Transcript

Transcript of a Press Briefing by the Chairman of the Intergovernmental Group of 24 on Monetary Affairs and Development ("G-24"), Mr. Jean-Claude Masangu Mulongo.

April 11, 2008

MS. MBOTO-FOUDA: Good afternoon, ladies and gentlemen. Welcome to this press conference of the chairman of the Intergovernmental Group of 24 on Monetary Affairs and Development. I am Lucie Mboto-Fouda from the IMF's External Relations Department.

Before I introduce the panel today, I would like to quickly remind you that the G24 was established in 1971 to concert the position of developing countries on monetary and development issues. The G24 represents three groups of countries; in Africa, Latin America, and the third group is Asia and developing countries in Europe.

Let me now introduce the panel. We have here today, representing the chair of the G24 which held by the Democratic Republic of the Congo, Mr. Jean-Claude Masangu Mulongo, Governor of the Central Bank of the Democratic Republic of the Congo (DRC). He is the Chairman of the group. Also in the chair is Mr. Wa Bilenga Tshishimbi. He is the chair of the Deputies and is also from the DRC. Representing the First Vice Chair, which is held by Syria, is Mr. Samir El-Khouri, Alternate Executive Director at the IMF; and representing the Second Vice Chair, which is held by Brazil, and just joining us now is Mr. Rogerio Studart, Executive Director at the World Bank. Representing the G24 Secretariat is to my immediate right, Mr. Amar Bhattacharya, who is Director of the G24 Secretariat.

Mr. Masangu Mulongo will have a few opening remarks, then we will take questions in the room.

Mr. Chairman, you have the floor.

MR. MASANGU MULONGO: Thank you. Ladies and gentlemen, I will speak in French, and maybe when we answer questions, I may switch from one language to another.

Ladies and gentlemen of the press, let me start by giving you some introductory remarks, following which my colleagues at the head table will answer any questions you may have for us. This morning we held our 79th Meeting of the Intergovernmental Group of 24 that it is my honor to chair, and the two heads of the Bretton Woods Institutions, the Managing Director of the IMF, Mr. Strauss-Kahn, and Mr. Robert Zoellick, President of the World Bank, attended.

In my view, all the important topics that are current were satisfactorily addressed. First of all, having to do with the global financial and economic situation, we all noted that this meeting takes place at a time of turbulence and uncertainty that has no precedent. This crisis is far different to the ones that preceded it in the past 20 years not only because of its gravity, but also its scope and source. It is based on inadequate policies adopted by the developed countries and some gaps in market regulations. The developing countries, on the other hand, are facing greater stability thanks to the policies that they have implemented and the margins that they have put in place. We noted, nonetheless, that the crisis presents serious risks to our countries, I am thinking in particular of the increase in food prices, oil products, the disorganized movement of short-term capital, the contraction of demand for export and new turbulence on the stock markets.

In these conditions, the group thought it was advisable to recommend three series, three types of urgent actions. First, the developed countries must take determined steps to contain the crisis; second, it is necessary to reform the global monetary system; and third of all, it is necessary to help developing countries, in particular the poorest, so they can face the impacts of the crisis.

The two Bretton Woods Institutions have an important role to play in this area. The IMF must strengthen its surveillance of developed countries and implement an effective instrument to avoid future crises. It should also eliminate the problems to access natural resources. To face increasing prices for food, donors and bilateral entities should increase support for affected countries. We should also take this opportunity, the opportunity of the increase in food prices, to obtain decreases in custom tariffs and subsidies on agricultural products and thus relaunch the Doha cycle.

The second item on the agenda was the voice and quota reforms. Recent events and long-term challenges that we face underscore the importance of the IMF's role and that of the World Bank at this crucial point in history. These two institutions, however, can only take up the challenge if they are capable of meeting the democratic shortfall in their governance. The participants of the group and myself welcomed the efforts mentioned by the Managing Director to accept the reforms presented to Governors that provide for a number of positive steps, but we all agree that we will not correct the underlying imbalance of the governance. This is a process. So we must be firmly committed to pursue the reform process, and in particular this process must be transparent, to adjust the quota and to commit to these changes.

Having presented all these details at the IMF, it is now time for the World Bank to also commit to this process of reform, a reform focusing on the specificity and the difference of the mandate given to the World Bank as well as the objectives. The schedule for reforms must be more ambitious, because the World Bank is a development agency. We believe it is urgent to establish parity between the shares given to the developed countries and the developing countries, and the developing nations need to have greater choice, and this applies to both of the institutions. We must also pursue initiatives in parallel, in particular with the size and makeup of the Boards of both institutions, strengthen the means made available to the groups that bring together the largest number of countries, improving the structure and also the process for the appointment of the heads of both institutions.

Third item on the agenda addressed this morning, climate change. If the financial crisis is a major concern today, the climate change that we can see over the horizon requires as much attention from us all, both scientifically and politically, and we all concur that climate change will have catastrophic effect on developing countries and poor populations and could even put at risk and jeopardize life on the earth. We need to attenuate the impact of climate change and we need to adapt to the situation. We can no longer ignore the fundamental issues in attempting to find effective solutions. Developing nations may contribute to carbon emissions and through the use of energy which per inhabitant is far lower to that of developed countries. More than two billion inhabitants in developing countries do not actually have any access to energy, and the high cost of energy is a discriminatory burden on the countries that are attempting to bridge the development gap. We welcome the work carried out by President Robert Zoellick and his proposals in this respect within the World Bank. The World Bank has a potentially important role to play to catalyze and support the type of reaction that is required for the financing, transfer of technology, and implementation of initiatives to bring out tangible benefits for our countries.

Lastly, the final item that we addressed was financial developments. We addressed important questions in this area in preparation of the high level meeting scheduled to take place in Qatar in late November. Discussions are still at the early stages. However, we will continue our negotiations in the Doha perspective. We now welcome your questions.

MS. MBOTO-FOUDA: We are now going to take questions in the room. As usual, could I kindly remind you to please introduce yourself and your media outlet before you ask your questions.

QUESTIONER: Today situations are very bad as far as the economy is concerned economically, markets are down and all that. As far as India is concerned, what role do you think India is playing as far as the World Bank and IMF is concerned? As far as corruption in many countries where the IMF and World Bank lend money, but people are asking it is not reaching to the people in many countries, including India, Pakistan, and Bangladesh, especially in Third World countries. Are the World Bank and IMF taking steps in the future so people can benefit, not the dictators or the politicians?

MR. MASANGU MULONGO: That is a very tough question. We did not discuss that this morning. Maybe Amar, would you like to take a shot at that question?

Mr. BHATTACHARYA: India is a member of the G24, and the main message that came out from the discussions today is that so far emerging markets, including those such as India, actually have been a stabilizing force in the world economy, and this point was made by our Ministers as well as by both the Managing Director and President Zoellick. However, it is also clear that the present events are having an effect on developing countries, including in terms of downturn in external demand, including through potential instability in capital flows, including through stock markets, but most importantly right now through high energy and food prices. So developing countries cannot be complacent, and indeed there is a need for them to step to the plate in terms of reducing their vulnerabilities, but they will also need assistance to deal with these shocks.

There was no explicit discussions of the issues of corruption and governance, but our Ministers had stressed in the previous discussions that they of course remain very firm in tackling those issues in their countries, but it has to be done within the governance and democratic processes of each individual country.

QUESTIONER: Could you please tell us what kind of recommendation do you make to strengthen the regulatory and supervisory framework, and I would like to ask Rogerio Studart how Brazil is in this discussion. Thank you.

MR. STUDART: Okay, thank you. Well, first of all, we have not addressed this in details. We understand that this is one of those rare occasions where the epicenter of the crisis is in the developed world and has to do with the regulations in the developed economies, and that developing economies have done quite a great deal in terms of improving their own regulations and, by the way, their own macroeconomic management. So we are in the position to request a multilateral approach both to the question of improving regulation but also in the question of crisis management. So I think that we all agree that we have to reinforce the multilateral institutions' role in getting a multilateral response to this crisis that does not affect the process, the sounder process of development of our own countries.

MR. STUDART: Well, I think that we are in a very good position because, as you know, we have done quite a lot in terms of improving our domestic regulation and supervision. Our banking sectors and financial markets are very strong at the moment. We also have a very strong macroeconomic manager at the moment, so we can be part of the solution and the stabilization not only by being one of the poles of growth, of sustained growth but also as part of the solution in proposing multilateral efforts, ways of improving international regulation of the financial markets. So in a nutshell, we are in a very good position, we are very well engaged, and we have been heard for obvious reasons.

QUESTIONER: Good afternoon. I am from Radio Canada. I have two questions. First is there a reaction to the fact that there are not many U.S. journalists in the meeting to cover the G-24 meeting. What is your reaction to that fact?

MR. MASANGU MULONGO: Well, that is something that has been noted, but after all, it is the G-24. G-24 represents many countries, and the voice of the G-24 is a significant voice that must be heard. Moreover, we will be able to express ourselves at the Board of the IMF and I think we will also be heard at the Development Committee, so we have a chapter. It is a pity, yes, but that will not prevent us from being heard.

QUESTIONER: My second question refers to the price of food. There have been riots in Africa, in Egypt, there have been deaths in Haiti. I would like to know the position of the G-24 for things to concretely change. In addition to the problem of food, you see some important structural changes to bring an end to all of this. Thank you.

MR. MASANGU MULONGO: I thank you for your question. This is a matter of concern not only for African countries but many other countries that are impacted by the extremely steep increase in food, and the increase in food prices have a negative impact on our people. They will feel hunger, there will be malnutrition, there may be an increase in child mortality and also mortality of pregnant women and young females, and there will also be social unrest. This is actually something we have seen. In Africa there have been a number of demonstrations because of the social issues, and these also have a repercussion on political stability of nations. The World Bank President said that we do have an objective, and it is the MDGs, the Millennium Development Goals, and because of this crisis in food products and the increase in commodities, we have learned through World Bank studies, and these are preliminary studies, but apparently we are already lagging seven years behind in attainment of the MDGs. This is an extremely important fact. The World Bank is asking donor countries to contribute to the World Food Program, to make a contribution of half a billion dollars. This is not a negligible amount of money, but it is necessary for our countries to be able to find the ways and means to mitigate these exogenous shocks caused by increased oil prices which has a repercussion on transport costs, and this is the transport of goods and persons, also the transport of merchandise, and all of these things have negative impacts on African countries. At the level of budgetary policies some African countries have proposed that some of the tariffs and taxes be decreased, and these are things that are under consideration, but the ultimate beneficiary, the consumer, should be able to benefit from these decreases in taxes and charges and fees, and hopefully the International Monetary Fund will be in a position to help countries by providing some new facility and added liquidity, to not only impact the balance of payments but also to have a very specific objective, which in this case is the crisis that we are experiencing today. This is the position of the G-24 group and not simply that of one Central African Governor.

QUESTIONER: I have two concerns. The first has to do with the voice and quota reform within G-24, I would like to know if your discussions with respect to the quotas, are they optimal or marginal? That is my first question.

My second question relates to climate change. Since the Kyoto agreement, we have seen that the group of polluters - U.S., China, and yet others - are not paying their bill. They are not giving to those who are not causing any pollution, they are not meeting their commitments. I would like to know whether at your meeting within the G-24 this was discussed to see how the two forest lungs of the world, I am thinking of Amazonas and the Congo Basin, which contribute really to mitigating the effect of the greenhouse effect, have you raised your voices? Do you speak as a bloc seeking that developed countries pay their bill and their charges or ensure that poor countries just simply are able to pay their foreign debt using the carbon credits?

MR. MASANGU MULONGO: In reply to your first question and even the second one, I am sure that the other members at the head table will be able to complete my answer, but your first question addressed the issue of voice and quota, and whether the proposals that have been tabled; are they optimal or marginal? I think that the answer to that question is that a first step has been taken, so this is a first step, and it is a significant one in order to reform, restructure the International Monetary Fund. The formula to calculate the quota structure takes into account the relative weighting of each country in their global economy through GDP and the purchasing power parity. What is important here is that all countries have contributed to finding a solution, those with a stronger voice or with more votes have tried to give up part of their voice to those that had less, and this is extremely important.

In all of this, we have agreed that it is a process. We need to go much further. There are formulas that will make it possible every five years to increase the quota shares. Based on the IMF needs for liquidity, the position of the G-24 group was to say that it did not only depend on the IMF needs for liquidity that the quotas were to be revisited, so there is now a willingness to push forward in this area.

Then there is the tripling of the basic votes that allows low-income countries to maintain their weight, to retain their voting power, and even to improve it even if that is slight. So a consensus was reached, and I think that our friends at the IMF have really done very good work, but we must continue.

In reply to your second question on climate change, whether we faced one another, if we have really spelled out all the truths. Well, this morning we had a meeting, and things did not occur in that manner, but we did nonetheless stress the most important issue - equity. There is no doubt about that. Some have developed by being high polluters and others are seeking to develop and face obstacles because they must change their technologies in order to move towards cleaner technologies which cost more money. So we need to strike a balance for those countries who are in that situation.

Is there anybody else who would like to complete this answer or add to it?

QUESTIONER: A moment ago you very clearly and exhaustively described all the prices having to do with increase in food, particularly affecting Africa. I do not know if I fully understood what you expect of the IMF, especially in the short term. Do you expect broader actions such as grants or massive injection of money? Could you please clarify exactly what you expect of the IMF to face this very pressing problem.

MR. MASANGU MULONGO: I believe earlier I indicated that it was necessary to implement a new financial facility, enabling countries such as ours to be able to access the International Monetary Fund resources and thus mitigate the exogenous shocks, so this is a pretty concrete action, and I also believe that - and one of the objectives, and please correct me if I am mistaken, but one of the objectives of selling the gold held by the IMF, part of these funds will serve precisely this purpose.

QUESTIONER: What is the position of the G24 on the current food crisis facing some African countries and others like Haiti?

MR. STUDART: Very good question, because it allows me to address an issue and some initiatives that are taken in the World Bank. First of all, we have to understand that the multilateral world, we all know, have specific mandates for specific institutions. So for instance, when you are talking about agreements, and this is why we all said in our communiqué, we are talking about the United Nations, how all the nations are on equal footing in discussing these issues that affect all of us. The Chair has already mentioned the role of the IMF, it is in our communiqué. In our communiqué we mentioned that we are very pleased with some of the initiatives that President Zoellick is putting forth, which comes towards our approach to the question of food prices, I believe, at least this is something that some world leaders, for instance in our case President Lula, has been preaching in the international fora. The food crisis now has a short term perspective which is out there. You can see it in the newspapers, in Haiti, you see riots in the African nations and so on, which can destabilize. People are dying out of it. It can destabilize the countries that otherwise would go on a very good development pattern, but it has to be dealt with as a crisis, and you have a long-term problem which for some of the developing countries is also a good part, which is the increased demand for food, which has to do with the fact that some of the poorest are eating more, which is good news. Of course, the sad side of that is that some people of the developed countries are eating too much. The consumption of energy and food has been too strong. So you have a long-term perspective, and you have a crisis which is also associated, by the way, with the financial crisis. I could explore that much more, but I do not want to take too much time.

The role of the institutions should be differentiated., We have welcomed the initiative there in the communiqué by The World Bank President Zoellick in what he calls the New Deal for Global Food Policy, which is basically addressing the issue of the short term in terms of transfer to face the crisis as it is, increasing the transfers right now, and then you can look at the communiqué, and you also see the speech given by President Zoellick some days ago, which responds to that. The long-term perspective which has to do with the role the World Bank can have in improving productivity in agriculture in developing economies. We are talking about pushing for more family agriculture, not only just transfer of technology and resources from developed countries to developing countries, but also south-south cooperation, which can help.

So I think that in a way, if you look at the two institutions, what they can do in their respective mandates, they are doing a good job. That is what I had to say, Chair. I hope that answered your question.

QUESTIONER: You called on the advanced economies to take decisive policy actions. Could you give us some specific examples of what you would like to see them do.

MR. EL-KHOURI: Well, there have been ongoing discussions among the industrial countries themselves, and of course within the framework of the IMF which concerns itself with the international financial system, and so you have the upcoming meetings of the IMFC which is the International Monetary and Financial Committee, which is tomorrow, and that encompasses both the Group of 24 as well as the advanced countries, and that would be a very good occasion in order to go into more specific recommendations, but I think that, as was alluded in the communiqué that we have, there are two kinds of issues involved. In terms of the financial issues, you have the questions of the regulatory and supervisory framework, and so there obviously have to be some more advances made on that front in order to correct some of the things that have happened before and partly contribute to the crisis.

There is the other aspect also of trying to shield the international monetary and financial system from the crisis spreading, and you can do that in two ways. You can have on the part of the emerging countries, concerning the Group of 24, what they can do to shield themselves, but there is also some obligations on the part of the industrial countries to make sure that there are no negative spillover effects. So far it has not happened yet, but it does not mean it wouldn't happen. So there would have to be also some actions on the macroeconomic policy fronts, and I think what we are trying to do is that within the IMFC, which happens tomorrow, there has to be a global discussion of how you could put it all together in a global framework because all the G-24 can do is to have a dialogue with the industrial countries. I think that will be happening. Thank you.

QUESTIONER: I want to turn to the quota issue because there is not a single emerging or developing country that I have spoken to that actually agrees with the adjustment that has gone on, particularly from the developed to the developing world, yet you are all backing it. Wouldn't it have been better to hold out for a better one now, because there is no guarantees that in five years it is actually going to change?

The second thing is, if you do not have confidence in this adjustment, do you really believe that the IMF can improve its legitimacy now, that it is legitimate enough to address the issues and the policies that you are all seeking?

MR. MASANGU MULONGO: I think that we have to take this opportunity. We know that things are not perfect, but at least we have a proposal on the table. If we have to compare, because all these initiatives started in Singapore in 2006, I can tell you that we worked very, very, very hard to come up to this point. For example, last year at the Annual Meetings we were far from reaching a consensus, so this is a major step forward. It is important to give it a chance.

I would add something important. We have time to vote. The Governors will vote for or against that proposal. So we have to wait until everybody has cast their vote, and then when we count the vote, it is most likely that this proposal will pass.

QUESTIONER: I am just trying to understand what this new IMF facility that you want would look like. What exactly is wrong with the current facilities and how would you like a new facility to look?

MR. BHATTACHARYA: Actually our communiqué calls really for enhanced access to the Exogenous Shocks Facility. Energy and food prices will have, as Mr. Studart pointed out, very high social costs, and for that we expect the World Bank, as he mentioned, to be the primary institution to respond to that, together with bilateral donors But for the Fund it is the balance of payments impact, and for that we see the Exogenous Shocks Facility, and the enhanced access to it, as the main response.

QUESTIONER: Please, what is the position of the G-24 on MDG as it relates to African countries, what are the discussions on ways to meet the goals, I mean strategies to meet the goals by 2015 given the fact that many of the countries and developing countries in Africa are dragging. What is the assessment of the G-24 on Nigeria's meeting the MDGs?

MR. TSHISHIMBI: I believe you are referring to the issue of how the African countries as a region are quite far from the path to reach the Millennium Development Goals. Under the Monterrey Consensus it was decided that the group of Part One countries, the most advanced countries, would help by increasing assistance, financial assistance to Part Two countries, which are developing countries to finance the Millennium Development Goals. Now, this was premised on the fact that in the developing countries there would be important reforms including governance, and I believe as far as African countries are concerned, especially within the NEPAD consultations, a number of measures have been taken, indeed to improve governance, and respond to most difficult questions that the Part One countries were requesting, but since the Gleneagles conference, as you know, the summit, and the advanced countries decided actually to double assistance to Africa. This has not happened. So our group expressed a lot of disappointment that this has not materialized, and we have insisted very much that the advanced countries come up, indeed, with the promised aid to help developing countries finance the Millennium Development Goals. I think that is the answer for the time being for your questions.

QUESTIONER: What is the G-24's assessment of Nigeria in meeting the MDGs?

MR. TSHISHIMBI: The G-24 is an intergovernmental organization to help foster consultation among the countries, so this group in itself cannot help a particular country, such as Nigeria, so what we are doing is to get our heads together and formulate our request, our demands in a consistent fashion, so we are, if we will, a group of, like a lobby that is presenting the demands of all the developing countries including Nigeria, of course. But the group as such does not have the means of its own to help a particular country.

The staff representative from the External Relations Department (Ms. Mboto-Fouda) - I see that we have no more questions in the room. In the back of the room, that would be the last question, then the Chairman will conclude the press conference.

QUESTIONER: Just a follow-up question. You did mention that the African countries are waiting for aid promised by Gleneagles and some other organizations. My question is why do you have to keep waiting for aid? All these years there has been tons of aid going into the continent, and there has been progress made in some aspects. In some other aspects there has not been progress. Why can't we begin to find new strategies to begin to tackle the problems? For a couple of years now many countries have posted strong economic growth, and why can those countries not begin to come together and look for other ways and means to begin to achieve these MDGs instead of waiting and begging for more money?

MR. BHATTACHARYA: It is a good point, and indeed if you look at the record of sub-Saharan Africa in the past decade, there has been real acceleration in growth and real acceleration in progress, but the question we are asking is will that be sufficient to meet the Millennium Development Goals, and one of the reasons that countries cannot just do it on their own is because the levels of income still are very low, and the number of people who are at risk of not meeting the Millennium Development Goals in Africa are so large. Now, there are innovative solutions. For example, there are many countries who are benefiting from windfalls from the high energy prices and high mineral prices that are presently prevailing. Those resources could be used, for example, to spur increased development in the continent, but the important point is the north needs to live up to its commitment to help Africa meet the Millennium Development Goals. For example, in the last five years, aid has increased from 50 billion to 105 billion, but the amount of aid that has been available to Africa for projects and programs has not increased one dollar. It remains at a level of 12 billion dollars compared to 1995. So without an increase in that aid, it will be very difficult for the poorest countries in Africa to accelerate progress towards the Millennium Development Goals.

MR. STUDART: I am sorry, I was very tempted to say something about that. I think your point is very fair. One of the problems about poverty and underdevelopment is what I call the exclusion trap. It goes beyond the poverty trap. You need to bring up the bottom billions or so into the economic and social lives in order for them to have their own voices and start making changes internally. This may be very abstract but something, for instance, that is happening in my own country, Brazil, with the social inclusion programs; when you not only bring them economically but also politically into the process, and then that becomes a self-sustaining process of changes in politics and changes in economy, that sets a path of growth and development.

Now, having said that, to bring those people up, you need not only resource transfers, but you also need some technology transfers this way. For instance, a cash transfers program is well known in several countries, but it is not implemented in many other developing countries. So using the multilateral institutions to channel their knowledge in order to speed up the process and provide their resources is very useful. This is why we support the developed economies, the developed economies are not doing that just for a favor, it is because globalization has created a situation where the global equilibrium, both political, social, and economic depends on that. So it is only fair that there is a transfer of real resources and knowledge in order to speed up the process that has to be from within.

QUESTIONER: Thank you. I just do not feel that my question was answered fully. Coming back to the quota issue. I know that you said you feel this is the best you can get now and therefore you are supporting it, but do you feel that this actually makes you feel better represented in the IMF?

MR. MASANGU MULONGO: Well, the representation is not just based on the quota or the power of votes. Representation also means that nationals from our country should also have access to various positions at the IMF and at the World Bank and in general in the multilateral institutions. That representation is also important. It is also important for us, and I think we work on it, we have been asking for it, to also revisit the way, the selection process of the Managing Director of the IMF or the President of the World Bank, so these things are going maybe not together but in parallel, and I said that we had an opportunity based upon the votes is the first opportunity that we have, and I think that it is my bet at least, from what we have discussed, is that the G24 will support the proposal which is put on the table.

MR. MASANGU MULONGO: I will make the conclusion in French.

We are facing an international crisis, an unprecedented one, and to quote the Managing Director of the IMF, it is a crisis which is a systemic one, it is not on the outside limits of the system, it is in the heart of the system where the crisis began. It began in the United States, and it is spreading.

Amongst the important actions that we must all undertake to deal with this crisis, we have entrusted the mission to the IMF and to the World Bank to find a response, a coordinated and collective response to this crisis which has repercussions on emerging countries and on developing countries.

How else might one conclude this press conference? All I can do is thank you all.

The staff representative from the External Relations Department (Ms. Mboto-Fouda) - Thank you, Mr. Chairman. Thank you all for attending this press conference. We will see you next time by the end of the year during the Annual Meetings..