Annual meetings 2008: Communiqués coverage
News||12 October 2008|
G24 communiqué (10 October)
The G24 is a grouping of some of the most important developing countries in the World Bank and IMF. The G24 Communiqué is the first off the block, coming in earlier than the G7. It addressed the global economy first and foremost, but the lengthy statement for this meetings reflects the breadth of issues on the table.
The communiqué used the occasion of instability in the world markets as a chance to once again tell the IMF to spend more time looking at "advanced economies" and castigating the IMF for not evaluating the vulnerabilities of big rich countries as closely as it evaluates emerging markets. The G24 has long complained that the Fund is not even-handed, and "ministers reiterated their call for stronger surveillance of advanced economies policies and financial systems." The G24 recognised the "need for fundamental reform of the regulatory and supervisory framework as well as clearer accounting rules and transparency," and "fundamental reform of the international financial architecture and improved instruments to assist developing countries in the face of potential instability." It was unclear how far the G24 leaders are willing to go in demanding an overhaul of the international financial systems. A paper presented to the G24 technical group meeting suggested the need for comprehensive regulation of all actors in financial markets with a stress on transparency and counter-cyclicality.
As a response to the crisis the G24 welcomed the lending review, and again requested that the IMF implement an acceptable instrument for providing financial support to emerging market countries facing a crisis. So-called 'contingency financing' has been a long-term request of the G24. The previous IMF instrument, the Contingent Credit Line (CCL), was allowed to expire as no country had ever used it. Developing countries complained that it would not have provided enough financing fast enough to make a difference in the case of a financial crisis. They also disliked the conditions attached to its financing. This has been on the IMF's agenda for several years, but it seems the financial crisis increased the urgency of the demands. The G24 also called for higher loan limits, lower conditionality, and better terms on IMF lending. On the food and fuel price crises, there was displeasure expressed at the IMF's speed of response but acceptance of the World Bank's work.
The next main topic was World Bank governance, on which the communiqué dwelt at some length. The demands are familiar to those who follow the debate: an immediate additional board chair for Africa; open and meri-tbased leadership selection for the IMF and World Bank, and a call "for parity in the voting shares between developed and developing countries as a minimum goal." Over the summer numerous rounds of discussions were held at the World Bank board and other venues such as the Development Committee deputies meeting. The options paper went back and forth on either including parity as an option or deleting it - with the developed countries fairly united in absolutely opposing it as a concept. The rich world seems to have dug its heels in on this one and most expectations are for a very modest reform over the next 6 months to 1 year that does little more than shift a few percentage of voting power towards developing countries.
Finally the G24 ministers turned their attention to climate change, where the language they used will not be welcome by many environmental NGOs. While the focus on the UN Framework Convention on Climate Change (UNFCCC) as the venue for negotiation was solid, there was also a welcoming of the Bank's strageic framework document and the climate investment funds. The debate over technology choice is the thorny one as "they recognised the importance of supporting the supply of both traditional and renewable energy based on country demand and preferences." This is anathema to the NGOs who have demanded that the World Bank cease lending for fossil-fuel projects and vastly increase resources flowing to new renewable energy programmes.
G7 communiqué (10 October)
The group of the 7 largest economies in the world usually issue a communiqué on the friday before the IMFC meeting. This year however, they have not done so. Of the seven, four countries (US, UK, Germany, France) have experienced failures or near-failures of major financial institutions in the last 2 weeks. Commentators and financial markets were looking to the G7 finance ministers meeting to produce a plan to rescue the financial sector. As the cover of the newspaper The Economist put it: "saving the system". So the communiqué was dropped in favour of a "plan of action".
The plan however was short on details and long on blank space on a page. It was a terse 12 sentences, with the main content in 5 bullet points. While financial and media analysts had called for something more detailed than a statement of principles, that seems to be what the G7 delivered, but simply renamed it a plan of action. It contained the cryptic "we are committed to thepressing need for reform of the financial system" without any further elaboration. Of course the push for significant reforms such a ban on all speculative trading and the regulation of all financial institutions including hedge funds and private equity firms may not be what they all have in mind.
However, in terms of the agenda of the IMF and World Bank, the G7 has left the world wondering. Not wondering about their stance towards the institutions and their policies - that will be made abundantly clear through IMFC and Development Committee statements, stances at board meetings, and other public pronouncements , not to mention all the other back channels that the rich countries use to influence the agenda of the IFIs - but wondering about just what is the point of the G7 communiqué after all. If the work of the IMF and World Bank continue on despite the absence of a the communiqué, that what is all the sound anf ruy about?
IMFC communiqué (11 October)
The International Monetary and Finance Committee (IMFC) is the direction setting body of finance ministers and central bank governors for the IMF. The Egyptian finance minister Yousef Boutrous-Ghali was selected to head the committee in early October, the first time the chair of the committee comes from a developing country. The late selection meant that the committee might not have had a chance to have its deputies meeting in the usual fashion - about a week before the IMFC meeting itself. This may explain why the communiqué was much shorter than usual.
In fact the topics usually covered in the communiqué - the IMF's policy agenda, plans for IMF reform, an assessment of global economic growth, etc - were downgraded from communiqué status and put in an attachment. The new format was adopted before of the financial crisis, with the body the communiqué a terse 7 paragraphs. Two of those were perfunctory, one was a mere restatement of the G7 "plan of action" (see analysis), and one was an endorsement of that plan of action. That left a scant 3 paragraphs of any substance. Despite commentators and some finance ministers lambasting the Fund for being on the sidelines of the crisis and doing little in the way of prevention, the IMFC as a whole still seems to think the IMF has a big role to play. The IMFC called for "further intensive Fund engagement across the membership to discuss and develop robust policy responses to the crisis" and "asks the Fund to focus discussion, and enhance cooperation, with a wide range of perspectives with the [Financial Stability Forum], the G-20, and others on this issue in an inclusive setting." The notable absence from the statement is a call for a "Bretton Woods 2", a new international conference that would remake global economic governance and the international financial architecture.
The attachment does hit on some of the key policy issues facing the IMF. The financial crisis has put a few things on the agenda, esp a review of the Fund's lending instruments. Predictably the IMFC welcomed this, but used some strong language, given the usual diplomatic tone, on the need to move more quickly on some elements: "The Committee strongly recommends that decisions be taken on an accelerated basis in those areas where there is strong consensus and particular urgency - such as the establishment of a new liquidity instrument - and on the full range of issues by the time of the 2009 Annual Meetings." The liquidity instrument, a lending facility that should disperse a lot of money quickly and without onerous conditions, has been a request of developing countries and the G24 group for a long time (see G24 communiqué). The IMFC statement either indicates that the board is already close to consensus on this issue, or is close enough that the objections of one or more of the major shareholders may be overruled by the others.
In other areas, the IMFC did its usual to welcome the initiatives that are already in place: "welcom[ing the recent coordinated monetary policy actions undertaken by several central banks", "welcom[ing] the mission statement on low-income countries", "welcom[ing] the development of the Santiago Principles by the International Working Group of Sovereign Wealth Funds (SWFs)", and "welcom[ing] the ongoing re-assessment of the Fund's governance". Little surprise on any of these fronts. On the IMF governance front at least one element in the statement may prove important in a few years time: "The Committee also looks forward to further work by the Executive Board on elements of the new quota formula that can be improved before the formula is used again." This seems to the commit IMF members to opening up the quota formula that determines IMF voting rights for debate in advance of the next quota adjustment in 4 and half years time.
In a final interesting note, the IMFC indicates: "Work should also be undertaken toward a reshaped Financial Sector Assessment Program that is better integrated with the Fund's surveillance mandate, and embraces regional perspectives." The FSAP was instituted after the Asian financial crisis and was supposed to check on the regulatory and supervisory arrangements of IMF members. Predictably, everyone seemed to think the programme was a great success until this crisis started. Of course this financial panic started in the US, one of the few countries not to undergo the voluntary assessment yet. It is unclear what the work programme on reshaping the FSAP entails except to perhaps incorporate more of the global analysis found in the IMF's World Economic Outlook and Global Financial Stability Report. Would they perhaps be willing to rethink some of the standards upon which the FSAP is based, especially if those standards are not radically altered in light of the evidence of their failure in preventing this crisis?
Development committee communiqué (12 October)
The meeting was dominated by discussion of the credit crisis, though, nothing concrete is promised. Existing initiatives on the food crisis are repeated and an initiative called Energy for the Poor is mooted, though this is still on the drawing board. Apparently it will "provide rapid assistance to social safety nets, and support countries' longer-term vulnerability to high and volatile food prices."
Climate Change: The Strategic Framework on Climate Change is welcomed, though it's clear little time was devoted to discussing it. The "primacy of the UNFCCC process" is emphasised, but strong support is given for the Bank's role in climate financing. The communiqué encourages the Bank to "strengthen its resource mobilization efforts," and "give increased attention to mobilizing resources for adaptation."
Governance: The expected minor reforms are mentioned: a third chair for Africa, small increases in voting share for developing countries at IBRD and IDA. Apparently there is "considerable agreement" that the president should be selected in a "merit-based and transparent" process, with "nominations open to all Board members". The comminiqué indicates that the reform process will continue for quite some time, possibly up to the 2011 Spring Meetings. The board is tasked to undertake "an important shareholding review" that will consider "moving over time towards equitable voting power between developed and developing members." In the run up to the annual meetings, World Bank President, Robert Zoellick also promised a commission, led by former Mexican president Ernesto Zedillo to modernise the Bank's governance structures.
Aid: Beyond encouraging countries to ensure that aid volumes are "consistent with existing commitments" the Bank promises to develop an action plan to implement the Accra Agenda for Action before the Spring Meetings next year.
This text may be freely used providing the source is credited.
Published: 12 October 2008 , last edited: 22 April 2010
Viewings since posted: 7093
Climate Investment Funds Monitor 7: April 2013 25 April 2013
Working paper: The private sector and climate change adaptation: International Finance Corporation investments under the Pilot Program for Climate Resilience 24 April 2013
The UK's role in the World Bank and IMF: Department for International Development and HM Treasury 13 March 2013
The World Bank and industrial policy: Hands off or hands on? 6 December 2012
Climate Investment Funds Monitor 6: October 2012 26 October 2012