FROM THE OFFICE OF PUBLIC AFFAIRS

Our meeting opened today with a review of developments in the world economy, with global conditions better than they have been for some time. We all agreed that prospects for continued expansion in industrialized countries generally have further improved since our last meeting, with a more balanced pattern of growth now emerging.

Nonetheless, important challenges remain. In Europe, while we are encouraged by recent moves toward reform, there is widespread recognition of the need for governments to press ahead with structural reform to increase productive potential and raise incentives for job-creating investment. And in Japan, supportive macroeconomic and structural policies, particularly with regard to the reform of the financial and corporate sectors, will be crucial to ensuring a durable recovery.

With respect to exchange rates, let me repeat the statement that was released.

• We discussed developments in our exchange and financial markets. We have a shared interest in a strong and stable international monetary system. At the initiative of the European Central Bank, the monetary authorities of the United States, Japan, United Kingdom, and Canada joined with the European Central Bank on Friday, September 22, in concerted intervention in exchange markets, because of the shared concern of Finance Ministers and Central Bank Governors about the potential implications of recent movements in the Euro for the for the world economy. In light of recent developments, we will continue to monitor developments closely and to cooperate in exchange markets as appropriate.

We also shared concern about the adverse effects on the world economy of the recent sharp increase in the world oil price. It is important that world oil prices return to a level consistent with lasting global economic prosperity and stability for both oil producing and consuming countries, and in particular for the poor developing countries.

In light of continuing high prices and low levels of stocks it is crucial for the world economy that OPEC and other oil producing countries take actions to contribute to a reduction in oil prices and greater stability in oil markets. Improved efficiency in the use of energy in all economies would contribute to that objective. Ministers and Governors also welcomed the U.S. action to release a limited quantity of its oil reserves in the form of a series of swap transactions. We agreed to remain in close contact and to continue our discussions with oil producing and consuming countries as we evaluate measures appropriate to the evolving situation in oil and product markets.

We also welcomed the continued recovery and strengthening fundamentals in emerging market economies, while stressing the need for further progress on economic reform, in particular to improve underlying fiscal positions and debt structures and strengthen the financial sector.

In addition to our review of the global economy, we focused on three key ongoing issues: reform of the international financial institutions, improving implementation of the enhanced HIPC initiative, and actions against abuse of the global financial system.

IMF Managing Director Koehler joined us for our discussion on reform of the international financial architecture and the IMF. I was struck by the consensus in the room that the international financial institutions need to continue to adapt their activities to the framing reality that private capital flows are now the predominant source of global finance.

With respect to the IMF, we welcomed the recent agreement in the IMF Executive Board to help establish a more focused and selective financing role for the Fund, including through a shorter effective maturity for lending under its core facilities and higher charges. We urged the Fund to speed up its work in strengthening the surveillance role of the IMF, including by increasing the emphasis on national balance sheet and liability management and enhancing its ability to identify sources of vulnerability. We emphasized that IMF conditionality needs to be focused to be effective, and, in cases of financial crises, in particular, address issues central to the recovery of confidence and the return of capital market access. We look forward, in that context, to the upcoming review of conditionality associated with IMF lending. We also welcomed the establishment of an Evaluation Office that is independent, transparent, and committed to external consultation.

With respect to the multilateral development banks, we have outlined several important priorities for reform. In particular, I want to highlight the need to expand the provision of global public goods, initiate comprehensive pricing policy reviews, and establish performance-based frameworks for the allocation of resources to borrowers.

Second, with respect to the Enhanced HIPC Initiative, we reaffirmed our determination to move forward as quickly as possible with the provision of debt relief to HIPC countries, while ensuring that the resources that are freed up by debt relief are targeted to core social investments, such as health, education and other human development priorities. In this context we also repeated our commitment to relieving 100% of both Official Development Assistance debt to HIPC countries and eligible commercial claims. At the same time, we must all of us remember that the true measure of HIPC's success will not be whether or when a country has received relief, but how well those resources are used, and whether the reforms that accompany HIPC can achieve enduring poverty reduction and growth.

Finally, we re-affirmed our commitment to the fight against financial abuse, including money laundering and corruption. In this context, we called on the IMF, the World Bank and the regional development banks to integrate fully the fight against financial abuse into their surveillance exercises and programs. And we specifically urged the IMF and World Bank to prepare a joint paper and discuss in coming months within their Boards their respective roles in this area, including the possibility of conditioning or restricting support for non-cooperative countries and territories.