1998 Annual Meetings Overview: Governors Stress Cooperative Approach to Crisis; Endorse Concept for New Financial Architecture

• Pages: 305-308

Page 305

Gathering amid the most pervasive global turmoil in a generation, the governors of the IMF and the World Bank at their fifty-third Annual Meetings unanimously agreed on the need for an urgent cooperative effort to tackle the far-reaching problems facing the world economy. They also emphasized that priority should be given to developing the basis for a new financial architecture.

As IMF Managing Director Michel Camdessus put it in his opening address to the meetings on October 6, the crisis "has already cost hundreds of billions of dollars, millions of jobs, and the unquantifiable tragedy of lost opportunities and lost hope for so many people, particularly among the poorest." Four basic questions, he said, were: Where do we stand? What has gone wrong? What should be the basis for a new financial architecture? How can the international community move toward a more secure, stronger international monetary system?

At the meetings, held in Washington, D.C. on October 6-8, central bank governors and finance ministers

The Brazilian authorities and the IMF management have discussed during the Annual Meetings the main lines of the Brazilian government's proposed economic policy framework. The authorities have emphasized their determination, highlighted in the September 23 speech of President Cardoso, to put rapidly in place a strong, front-loaded, and sustained fiscal adjustment program designed to stabilize the ratio of the public debt to GDP by the year 2000. This will require the achievement as from 1999 of primary surpluses of the overall public sector in the range of 2.5-3 percent of GDP. The government is preparing the policy initiatives needed to ensure representing the IMF's 182 member countries discussed the continuing impact of the crisis on both their national economies and the world economy as a whole. They expressed their serious concerns at the deepening recessions in Japan and several Asian economies; the impact of the financial crisis in Russia, stock market declines across the Page 306 globe, weakening prices for major commodities, and the impact that all these troubling developments were having on the orderly process of economic adjustment and prospects for growth in their economies. Amid this gloomy outlook, governors saw some positive developments, including continuing growth in the main industrial countries of North America and Europe; the contribution to monetary stability of European economic and monetary union (EMU); and indications that growth had been maintained in China and India and that some Asian crisis countries had moved toward financial stabilization and strengthened external positions.

Consensus of the Meetings

Summing up in his concluding remarks the consensus that had been reached at the meetings, the Managing Director said that there had been a sober and substantive assessment of the causes of the immediate crisis and its global effects. The governors had moved a long way forward in identifying the steps needed to address the crisis, he said, and were unanimous that "a global crisis requires a global response."

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