WASHINGTON (MNI) – The following is the communique issued Saturday
at the conclusion of the 25th meeting of the International Monetary
Fund’s steering committee, the IMFC:

Chaired by Mr. Tharman Shanmugaratnam, Deputy Prime Minister of
Singapore and Minister for Finance

The global economy is recovering gradually. Since we last met,
important policy actions have been taken in the euro area, both at the
national and regional levels, including through an enhancement of the
European firewall. Economic indicators in the United States have
improved. Emerging market and developing countries on the whole remain a
source of strength for the world economy. But more remains to be done.
The outlook remains one of moderate growth globally, and risks remain
high. We will continue to act collectively to restore confidence,
rekindle growth, and create jobs.

— In advanced economies, further actions are needed in many
countries to achieve credible fiscal consolidation and government debt
reduction, while avoiding excessively contractionary fiscal policies.
Where conditions permit, automatic fiscal stabilizers should be allowed
to operate. In all countries, viable medium-term consolidation
strategies should be in place. Monetary policy will need to remain
accommodative as long as inflation prospects remain anchored and weak
growth persists. The potential impact and cross-border spillovers of
such a policy should be closely monitored. Structural reforms to boost
potential output and employment are critical, and need further momentum.
In the euro area, continued progress on ensuring debt sustainability,
securing financial stability, and undertaking bold structural reforms
will be crucial to boosting confidence and productivity, facilitating
rebalancing within the monetary union, and promoting strong and balanced
growth.

— Emerging market and developing countries continue to grow, while
facing spillovers from the advanced economies. Ongoing stresses in
Europe, high and volatile oil and commodity prices, and large and
volatile capital flows pose significant policy challenges. This requires
the right balance between attenuating downside risks with appropriate
policies to support growth and curbing inflationary pressures. Rapid
credit growth in some economies warrants attention. Low-income countries
should preserve macroeconomic stability and debt sustainability while
pursuing their development objectives and addressing infrastructure gaps
to enhance their growth potential. We call on the membership to complete
the low-income-country financing package under the Poverty Reduction and
Growth Trust through 2014-15, and will consider proposals to ensure its
long-term sustainability, by our 2012 Annual Meetings. We call on the
Fund to support the efforts of Arab countries in transition with policy
advice, technical assistance, and appropriate financing at this historic
time; we support these efforts, including through collaboration with the
Deauville Partnership, to facilitate economic transition while
safeguarding financial stability. We encourage the Fund to enhance
attention to small states, especially those that are most vulnerable to
external shocks.

— Global collaboration is key to sustaining growth everywhere and
ensuring stability. Further actions are needed to build on the progress
made to date in reducing global imbalances. In general, deficit
countries need to continue with their efforts to strengthen national
saving while enhancing export competitiveness, and surplus countries
need to continue to implement structural reforms to strengthen domestic
demand, supported by continued efforts that achieve greater exchange
rate flexibility. It is also crucial to press ahead cooperatively in
strengthening financial systems by completing and implementing the
agreed international financial reform agenda in an internationally
consistent and non-discriminatory manner, including in the area of Basel
standards, derivatives, and cross-border resolution of financial
institutions. In addition, fostering and protecting investment is
crucial for the global recovery. We reaffirm our collective
responsibility to avoid protectionism in all its forms.

The next Consolidated Multilateral Surveillance Report provides an
opportunity to assess progress in our efforts.

We will ensure that the IMF has the tools and resources to
effectively support the membership and welcome the directions in the
Managing Director’s Action Plan.

— Resources. We remain committed to take the necessary actions to
secure global financial stability. We welcome the euro area members’
decisions in March to strengthen European firewalls as part of broader
reform efforts and the availability of central bank swap lines. Together
with the G-20, we have reached agreement to enhance IMF resources for
crisis prevention and resolution. This is the result of a broad
international cooperative effort that includes a significant number of
countries. There are firm commitments to increase resources made
available to the IMF by over $430 billion in addition to the quota
increase under the 2010 reform. These resources will be available for
the whole membership of the IMF, and not earmarked for any particular
region. The resources would be channelled through temporary bilateral
loans and note purchase agreements to the IMF’s General Resources
Account. Should it become necessary to use these resources, adequate
risk mitigation features, conditionality, and adequate burden sharing
among official creditors would apply, as approved by the IMF Board. This
effort, together with the national and regional structural, fiscal, and
monetary actions that have been put in place in the past months, shows
the commitment of the international community to safeguard global
financial stability and put the global economic recovery on a sounder
footing.

— Governance. We reaffirm the urgency of making the 2010 quota and
governance reforms effective by the 2012 Annual Meetings, to enhance the
Fund’s legitimacy and credibility. We urge members to ratify these
reforms expeditiously and call on the Fund to monitor progress
transparently and more frequently. We look forward to an agreement, by
January 2013, on a simple and transparent quota formula that better
reflects members’ relative positions in the world economy. We reaffirm
our commitment to complete the Fifteenth General Review of Quotas by
January 2014. Any realignment is expected to result in increases in the
quota shares of dynamic economies in line with their relative positions
in the world economy, and hence likely in the share of emerging market
and developing countries as a whole. Steps shall be taken to protect the
voice and representation of the poorest members. We call on the Fund
with the input from our Deputies to report on progress at our next
meeting.

— Surveillance. We welcome recent initiatives on Fund
surveillance, and agree that the current surveillance framework should
be significantly enhanced. We welcome the progress by the Fund in
advancing consideration of an integrated surveillance decision and
commit to support the decision process. Strengthening surveillance
should bring together bilateral and multilateral perspectives in Fund
policy advice and enable better assessment of global and country level
risks and spillovers to economic and financial stability, and engage
more effectively with policymakers. The IMFC has a key role to play in
regularly guiding strategic and operational priorities for Fund
surveillance.

The next Action Plan provides an opportunity to report on progress.

Next IMFC meeting. Our next meeting will be held in Tokyo on
October 12-13, 2012.

** MNI Washington Bureau: 202-371-2121 **

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