FROM THE OFFICE OF PUBLIC AFFAIRS

Good morning. While this is no time for complacency, these meetings in Prague come at a time when global economic conditions are better than they have been for some time.

I expect our discussions to focus on two areas: the global economic situation; and the ongoing reform of the International Financial Institutions (IFIs).

This being the final G7 finance ministers' meeting of the Clinton Administration, it affords some opportunity to reflect on the first meeting I attended, in London in February 1993. At that time, slow growth and chronic public borrowing in the US were of major global concern. How different the picture looks today.

• Our economy continues to show strong growth with low rates of inflation, and this year we will have achieved three consecutive years of unified budget surpluses, totaling over $400 billion. But we must not take our economic expansion for granted. We must continue to plan prudently: paying down the debt and maintaining fiscal discipline.

Looking beyond the US:

There have been welcome signs of stronger economic growth in all of the other major industrialized countries. But supportive policies continue to be essential, especially structural reforms to raise productive potential and investment and realize the opportunities afforded by new technologies.

The emerging market economies have strengthened since the recent crises, as recovery has taken hold and financial vulnerabilities reduced. But here too, it will be crucial to avoid complacency. Strong follow-through on financial sector restructuring and other reforms will be crucial.

• While the global fundamentals are sound, recent developments in oil markets are obviously a concern for consumers and businesses and around the world. I expect that energy market issues will be among those discussed in Prague this weekend. More stable prices, in line with historic norms, are in the mutual interest of both oil producers and consumers.

• With regard to exchange rates, let me repeat the statement that was released earlier today:

• "At the initiative of the European Central Bank, the monetary authorities of the United States and Japan joined with the European Central Bank in concerted intervention in exchange markets because of their shared concern about the potential implications of recent movements in the euro for the world economy." The British and Canadian authorities also took part in this operation, purchasing euros with their currencies.

Our policy on the dollar is unchanged. As I have said many times, a strong dollar is in the national interest of the United States.

We welcome the recent Board agreement to reform IMF facilities. These changes will help to establish the more focused and selective financing role for the Fund that the US has strongly supported. In this context and more broadly, we will also continue our discussions of private sector involvement in the resolution of crises. And, in line with recent progress toward reducing financial vulnerabilities in the emerging market economies, we will consider how the IMF could further integrate indicators of national balance sheet risk into its surveillance and programs.

We want to address more fully the provision of support by the MDBs at a time of financial crises. In particular, we will urge the World Bank to consider how to expand the use of the emergency financial vehicles that it now has in place, and of the pilot programs they have introduced to make more innovative use of guarantees in support of proactive policy reform. We will also address the need for greater institutional accountability and transparency within the World Bank and the MDBs more generally.

We continue to be strongly committed to maximizing the effectiveness of the HIPC debt relief initiative. In Prague we aim to agree on clear and achievable conditions for providing debt relief that enable the funds to be provided as rapidly as possible, while ensuring there are strong safeguards to maximize the chances of success. We are also supporting concrete reforms to the provision of assistance to such nations, so that the recipients of HIPC relief do not get into the same difficulties again.

We recognize that the US needs to do its part to keep HIPC moving forward. We are working hard to obtain Congressional approval of the President's pending requests for HIPC funding and authorization so that the US can fulfil its commitments.

We will also be calling for enhanced support for the provision of global public goods, such as vaccines and effective treatments for diseases such as HIV/AIDS and malaria, and agricultural and environmental research - including a multi-year program of increased Development Grant Facility funding for such projects within the World Bank.

There is now widespread agreement that financial crime has the potential to negatively affect the international financial system. Given the natural fit between the financial crime agenda and the IFIs' focus on the integrity of the global financial system, their financial sector work, and their promotion of good governance, we are working to ensure that both institutions to play their part in combating this problem. These issues will be firmly on the agenda of both the IMFC and Development Committee in Prague.