Meeting of commonwealth finance Ministers Barbados 23–24 September 1987

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This article was downloaded by: [University of Leeds]On: 29 October 2014, At: 05:17Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UKThe Round Table: TheCommonwealth Journal ofInternational AffairsPublication details, including instructions for authors andsubscription information: of commonwealthfinance Ministers Barbados 2324September 1987Published online: 15 Apr 2008.To cite this article: (1988) Meeting of commonwealth finance Ministers Barbados 2324September 1987, The Round Table: The Commonwealth Journal of International Affairs,77:305, 67-73, DOI: 10.1080/00358538808453855To link to this article: SCROLL DOWN FOR ARTICLETaylor & Francis makes every effort to ensure the accuracy of all the information(the Content) contained in the publications on our platform. 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Terms & Conditions of access and use can be found at Round Table (1988), 305 (67-73) 67DocumentationMEETING OFCOMMONWEALTHFINANCE MINISTERSBARBADOS23-24 SEPTEMBER 1987COMMUNIQUECOMMONWEALTH FINANCE MINISTERS met in Barbados on 23-24September under the chairmanship of the Hon L. Erskine Sandiford,Prime Minister and Minister of Finance of Barbados.2 The following paragraphs record the main elements in their wide-rangingand detailed discussions.World economic situation3 Ministers noted that there had been recovery from recession in industrialcountries and inflation had been brought down to very low levels. But this hadnot brought with it the full benefits that had been hoped for. Industrial countrygrowth had slowed since 1984. There had been a further decline in the growthrate of developing countries in 1986 and growth prospects remained poor formost of the developing world. Ministers expressed particular concern over theserious growth and debt problems facing many developing countries especiallythose in sub-Saharan Africa. Faster growth was needed in both the developingand industrial world.4 They agreed that a substantial contributing factor to slow growth in theworld economy was the persistence of large macro-economic imbalancesamong industrial countries which had prolonged uncertainty in foreignexchange markets, weakened business confidence, encouraged protectionist0035-8533/88/305067-07$03.00 1988 Butterworth & Co (Publishers) LtdDownloaded by [University of Leeds] at 05:17 29 October 2014 MEETING OF COMMONWEALTH FINANCE MINISTERSsentiment and inhibited expansionary policies. Ministers noted the efforts beingmade by major industrial countries since the 1986 Tokyo Summit to improvepolicy coordination. In particular they welcomed the commitment made at the1987 Venice Summit to foster greater exchange rate stability and to take addi-tional action if future world economic growth proved inadequate. Ministerswere of the view that current circumstances warranted further action toimprove growth rates.5 Ministers commended the report of the World Commission on the Environ-ment and Development entitled 'Our Common Future'. They agreed that thegoal of environmentally sustainable development should be central to nationaland international economic policy. They also agreed that much environmentalstress originated in poverty and in unequal access to the world's resources andthat remedial action required not merely more effective environmental controlbut radical action to improve living standards in the developing world.6 Ministers recognized the important role played by women in every aspect ofthe national economy and in many sectors where structural adjustmentmeasures had the greatest impact. They acknowledged that inadequateemphasis had been given to women in such programmes. They commended toHeads of Government the recommendation made by Ministers Responsible forWomen's Affairs in Zimbabwe to establish an Expert Group to look atstructural adjustment issues in relation to women.Trade7 Ministers noted that the terms of trade of most commodity exporters werestill very unfavourable though there had been some revival in the price of somecommodities, notably metals. They emphasized the need to remove distortionsaffecting conditions in commodity markets with a view to improvingcommodity prices. They called for further action to assist developing countriesto diversify their economies, and hoped that the Common Fund would soon beoperational.8 Ministers expressed the deepest concern at the growing strength of protec-tionist pressures and the spread of new trade restrictions. These measures weredisrupting world trade, undermining business confidence and investment,sapping the growth and anti-inflationary policies of countries which imposethem, and causing immense difficulties for developing country economiesseeking to expand and diversify exports, especially low-income and smallstates. They noted that the viability of debt servicing hinged critically on oppor-tunities for developing countries to achieve freer access to world markets, so asto export more and attract export-oriented investment. Ministers wereencouraged by the business-like opening to the new round of multilateral tradenegotiations in Geneva and expressed their hope for early and substantialprogress in reducing trade barriers. They urged, as a matter of priority, astrong, renewed, commitment to a standstill and roll-back of protectionism.Ministers also emphasized the need to achieve early results in reducing restric-tions and distortions, including subsidies, in world agricultural trade.68Downloaded by [University of Leeds] at 05:17 29 October 2014 MEETING OF COMMONWEALTH FINANCE MINISTERSFinancial flows to developing countries9 Ministers were deeply concerned about the serious deterioration in, andpoor prospects for, financial flows to developing countries. They underlinedthe importance of adequate external financeboth private and publicforsustained development and successful growth-oriented adjustment and warnedthat current adjustment efforts would be endangered without a revival offinancial flows. To this end, Ministers stressed the desirability of substantiallyincreased net resource flows from developed to developing countries.10 They pointed to the highly beneficial implications for the internationaladjustment process, and for sustained world growth, of channelling some ofthe savings surpluses of industrial countries to developing countries. In thisregard, they welcomed recent initiatives by Japan. They called, however, forgreater efforts in the area of intermediation in channelling private financialflows to capital deficient developing countries.11 Ministers expressed disappointment at current levels of official develop-ment assistance, now far below the UN target level. However they noted thatsome countries had substantially increased their development assistance. Theyreiterated the importance of aid for the least developed and other low-incomecountries. They urged donors to give renewed priority to aid targets and calledfor their fulfilment as rapidly as possible. They urged continuing improvementsin the quality of aid, in its terms, and in its effectiveness, and in simplifyingadministrative procedures.12 Ministers expressed disappointment that foreign investment had also beenfalling. They stressed the importance of a larger role for such investment tocomplement domestic investment. They noted the work of the Secretariat in thefield of foreign investment and welcomed the special emphasis being given tothe promotion of investment possibilities in small island states. They also notedthat investment promotion would be a prominent feature of the Common-wealth Small States Exposition, to be held in Vancouver at the time of theCommonwealth Heads of Government meeting and thereafter in Toronto.13 In view of the serious difficulties that many Commonwealth developingcountries were facing in attracting new financial flows, Ministers called uponthe Secretariat to examine ways in which Commonwealth capital-importingdeveloping countries could be assisted in improving their access to privatecapital. In particular, they requested the Secretary-General to put in hand anexamination of the possibilities of facilitating increased private flows includingventure capital and portfolio investment, to Commonwealth developingcountries.The debt problem14 Ministers had extensive discussion of the very serious debt situation facingmany low-income countries, especially those in sub-Saharan Africa, and theproposals for tackling it, especially those made by the Chancellor of theExchequer of the United Kingdom, which they strongly recommended to the69Downloaded by [University of Leeds] at 05:17 29 October 2014 MEETING OF COMMONWEALTH FINANCE MINISTERScreditor countries for early approval. They recalled that both the VeniceSummit and UNCTAD VII had recognized that the problems of these countrieswere unique and needed special treatment because of their poverty, poor exportprospects and long-term development needs. They recognized that thesecountries' debts were owed for the most part to the international financialinstitutions and the governments of industrial countries.15 Ministers recognized the need for action on a number of fronts. Funda-mentally it was a question of increased resources to support growth-orientedadjustment. In order to deal with the problem of obligations of low-incomecountries to the Fund, Ministers stressed the urgency of an agreement by theend of the year on a very substantial enlargement of the IMF Structural Adjust-ment Facility (see also paragraph 26). More generally, adequate flows of ODAhad an important role to play in alleviating debt problems and preventing theiroccurrence.16 As regards bilateral debt, they welcomed the agreements reached so far atthe Paris Club for longer repayment and grace periods on rescheduled debt forsome low-income countries. They emphasized the scope for multi-yearrescheduling of official bilateral debt in the Paris Club. Ministers also stressedthe need for other measures for low-income debt-distressed countries pursuingappropriate policies. These measures should include lower interest charges onrescheduled Paris Club debt. They emphasized the crucial importance ofachieving a consensus on this proposal and urged its implementation as soon aspossible. They also urged in that context the total conversion of ODA loans intogrants.17 Ministers stressed that debt relief must support growth-oriented strategies.It must take into account a country's capacity to generate export earnings. Itmust also lead to additionality of resources. Increased emphasis on debt-distressed countries should not be at the expense of aid flows to other needycountries.18 Ministers recognized that, while debt relief was of vital importance for thedebt-distressed low-income countries, major problems were also faced by somelow- and middle-income countries for whom a high proportion of external debtwas held by international financial institutions. In this connection, Ministersnoted with considerable interest the proposal on the problem of severe indebted-ness of such countries put forward by the Prime Minister of Jamaica on behalf ofthe member states of the Caribbean Community (CARICOM). The proposalprovided for a mechanism which addressed specifically the problems ofcountries which were not appropriately covered either by the Baker Plan or theLawson initiative. They commended the proposal for serious examinationwithin the international community.19 Ministers expressed disappointment that private lending to heavilyindebted middle-income countries had not materialized to the extent envisagedunder the Baker initiative. They noted that commercial banks had shown greatreluctance to participate in new concerted lending. They also noted the recentrecognition of the need for increases in loan-loss provisions by major70Downloaded by [University of Leeds] at 05:17 29 October 2014 MEETING OF COMMONWEALTH FINANCE MINISTERScommercial banks against bad debts. They considered that the growth of asecondary market in debt offered new opportunities for a more realistic andflexible treatment of outstanding commercial debt.The World Bank Group20 Ministers welcomed the agreement on the $12.4 billion Eighth Replenish-ment of the International Development Association (IDA) and urged that it beput into effect immediately. They also recalled the concern expressed last yearthat a replenishment of even this size would still be inadequate to meet the needsof all low-income countries. They therefore supported the Bank's efforts tomobilize increased resources, including co-financing, from bilateral donors forlow-income countries, especially those in sub-Saharan Africa, which continueto face a substantial resource gap for pursuing growth-oriented strategies.They encouraged the Bank, in cooperation with donor governments, tointegrate aid and debt relief discussions more closely.21 Ministers stressed the need for steady growth in IBRD net lending. Theyunderlined the urgency of an early agreement on a very substantial generalcapital increase. Ministers specifically urged an enlargement of the Bank'scatalytic role in stimulating commercial lending.22 Ministers welcomed the increased attention that the Bank was giving to thesocial costs of adjustment and its recognition of the important inter-relation-ships between poverty, the environment and long-term development. Withinthe context of adjustment with emphasis on growth, Ministers nonethelessemphasized that the primary role of Bank lending was to supply long-termdevelopment finance. They urged the Bank to pay greater attention to thefundamental role of women in economic development.23 Ministers welcomed the expanding role of the IFC but stressed the need forit to increase by appropriate means its lending to sub-Saharan Africa and smallstates. They urged speedy ratification of the convention of the MultilateralInvestment Guarantee Agency (MIGA), so that it can become operational atthe beginning of next year.24 Ministers reviewed the Bank's graduation policies and practices. Theyrecognized the concern of Commonwealth members on this question, especiallyas regards graduation from IDA. They called on the World Bank to ensure thatcountries are not prematurely graduated and that the graduation process takesinto account individual country circumstances, including the ability to tapalternative sources of finance.International Monetary Fund25 Ministers welcomed the strengthened role given at the Venice Summit tothe IMF in the mulilateral surveillance of major industrial countries, especiallyin developing a common analytical framework for policy coordination and inidentifying areas requiring remedial action.71Downloaded by [University of Leeds] at 05:17 29 October 2014 MEETING OF COMMONWEALTH FINANCE MINISTERS26 Ministers stressed the urgency of an agreement by the end of the year on avery substantial enlargement of the Structural Adjustment Facility, followingthe IMF Managing Director's proposal for at least tripling to SDR 9 billion theresources available to the Facility. They emphasized that resources madeavailable should be additional.27 Ministers emphasized the need for IMF conditionality to be responsive tocountries' growth objectives and for performance criteria in IMF programmesto be sufficiently flexible to reflect this. They recalled the concern they hadexpressed about cross-conditionality at their 1985 and 1986 meetings and urgedconsideration of ways in which cooperation between the Fund and the Bankcan grow while avoiding cross-conditionality. They called on the Secretariat tocontinue monitoring the problem.28 In view of the sharp fluctuations in commodity-based earnings Ministersstressed again the desirability of the earliest possible international agreement tosecure greater and more effective financial compensation for temporary exportshortfalls. In this context, they emphasized the importance of improving accessto the IMF's Compensatory Financing Facility and also of preserving itsintegrity and character as a source of timely finance for temporary exportshortfalls.29 Ministers affirmed the importance of maintaining the current access limitsunder the enlarged access policy. They noted quota increases had lagged behindthe growth of world trade and that there would be a need for an increase inquotas in the Ninth General Review.30 They also called on the Fund to exercise the maximum flexibility in dealingwith countries in arrears.31 Ministers considered that the current world economic situation, withsevere liquidity problems experienced by many countries, provided a context inwhich an SDR allocation merited serious consideration at the forthcomingmeeting of the Interim Committee.Commonwealth functional cooperation32 Ministers reiterated the great importance they attach to the activitiesundertaken by the Commonwealth Fund for Technical Co-operation (CFTC).They expressed deep concern that financial constraints had resulted in a sub-stantial curtailment of its activities. They urged all governments to makegreater efforts to provide additional contributions to the CFTC in order tomaintain the vigour of Commonwealth functional cooperation.33 Ministers noted with appreciation the valuable programme of activitiesundertaken by the Secretariat in assisting developing countries, especiallysmaller members, in their efforts to mobilize financial resources and use themmore effectively. They asked the Secretatiat to explore the possibility ofassistance to member countries in designing growth-oriented programmes.They welcomed the further development of the Commonwealth Secretariat72Downloaded by [University of Leeds] at 05:17 29 October 2014 MEETING OF COMMONWEALTH FINANCE MINISTERSDebt Recording and Management System and the financial advisory servicesavailable to help with debt renegotiation.Appreciation34 Ministers expressed their appreciation to the government and people ofBarbados for their warm hospitality and for the excellent facilities they hadprovided for the meeting. They recalled with particular pleasure that Barbadoshad welcomed Commonwealth Finance Ministers with equal warmth on twoprevious occasions in 1969 and 1977. They accepted with pleasure an invita-tion from the Government of Cyprus to meet there in 1988.73Downloaded by [University of Leeds] at 05:17 29 October 2014