IMF Actions Supported: Group of Seven Calls for Debate on Implications of Asian Crisis for Strengthening Monetary System

• Pages: 65-69

Page 65

Finance ministers and central bank governors of the Group of Seven industrial countries met in London on February 21 for their regular winter meeting to review recent developments in the world economy and financial markets-in particular, the recent and ongoing turmoil in Asia. IMF Managing Director Michel Camdessus joined the Group of Seven-which comprises the United States, Japan, Germany, the United Kingdom, France, Italy, and Canada-for part of the discussions. In its communiqué, issued on February 21, the Group of Seven called for a debate on the implications of the Asian crisis for strengthening the international monetary system. It added that the impact of the Asian crisis on world economic growth would be manageable if the affected economies undertake tough reforms to make their markets more open and transparent. The Group of Seven also urged the IMF to develop a code of conduct on transparency in fiscal policy to help forestall future crises. (See page 69 for excerpts from the Group of Seven communiqué.)

U.K. Chancellor of the Exchequer Gordon Brown opened the meeting by calling for a "considered and wide-ranging debate on the causes and the lessons of recent events." An important item on the agenda was the role the IMF could play in helping to prevent crises like the Asian turmoil. Calling for the development of a code of conduct, the Group of Seven communiqué said that an early response to IMF advice is vital to prevent economic problems from turning into crises and spreading to other countries. Further action is also required, Page 69 according to the Group of Seven, to allow countries to take full advantage of global capital flows by opening their financial markets. In this context, the Group of Seven communiqué called for speedy amendment of the IMF's Articles of Agreement defining the IMF's role in capital account issues. In light of the IMF's central role in the international monetary system, the communiqué also urged early implementation of the IMF's quota increase.

The Group of Seven emphasized its support for the approach taken by the IMF and other international financial institutions-particularly the emphasis on structural reforms to reduce inappropriate government...