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G-24
calls for international regulation of financial markets GENEVA: The Group of 24, the Third World grouping at the IMF and the World Bank, have called for international arrangements for the supervision and regulation of financial markets and institutions. In a declaration issued in Caracas after their extraordinary session (7-9 February), the G-24 also injected a note of caution towards liberalization of capital accounts under IMF auspices, and called for global arrangements to secure "appropriate sharing" of the cost of crisis resolution in post- crisis situations. While previously the G-24 have been speaking of a "progressive and flexible" approach, and "orderly" liberalization as a prelude to any amendment of the IMF Articles (being pushed by the IMF management), the Caracas meeting has called for a "cautious approach". It is a setback to the drive of the IMF Managing Director, Michel Camdessus, who has been pushing for changes in the IMF Articles, and for developing countries to agree to move towards capital account convertibility (and an IMF role in it), which, however slow and measured, would nevertheless preclude any reversal of direction. The G-24, which had met in Caracas to hammer out a common approach in the aftermath of the Asian crisis, called for a wide-ranging review by a Task Force of industrial and developing countries on a range of issues, including the capacities and modalities of international monetary and development finance institutions to respond in a timely and effective manner to crises induced by large-scale capital movements, and the appropriateness of the conditions prescribed by these institutions to deal with such crises. Following is the text of the Declaration: "The Ministers of the Intergovernmental Group of Twenty-four (G-24) met in extraordinary session for their 58th meeting in Caracas, Venezuela, from February 7 to 9, 1998, and agreed to issue the following Declaration: Recent events in international financial markets demonstrate the profound implications of the newly intensifying integration and participation of developing countries into the global economy, and emphasize the need for global cooperation to preserve the stability of the international economic and financial system. The Asian crisis threatens to generate deflationary influences throughout the world. At the same time, the imminent introduction of a new currency - the Euro - into the global economy creates more challenges for macroeconomic policy formation in association with the functioning of the international financial system so far based on national currencies. These events have shown that, without strengthened international cooperation (i) to improve the functioning of the global economy and (ii) to reduce the potential costs and risks of globalization for its more vulnerable participants, the potential benefits of globalization are at risk. The Group of 24 agrees: * to promote an orderly and cautious approach to the liberalization of capital accounts under IMF auspices; * to explore global arrangements for the purpose of securing an appropriate sharing of the costs of crisis resolution in post-crisis situations; * to support efforts to strengthen and coordinate the work of agencies for financial market surveillance and supervision, and to pursue urgently discussions in respect of international arrangements for supervision and regulation of financial markets and institutions; * to endorse the initiative on the debt problem expressed in the Mauritius Mandate, adopted by the Commonwealth Finance Ministers last September, within the context of an appropriate burden-sharing arrangement, and to further the effort to seek permanent and creative solutions to the debt problems and development financing needs of the poorest countries; * to support an expanded role for the special drawing rights (SDR) in the international monetary system; * to welcome the principles expressed in the OECD Convention on Combating Bribery of Foreign Public Officials, recognizing that the fight against corruption must be carried on the basis of symmetry with regard to the responsibility of both developed and developing country governments, and to examine the Convention, along with other proposals, with a view to recommending them for consideration by governments; and * to support national and international efforts to further develop and disseminate comprehensive and timely economic and financial information. The Group of Twenty-four sees an urgent need for a wide- ranging review by a Task Force comprising industrial and developing countries of the following issues: * the capacities and modalities of the international monetary and development finance institutions to respond in a timely and effective manner to crises induced by large-scale capital movements; * the appropriateness of the conditions prescribed by these institutions to deal with such crises; * the equitable sharing of the costs of post-crisis financial stabilization between private creditors, borrowers and governments; * the more effective surveillance of the policies of major industrialized countries affecting key international monetary and financial variables, including capital flows; * the modalities for building domestic social safety nets as integral elements of stabilization and adjustment programmes to protect the most vulnerable elements of the population of crisis-affected countries; and * increased representation and participation of developing countries in the decision-making organs of the international community to properly reflect the developing countries' growing influence in the world economy, including through the revision of the basis for determining the voting power in international financial institutions." - (Third World Economics No. 179/180, 16 Feb-15 March 1998) The above article was originally published in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.
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