Joint Ministerial Committee
Boards of Governors of the Bank and the Fund
Transfer of Real Resources to Developing Countries
Washington, D.C., September 25, 2005
MR. MILVERTON: Good afternoon, everyone, and thank you very much for attending the Development Committee Press Conference.
Joining us on the panel are, from left to right, Mr. Rodrigo de Rato, the Managing Director of the International Monetary Fund; Trevor Manuel, Finance Minister of South Africa and Chairman of the Development Committee; Mr. Paul Wolfowitz, the President of the World Bank.
Without further ado, I'll give it over to--
MR. WOLFOWITZ: Actually, it's right to left, Damian.
MR. MILVERTON: Oh, I'm sorry. It's terribly egotistical of me.
MR. MILVERTON: From my perspective; from yours, I think you get it.
I'll hand it over to Mr. Manuel and let him open up.
MR. MANUEL: Thank you very much, and good afternoon.
It is, as you know, the last press briefing of the Development Committee that I will be sharing with you, this having been my last meeting as Chair of the Development Committee.
A number of important decisions--key amongst those is that we entered this weekend with something that certainly had some life in the Lancaster House discussions of the G-7 Finance Ministers in June. It went from there to Gleneagles. It secured the agreement of G-8 heads of state. It entered the meetings here this weekend as G-8 agreement. It has emerged as "G-184" agreement.
The agreements now carry the full weight of support of all member states of the IMF and the World Bank, and they set the basis for the next moment.
These agreements are premised firstly on 100 percent debt relief, and in the Development Committee this morning, a request--in fact, it wasn't a request; it was an agreement--we battled to craft it into the Communiqué. We weren't sure whether Paul Wolfowitz wanted to do this right away or whether it was the 24 Ministers gathered in the room, but an agreement that in a very short space of time, the details should be worked out within the World Bank, shared with the Board, shared with the key member states, the 24 who make up the Development Committee, and then taken forward.
I think that that is certainly a sea change from where the discussions have been previously and one that sets, then, the basis for everything else that we have desired, because that agreement allows for the faster implementation of the Millennium Development Goals. It is there, it is on the table, and the acceleration of the MDGs therefore becomes possible. We have a strong agreement on that front.
Some issues of detail that we need to bring together relate to the effectiveness of donors' aid, and we will talk about this in the context of the quality of aid, and there, you are looking for predictability and certainty, and that was also part of the Gleneagles agreement, and we must sort out the detail of that so that IDA, the International Development Association--as you will see in the Communiqué, no part of the agreement on debt will compromise the resource availability in IDA. That is intact, but over and above that, a commitment from donor nations to additional resources on the table.
So this places us in a very, very strong position. Other matters that have been part of the discussions here would include a commitment, a renewed commitment, from the World Bank, for instance, on the financing of infrastructure as part of economic growth and expansion, taking account of the many lessons learned, some of the failures of the past, and ensuring that those can proceed--you don't not have to finance, then, infrastructure because there have been some mistakes made in the past.
That is a very, very important commitment to have arisen from the meeting here today. So in respect of development broadly, in respect of the issues that confront these two institutions, in respect of the mandate of the Development Committee that is about the sufficiency of resources for development and the allocation thereof, I think we can all say thank you very much to the World Bank and the IMF. The Development Committee is satisfied, as reflected in the Communiqué, that those agreements are met.
We also spent some time, and we were advised today by Pascal Lamy, the Director-General of the WTO, of the issues at hand. Part of what we quizzed was why it is that so many people in one room would agree about what needs to be done, and when they meet in another room as trade ministers, they can't agree about what needs to be done. But the focus is clearly on the fact that the Hong Kong Ministerial of the Doha Development Round cannot fail. It cannot fail because it would in fact undermine the strength and the quality of the agreements reached in these meetings in the Development Committee today, in the IMFC yesterday, in the UN ten days ago, in Gleneagles 11 weeks ago--it would undermine all of that if the Hong Kong Ministerial failed. So there is no room for error. We have to ensure that the next few weeks are in fact about the intensification of that agenda ensuring that there is no room for escape therefrom.
Thank you, Damian.
MR. MILVERTON: Thank you very much.
MR. WOLFOWITZ: Good afternoon, and let me start by saying what a pleasure it is to be able to share the podium here with Rodrigo de Rato and Trevor Manuel and to thank them not only for their guidance during what has been my first Annual Meetings as President of the World Bank but in the last few months, in helping me understand better the complexities of this enormous job.
Unfortunately for me, these are my first Annual Meetings, and they will be the last ones where Trevor chairs the Development Committee. You do a magnificent job and are going to be a very hard act to follow. You have guided this Committee through a critical period for our institutions and, as demonstrated again today, with tremendous candor and wisdom and passion and good humor, and thank you very much.
Earlier today in my remarks to the Development Committee, I congratulated the delegates on accomplishing so much in two days, in which time, I believe we have made significant progress in fulfilling our obligations to the world's poorest people, whom we ultimately represent at these meetings.
The high point of the meetings is the historic endorsement provided by both the Development Committee and the IMFC of the G-8 proposal to cancel 100 percent of the debts of some of the world's poorest countries. And, as Trevor Manuel just said, it has gone from being a G-8 agreement to being a "G-184" agreement.
The path to complete debt relief is now being cleared--has been cleared. Across Africa and around the world, leaders in 38 countries will no longer have to choose between spending to benefit their people and repaying impossible debts, often the legacy of governments past.
From concert stadiums to high-profile summits, people from rich and poor countries alike have been moved by the suffering we see in so many parts of the world. They have demanded action, and with this debt relief agreement, they have it.
At the World Bank Group, we will move swiftly to give the Bank's Board of Directors a paper outlining a compensation schedule and a monitoring system--a process that can be completed within weeks.
I am particularly pleased that in this breakthrough to 100 percent debt relief, the Bank's shareholders committed to preserving IDA's financing capability dollar-for-dollar by assuring that there will be additional funds.
The Development Committee also gave its full support to the Bank's Africa Action Plan. There was a unanimous view that we have reached a critical point in history with a real opportunity to help Africa accelerate growth and reforms.
Taken together, the G-8 commitments and the Africa Action Plan represent the largest commitment to increased development assistance in 50 years.
As important as debt relief is, this scaling up of assistance to Africa is even more so, because it is a commitment to support those countries outside the scope of the debt relief effort and over a sustained period of time.
But this increased assistance will only be effective if it is matched by continued strong performance by the developing countries. As Prime Minister Blair has said, it's a deal for a deal. It is the improved performance of many African countries that gives me hope that this is a moment of real opportunity.
Perhaps even more important than either of these two tremendous advances, however, is the need for a comprehensive trade agreement at the Doha Round of the WTO negotiations in December. A trade agreement in Hong Kong would provide the spur for investment and economic growth that promises a lasting exit from poverty for millions, even billions, of people in developing countries.
The momentum we now have must be maintained heading into the WTO negotiations in Hong Kong. We have agreement on more aid. We have consensus on debt relief. Now let's complete the picture and deliver a true development round on trade.
MR. MILVERTON: And now we pass over to Mr. Managing Director.
MR. DE RATO: Thank you very much.
First of all, I want to join Paul in saying that the tenure of Trevor Manuel as Chairman of the Development Committee has been a very impressive one. I had the chance of working with him as a Minister for two years and as the Managing Director for another two, and I can tell you that he has been able to deliver very important steps, both in the depth of the discussions but also in the consensus that he has been able to promote.
And I am very glad that he has been the chairman in today's decision, which I think is a very, very important step in the long march toward the Millennium Development Goals. And, as Paul said, this is a historic moment in which opportunities are open for many low-income countries.
From the point of view of the International Monetary Fund, we arrived to an agreement yesterday in our equivalent IMFC Committee, and I just want to say that yesterday, too, the Ministers endorsed two important new instruments of the Fund to deliver help and advice and also financing in certain moment to low-income countries, both the Policy Support Instrument and the Shock Facility, that I hope will be a very important instrument for low-income countries facing exogenous shocks from oil prices or other raw materials, and from natural catastrophes.
In terms of the increase of aid, certainly we will work with the World Bank in this very important moment in this idea of a deal for a deal. And I want to say that, as I have recently stressed on more than one occasion, we see the need, and we certainly back the need for more aid, but we see also a need for better aid, much more tailored aid, to the needs of countries and also an aid that is more predictable and an aid that is less costly in terms of red tape, and also a more intelligent and a better use of the aid. The capacity of the countries to absorb aid, especially increased levels of aid, is going to be a challenge in itself. And certainly, I think the International Monetary Fund has the expertise and is ready to provide countries with macroeconomic frameworks and policies that will help them take the best of this opportunity.
Thank you very much.
MR. MILVERTON: Thank you very much, Mr. Managing Director.
We'll throw the floor open to questions, but just before we do, a reminder to switch off your cell phones--I didn't think they could actually work down here, but obviously, I have been corrected on that one--and state your name, organization, and who you are directing your question to.
QUESTION: Jim Berger, with Washington Trade Daily. A question for Mr. Manuel--
MR. MILVERTON: No--sorry--it was Mr. Balls from The Financial Times.
QUESTION: Sorry--I was busy turning my phone off.
A question to Mr. Manuel, and maybe what you say will be so provocative that Mr. Wolfowitz and Mr. de Rato will feel compelled to respond.
As you leave the Development Committee, you have a new President of the World Bank on one side and an IMF Managing Director on the other side who is looking at the Strategic Review of the Fund.
So what would you urge them to do? What would be the things as you go that you would urge them to do to change those two institutions?
MR. MANUEL: Pass.
QUESTION: I should have left it at the first question. I'm sorry.
MR. MANUEL: You know, in both instances, this is a very poignant moment in the history of multilateralism, firstly, because there is an energy. One of the things that happened is that the G-7 Finance Ministers, or the G-8, signed a letter to Paul Wolfowitz about their commitments.
Now, it strikes a balance for partnership. I don't know if this--this letter is not so secret that you people can't know about it, Paul--sorry I spoke about it--but there is an energy, and I think that that energy is what must be taken forward.
If there has been a fear or concern, if there has been a sense even at times that the meeting was too G-8, too G-7, then I think we have bridged that. Paul Wolfowitz is now sitting with the tides favoring him. The key question that confronts him is how to maximize, because if the moment passes, then I think the World's poor are going to be left behind--feel failed, feel that the big agreements at Gleneagles and elsewhere were merely spin. So on that issue, I think the ball is really very squarely in his court, and the key is what he does with it.
In respect of Rodrigo de Rato and the IMF, I think there are a similar set of challenges, because clearly, right now, there is a measure of insecurity. On the one hand, we are dealing with a very benign environment economically, but on the other hand, there is an insecurity that arises from huge imbalances--all of those macro imbalances that pose a threat to stability going forward. And the key question for Rodrigo at the helm of the IMF is how you bring these things together, how you are able to convince people that some decisions must be taken to deal with the imbalances whilst you have a generally benign environment. If you fail to do that, it is going to be harder further down the line.
So both of them, I think, would leave these Annual Meetings with a sense of urgency about the tasks at hand. They may disagree; they may even beat me up for saying these things--but there you have it, Andrew.
MR. DE RATO: I won't beat him up, and I agree. I agree totally--I think in the sense of the macroeconomic situation of the world, there is a sense of urgency. Things are well. Things are good. The environment is benign, but risks are looming. And every country has a role to play. Certainly what we could call systemic countries may have maybe a bigger role to play, if you want to put it that way, but every country has a role to play.
I think the Fund has outlined a clear agenda for different countries, and we are, I think, making progress in convincing people that things have to be done now. But there is still a lot to do. And as somebody reminded us yesterday in the IMFC, the business cycle is not gone, so everybody should be aware of that.
MR. WOLFOWITZ: And I might just say, I think, in case I garbled my words, that the path has been cleared to complete debt relief, and at the risk of a dangerous metaphor, I think Trevor has given us the ball right in front of the goal, and the goalie has tripped, and all we have to do now is kick it in. It is basically, as I said in my statement, a matter of in the next number of weeks, putting together--outlining a compensation schedule and a monitoring system and presenting that to our Board.
MR. MILVERTON: Thank you.
I did manage to hijack you--sorry--but go right ahead.
Jim Berger with Washington Trade Daily.
I know you were briefed by the Director-General of the WTO on the status of the talks, and my question is to Mr. Manuel. Did the Committee hear about the latest meetings over Friday and Saturday in Paris, and if you did get a briefing on those, did the Committee come out more optimistic, or did you personally come out more optimistic or less optimistic or even pessimistic on the future of the talks?
MR. MANUEL: You know, essentially, this was a briefing and a confirmation of the imperatives of the moment.
One of the big risks of a meeting like this is if you are sitting in a room with economic decisionmakers from a variety of countries, the biggest risk that confronts us is that we actually think that we are the trade negotiators--yes?
So our briefings were quite general. Mr. Lamy has referred to some of the challenges, and of course, the big, big issues are in services firstly and in agriculture secondly. And without going into detail, I think that he was asking us to return to our capitals and ensure that we can convince our trade ministers that a deal--that failure to deliver the deal is clearly not acceptable.
One other point that arose very sharply and is worth repeating is that whilst there has been discussion in this meeting as well on aid for trade, aid for trade cannot be a substitute for a deal on the Doha Development Round--yes? So we can't feel good because we failed to deliver on, but we can support countries that will take strain going forward.
MR. MILVERTON: Thanks very much.
QUESTION: Ruber Barrera, Notimex Mexico.
I have a twofold question. The first one is for Mr. Wolfowitz.
Minister Gil Diaz of Mexico during his intervention this morning expressed some concern about the way the debt relief is going to be implemented. Especially, he pointed out the fact that there is a risk that the funds of IDA could not be replaced in a 100 percent way. So I wonder, would you say that the path for debt relief has been cleared? Does that mean that those concerns which in some way were echoed by Minister Palocci from Brazil have been cleared?
And the second question--this is for the panel--Mr. Gil Diaz also pointed out the necessity to consider the possibility to extend debt relief for the Latin American countries for the Inter-American Development Bank (IADB). I would like to know what is your position in that regard.
MR. MILVERTON: Thank you very much.
MR. WOLFOWITZ: As I said in my opening comments, one of the reasons that I am so pleased with this outcome is there is a commitment, started by the G-8 countries and I think now joined by everyone, on dollar-for-dollar replacement of the funds that would otherwise have gone to IDA. So IDA is kept whole, and all of the countries that benefit from IDA will continue to benefit. And indeed, I think they will benefit more because IDA resources will now be going entirely for funding development, not for repaying old loans. So it is a net benefit not only to the highly-indebted countries but to all IDA participants.
MR. MILVERTON: If anyone would like to comment on the IADB aspect--they may not, because that's not really our institution--but I'll leave that to the panel. It doesn't look like it--
MR. MANUEL: There is one element, and that is that what the responsibility of the institutions is in the present circumstance is to prevent a legal challenge, because countries may feel that some have been favored against others.
So the key issue my understanding is that both Rodrigo and Paul will go before their boards, sort out what the equality of treatment principle would be in each of the instances, and ensure that there is equality of treatment. So whether a country is in Africa, in Latin America, or in Asia, there must be equality of treatment, and that is a definitional issue rather than a regional one.
MR. DE RATO: But that's true in our institutions.
MR. MANUEL: Yes.
MR. DE RATO: There is no question about it. About other institutions, I certainly cannot say anything.
MR. MILVERTON: Thank you, sir.
QUESTION: Emit Ingersoll with ATV [ph.]
My question is for the World Bank President and the IMF Managing Director.
The European Union is scheduled to open accession talks with Turkey on October 3. How do you think this will affect Turkey's economy? Any comments?
MR. WOLFOWITZ: I'm going to say broadly I think the movement of Turkey toward Europe is a very positive development for both Turkey and Europe, and indeed, I think for the larger region in which Turkey is a part, I think Turkey's progress is something that contributes not only to the millions of people living in Turkey but to a much healthier Europe and a much healthier Middle East.
So I think this is a positive thing. It's obviously going to take a long time, but long journeys start with a few steps, so I'm hopeful.
MR. MILVERTON: Mr. de Rato, please.
MR. DE RATO: Yes. Turkey has made very impressive improvements in the last four years in terms of growth, in terms of reduction of inflation, in terms of credibility. It has pursued a very important program of reform. The Fund has been engaged in that process and is clearly engaged right now.
We have always backed the idea of the negotiations between Turkey and the European Union. Of course, that's up to them, the point of view of reaching an agreement, but we think there is a positive sign on the whole modernization of Turkey, and it is certainly a part of the objectives of the actual not only government but Turkey's society.
I think the negotiations that will start next week are certainly very complex and difficult, but at the same time, they are very promising, and I hope they will not only be fruitful but will serve the Turkish society to have a horizon of change and increased transparency and efficiency, not only in economic terms but also social and political, and that that will certainly help the Turkish society in any case--but of course, the negotiations are between partners, and they will have to see what they decide at the end.
MR. MILVERTON: Thank you very much, sir.
QUESTION: Christopher Thompson from Africa Confidential.
There has been a laudable focus on Africa during this meeting, and as you put it, Mr. Wolfowitz, now the goal is open for the debt deal to go through, and to this end, Mr. Manuel, you said that countries cannot fail at Doha, because that might compromise what has been agreed from Gleneagles onward.
So I am just wondering why do you suppose that you can keep up this momentum on Africa, keeping it on the agenda, not only within the Bank and within the multilaterals but, more importantly, compelling member countries themselves to make good now that they have promised in Doha?
MR. MILVERTON: Thank you.
MR. MANUEL: Let me start with the African perspective.
Right now, the macroeconomic conditions in Africa have never been better. You have growth across the continent at 4.7 percent. You have inflation in single digits. The bulk of countries have very strong fiscal balances as well. Many are demonstrating a primary surplus at the moment.
The situation on the African continent has never been better. This has only come about because of a series of changes, including very strong macroeconomic reform programs undertaken by countries, individually, and not Africa as a bloc. Sure, there are still some significant outliers on the continent, but if you look at the performance region by region, it is quite remarkable. But that masks the fact that there is still an inability to deal with the ravages of poverty. Africa is still furthest behind in respect of the MDGs, but you can't have that kind of macroeconomic performance without strong governance in place.
So that is there. That must be supported and the support comes in the form of the partnership. That partnership is the spirit of Monterrey, it is the spirit of the NEPAD agreement, and that is now--that comes to fruition because of the nature of the agreement struck.
So what all of us, and certainly what the multilateral institutions, must indicate to Africa is that the pace of reform must be maintained, and it will be easier to maintain the pace of reform now that there is resource within the institutions to carry that forward.
MR. MILVERTON: Does anyone else care to comment?
MR. DE RATO: Yes. I want to say that the reasons for being optimistic in the challenge of Doha are that I think all the characters are aware that they have a lot to gain.
Of course, as we learned in other negotiations of the same sort--and Mr. Lamy was reminding us of the last one in Doha--the last few weeks are the ones in which agreements are made, and the agreements are made when the agenda of countries is not so much to keep their cards close to the chest, but to really see the broad picture. I think there is a lot of gain for the world in Hong Kong, and I think that there is a lot of risk if Hong Kong fails, because not only will that delay a very important step toward multilateral liberalization, not only in agricultural products but also of services and manufactures, but it will also be a bad sign in a time in which we are seeing some signs of protectionism that will be extremely dangerous for the world economy. And history can show us that free trade has produced incredibly good results for developed countries, but especially for developing countries.
The agenda is very challenging, and it is not only a question of developed countries to open the frontier, reducing the trade barriers, but for developing countries to make concessions and to advance and believe in multilateral liberalization and in trade among themselves.
The Fund has been stressing very much that there is a lot of growth to be gained by multilateral liberalization, and there is a lot of growth to be gained by middle-income and low-income countries trading with rich countries, but there is a lot of growth to be gained by countries trading amongst themselves.
QUESTION: Would you say that--
MR. MILVERTON: Sorry--we're going to be so squished for time, I've got to be fair to the rest of the panel here.
MR. WOLFOWITZ: But let me just say that a lot has been accomplished this weekend, but let's be absolutely clear--I don't think anyone is under illusions--we have set some very high goals for the world, and they're not going to be accomplished in one meeting or in one year, and it is going to take, I think, sustained effort. People are going to have to honor promises that are sometimes difficult, make new decisions that are sometimes difficult.
The reason I think this has a real chance of happening is, number one, the world really has been powerfully moved by the suffering of people living in extreme poverty and the unnecessary deaths and the uneducated children that happen because of that; but secondly, I think just as important, the promise that comes from the fact that governments in some of the poorest countries are now performing by a standard that was virtually unknown ten years ago and that they are dealing with their own problems and taking on their own responsibility.
And just to come back to the trade round, it is clearly so much better to give people the means to support themselves and to create a permanent dependency on aid, and if you want them to have the means to support themselves, then trade is one of the most important agreements there.
I think no one should underestimate the difficulties, but I think the opportunities are huge.
MR. MILVERTON: I'm sorry, we really only have time for two more questions.
The lady here, and then Mr. Blustein--I believe you had your hand up--in the back of the room.
QUESTION: Shizu [ph.] from Interpress Service.
My question is for the panel. With regard to the debt cancellation, you have said that you have emphasized the importance of maintaining sound economic performance and good governance by eligible countries.
Does this mean conditions for these 18 countries in question, and if "yes," then what are these conditions going to be?
MR. DE RATO: Yes. As you know, the countries are the HIPC countries, so the conditions will be the ones that are already applying to the completion point; they will not be new conditions.
MR. MILVERTON: Thank you very much.
Mr. Blustein--you're lucky I could see you all the way back there--
MR. DE RATO: Let me just add one thing. It will be a follow-up in the sense that we will be reporting to the IMFC about the consequences of this. So that is not a condition, because debt relief will be granted outright--up front, if you want to say it that way--but it will be a follow-up that I think will be useful both for the institutions and for the countries themselves and for the world public opinion.
MR. MILVERTON: Please.
QUESTION: Paul Blustein, The Washington Post.
I just had a quick question--I'm sorry it's a bit of a wonky one--about what this compensation schedule means and how that's supposed to--how do you set a compensation schedule for the major donors? Is this just a matter of taking the baseline of IDA14 real resources and stretching it out into the future? Is it as simple as that, or does it still have to be negotiated?
MR. WOLFOWITZ: If it were quite that simple, we'd have done it today; but I don't think it's complicated, or I wouldn't say we could do it in a few weeks.
But the basic concept is, as you suggested, to have some clarity by all the donors as to what their individual responsibilities are going to be.
MR. MILVERTON: Thank you very much.
[Whereupon, at 4 o'clock p.m., the press conference was concluded.]