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G7 Finance Ministers Meetings

Statement by G7 Finance Ministers
and Central Bank Governors

London, December 2-3, 2005

See also:
Statement on Actions to Combat Money Laundering and Terrorist Finance
Statement by Gordon Brown, UK Chancellor of the Exchequer

Overall global growth remains and should continue to be solid although slowed by high and volatile oil prices. Risks include rising protectionist sentiment, the possibility of increasing inflationary pressures and growing global imbalances, which have been exacerbated by high oil prices.  We are each taking steps to address these imbalances as we set out at our last meeting.  But more vigorous, mutually reinforcing action is now needed from the G7 and other countries to accelerate this process in a way that maximises sustained growth. Recognising the need for greater and wider partnerships, we continued our productive dialogue with key global economies.

We reaffirm that exchange rates should reflect economic fundamentals.  Excess volatility and disorderly movements in exchange rates are undesirable for economic growth.  We continue to monitor exchange markets closely and cooperate as appropriate.  We expect that further flexible implementation of China's currency system would improve the functioning and stability of the global economy and the international monetary system.

An ambitious outcome from the Doha Development Round by the end of 2006 is essential to enhancing global growth and reducing poverty.  The Hong Kong Ministerial in ten days will be a critical step and the opportunity must be seized to make progress including through agreeing a comprehensive development package that addresses the concerns of developing countries, in particular least developed countries. We call for a multilateral rules-based global trading system and reforms to trade policies and renewed momentum in the negotiations.  We urge all participants to maintain a high level of ambition and to make significant progress on market access in agriculture, industrial products and services; reducing trade distorting domestic support; eliminating all forms of export subsidies in agriculture; making significant progress on services, including financial services as liberalisation in financial services is linked to increased growth; and on intellectual property rights consistent with our development objectives.  In this context, we welcomed the statements made by our Brazilian, Indian and Chinese colleagues at our meeting with them today. We recognise that least developed countries need the flexibility to decide, plan and sequence reforms to their trade policies in line with their country-led development programmes and international obligations. We agree on a series of additional measures working with the IFIs, for developing countries to ease adjustment costs and increase their capacity to trade.  We expect spending on aid for trade to increase to $4bn, including through enhancing the Integrated Framework.  In the context of our shared commitments to double aid for Africa by 2010, we agree to give priority to the infrastructure necessary to allow countries to take advantage of the improved opportunities to trade.

We reviewed the steps taken since our last meeting to improve stability of the oil market and the global energy outlook, and our enhanced dialogue with oil producers. Significant investment is needed in exploration, production, energy infrastructure, and refinery capacity. We welcome the launch of the Joint Oil Data Initiative (JODI) database and stress the need to improve further the transparency of demand and supply data in the oil market, including through development of a global common standard for reporting oil reserves. With a view to enhancing predictability of demand, we will ask the IEA to report on progress on energy efficiency and developing alternative sources of energy, which are key challenges for all economies. We will include these issues in our continued dialogue with producers. We welcome the creation of the IMF's Exogenous Shocks Facility and support its financing including through oil producing countries' contributions.  We look forward to the launch at the Spring Meetings of the World Bank led framework with the full participation of Regional Development Banks to enhance investment in low carbon energy and energy efficiency in developing countries.  We will review progress on these issues at our next meeting in Washington.
We discussed the role of the IMF in the global financial system in the context of the Managing Director's strategic review and agreed that the IMF has an important role through its credibility and independence to support multilateral solutions to global economic challenges.  We urge the IMF in all its surveillance work to deepen its analysis of global economic issues, exchange rate policy issues and the spillover effects of domestic policies in systemically important economies.  We also stress the need to review the Fund's governance and quotas to reflect developments in the world economy.

This year we have made important progress on development including commitments on multilateral debt relief, aid effectiveness, and increasing resources for development. Now they must be implemented.  We welcome the adoption of the necessary decisions by the IMF Board to implement 100 per cent multilateral debt relief and encouraged all PRGF contributors to agree the necessary consents as soon as possible. We also encourage IDA and the African Development Fund urgently to take all the necessary steps for implementation as soon as possible. We welcome Minister Tremonti's report, published today, on Advance Market Commitments (AMCs) for vaccines.  Alongside direct funding of research, AMCs could be a powerful, market-based mechanism to support research and development of vaccines for diseases which affect the poorest countries. We agree to work with others on developing a pilot AMC next year, including continued discussions with expert bodies on the diseases to be addressed.  We confirm our support for the national and international processes already established to minimise the risk and deal with the potential threat posed by a pandemic influenza. Recognising the vulnerability of all countries especially the poorest, to natural disasters, we call on international institutions to improve their preparedness, coordination and the speed and scale of their response. 
Finance Ministers met with Ministers Fayyad and Olmert and the Quartet's Special Envoy, James Wolfensohn. Economic development of the West Bank and Gaza is an indispensable element of lasting peace in the region and all parties have a role to play.  We welcome recent progress on access issues and encouraged the authorities to build the foundations for sustained economic growth in the Palestinian economy. We affirm our commitment to supporting the Palestinian Authority in the context of its medium-term development plan.  The regional and international private sectors have a crucial role to play.  This will be the focus of the Investors Conference to be held in London on 13th December.  We will return to these issues at our next meeting.

Demonstrating the importance we attach to the continued fight against terrorist financing and financial crime, we are today publishing a progress report on actions taken this year in this area. Ministers welcome both the Financial Stability Forum's work on the codes and standards that underpin global financial markets and the process in relation to offshore centres established at its March meeting, and encourage swift progress on both.  We encourage the international standard setting bodies to cooperate fully with these initiatives. 

Source: H.M. Treasury

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