camdessus on debt

[Robert Weissman <rob@essential.org>]

Our friend Michel Camdessus, anxious not to be left out of the debt
relief dance, offers his opinion: yes to debt relief, it will strengthen
our efforts to impose structural adjustment.

Robert Weissman
Essential Information			|   Internet:	rob@essential.org

PRESS CONFERENCE
                                               OF 
                           MICHEL CAMDESSUS, MANAGING DIRECTOR
                                INTERNATIONAL MONETARY FUND

                                          April 21, 1999 
                                              a.m.
                                         IMF Meeting Hall
                                         Washington, D.C.

MR. ANJARIA: Good morning, ladies and gentlemen. Welcome to the press
conference of Mr. Michel Camdessus, the
Managing Director of the International Monetary Fund, and to his right Mr.
Stanley Fischer, First Deputy Managing
Director. The conference proceedings will be under embargo until the end
of this press conference. I would like to ask
the Managing Director if he would like to make some introductory remarks. 

MR. CAMDESSUS: Thank you. Briefly to tell you
first something you know already pretty well, namely,
what will be the key issues addressed by the Interim
Committee next Tuesday. As usual, the review of the
world economic outlook, on which you had yesterday
the press conference of Mr. Mussa; recent
developments, including a particular focus on the
policy response to recent crises in Asia, in Russia, and
in Latin America. 

Second--not second in order of importance, but second
on my list--the issue of the strengthening of the
architecture of the international monetary and financial
system. We have been talking about that and working a
lot recently in the different fora, and now it is time, at
least in my judgment, to go from the broad design to
more specific action. 

Then, with growing interest in this issue, the question of how to
strengthen our initiative in favor of the highly-indebted
poor countries, the so-called HIPC initiative, and together with it the
instrument which allows us to do our job in this
area, the Enhanced Structural Adjustment Facility, our facility for the
poorest countries, and its financing. 

We will also touch on and discuss strengthening our action for countries
in a situation of post-conflict. We will also
certainly devote some discussions to the issue of Kosovo and how the
international community can evaluate, first, the
regional impact of this crisis and coordinate best its efforts to
alleviate the immense human suffering in this part of the
world, the humanitarian effort; and, second, start preparing for the
reconstruction time. Of course, this is a heavy
agenda, with crucial questions at a very important moment of history.
Possibly I should say a few words, a few personal
impressions, on each of these items, before we open the floor for
discussion. 

On the economic outlook, you have seen or heard what Mr. Mussa told you
yesterday. Certainly, we can say that we
have come a long way since I last appeared here last October. Last October
your questions were around, "Well, is there a
risk, a major risk, of credit crunch; is there a major risk of systemic
meltdown?" The answers to these questions at that
time were not that straightforward, I must say. Well, now the climate is
distinctly better. Of course, if you look at the
numbers we have circulated yesterday, 1999 does not offer the prospect of
stellar growth; as a matter of fact, a little bit
below 1998, which was not bright. But we recognize the prospect of some,
perhaps significant, acceleration of growth,
and we see a significantly better year for 2000, not only as far as the
numbers are concerned--we see 3.4 percent growth,
instead of 2.3 percent--but also the prospect of sounder growth, inasmuch
as the program reforms in the countries hit by
the crisis, if they are steadily implemented, have all the potential to
establish the growth pattern of these countries on a
much better, sounderbasis. But there are still parts of the world with
difficulties and problems. Latin America as a whole
will be in a recession--Brazil mainly, but several other countries, even
though in Brazil and in Latin America in general
the situation today is much brighter than it was two months ago. We
believe that growth could resume in that part of the
world later this year, and we could have, as a matter of fact, a kind of
V-shaped curve, with a rapid pickup and recovery
at the end of the year and the beginning of next. There are also, as you
know, signs that capital flows to the emerging
markets are beginning to recover. Witness, indeed, the rapid rise of Asian
equity markets, the renewed interest for
emerging countries' debt instruments, et cetera. 

So, the situation is, yes, better, but you know the motto of the IMF:
there is no room for complacency at all. To confirm
these better prospects, a lot will depend on the quality and the
perseverance in continuing with the policies of adjustment
and reform. Frequently we have had the metaphor of theater about the three
current years, with 1998 being the beginning
of a tragedy and 1999 continuing under the effects of the problems of
1998. Now we tend to believe that the third part of
this world drama should be--could be and should be--the part of renewal. 

You can imagine that the discussion of the Ministers and Governors will
certainly focus on how the three major currency
blocs will distribute among themselves the responsibility for maintaining
world demand at a proper level. You can also
imagine that discussions will also focus on the exchange rate relationship
among major currency blocs and on exchange
rate regimes in emerging countries. And, of course, what lessons should we
draw for the future from all these difficult
developments. 

Architecture. Well, possibly one of the good things which has come out
from these crises in Asia is the powerful impetus
for proposals to strengthen the international monetary system. You know
the directions of work: reforming financial
systems; introducing more transparency in institutions, in countries, in
markets; developing standards and codes of good
conduct to make the international markets as civilized as the domestic
markets in advanced economies; and involving the
private sector more in this effort. On these principles, these directions
of action--and in pursuing the liberalization of
capital markets--there is a broad consensus. 

The question now is how to go from this, I must say, uneven consensus on
the big principles to specific and quick
action. Of course, there are fears expressed about the fact that, now,
with this improvement of general economic
conditions in the world, the impetus for change, the impetus for changing
the system, could be, let us say, less obvious.
I do not think it is the case. Every day demonstrates to us that the
interest in action is there. But a word of caution about
the word "architecture." Possibly, it does not describe exactly what we
are doing. We are not that much into, let us say,
plumbing or decorating; we are into something which is much more
important. We are into ensuring that we create a
system which could really serve better the needs of the people everywhere.
This implies many things, including the fact
that we continue striving for integrating in this globalized world
countries which so far are not there and which do not
benefit from all that globalization can create for growth, and hopefully
high-quality growth. We must not forget either the
fact that the strengthening of socialpolicies is a vital complement to the
reform of the international monetary system. So,
we would like very much in the IMF to put emphasis on these dimensions,
and on now taking action. I have proposed to
the Executive Board, and I will certainly press Ministers to try to go to
a more concrete agenda than so far. 

Lastly, debt. There is--and I am delighted to tell you this--great
interest now in the world, and widespread support, for
more debt relief for the poorest countries. I believe there is a broad
consensus that the time has come to adopt further
steps to relieve debt. You see that illustrated by a proliferation of
initiatives of major leaders of the world in several
directions, but always with this basic objective. But there are many
questions still unanswered, and of course they are
hard. How much are major shareholders of our institutions and bilateral
creditors ready to effectively pay toward this
effort; and, assuming that there is really fresh money for that, how will
we spend it? What is the best way of allocating
these resources to have the strongest leverage for improving development
conditions and the human orientation of
development in these countries? Should we, in allocating the resources,
try to have a deeper alleviation of the debt in the
countries already identified in our list for debt relief--23, more or
less, at this very moment? Or should we utilize the
resources in broadening the list of the countries which could benefit from
it? My personal inclination, I tell you very
frankly, would be for broadening the list. Having in mind that debt
alleviation can be a powerful incentive to economic
reform and economic progress, then the more countries going for economic
reform and progress and benefitting from
debt alleviation, the better for the global community. I insist on that.
If we have learned one thing about debt relief, it is
not so much that the amount of debt reduction matters--of course, it
matters a lot. But what matters even more is the
quality and duration of the economic effort that must support the debt
relief and create change for the better. This, of
course, carries a message about the way in which money should be spent on
debt relief. It must be in a way that creates
incentives for countries to continue to persevere with adjustment and
reform. And we must be inventive for that. Debt
relief must give reform added chances, and then you will achieve more for
the poorest people in the world.. I could
elaborate, later on, on that, but I wanted to tell you that, because this
is central to our concerns in the IMF.