengthen
crisis prevention and resolution measures designed to promote
conditions for sustained growth of private investment in emerging
markets. The progress made on each element of the Action Plan is set
out below.
Surveillance and Crisis Prevention -- Better information is key to
sound economic analysis and improved pricing of risk, with a view to
promoting more stable capital flows. In this regard, the IMF has made
progress in deepening its surveillance capacity, including through the
development of more robust debt sustainability analyses and greater
focus on national balance sheets. The IMF and its Independent
Evaluation Office (IEO) have identified areas for further progress to
make surveillance more comprehensive, independent and accountable,
including a fresh perspective in program countries and improved
analysis of vulnerabilities. We urge the Fund to intensify its work in
these and other critical areas, including currency mismatches,
reporting progress to the 2003 Annual Meetings. To complement these
measures, we support the presumption of publication of Article IV
reports, Public Information Notices (PINs) of relevant Board
discussions, program documents, and reports on the observance of
standards and codes (ROSCs), especially for countries with IMF
programs, while taking into account its impact on deletion and
correction policy. Program documents for cases of exceptional access
should always be published.
Access Limits -- Consistent with the need for greater discipline in
the provision of official finance in crisis situations, we support the
IMF Board's decision that normal access should be limited to 100
percent of quota in any one year and a cumulative total of 300 percent
of quota. Lending under any facility, or combination of facilities,
above these limits will be considered exceptional. Over the past year,
the IMF has set out criteria and procedures to inform decisions and
judgments for cases where exceptional access is contemplated. These
stronger procedures, including early Board involvement and a separate
report evaluating the case for exceptional lending, will be applied to
any exceptional lending, even where the member is not experiencing a
capital account crisis. We welcome the recent establishment of a
strong presumption that only the SRF [supplemental reserve facility]
will be used for any exceptional lending to address significant
balance of payment pressures on the capital account. We also welcome
the progress made in clarifying the Fund's policy for lending in cases
where members are in arrears to their private creditors.
Code of Conduct -- In the light of growing interest in exploring a
voluntary "code of good conduct", and since good investor relations
are key to timely, orderly debt restructurings, we have instructed our
officials to prepare a report, in consultation with issuers and the
private sector, on these issues by our Fall meeting. We note that the
Fund has already started to examine the concept and we look forward to
a progress report on its work.
Collective Action Clauses (CACs) -- We remain committed to promoting
the early and widespread adoption of CACs. To date, experts from the
private and official sector have made progress toward developing model
clauses for use in sovereign bond contracts. We expect that G-7
countries will continue their leadership by adopting CACs in their own
bonds governed by the laws of a foreign jurisdiction. Consistent with
the policy of the European Union to introduce these clauses in new
foreign bond issues, some EU members will start issuing bonds with
such clauses this year. We welcome the leadership that Mexico has
shown by including CACs in its successful bond issues under New York
law.
Sovereign Debt Restructuring Mechanism (SDRM) -- The extensive
analysis and consultations undertaken in the course of the Fund's
development of a concrete SDRM proposal have promoted a better
understanding of the issues to be addressed in the more orderly
resolution of sovereign debt crises. In view of the experience gained
through the implementation of CACs and the interest in a code of
conduct, and recognizing that it is not feasible now to implement the
SDRM proposal, work should continue on issues raised in the SDRM
discussions, such as aggregation, scope of debt, and inter-creditor
equity that are of general relevance to the orderly resolution of
financial crises.
(end G-7 action plan)
(end transcript)
(Distributed by the Office of International Information Programs, U.S.
Department of State. Web site: http://usinfo.state.gov)



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