Group of 24 communiqué: Representatives of developing countries call for comprehensive approach to debt issues
| Pages | 323-325 |
Page 323
Global economic prospects and financial markets have improved in the past few months, largely allaying the earlier fears of a worldwide economic recession and a financial meltdown. However, the recovery in the developing world is still quite fragile, and a number of risks and uncertainties continue to pose challenges for policymakers.
A major concern arises from the unbalanced growth pattern among major industrial countries. The persistence of macroeconomic imbalances generates the potential risk of sharp corrections in asset markets, especially in the U.S. equity market and in foreign exchange markets worldwide. Despite some stabilization in international financial markets, net capital flows to developing countries and transition economies have not yet recovered from the very low level reached in 1998. Moreover, the distribution of flows remains uneven, and interest rate spreads are still very large. Oil prices remain volatile, while nonfuel commodity prices remain depressed, and an early improvement in developing countries' terms of trade appears unlikely. Increasing protectionist tendencies in industrial countries, particularly nontariff barriers, aggravate difficulties for developing country exports. Despite the various initiatives currently in place to address the problems of the heavily indebted poor countries, comprehensive relief is yet to be achieved. Furthermore, adverse reactions to actual or perceived Y2K compliance problems create an additional risk factor in the lead-up to the year 2000.
In noting the adjustment efforts undertaken by developing countries, ministers consider that the uncertainty surrounding the sustainability of global growth requires a parallel effort on the part of industrial countries, particularly by strengthening macroeconomic policy coordination. They are of the view that enhanced policy coordination is crucial to contain sharp fluctuations in exchange rates among the major international currencies, which create severe difficulties for developing countries. Ministers stress that a significant lowering of selective tariff and nontariff barriers in industrial countries is imperative to help developing economies integrate into the global economy and achieve satisfactory growth rates.
Ministers recognize that the role of private capital flows will continue to expand in an increasingly integrated global economy. Therefore, it is difficult to visualize the prevention or resolution of financial crises without direct and timely private sector involvement. In this regard, the major challenge for the international community is to develop a market-friendly strategy for involving the private sector in a manner that does not disrupt or unduly raise the cost of capital flows to developing countries. Ministers suggest that any strategy should minimize spillover effects on other borrowers. They encourage further progress toward voluntary arrangements for private sector participation before crises arise, such as through contingent credit lines, embedded call options, and debt-service...
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