The Finance Ministers and Central Bank Governors of Canada, France, the Federal Republic of Germany, Italy, Japan, the United Kingdom, and the United States met on September 23, 1989, in Washington for an exchange of views on current international economic and financial issues. The Managing Director of the IMF participated in the multilateral surveillance discussions.
The Ministers and Governors reviewed their economic policies and prospects. They noted that their economies were experiencing further solid growth this year and that the current expansion was expected to continue in the coming year. Moreover, inflation remains contained thanks to the implementation of appropriate policies, but vigilance is still required, particularly in those countries where inflationary pressures persist. Some further progress is also being made in reducing large external imbalances although adjustment has slowed. The Ministers and Governors considered the rise in recent months of the dollar inconsistent with longer run economic fundamentals. They agreed that a rise of the dollar above current levels or an excessive decline could adversely affect prospects for the world economy. In this they agreed to cooperate closely in exchange markets.
The Ministers and Governors reaffirmed support for the economic policy coordination process and stressed the importanceof continuing to implement the economic policies which have produced 7 years of sustained growth with relatively low inflation. They encouraged the ongoing efforts of the United States to reduce the Federal budget deficit by implementing measures that will achieve the Gramm-Rudman-Hollings budget deficit targets. They also encouraged further deficit reduction in Canada and Italy, as well as the efforts of those countries and of the U.K. to reduce inflation. France will continue to promote savings so as to facilitate investment. The surplus countries, Japan and Germany, will continue to undertake economic policies aimed at promoting non-inflationary growth with a sufficient margin in the medium term between domestic demand and output growth to reduce substantially their large external imbalances. All need to implement reforms promoting economic efficiency, open their economies to foreign goods and services, curb subsidies and excessive regulations, and to take appropriate measures to foster savings where they are inadequate.
The Ministers and Governors reaffirmed the importance they attach to an early and successful conclusion of the Uruguay Round of trade negotiations. They expressed their determination to resist protectionism and to strengthen the open multilateral trading system.
The Ministers and Governors discussed the historic events now in progress in some of the countries of Eastern Europe, especially in Poland and Hungary, and expressed their strong support for plans to create more open and market-based economies. They urge the Polish Government to reach an early agreement with the IMF on a strong and sustainable program and they stand ready to support such a program through bilateral and multilateral actions, including Paris Club rescheduling.
The Ministers and Governors expressed their support for the strengthened debt strategy and recognized the substantial progress which has been achieved. They commended the Fund and the Bank for their prompt and effective response in developing the operational guidelines governing their support for debt and debt service reduction.
The Ministers and Governors reaffirmed the key role of commercial banks in resolving debt problems. They further agreed that diversified financial support from the banks is needed to support sound economic reform programs through a broad array of new lending and debt/debt service reduction mechanisms. They also noted that they had reviewed, in a manner consistent with maintaining the safety and soundness of the financial system, their regulatory, tax and accounting practices with a view to eliminating unnecessary obstacles to debt/debt service reduction transactions and that this review had helped to clarify procedures to facilitate such transactions.
The Ministers and Governors reemphasized the central importance of sustained implementation by debtor countries of macroeconomic and structural policy reforms in order to achieve sustainable growth, viable balance of payments positions, and restoration of normal access to private credit markets. They noted that complementary efforts to reverse capital flight and attract foreign investment were particularly important elements of Fund and Bank programs for countries seeking to gain access to support for debt and debt service reduction.
The Ministers and Governors also reviewed other issues to be discussed in the forthcoming meetings of the Fund and the Bank. The Ministers and Governors recalled that the Executive Board of the IMF has been urged to complete its work on the 9th Review of Quotas with a view to a decision on this matter by the Board of Governors before the end of the year.
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