FROM THE OFFICE OF PUBLIC AFFAIRS

Recent data indicate that a global recovery is underway. Equity markets have rebounded, confidence has increased, financial conditions have improved, oil prices are expected to remain stable and inflation is under control.

Macroeconomic policies should continue to support the recovery while ensuring medium-term fiscal sustainability. However, for growth to strengthen, be sustained and be less unbalanced, structural reforms must be accelerated. We support the progress made to reform tax and regulatory regimes, labour markets and pension systems. Further efforts are needed. Our top priority is to raise productivity and employment. We will do our part in further reforms as set out in the attached Agenda for Growth.

We reiterate the importance of a rules based and multilateral approach to trade. We are disappointed at the breakdown of trade negotiations in Cancun. We urge a speedy resumption of the Doha Round which is vital for global growth and the alleviation of world poverty. We believe that the immediate blockages can be removed and, with an effort on all sides, agreement reached on the remaining issues. We welcome the International Financial Institutions' proposed assistance for countries to deal with the transition to a more open trading system.

We reaffirm that exchange rates should reflect economic fundamentals. We continue to monitor exchange markets closely and cooperate as appropriate. In this context, we emphasize that more flexibility in exchange rates is desirable for major countries or economic areas to promote smooth and widespread adjustments in the international financial system, based on market mechanisms.

Effective and persuasive surveillance is crucial. Even in current favourable conditions, the IMF should identify vulnerabilities, in particular currency mismatches, and provide candid advice on policy reforms. We welcome the agreement to publish exceptional access reports. We welcome the increasingly widespread use of collection action clauses (CACs) in foreign sovereign bond issues. We look forward to further work on the Code of Conduct, which will be discussed by the G-20 meeting in October.

We encourage emerging market countries to pursue sound policies and to enhance their climate. This will help attract flows, reduce external vulnerabilities, and support sustained growth. We welcome the progress Brazil and Turkey have made in implementing structural reforms and support further efforts. We welcome today's agreement between Argentina and the IMF. The implementation of the program will be the key to restore strong and long-lasting economic growth and investment climate. We look forward to a speedy agreement with private creditors ensuring fair treatment.

We remain committed to transparency and effective exchange of information between countries as vital weapons is the fight against money laundering and tax evasion. We strongly urge those OECD countries that have not taken necessary steps – in particular in allowing access to bank information – to do so as soon as possible.

We welcome the work of the Financial Stability Forum, in particular in areas of audit, financial analysts, credit risk, reinsurance and rating agencies, and encourage it to continue strengthening cooperation in these areas.

We reaffirm our commitment to fight global poverty and to help developing countries achieve the international development goals of the Millennium Declaration. In this respect, we discussed financing issues and results based measurement. We asked the IMF and the World Bank to do further work on aid effectiveness, absorption capacity, financing facilities and results-based measurement mechanisms, and report at the Annual Meetings in September 2004. We welcome the views of developing and emerging market countries on these issues.

We reaffirm our strong commitment to complete the Heavily Indebted Poor Countries Initiative. We urge all bilateral creditors to join with us in canceling out the 100% of their eligible claims. We ask the IFIs to review the methodology for calculating the amount of "topping up" debt relief. We look forward to the outcome of the IFIs work on low income countries vulnerabilities to exogenous shocks.

Since September 11, 2001, we have made significant progress in the fight against terrorist financing, although much remains to be done. We look forward to the Fund and Bank making terrorist financing/money laundering assessments a permanent part of their work. We have intensified the dialogue with several non-G7 countries to prevent abuse of non-profit organizations and alternative remittance systems. We seek to eliminate terrorist financing through implementation of measures in accordance with the FATF Eight Special Recommendations.

We welcome both the Afghan donors meetings this month and the upcoming Iraq Donors' Conference. We reaffirm our support for a multilateral effort to help rebuild and develop Iraq, based on a needs assessment led by the World Bank at the Donors' Conference in Madrid, next month. We support the IMF and the World Bank rapidly providing, subject to their policies, financial and other assistance to Iraq and call upon regional financial institutions to do likewise.

We call upon the Paris Club to make its best effort to complete the restructuring of Iraq's debt before the end of 2004. We urge all non-Paris creditors to cooperate.