(Archived Content)
FROM THE OFFICE OF PUBLIC AFFAIRS
JS-2491
Good afternoon. I was pleased to meet with my fellow Finance Ministers in London these last two days as we prepared for Leaders to gather in Gleneagles.
We have just concluded what I think will be viewed as a very successful and even historic meeting in preparation for the Gleneagles Summit next month.
As you know, development was a key focal point of our meetings. The Ministers were able to come to agreement on a proposal put forth by the United States and United Kingdom to cancel 100 percent of the debt obligations owed to the World Bank (IDA), African Development Bank (AfDF), and International Monetary Fund (IMF) by countries eligible for the Heavily Indebted Poor Countries (HIPC) initiative building on the landmark agreement by President Bush and Prime Minister Blair earlier this week. Relieving poor countries from their debt burdens so that they can focus on meeting their development goals is an important element of President Bush's comprehensive development strategy for Africa.
It is my hope today that this reform will conclusively end the destabilizing lend-and-forgive approach to development assistance in low-income countries. The removal of unsustainable debt combined with additional development resources will provide significant support for countries' efforts to reach their development goals. We are making remarkable strides in delivering assistance to Africa in more robust and smarter ways, and this agreement builds on those efforts. President Bush has tripled America's development assistance budget for Africa so that today nearly a quarter of every dollar of assistance in the region comes from America, when four years ago only 10% of assistance to the region came from America. So we are proud of our record. And with the Millennium Challenge Account program and President's Emergency Plans for AIDS Relief more assistance is on the way especially if countries continue to implement economic reforms, end corruption, and invest resources in their people.
We also agreed that grants would be used to ensure that countries do not quickly re-accumulate unsustainable debts. The eighteen countries that have already reached the initiative's completion point requirements would see their debts immediately cancelled. Other HIPCs would be eligible for debt forgiveness as they fulfill their obligations under the program -- improving governance, reducing corruption, and completing a program with the IMF that demonstrates a commitment to sound economic policies.
Importantly, under this agreement donors have committed to preserve the financial integrity of the IMF, World Bank (IDA), and African Development Bank (AfDF). This would this include additional contributions IDA and AfDF that would be available to all low-income countries based on existing performance-based allocation mechanisms.
The eighteen countries that have already reached Completion Point will have their debt stock owed to the IMF immediately cancelled. The remaining HIPCs would also be eligible for relief upon reaching Completion Point. IMF debt relief would be financed by existing IMF resources and would require no use of gold. The G-8 are also committed that the IMF's financing capacity for low-income countries going forward will not be diminished.
Our discussions this weekend also centered on the imperative to generate growth. And, in fact, the importance of growth is not unrelated to the discussion of development assistance. It is striking to note that if the developed economies had grown as rapidly as the United States over the past ten years, up to $100 billion more in development assistance would have been generated -- without countries increasing the share of their GDP reserved for development.
Growth among all the G7 countries is also essential for citizens in the G7 countries and to sustain and strengthen the global economic expansion.
The United States is doing its part. I reported on the recent performance of the U.S. economy, which expanded by 3.5 percent in the first quarter. Growth is broad-based, with expanding business and residential investment and strong household demand. The economy has added 3.5 million jobs in the last two years, and the unemployment rate is at its lowest level since September 2001.
I also detailed for my colleagues our strong commitment to fiscal discipline and the results already being demonstrated in this area. With tax revenue showing sizable increases this year, I was able to indicate that we now expect the Federal budget balance to come in well below the $427 billion that had been projected for fiscal year 2005. In fact, many private forecasters are projecting that the federal deficit this fiscal year will come in under 3 percent of GDP. But I also reiterated that we continue to press ahead to further enhance the conditions for strong growth well into the future by making the tax cuts permanent, reducing the burden of frivolous lawsuits, passing a national energy policy, and strengthening social security.
I listened carefully to my colleagues about the prospects for their economies. Many of them face modest forecasts at best and confront challenges in their efforts to strengthen the prospects for growth.
All of us need to act to achieve strong growth. We all understood that global adjustment is a shared responsibility. U.S. action alone cannot do this job. Vigorous structural reforms are needed in Europe and Japan to lay the foundation for vibrant growth, as well as increased exchange rate flexibility in emerging Asia.
I welcomed the opportunity to meet with Finance Ministers from key emerging market countries India, Brazil, South Africa, and China a number of whom I also met with bilaterally. We can learn a great deal from these countries' experiences. Their Ministers brought an important perspective to our discussion. I look forward to continuing to work with them going forward.
We also discussed the fundamental importance of free trade to the global economy. I underscored the contribution that fully open financial services sectors can make to growth. We discussed the importance of working together for an ambitious result at the Hong Kong WTO Ministerial. Contributions by all countries is essential to achieving wide-spread liberalization of trade in goods and services and a successful conclusion to the Doha Development Round in 2006. I emphasized the role free trade can play in solidifying the gains in democracy, such as in the Administration's Middle East free trade agreements (e.g., Morocco, Bahrain) and CAFTA, which is currently being considered by Congress. I will continue to stress the importance of the financial services agenda with European finance ministries and key EU regulators when I visit the Netherlands, Belgium, France and Germany over the next few days.
Finally, ongoing work to combat terrorist financing was also a key item of discussion. We took note of the progress made by Financial Experts to implement their Action Plan to strengthen the process of multilateral asset freezing, improve information sharing, and explore the possibility of broadening the application of new financial tools to disrupt serious crime. In this context, I described for my colleagues the tools that we, in the United States, have available to identify, block and freeze the sources of terrorist financing. We believe that efforts to disrupt the financing of terror are succeeding and must continue.
Thank you.