HISTORIC PRESS RELEASE : Statement by the G7 Finance Ministers and Central Bank Governors [September 1998]

The press release issued by HM Treasury on 14 September 1998.

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.