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International Monetary Fund/World Bank, development committee meeting, 4 April 1989, statement of the Honourable Peter Morris, Minister assisting the Treasurer, Australia



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PARLIAMENTARY LIBRARY MICAH

TREASURER

EMBARGO NOT TO BE RELEASED BEFORE 11.00PM, TUESDAY, 4 APRIL 1989.

INTERNATIONAL MONETARY FUND/WORLD BANK, DEVELOPMENT COMMITTEE MEETING, 4 APRIL 1989, STATEMENT OF THE HONOURABLE PETER MORRIS, MINISTER ASSISTING THE TREASURER, AUSTRALIA

MR. CHAIRMAN,

BOTH POSITIVE AND NEGATIVE FACTORS HAVE EMERGED IN RELATION

TO DEVELOPMENT PROSPECTS. GROWTH HAS BEEN MAINTAINED IN THE

INDUSTRIAL COUNTRIES AND COMMODITY PRICES HAVE FINALLY

STRENGTHENED. SOME ENCOURAGING SIGNS ARE EVIDENT IN

SUB-SAHARAN AFRICA. ECONOMIC DECLINE IN A NUMBER OF

ADJUSTING COUNTRIES HAS AT LAST BEEN ARRESTED. THIS IS

MAKING THESE COUNTRIES INCREASINGLY RECEPTIVE TO SUSTAINING

AND EXTENDING ADJUSTMENT. THE DEMONSTRATION EFFECT OF THE

CLEAR PERFORMANCE DIFFERENCES BETWEEN ADJUSTING AND

NON-ADJUSTING COUNTRIES ALSO AUGURS WELL FOR A MORE

WIDESPREAD RESORT TO THOROUGH-GOING REFORM.

NEVERTHELESS, WE ARE MINDFUL OF PROTECTIONISM, WHICH REMAINS

A STRONG AND GROWING MENACE TO BOTH DEVELOPING AND DEVELOPED

COUNTRIES ALIKE. IT IS PERVERSE THAT COUNTRIES UNDERGOING

ADJUSTMENT PROGRAMS ARE EXHORTED TO LIBERALIZE TRADE BY A

GROUP OF RICH NATIONS WHICH ARE THEMSELVES MOVING IN THE

OPPOSITE DIRECTION. APPROPRIATE CONSIDERATION SHOULD BE

GIVEN TO ACTION TAKEN BY DEVELOPING COUNTRIES TO LIBERALISE

TRADE. PROBLEMS IN RELATION TO THE URUGUAY ROUND OF TRADE

NEGOTIATIONS WERE CLEARLY EVIDENT IN MONTREAL. IT IS

ESSENTIAL FOR US ALL THAT THOSE PROBLEMS ARE RESOLVED AND

CONCRETE RESULTS EMERGE.

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WE ARE ALSO MINDFUL THAT THE PACE OF REFORM AND COUNTRIES'

WILLINGNESS TO SUSTAIN THE PROCESS OVER TIME HAS VARIED

WIDELY. IN COMMITTING THEMSELVES TO REFORM PROGRAMS

GOVERNMENTS HAVE TO BE CONSCIOUS OF SOCIAL AND POLITICAL

CONSEQUENCES. "

SINCE THE VARIOUS SECTORS OF AN ECONOMY ARE INTERDEPENDENT, A

BROAD APPROACH TO ADJUSTMENT MAY OFFER THE GREATEST

BENEFITS. MOREOVER, SUCH AN APPROACH CAN EASE POLITICAL AND

SOCIAL TENSIONS BECAUSE THE BURDEN OF ADJUSTMENT IS PERCEIVED

TO BE SPREAD EQUITABLY THROUGHOUT THE COMMUNITY. AT TIMES A

RELATIVELY SPEEDY REFORM PROGRAM FORESTALLS THE EMERGENCE OF

ADJUSTMENT FATIGUE.

MR. CHAIRMAN, THIS CONSTITUENCY HAS SUPPORTED WORLD BANK

ADJUSTMENT LENDING AS A MEANS OF SUPPORTING ORDERLY REFORM,

WHICH IS AN ESSENTIAL PREREQUISITE FOR DEVELOPMENT. WE ARE,

NEVERTHELESS, CONSCIOUS THAT THE BANK'S ABILITY TO ABSORB

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RISKS HAS LIMITS, AND THAT ADJUSTMENT LENDING DIVERTS

RESOURCES FROM OTHER PRIORITY AREAS SUCH AS HUMAN RESOURCE

DEVELOPMENT, AND MUCH NEEDED ATTENTION TO INFRASTRUCTURE

CONCERNS.

ACCORDINGLY, THE INTENDED PHASE DOWN OF SOME COUNTRIES'

FAST-DISBURSING LOAN PROGRAMS IS WELCOME. IN THOSE COUNTRIES

WHERE THE REFORM PROGRAM IS INSUFFICIENTLY ADVANCED TO PERMIT

A REDUCED EMPHASIS ON ADJUSTMENT LENDING, SPECIAL CARE NEEDS

TO BE EXERCISED TO ENSURE THAT FAST-DISBURSING LOANS ARE NOT

USED MERELY IN SUPPORT OF THE BALANCE OF PAYMENTS

CONSEQUENCES OF UNTENABLE DOMESTIC POLICY POSITIONS.

TURNING TO THE PARTICULAR PROBLEMS OF THE HEAVILY INDEBTED

MIDDLE INCOME COUNTRIES, MR. CHAIRMAN, WE CONCUR WITH THE

EMERGING RECOGNITION THAT THE INTERNATIONAL DEBT STRATEGY IS

IN NEED OF REVIEW.

IT HAS BEEN SUGGESTED THAT THE BANK AND THE FUND - WITH THE

AGREEMENT OF SHAREHOLDERS - COULD DO MORE TO FACILITATE DEBT

REDUCTION.

MR. CHAIRMAN, WE BELIEVE THAT DEBT REDUCTION CAN MAKE A

POSITIVE CONTRIBUTION TO THE RESTORATION OF CREDITWORTHINESS

AND A RETURN TO NORMAL ACCESS TO FINANCIAL MARKETS.

BUT WE DO HAVE A NUMBER OF IMPORTANT QUALIFICATIONS.

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FIRST, DEBT REDUCTION IS NOT A SUBSTITUTE FOR NEW LENDING.

THE INCREASED GROWTH AND DOMESTIC INVESTMENT WE ALL WANT TO

SEE IN THE HEAVILY INDEBTED COUNTRIES WILL CONTINUE TO

REQUIRE ACCESS TO NEW MONEY. DEBT REDUCTION MUST BE

STRUCTURED SO AS TO ENHANCE, NOT DIMINIS*H, CREDITWORTHINESS

AND NEW MONEY FLOWS.

SECOND, THE BANK'S AND THE FUND’S CAPACITY TO ACCEPT

ADDITIONAL EXPOSURE TO THE HEAVILY INDEBTED MIDDLE INCOME

COUNTRIES IS LIMITED. AN EXTENDED AND DIVERSIFIED

INVOLVEMENT BY THE BANK AND THE FUND MUST BE TRULY CATALYTIC

AND EFFECTIVELY LEVERAGED.

THIRD, THE INTERNATIONAL FINANCIAL INSTITUTIONS' CAPACITY TO

SERVE THEIR ΝΟΝ-HEAVILY INDEBTED MEMBERS MUST NOT BE IMPAIRED.

FOURTH, THE PROSPECT OF DEBT REDUCTION MUST NOT BE ALLOWED TO

UNDERMINE REFORM PROGRAMS. ACCESS TO THE DEBT REDUCTION, AS

WITH NEW LENDING, MUST BE ANCHORED FIRMLY IN ADJUSTMENT

PERFORMANCE. THOSE COUNTRIES MAKING THE MOST CREDIBLE

EFFORTS TO REDRESS THEIR PROBLEMS SHOULD STAND TO GAIN THE

MOST BENEFIT.

FIFTH, DEBT REDUCTION SHOULD NOT OBSCURE THE IMPORTANCE OF

APPROPRIATE INDUSTRIAL COUNTRY POLICIES TO ADDRESS THE DEBT

PROBLEM. TRADE LIBERALISATION AND THE CORRECTION OF FISCAL

IMBALANCES IN THESE COUNTRIES WILL ASSIST HEAVILY INDEBTED

COUNTRIES BY PROVIDING A MORE OPEN AND PREDICTABLE EXTERNAL

ENVIRONMENT

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WE LOOK FORWARD TO CONSIDERING PROPOSALS THAT MEET THESE

CRITERIA. '

FINALLY, MR. CHAIRMAN, WE WELCOME THE INCREASED INTEGRATION

OF ENVIRONMENTAL CONSIDERATIONS INTO THE BANK’S OPERATIONS.

STEPS HAVE BEEN TAKEN TO IMPROVE THE FLOW OF INFORMATION ON

THIS ASPECT OF THE BANK'S WORK TO ITS MEMBER GOVERNMENTS AND

THE PUBLIC. THESE ARE IN THE RIGHT DIRECTION BUT NEED TO BE

TAKEN FURTHER. I THEREFORE JOIN MY COLLEAGUES WHO HAVE

CALLED FOR A REPORT ON THIS MATTER TO THE NEXT MEETING OF THE

COMMITTEE. 1

WASHINGTON DC

4 April 1989