1. The global economy and financial markets : outlook, risks, and policy responses

Since our Spring Meeting, global prospects have significantly weakened. The recent decline in global equity markets and the deterioration in emerging markets financing conditions, in a context of weakness of domestic demand in the major industrial countries, persistent deflationary pressure in Japan, and unfinished agenda of structural reforms in the Euro area have a dampening effect on growth. The downside risks to strength and sustainability of the global recovery are further aggravated by the increased volatility in oil prices and the persistent difficulties in Argentina and their contagion effects into neighboring countries.

Against this background and in light of the increased interdependence of the global economy and the major weight of the industrialized countries, greater efforts should be directed toward supporting sustainable growth through accommodative macroeconomic policies, while orderly addressing the global imbalances and enhancing structural reforms, notably in the Euro area and Japan. At the same time, further international cooperation is crucial to secure more stable oil and commodity prices for the benefit of both consumers and producers. Strengthened international cooperation is also needed to address and limit the spill over effects of the Argentinean crisis.

The efforts of the international community should focus on continuously promoting a more favorable environment for growth in the developing world, where prospects remain fragile despite strong domestic adjustment efforts. While domestic efforts need to be sustained and enhanced to encourage investment, promote sustainable growth, and reduce poverty through achieving and maintaining macroeconomic stability, implementing and deepening structural reforms, and improving governance stronger support from the international community, particularly for low-income countries, is urgently needed.

Access to the industrialized countries' markets should be facilitated, notably through the removal of agricultural subsidies and trade barriers. This will significantly contribute to an increase in developing countries' exports and growth prospects, while benefiting the developed countries' consumers themselves. Benefits from sound, growth-oriented policies could be jeopardized by distortions in commodity markets and barriers to trade in the advanced countries. Better access to the industrialized countries' markets should also be facilitated by stronger technical support from the Bretton Woods institutions to strengthen developing countries' capabilities in trade-related issues.

2. Strengthening surveillance, crisis prevention, and crisis resolution

As reflected in the Managing Director's report on the IMF in a process of change, the Fund has made considerable progress over the recent years towards achieving greater effectiveness in carrying out its core missions, particularly in strengthening its surveillance role.

The important steps taken to improve the focus and quality of the Fund's bilateral and multilateral surveillance, enhance the impact of its policy advice, increase the effectiveness of surveillance in program countries, and improve countries' institutional capacities are commendable. They should strengthen the Fund's capacity to play a major role in promoting the stability of the international financial system and reducing the risks of future crises, by helping countries reduce vulnerabilities and achieve macroeconomic stability and sustainable growth.

We support, in particular, the view reflected in the Managing Director's report, that improving the quality of the Fund's policy advice implies, among other crucial issues, "intensifying the focus on the global or regional impact of the largest economies, including their trade policies" and that the "efforts to improve the quality of the Fund's advice can only translate into effective surveillance and crisis prevention if this advice informs and affects the policy choices of its members."

In pursuing its efforts to enhance the effectiveness of surveillance, the Fund should focus on the areas within its mandate and expertise and rely on relevant institutions' capacities for all other areas within a cooperative approach.

We note the progress achieved in designing appropriate means to enhance the effectiveness of the Fund's response to crises, as better surveillance "could not prevent crises from occurring altogether." We support the ongoing work of the Fund in strengthening the assessment of debt sustainability, improving the clarity and predictability of its policy on large access to its resources, refining its financial facilities, and clarifying its policy on lending into sovereign arrears to private creditors. We call for further refinement, as needed, while safeguarding the Fund's flexibility to respond to unforeseen situations. We note the progress towards strengthening the framework for restructuring sovereign debt through work on the contractual and statutory approaches and look forward to concrete measures in this area, which would secure an effective, realistic and orderly participation of all parties concerned in the resolution of the crisis without unduly affecting market conditions for emerging economies. It is important, however, to seek collaboration of the private sector in this area and to avoid any measure that could lead to reduction in access to and tightening of conditions in international capital markets for emerging markets.

3. Low-income countries

While progress under the HIPC Initiative has been steady, it remains far below expectations, as only 6 out of the 38 eligible countries have reached the completion point. This calls for enhanced assistance to the remaining countries to accelerate the PRSP preparation, focusing on key areas and reflecting strong country ownership. Moreover, greater flexibility is needed when dealing with post-conflict eligible countries, taking into account the longer time needed to strengthen their implementation capacities.

In addition, adequate resources should be secured for topping-up debt relief for countries that reach the completion point but face deterioration in their debt situation for exogenous reasons.

4. Combating money laundering and the financing of terrorism

We reiterate our support to the global efforts of the international community aimed at combating money laundering and financing of terrorism. We commend Fund's further work and involvement in addressing these problems of global concern, in coordination with the relevant international institutions and bodies.

In this regard, we support the proposal to assess a global standard and the creation of a new ROSC module, subject to a 12-month pilot period. Within this process, Fund's assessment should be limited to its core areas, mandate, and expertise, without involvement in law enforcement issues. In addition, assessment should be on a voluntary basis, and technical assistance should be provided where needed.

5. Twelfth general revue

We welcome the ongoing work on the twelfth general review and quotas and call for a strengthening of the developing countries' role in the decision-making process of the IMF.

6. Independent evaluation office

We welcome the first report of the new Independent Evaluation Office on prolonged use of Fund resources and hope that the Fund would make good use of its recommendations.