Camdessus Urges Second Generation Reforms To Tap Globalization's Opportunities

• Pages: 224-225

Page 224

On July 2, IMF Managing Director Michel Camdessus addressed the High-Level Meeting of the UN Economic and Social Council (ECOSOC) in Geneva. He addressed what needs to be done to foster an enabling environment for development and the IMF's role in this effort. Following is a summary of his remarks.

'First generation' reforms are not enough to raise competitiveness and accelerate social progress.

Globalization, stressed Managing Director Camdessus, raises new issues for all countries and for the international community. A particularly favorable world economy-one characterized by solid growth, low inflation, reduced fiscal deficits, and significant structural reforms in many countries-offers a "window of opportunity" to pursue the bold initiatives and reforms needed to meet globalization's challenges. The IMF's strategy still begins with helping its members reestablish basic macroeconomic equilibria and complete the structural reforms needed to allocate resources efficiently and "jump-start" the engines of growth. The importance of a sound macroeconomic environment is rooted in both the increasing competition for capital and investment and the desire to accelerate social progress. This approach has provided the impetus for growth even in countries where the problems of under-development have seemed intractable.

"But we have learned," said Camdessus, "that this 'first generation' of reform is not, by itself, enough- either to accelerate social progress sufficiently, or to allow countries to compete more successfully in global markets." He cited the IMF Interim Committee's "11 commandments" for broadening and strengthening the adjustment process and stressed four elements that constitute the "second generation" of reform and that are indispensable in boosting real per capita growth significantly and encouraging greater equity in income distribution:

* Quality of fiscal adjustment. Reducing budget deficits is key, but improving the composition of fiscal adjustment can have profound effects on economic welfare, saving, investment, and growth, according to Camdessus. The sustainability of growth depends on development of human resources, he said, again citing the Interim Committee.

* Bolder structural reforms. Too often, citizens are disappointed with initial stabilization and reform, because they do not see their own economic situation improving. Indeed, many obstacles to private sector initiative, job creation, and foreign...