HM Treasury News Release

149/98                                14 September 1998
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STATEMENT BY THE G7 FINANCE MINISTERS AND CENTRAL
BANK GOVERNORS

Finance Ministers and Central Bank Governors of the G7 countries
have been in close contact over the last few days to discuss
developments in the world economy and global financial markets
and to explore ways to respond to the challenges now facing the
international financial system.

In light of the exceptional pressures in financial markets and
deteriorating prospects for growth in many parts of the world,
the Ministers and Governors agreed on the following approach.

First, they agreed that inflation is low or falling in many parts
of the world. They welcomed some encouraging developments as
regards domestic demand growth in continental Europe.
Nevertheless, in view of the slowdown in demand in a number of
economies, especially among emerging market economies, the
balance of risks in the world economy had shifted. They
emphasised their commitment to preserve or create conditions for
sustainable domestic growth and financial stability in their own
economies. In this context, they noted the importance of close
cooperation among them at this juncture.

Second, the Ministers and Governors welcomed the courageous
measures taken in many emerging economies and the significant
progress made in laying the foundation for stability and
recovery. They agreed to explore ways to reinforce the existing
programmes, in support of growth-orientated policies, with
accelerated efforts to promote comprehensive programmes for
corporate and financial sector restructuring, improved
transparency of policy-making. In addition, they agreed to
consider measures to alleviate the effects of the crisis on the
poorest segments of society, including if necessary through the
provision of augmented financial assistance centred in the
multilateral development banks.

Third, the Ministers and Governors emphasised that the adverse
developments in the external environment make it particularly
important that countries take appropriate steps to strengthen
policies and improve confidence. Countries that embrace
unilateral action on debt as a substitute for reform and
cooperation hurt the prospects for their own economies and the
world system.


Fourth, the Ministers and Governors agreed to support a
cooperative international approach to support those countries
that have been adversely affected by recent developments in
global markets and which are implementing strong economic
programmes. They expressed concern about the extent of the
general withdrawal of funds from emerging markets without respect
to the diversity of prospects facing those countries and the
significant progress that has been made in many countries in
carrying out strong macroeconomic policies and structural reforms
that enhance long-term growth prospects. They agreed on the
urgency of the early implementation of the IMF quota increase and
establishment of the New Arrangements to Borrow.

Finally, they agreed to continue to support the provision of
financial assistance from the IMF, which will remain at the
centre of the system, in support of strong policies, and
including in parallel with the private sector. In this context,
they drew attention to the possibility, if circumstances so
warrant, of activating the General Arrangements to Borrow, in
consultation with other participants in the arrangements. They
also support an active role for the World Bank and the other MDBs
in cooperating with and providing finance and technical
assistance to support their member economies in this difficult
time, with a particular focus on support for the vulnerable
groups in society and for financial sector restructuring.

The Ministers and Governors will continue to consult closely
among themselves and with the major financial institutions in
their countries that have a key interest in the smooth and
efficient operation of markets and promotion of financial
stability.


NOTES TO EDITORS

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# = pounds sterling