The World Bank and IMF Annual Meetings, Washington D.C., 28-30 September 1993
When we met here last year, the world economy was under the long shadow of recession. Although there were expectations of robust economic growth in East Asia and a mild recovery in the United States, these had been offset by the worsening situation in some OECD countries. Indeed, notwithstanding the problems of the developing countries, the main responsibility for strengthening world economic growth now lies with the industrialised countries. As long as the industrialised countries fail to pursue more balanced macro-economic policies they will be a major destabilizing force in the world economy.
Economic recession has raised the spectre of massive unemployment in the industrialised countries to an unprecedented level. Massive unemployment will be a fertile ground for growing protectionist interests, racism and strong anti-foreign sentiments. We are, therefore, anxious to see the pledges made by the Group of Seven, to increase macro-economic policy co-ordination among themselves to expedite economic recovery, be implemented speedily and effectively.
It has been recognised that the resilience of the East Asian economies in adopting appropriate macroeconomic-adjustment measures - privatization and general economic reforms - have been the foundation for sustaining economic growth with stability. Implementing these structural adjustment measures and appropriate macro-economic stabilisation policies require some degree of persistence and courage.
The conclusion of The Uruguay Round for trade liberalization is essential for the growth of the world economy and crucial for the development process in the South. We all wish that The Uruguay Round be concluded by the end of this year and not delayed by any insistence on additions or changes in the Draft Agreement.
Many middle - and low-income countries which are making slow progress in their development efforts require not only markets for their exports but also continued support from the international community, in terms of financial and technical assistance, and the transfer of technology. We, therefore, welcome the establishment, earlier this year, of the Systemic Transformation Facility (STF) to help the urgent needs of countries in transition. While this effort is commendable, the Fund must ensure that the facility is also extended to all member countries experiencing similar difficulties. Equal opportunity for access to this facility should be the guiding principle.
We are also pleased to note the progress made towards resolving the debt problems of middle-income countries following the implementation of structural adjustment and reforms programmes, with the support of the Fund and the World Bank. However, we are concerned that the debt situation of many low-income and a number of lower middle-income countries remain severe, despite concessional rescheduling terms offered by the creditors. We suggest that the rescheduling terms be made more flexible, according to the debtor's capacity to pay. Creditors should also provide further debt reduction to a number of countries to help reduce their debt payments to manageable levels.
We note that during the last year there was a net increase in resource flows much of which constituted private flows. However, these flows were concentrated among a small number of countries. The budget cuts from donor countries resulted in the reduction of Official Development Assistance, which is now stagnating at a level well below the internationally agreed target of 0.7 percent of donor GNP. Yet the necessity for aid is now even greater than ever before. We hope all members would strongly support the speedy ratification IDA-10. We are also equally concerned over the decision by the Fund to adopt the Purchasing Power Parity concept for the purpose of aggregating individual country output. No developing country deserving of financial assistance should be disqualified simply on the basis of PPP income. We, therefore, urge for greater transparency in the use of the PPP concept.
Ensuring the success and improving the development impact of the Bank's current projects and loans is as important as giving out new facilities. Thus, I would like to congratulate the Bank, in particular, the President, in initiating bold actions under the Wapenhans Report to improve the effectiveness of the Bank portfolio management and to ensure greater accountability by the Bank.
The Bank has continued to play a very important role in supporting developing countries moving towards market oriented economy. The Bank is again called to play its part for the people of Palestine and South Africa. With respect to Palestine, we need to translate the peace agreement into a framework that would meet the hopes, ideals and aspirations of the Palestinian people.
We support the call for a successor to the Enhanced Structural Adjustment Facility (ESAF). The continuing need for the Fund's concessional financing is clearly evident, not only to sustain ongoing programmes under ESAF, but also to support new reform efforts of low-income countries which have yet to benefit from ESAF and are currently in arrears with the Fund.
Finally, we also support the call for a modest allocation of Special Drawing Rights during the remainder of the Sixth Basic Period and a post-allocation redistribution of SDRs. This is to enable low-income developing countries to reach appropriate levels of international reserves to meet their liquidity requirements. Such an allocation will not be inflationary but will facilitate structural adjustment being undertaken by many developing countries.
No one should dispute our common resolve towards achieving democracy, to honour human rights and to protect the environment. But, what is resented is a condescending approach to some countries preaching these ideals as a new kind of theology. We have also to accept the need to enhace and translate these ideals in all societies. But we have to accept a multitude of social, economic and political problems encountered by different countries with equal urgency. The continuing debates on aid conditionalities and structural adjustments show the extent of the resentment among many developing countries, and it is viewed as an attempt to impose a set of new beliefs. Some degree of flexibility is surely required in the design and timing of the implementation of adjustment policies. Similarly, countries should not feel inhibited to express their views because of their near total dependence on the IMF and the World Bank.
Our concern with economic growth should not, however, lead us to forget that there is a deep seated and abiding human concern with equity. Growth with equity can ensure the stability that we are all striving for. Our concern with growth must, therefore, be matched with a continuing concern with equity and distributing justice.