Finance ministers and central bankers from the Group of 7 (G-7) industrialized nations April 12 agreed that the international financial institutions should conduct a preliminary needs assessment of Iraq and provide the country with technical assistance as soon as possible, says U. S. Treasury Secretary John Snow.

Briefing reporters at the end of two days of meetings in Washington of ministers and bankers from Canada, France, Germany, Italy, Japan, the United Kingdom and the United States, Snow said the group also agreed that international cooperation is needed to "find, freeze and marshal" the assets of Saddam Hussein's regime.

"We recognize the need for a multilateral effort to help Iraq," the group said in a post-meeting communique issued the same day. "We support a further U.N. Security Council resolution [regarding an independent Iraq]. The IMF [International Monetary Fund] and the World Bank should play their normal role in rebuilding and developing Iraq, recognizing that the Iraqi people have the ultimate responsibility to implement the right policies and build their own future," the communique said.

The group reiterated that fighting terrorist financing remains a key priority, said Snow, who chaired the meetings. The ministers and bankers also repeated their commitment to strengthening national financial crisis prevention and resolution measures, he said.

The group also agreed that foreign aid works best in countries with good governance and environments conducive to private-sector economic growth, Snow stressed. He said the group underscored the importance of trade liberalization, especially in agriculture and financial services, for global economic growth and reduction of poverty.

The G-7 remains committed to the Millennium Development Goals -- which have broad international support -- to halve global poverty from 2000 to 2015, according to the group's communique.

The group will develop an approach for helping countries not eligible for assistance from the World Bank's lending arm, the International Development Association (IDA), the communique added. The approach will be discussed at the G-7 meeting in May in France, it said.

In a separate April 12 statement of progress on an action plan adopted in April 2002, the G-7 urged the IMF to intensify efforts to make surveillance of its members' economies "more comprehensive, independent and accountable."

The statement said the G-7 supports the promotion of early collective action clauses for sovereign bond contracts. It added that the sovereign debt restructuring mechanism proposed by the IMF needs further discussions on topics such as aggregation, scope of debt and inter-creditor equity.

Snow said he also met separately with finance ministers of several G-7 and non-G-7 countries, including those of Central American nations, Brazil, South Africa, France, Russia and Japan.

He said all G-7 members pledged to pursue domestic economic policies that would strengthen investor confidence.

He added that the basic U.S. economy "continues to perform well" and that the budget deficit is "manageable."

Good afternoon. I was very pleased to host my fellow G-7 Finance Ministers and Central Bank Governors over the last two days to discuss developments in the world economy and the challenges that confront us. I appreciated the opportunity to engage on some very important issues with my colleagues.

One important issue is the future of Iraq. During our bilateral discussions and in the G-7 meetings we began substantive discussions about how our nations and the international institutions can work together to help the Iraqi people recover -- not just from 25 days of conflict, but from 25 years of economic misrule. We agreed that the international financial institutions should provide technical assistance and expertise in Iraq and undertake a preliminary needs study. I noted the importance the United States attaches to international cooperation as the people of Iraq claim their liberty.

Cooperation is necessary in the efforts underway to find, freeze and marshal the assets of the Saddam regime and there was broad agreement on that subject as well.

And again we recognized that cooperation is vital for providing humanitarian assistance and for the challenges of reconstruction ahead. We had useful discussions about how to proceed with the Iraqi debt -- recognizing that the Iraqi people cannot bear the burden of current debt levels -- and we recognize the need of the Paris Club to begin to address this issue.

We shared the view that growth in our economies is not as strong as it needs to be -- both because of geopolitical uncertainties and other underlying weaknesses. A reduction of geopolitical uncertainty will help a global recovery, but this alone will not bring about the strong and lasting growth essential for our countries and for the world. Each of us pledged to pursue economic policies at home that support strong growth with low inflation, to raise potential growth through productivity-enhancing structural reforms, and to strengthen investor confidence through continued improvements in corporate governance practices, market discipline, and transparency.

Here in the United States, President Bush's jobs and growth plan will enhance growth potential over the long term. I underscored the need for structural reform in Europe and Japan so that all are contributing to global growth.

Terrorism financing continues as a key priority. We reiterated our commitment to implement the work plan we laid out in February and thereby keep our financial institutions and systems safe from abuse by terrorists. We reiterated our commitment to wage war against terrorist financing.

We also reiterated our commitment to strengthen crisis prevention and resolution measures as reflected in the communique. We also adopted an action plan which documents the progress made last year and charts a course for future activity.

As for crisis resolution, we welcomed the strong leadership that Mexico has shown, and there was broad agreement on the need to move forward with clauses to promote an orderly restructuring process.

We reaffirmed our support that aid is most effective in countries with sound policies, good governance, and an environment conducive to private sector-led growth.

Finally, we underscored the importance of trade liberalization to global growth and poverty reduction. Successful implementation of the Doha Development Agenda, in particular the agricultural and financial services agendas, offers potential benefits for all countries.

Statement of G-7 Finance Ministers and Central Bank Governors

April 2003

We met today at a time in which the world economy faces many challenges. In this light, we reaffirm our commitment to multilateral cooperation.

Growth in most of our economies has been subdued, though uncertainties have diminished. A strong and lasting recovery is essential for our own countries and for the world. To this end, we each commit to pursue sound macroeconomic policies that support sustained growth. In a low inflation, low interest rate environment, there is potential for higher growth through productivity-enhancing structural reforms, and to buttress investor confidence through continued improvements in corporate governance practices, market discipline, and transparency. We will respond as needed to developments in the economic environment. We will continue to monitor exchange markets closely and cooperate as appropriate. We underscore the importance to global growth and poverty reduction of successful trade liberalization through the timely implementation of the Doha Development Agenda, notably in financial services.

We encourage all emerging market countries to pursue sound policies and to enhance their investment climates. These policies will help attract financial flows, importantly including foreign direct investment, to reduce external vulnerabilities, and to support sustained growth. We welcome the strong macroeconomic policies and ambitious structural reforms that Brazil's authorities are implementing.

We reiterate our commitment to strengthen crisis prevention and resolution measures. We are pleased to see progress being made on each element of our Action Plan of last April, as detailed in the accompanying update. We will continue to work to further implementation in this area.

We reaffirm our strong commitment to combat terrorist financing and pledge to maintain the momentum we have achieved thus far. We will work with the Financial Action Task Force [FATF], the U.N., and the International Financial Institutions to implement the work plan that we endorsed in February. We welcome the Action Plan of the IMF and World Bank, and are encouraged by the progress of the Pilot Program agreed with FATF; we urge them to successfully carry forward this important initiative. We look forward to revised FATF recommendations by June, establishing an enhanced standard in the fight against financial crime.

We reaffirm our February commitment to address the challenge of global poverty and our support for the Millennium Development Goals and the Monterrey consensus. Achieving these will require mobilization of greater financial resources by developed and developing countries. We will continue to focus on the goals and their financing, including facilities, with a view to progress by Evian. Aid is most effective in countries with sound policies, good governance, and an environment conducive to private sector-led growth. We reiterate our support for NEPAD [New Partnership for Africa's Development] principles. We will develop an approach for dealing with non-IDA [World Bank's International Development Association] countries within the Paris Club for consideration at our May meeting. We also encourage developing countries, working with the World Bank, to integrate trade objectives as key elements of their PRSPs [poverty reduction strategy papers] and CAS [country assistance strategy] lending programs.

We recognize the need for a multilateral effort to help Iraq. We support a further U.N. Security Council resolution. The IMF and the World Bank should play their normal role in rebuilding and developing Iraq, recognizing that the Iraqi people have the ultimate responsibility to implement the right policies and build their own future. It is important to address the debt issue and we are looking forward to the early engagement of the Paris Club [informal group of official creditors].

G-7 Action Plan Implementation

April 2003

In April 2002, we adopted an integrated Action Plan to strengthen crisis prevention and resolution measures designed to promote conditions for sustained growth of private investment in emerging markets. The progress made on each element of the Action Plan is set out below.

Surveillance and Crisis Prevention -- Better information is key to sound economic analysis and improved pricing of risk, with a view to promoting more stable capital flows. In this regard, the IMF has made progress in deepening its surveillance capacity, including through the development of more robust debt sustainability analyses and greater focus on national balance sheets. The IMF and its Independent Evaluation Office (IEO) have identified areas for further progress to make surveillance more comprehensive, independent and accountable, including a fresh perspective in program countries and improved analysis of vulnerabilities. We urge the Fund to intensify its work in these and other critical areas, including currency mismatches, reporting progress to the 2003 Annual Meetings. To complement these measures, we support the presumption of publication of Article IV reports, Public Information Notices (PINs) of relevant Board discussions, program documents, and reports on the observance of standards and codes (ROSCs), especially for countries with IMF programs, while taking into account its impact on deletion and correction policy. Program documents for cases of exceptional access should always be published.

Access Limits -- Consistent with the need for greater discipline in the provision of official finance in crisis situations, we support the IMF Board's decision that normal access should be limited to 100 percent of quota in any one year and a cumulative total of 300 percent of quota. Lending under any facility, or combination of facilities, above these limits will be considered exceptional. Over the past year, the IMF has set out criteria and procedures to inform decisions and judgments for cases where exceptional access is contemplated. These stronger procedures, including early Board involvement and a separate report evaluating the case for exceptional lending, will be applied to any exceptional lending, even where the member is not experiencing a capital account crisis. We welcome the recent establishment of a strong presumption that only the SRF [supplemental reserve facility] will be used for any exceptional lending to address significant balance of payment pressures on the capital account. We also welcome the progress made in clarifying the Fund's policy for lending in cases where members are in arrears to their private creditors.

Code of Conduct -- In the light of growing interest in exploring a voluntary "code of good conduct", and since good investor relations are key to timely, orderly debt restructurings, we have instructed our officials to prepare a report, in consultation with issuers and the private sector, on these issues by our Fall meeting. We note that the Fund has already started to examine the concept and we look forward to a progress report on its work.

Collective Action Clauses (CACs) -- We remain committed to promoting the early and widespread adoption of CACs. To date, experts from the private and official sector have made progress toward developing model clauses for use in sovereign bond contracts. We expect that G-7 countries will continue their leadership by adopting CACs in their own bonds governed by the laws of a foreign jurisdiction. Consistent with the policy of the European Union to introduce these clauses in new foreign bond issues, some EU members will start issuing bonds with such clauses this year. We welcome the leadership that Mexico has shown by including CACs in its successful bond issues under New York law.

Sovereign Debt Restructuring Mechanism (SDRM) -- The extensive analysis and consultations undertaken in the course of the Fund's development of a concrete SDRM proposal have promoted a better understanding of the issues to be addressed in the more orderly resolution of sovereign debt crises. In view of the experience gained through the implementation of CACs and the interest in a code of conduct, and recognizing that it is not feasible now to implement the SDRM proposal, work should continue on issues raised in the SDRM discussions, such as aggregation, scope of debt, and inter-creditor equity that are of general relevance to the orderly resolution of financial crises.