February 7, 2004
The global economic recovery has strengthened significantly since our meeting in Dubai and risks have diminished. Growth projections for 2004 have been revised upward to their highest in three years. Fiscal and monetary policies have helped bring about these welcome changes.
Yet much more remains to be done. The pace of growth among our economies remains uneven. In our Agenda for Growth initiative, we emphasize supply-side structural policies that increase flexibility and raise productivity growth and employment. Today we released a progress report on our Agenda for Growth. This Agenda and sound fiscal policies over the medium-term are key to addressing global current account imbalances. We outlined strategies for sustained medium-term fiscal consolidation as economies recover. International trade is vital; we call for further efforts and for countries to take the steps to resume the Doha Round, which is pivotal to global growth and the alleviation of world poverty.
We reaffirm that exchange rates should reflect economic fundamentals. Excess volatility and disorderly movements in exchange rates are undesirable for economic growth. We continue to monitor exchange markets closely and cooperate as appropriate. In this context, we emphasize that more flexibility in exchange rates is desirable for major countries or economic areas that lack such flexibility to promote smooth and widespread adjustments in the international financial system, based on market mechanisms.
To combat terrorist financing, we urge all countries to strengthen their asset freezing regimes and to combat abuse of the informal financial sector and non-profit organizations. The IMF/World Bank should make permanent and comprehensive their assessments of countries' efforts to combat terrorism financing.
We are committed to further enhance transparency and supervisory standards in financial markets, in particular non-compliant off-shore centers.
We have a shared interest in seeing strengthened economic growth in the greater Middle East. We had a productive meeting with our counterparts from Afghanistan and Iraq. We welcome the completion of the currency exchange in Iraq and the removal of interest rate controls, and we look forward to the approval of the new central bank law. We welcome progress on reform and reconstruction in Afghanistan and the renewed efforts to collect revenues from the provinces. We call on others to join us in reducing the debt burdens of Iraq and Afghanistan. We welcome the plans of the IMF and the World Bank to provide financial and technical assistance to Iraq and Afghanistan.
The private sector plays a critical role in fighting global poverty and creating jobs in developing countries. We encourage the MDBs to work with governments to improve investment climates and provide more resources to support the private sector. Remittances are an important source of income for many developing economies. We aim to reduce the impediments that raise the cost of sending remittances. We reaffirm our commitment to fight global poverty and to help countries achieve the international development goals of the Millennium Declaration through our work on debt sustainability, aid effectiveness, absorption capacity, and financing facilities.
We discussed the progress in our efforts to reform the international financial system, including improved surveillance, collective action clauses, limits on exceptional access, measuring results, and the use of other mechanisms, including grants, to avoid heavy debt burdens. We also discussed how to consolidate and build upon these reforms. We welcome the improvement in financial conditions, and the higher economic growth in many emerging market countries. We welcome the efforts by creditors and issuing countries to develop a code of conduct, which will be discussed in the G-20. We call on Argentina to implement policies in line with its IMF program. Argentina should engage constructively with its creditors to achieve a high participation rate in its restructuring.
February 7, 2004
We met today with the Finance Minister and Central Bank Governor of Afghanistan, and we agreed on steps to support the Afghan Government's efforts to accelerate the creation of a dynamic market economy and to secure Afghanistan's future. The G-7 will continue to support the Government's development priorities in accordance with the National Development Framework. To that end, we will provide assistance that will produce visible and measurable results before June, as part of our long-term commitment to the country.
Human Capital: Afghanistan is making significant commitments to education and healthcare. The G-7 will continue to support these efforts to invest in Afghanistan's most valuable assets - its children - by building schools, training teachers, and providing textbooks. The G-7 will also continue to help the Government build additional health care facilities, and to support efforts to improve the status of women in Afghanistan.
Physical Capital: Improving the country's infrastructure, including its transport, electricity, and telecommunications systems, is a priority for the Afghan Government. We will help it reach its goals - such as a doubling of the percentage of paved roads in six years - by completing the Kandahar-Herat highway, and by supporting the efforts of international bodies to complete, by the end of 2004, roads they are constructing.
Private Sector Development: We will continue to support the Government's efforts to foster a climate where the private sector can flourish, including by providing assistance to the Government on trade and investment, and supporting microfinance lending. We urge bilateral and multilateral institutions to consider what support they can provide to those wanting to do business in and with Afghanistan, within their rules and Afghanistan's capacity.
Economic Governance: We will support the Government's efforts to ensure an adequate revenue base through improvements in provincial revenue collection, and to strengthen expenditure management, internal debt management systems and statistical capacity. We will provide technical assistance to support the Government's strengthening of key institutions and improvement of the civil service, and will also work with all creditors to ensure that Afghanistan's debt situation is sustainable, and with bilateral donors to provide as much assistance as possible in the form of grants.
Security and Rule of Law: The Government has noted the risks to private sector development and to the well-being of the Afghan people arising from weak security and rule of law. We will continue to support the Government in its efforts to address these problems, including through reforms to the police and legal systems; the disarmament, demobilization and reintegration of ex-combatants; and expanding security outside Kabul through the Provincial Reconstruction Teams. We recognize that opium production poses a major threat to security, economic growth and reconstruction in Afghanistan. We call upon the international community and the Afghan authorities to join together to eliminate opium production.
Finally, we pledge to provide support to Afghanistan over both the short and long term, and to help ensure the success of the international confe rence in March. We will increase our assistance, through bilateral and multilateral efforts, such as the Afghanistan Reconstruction Trust Fund.
February 7, 2004
In September 2003, we adopted the Agenda for Growth initiative to focus our efforts on the need to undertake supply-side and structural policy changes to increase flexibility, raise productivity growth and employment, and achieve higher, sustained growth in our countries. Such reforms sometimes may entail short-term costs, but have proven critical to advancing long-term growth. We also committed to experience-sharing, to reviewing our results together, and to reporting on our progress. Our focus is on cooperation. Today, in Boca Raton, we reviewed our accomplishments thus far and outlined our future priorities. In this Progress Report, we list selected accomplishments since September 2003 -- one for each country -- and review upcoming reform plans.
Accomplishments since September. Germany enacted key elements of the reform Agenda 2010, including labor market measures that improve work incentives and further tax reduction. Canada completed the full implementation of its five- year, $100 billion tax reduction plan. Japan formulated a pension reform plan in December 2003 with a view to securing long-term sustainability of the pension system, and is preparing for legislation to implement the reform. France is implementing key provisions of its pension reform law that significantly improves the sustainability of its public finances. The United Kingdom announced new measures to help small business raise finance and to help promote a culture of enterprise, and to improve access to its R&D tax credit. Tax rate cuts in the United States worked their way through the economy to promote record growth. Italy's recent labor market reforms entered fully into force in October, contributing to the further reductio n in the unemployment rate.
Upcoming Reform Plans. Our governments remain committed to pursuing additional pro-growth policies. The United States plans to spur saving by creating lifetime and retirement savings accounts and reducing the structural budget deficit, and to support job creation by making health care more affordable and pressing for tort reform. In an effort to raise productivity, the United Kingdom is targeting reductions in enterprise regulatory requirements including a collaborative initiative on regulatory reform across the EU over the next two years, establishing a long-term strategy for funding innovation and scientific research, and extended skills training programs. While continuing its steady reduction in the debt-to-GDP ratio, Canada will provide municipalities with the resources they need for infrastructure investment by exempting them from the Goods and Services Tax they now pay (worth $7 billion over the next decade) and examining other fiscal mechanisms to provide further predictable funding. Italy expects to push forward with its pension and corporate tax reform, including tax exemptions on dividends and capital gains, in 2004. France plans to advance health care reforms this year, while continuing to press for fewer labor market constraints. Japan will work on further fiscal expenditure and revenue reforms, including in social security, and will continue to address financial sector reforms. Pension and tax code reform remain key priorities in Germany, combined with further improvements in the framework for innovation.