FROM THE OFFICE OF PUBLIC AFFAIRS

I am glad that the IMFC is meeting today. I thank the people of Canada for generously hosting this meeting. The international community must take strong steps to stop terrorist financing. We also must take concrete actions to strengthen the world economy.

The tragic events of September 11^th have made clear the pressing need to eliminate the flow of funds that finance global terror. Severing the links that allow terrorists to finance their lethal acts is of the highest priority.

Cooperation in this effort is crucial. Many countries have taken on this challenge, and taken steps to freeze terrorist assets. But this is an area where every nation needs to act so there is no safe harbor, anywhere, for terrorist funds. We need to work together to implement United Nations resolutions to block the financing of terrorist networks, freeze terrorist assets, and criminalize the collection of funds for terrorism.

It is clear that terrorism poses a threat to the world financial system, and the IMF must take on an expanded role in the global effort to combat the financing of terrorism, as well as in the efforts to fight money laundering. The IMF should immediately step up its efforts to assess countries' adherence to the anti-money laundering standard developed by the Financial Action Task Force. It should put greater emphasis on terrorist financing in its financial sector assessments and it should enhance its analytical work on alternative payments and remittances systems, including hawala and non-regulated financial systems more generally.

The world is now confronting a marked slowdown in the global economy. The terrorist attacks exacerbated a downturn already taking place in a number of economies. It is important that each of us commit ourselves to take measures, consistent with our own circumstances, to restore strong and vibrant global growth.

The United States is doing its part. The U.S. economy began slowing in the summer of 2000 and this weakness extended through the first half of this year. Prior to September 11, the economy was moving forward at a slow, positive rate. Prospects for the resumption of strong growth were good, reflecting in large measure the tax rate cuts and rebates enacted this spring as well as the aggressive lowering of interest rates by the Federal Reserve.

The terrorist attacks set off disruptions that quickly swept through our economy. These will delay recovery. Nonetheless, the consensus forecast now anticipates that economic recovery will be visible early next year. The Federal Reserve has taken timely action, and the Congress and the Administration are working together on an economic growth package. The fundamental strengths of the U.S. economy - our strong macroeconomic foundations and our dynamic and flexible labor and capital markets - remain intact. The enactment of Trade Promotion Authority will help greatly by restoring confidence and by opening export opportunities.

Promoting a strong global economy should be one of the IMFC's paramount objectives. Countries' policies must be adapted to the particular situation of each country. But the basic direction of all our policies should be to support growth.

This weekend we are rightly concentrating on strengthening the world economy and combating terrorist financing. But this should not detract us from concerted efforts to reform the IMF so that it becomes an organization more consistently associated with success. The IMF should focus on its core areas of monetary policy, fiscal policy, exchange rate policy, and financial markets.

Improving the IMF's ability to monitor financial developments must continue to be a central focus. The IMF needs to sharpen its capacity to detect potential trouble on the horizon, be willing to warn countries that are heading down a dangerous path, and take appropriate action. The IMF also needs to develop better mechanisms to resolve financial crises that occur when IMF programs are already in place.

When the IMF lends, it must be selective and make sure that the preconditions for success are there. Countries should expect to be held to their commitments.

Finally, the IMF has a critical role to play. Meeting in the current circumstances, as the world seeks to confront the challenge of global terrorism, is itself a strong signal. I am confident that we will emerge with a common commitment for each of us to do what we need to do to support the resumption of growth, and to cut off the financing of terrorism. Thank you.