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Economy the focus: G-24
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April 16, 2000: 7:52 a.m. ET
Ministers of developing nations caution about effects on their economies
By Staff Writer M. Corey Goldman
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WASHINGTON (CNNfn) - While the global economy continues to exhibit signs of strong growth, rising interest rates, fluctuations between major currencies and restrictive trade policies of industrialized countries are placing a restraint on developing nations - something that could deter their prospects for growth, the Intergovernmental Group of 24 Ministers said Saturday.
In a communiqué released at the conclusion of their Saturday meetings - a gathering of ministers and finance officials of third-world nations that coincided with the International Monetary Fund and World Bank spring meetings - the G-24 focused on reducing or removing trade barriers in developing countries, with a mandate to get the world's poorest countries into the global trading system.
"The communiqué reflects our particular concern about the negative impact that excessive increases in short-term interest rates in the major industrialized countries on growth prospects and the cost of credit for developing countries," said Carlos Saito, Peru's Central Bank Governor and Chairman of the G-24 Deputies. "We are also concerned about the potential dangers of too much volatility among the major currencies and financial asset markets."
In addition, the ministers expressed "strong reservations" about reducing the amount of credit the IMF extends. Rather, they agreed that the G-24 and IMF should work out how contingent credit lines could be modified, so cash could be provided to financially-strapped countries in a way that doesn't send shocks through financial markets.
"Contingent credit lines could be modified to improve incentives for its use through moderating its cost, reducing the potential risk of sending negative signals to markets and simplifying procedures on its activation," they said.
Who's watching who
One issue that ultimately could prove contentious was surveillance - where the IMF would take an increasingly active role in monitoring the fiscal and economic progress of its 182 member countries, and require them to make their activities public.
"In essence, we recognize the importance of surveillance of all members, particularly of their domestic policies," Saito said. "What is fundamental is that countries should accept these standards and apply them as soon as possible."
At the same time, Saito and the other committee representatives shied away from discussing what could be a touchy issue in the future: That countries should accept and strive for international standards of reporting their economic and financial operations to the world, but only make their progress at achieving those objectives public if and when they see fit to do so.
Also discussed among the ministers were the issues of trade and the outlook for the global economy. Saito focused on what he saw as an "excessive increase in short-term interest rates" on behalf of industrialized countries, particularly in the absence of inflation, as is the case in the U.S. and Europe.
The risk of financial markets
Saito even went so far as to comment on the U.S. stock market. All three major U.S. indices posted their biggest single-day point losses Friday, raising concern about the pace of the U.S. economy and whether future increases in interest rates may snuff out the nine-year-long economic expansion.
"There is always a decided risk in fluctuations of financial markets, and fluctuations in exchange rates, as well," Saito said. "What happened on Friday may be a trend or it may be a temporary thing, but the main focus of the G-24 is on the outlook for the world economy."
As for trade, "we're sorry industrial countries placed these barriers," Saito said. "Negotiations should continue to take into account both the negatives of these trade barriers and the need for reciprocity on the part of industrialized countries" who have not been forthcoming in allowing products from third-world countries to enter - products such as textiles and foods.
The ministers also agreed that the future method of selecting a managing director for the IMF and a president for the World Bank be altered from its current tradition to design a process that is "transparent, involves the entire membership through executive boards and that agreements be reached in their decision-making bodies."
U.S. Treasury Secretary Lawrence Summers Thursday called for the IMF and World Bank to change the way their top positions are filled through a more transparent process that would allow more voices to have a say in who gets elected to the top jobs.
Currently The World Bank president's position, by tradition, goes to an American, while the IMF managing director's job goes to a European. German Horst Kohler will take over as IMF managing director in May.
No contradiction here
The G-24 affirmed their collective push for internal reforms at the IMF and World Bank, although they uniformly rejected recommendations made by a U.S. congressional commission last month. The commission, headed by Carnegie Mellon University Professor Allan Meltzer, said the IMF's influence on developing economies must be reined in and called for the World Bank to halt its lending to most nations.
Instead, the G-24 will focus on the IMF's ability to monitor the world economy, detect potential financial crises and prevent he sort of panic among investors that touched off the Asian recession in 1997, the communiqué said.
They also expressed "deep concern" about the IMF's Heavily Indebted Poor Countries, or HIPC initiative, in particular "the proportionate burden of the cost of the initiative that falls on other developing countries that have lent to HIPC countries."
As for the ongoing demonstrations outside the IMF and World Bank - or at least the threat of them, Saito said what many other officials at this week's meetings have stated - that their objectives and the interests of the protesters are one and the same.
"There is no contradiction between our position and the position of the people who are demonstrating," he said. 
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