Speech

Farewell Remarks by Horst Köhler, Former Managing Director, IMF

April 14, 2004

Ladies and Gentlemen, Dear Colleagues,

1. Thank you all for your kind words. Being in Washington over the last few days, and seeing all of you together again, makes me realize that in my mind I have not quite left the Fund yet.

2. My stay in Washington has been short, and I leave with the regret that I will not be able to complete the work of the ambitious agenda that we set together after my arrival four years ago. But I also leave with the satisfaction that I was privileged to lead the Fund during a period of momentous change, and I leave with the greatest respect for this institution, its dedicated staff, and its Board.

3. In my address to the Prague Annual Meetings, a few months after my arrival as Managing Director, I quoted the philosopher Karl Popper, who wrote in 1991: "The open future contains unforeseeable and morally quite different possibilities. So our basic attitude should not be `What will happen?' but `What should we do to make the world a little better?'." And indeed, global economic and political developments over the past four years have repeatedly tested the resilience of the world economy and the Fund. I believe that, on the whole, both have weathered the tests well — not least thanks to the reforms that the Fund and its membership embarked upon. I must pay tribute here to my predecessor Michel Camdessus, and to Stan Fischer, under whose watch many of those reforms were initiated.

4. We are by no means at the end of the process. But I do see significant progress toward better crisis prevention:

· Transparency has taken a quantum leap over the past four years. Both the Fund and its members publish more and better information than ever before. This is helping markets assess risks more accurately, although it surely doesn't guarantee it.

· The Fund's work on financial sectors and international capital markets has taken on a central role in our surveillance.

· The Fund has sharpened its analytical tools to assess vulnerabilities and risks. It is paying more attention to balance sheet risk and debt sustainability. And the Financial Sector Assessment Programs have evolved into a key tool to identify weaknesses and vulnerabilities in financial sectors.

5. Despite best efforts at prevention, it is unrealistic to expect that crises will disappear. Indeed, a dynamic market economy will face occasional crises — and the Fund's role must then be to help mitigate their impact and shorten their duration. Several times in recent years the Fund decided to support members facing severe difficulties with a significant commitment of resources, Brazil and Turkey being the most prominent examples. And I believe that these commitments have paid off: supporting strong domestic reform programs and avoiding a regional or even global contagion of the financial crises. It also shows the importance of safeguarding the size of Fund resources and ensuring that they do not shrink relative to the size of the world economy.

6. No less important, in my view, is the Fund's active role in the global fight against poverty. Our role in this area is necessarily complementary and needs to be exercised in close collaboration with others, especially with the World Bank and our fellow members of the UN family. But the challenge of global poverty is everyone's challenge: because the political consequences of extreme poverty — including civil conflict, uncontrolled migration, and international terrorism — ultimately frustrate the quest for economic stability and higher living standards everywhere. And the Fund, as a universal institution based on principles of solidarity and burden-sharing, must play its part.

7. By its nature, poverty alleviation is a long-term effort. But I believe we are making progress. I am encouraged by the remarkable international consensus, reflected in the common objectives defined by the Millennium Development Goals. And with the Poverty Reduction and Growth Facility, I believe the Fund has the right vehicle to play its part in achieving those goals. You may rest assured that should I have the honor to be elected as Federal President of Germany, I will remain an advocate for the development partnership established in Monterrey, and for Germany's engagement in it.

8. The world today is more inter-connected than at any time in its history. The instantaneous availability of information has also provided people around the world with the ability to participate in debates that are taking place a continent away. Seattle and Prague stand as reminders that the line between dialogue and confrontation can be a thin one. And being in the public domain has meant that the Fund is now subject to more scrutiny and criticism than ever before. This can be uncomfortable, at times even unpleasant. But I believe that on balance, openness serves the Fund well. Often, criticism is a healthy reminder that our decisions and actions are not theoretical case studies but fall into a real political context. And a culture of listening and learning helps avoid repeating past mistakes. The establishment of the Independent Evaluation Office bolsters such a culture, I believe, and I see the experience with its first few reports as very positive.

9. The creation of the Fund surely stands as a far-sighted contribution toward strengthening global ties among nations. When plans for the IMF were first discussed, the competing Keynes and White plans both sought to provide assurance that there would not be a return to the pre-war pattern of destructive economic practices. Allow me to quote briefly from the ultimately successful White Plan, circulated in April 1942: "The United States does not intend to desert the war-torn and impoverished nations ... but to help them in the long and difficult task of economic reconstruction. To help them, not primarily for altruistic motives, but from recognition of the truth that prosperity, like peace, is indivisible." I believe that this spirit must continue to be reflected in our operation as a cooperative institution, working through dialogue not diktat. We must be mindful of our global mandate. But our primary objective must be to help our members. All members, large and small, must feel that they are heard and can say, "Yes, this is also my Fund".

10. More than 60 years after Bretton Woods, we have seen tremendous advances across the world in terms of freedom, democracy, and market economics. But the expansion of markets has not made the Fund less needed, on the contrary. From financial crises in emerging market economies to corporate scandals in advanced economies it is abundantly clear that markets alone are no panacea. To flourish, they need a sound institutional framework of rules, regulations, and oversight. And the Fund is uniquely placed to contribute to the better functioning of markets across its membership. But market economies are more than merely efficient machines oiled to yield ever-rising standards of living, with the Fund as a well-trained mechanic. They are also social communities, which depend on social equity and social peace to build sustainable prosperity. Fundamentally, I agree with Hans Küng that there can be no survival of this planet without a global ethic, or in Václav Havel's words, without universally shared moral standards. This does not mean a single ideology, but rather a basic consensus of fundamental norms common to all religions and value systems.

Ladies and Gentlemen, Dear Colleagues,

11. It has been a privilege and an honor to serve as Managing Director of the Fund. It has also been a fascinating and exciting job. But my tenure as Managing Director would not have been as enjoyable were it not for all the valuable assistance I received. I would like to thank in particular Jim Wolfensohn for his friendship and support, and whose infectious passion has always inspired me. Allow me to thank the Dean of the Board, Abbas Mirakhor, for the excellent cooperation over the years. My heartfelt thanks also to Stan Fischer and Anne Krueger, First Deputy Managing Directors, as well as to Eduardo Aninat, Shige Sugisaki, Agustin Carstens, and Takatoshi Kato for their unstinting support. I would also like to thank the staff in my office, Delrene Boyd, Marjatta Quini, Sukham Lertprasert, Vicky Read, Axel Bertuch-Samuels, Siddharth Tiwari, and Ranjit Teja, as well as my speech writers, Scott Brown and Roger Nord. And last, but by no means least, I wish to pay tribute to the staff of the Fund, whose expertise, dedication, and limitless energy truly make this institution what it is.

Thank you.