April 20, 2002
We met last night and today with prospects for the global economy more positive than a few months ago. This is in part a tribute to strengthened international cooperation. We discussed the global economy, international efforts to combat the financing of terrorism, approaches to financial crises, and the importance of more effective development assistance.
We remain strongly committed to combating the financing of terrorism and we take note of the progress made in implementing our previous Action Plans. As a further and positive step forward in the war on terrorist financing, the G-7 Finance Ministers announced today the first G-7 joint designation of terrorist entities and the associated freezing of assets in the G-7 countries; the Ministers encourage other countries to freeze these assets as well. We again urge all countries to participate in the FATF self-assessment and to implement quickly the FATF recommendations against terrorist financing. We look forward to the report of the IMF on the efforts it and its member countries are making to combat the financing of terrorism. We urge the IMF and World Bank to begin conducting their financial sector assessments, incorporating reports on compliance with anti-money laundering and terrorism financing standards based on FATF recommendations. We are working to ensure that legitimate institutions, organizations, and networks are not misused by terrorists and their supporters.
Economic recovery from the slowdown is underway, supported by appropriate and proactive macroeconomic policies that were in part a response to the tragic events of September 11, but downside risks remain, including those arising from oil markets. Each of us has an ongoing responsibility to implement sound macroeconomic policies and structural reforms to sustain recovery and support strengthened productivity growth in our economies. We welcome the work programs of the Financial Stability Forum and International Accounting Standards Board responding to financial and related vulnerabilities. We look forward to the FSF report by September. We will continue to monitor exchange markets closely and cooperate as appropriate. We welcomed Russia’s continued strong economic growth, progress in implementing key reforms, and work toward WTO accession.
Many emerging markets and developing economies are also now showing clear signs of recovery, building on improved economic policies. Better availability and clarity of information furnished to markets have enabled market participants better to assess and differentiate across economies the fundamental causes of market developments. The situation in Argentina is of serious concern. Reforms of the fiscal framework encompassing the provinces, establishing a monetary anchor, and improving the bankruptcy and economic subversion laws will all help to restore investment and growth, thereby raising the living standards of the Argentine people. We thus support the IMF and the work it is doing with Argentina.
In February, we committed ourselves to making the crisis management framework more predictable and fair. Today, we announced an Action Plan to improve stability, growth, and potential living standards in emerging markets. Rapid progress in the weeks and months ahead is essential. We will review progress at our next meeting.
We affirmed our strong commitment to advancing development and combating poverty in the poorest nations including by linking greater contributions by developed nations to the adoption of good economic policies by developing countries. We recognize that official development assistance and private financing yield better results when used in a good policy environment and in support of sound policies such as good governance, human capital investment, and private sector development. These are the essential ingredients for raising productivity growth and reducing poverty in developing nations. We are committed to increasing the effectiveness of bilateral and multilateral development assistance, and to continuously monitoring and measuring its results. We also stressed the importance of continued trade liberalization, particularly in support of improving the effective participation of the poorest countries in the multilateral trading system.
April 20, 2002
We, the G-7 Finance Ministers and Central Bank Governors, have today adopted an integrated Action Plan to increase predictability and reduce uncertainty about official policy actions in the emerging markets. The Action Plan is part of an overall endeavor whereby the sovereign debt of all countries would ultimately be investment grade, a rating that every country could eventually achieve with the right policies. The Action Plan would help prevent financial crises and better resolve them when they occur, thereby creating the conditions for sustained growth of private investment in emerging markets and helping raise living standards of the people in emerging market countries. We pledge to work together to carry out this Action Plan. The plan comprises the following elements that are complementary and reinforce each other.
We will work with emerging market countries and their creditors to implement a market-oriented approach to the sovereign debt restructuring process in which new contingency clauses would be incorporated into debt contracts. These new clauses should describe as precisely as possible what would happen in the event of a sovereign debt restructuring. The clauses should include super-majority decision-making by creditors; a process by which a sovereign would initiate a restructuring or rescheduling – including a cooling-off, or standstill, period; and a description of how creditors would engage with borrowers. Within these parameters, we will work with borrowers and creditors to make the clauses as effective as possible, examining such issues as aggregation, new private lending, and treatment of existing debt. We will also work with the International Monetary Fund on incentives for countries with IMF programs to adopt such clauses.
With this market-oriented approach to the sovereign debt restructuring process, we are prepared to limit official sector lending to normal access levels except when circumstances justify an exception. It is becoming clearer that official sector support is being limited. Limiting official sector lending and developing private sector lending are essential parts of our Action Plan.
We will work with the IMF to improve the quality, transparency, and predictability of official decision-making as a key means of crisis prevention. Specific actions include a more pre-emptive analysis of debt sustainability using market-based measures of credit-worthiness, a consideration of a greater degree of independence between the surveillance or analysis role and the lending role at the IMF, and a clarification of the lending into arrears policy of the IMF.
We support further work by the IMF on proposed approaches to sovereign debt restructuring that may require new international treaties, changes in national legislation, or amendments of the Articles of Agreement of the IMF. Since these changes would take time, this work should not delay the expeditious implementation of the approach described above; indeed, this work is complementary.
We emphasize that this Action Plan should increase the incentives for governments to pay their debts in full and on time. These incentives, which include the benefit of continued market access at reasonable interest rates, should remain.