In the wake of the South Asian tsunami disaster, the world has witnessed an outpouring of humanitarian assistance. In an extraordinary demonstration of international cooperation, governments, international agencies, voluntary groups and private citizens have come together to provide the victims the means to get back on their feet and begin to rebuild their lives. But this achievement also underlines a broader challenge facing the international community in the wake of the tsunami: can we maintain our commitment to an important agenda of issues grounded in international cooperation? And can we produce results?
The spirit of cooperation truly represents the best of our globalized community. It shows that the nations of the world gain strength by acting together to deal with adversity and strive toward common goals. This commitment has been evident during many past crises; it underlies the work of the Bretton Woods Institutions—the International Monetary Fund and the World Bank. Indeed, the founding of the Fund and Bank in the 1940s was a direct result of the Great Depression and World War II, when deep divisions within the international community brought about man-made catastrophes.
Cooperation must be a mainstay of the global economy in an era in which huge sums of money flow across national borders in an instant, holding the potential for both prosperity and instability. In a world in which great wealth coexists alongside deep poverty, the real hope for widening the benefits of globalization must come from nations working together.
The work undertaken since the mid-1990s to confront the dangers of economic and financial crisis must be maintained. At the same time, it is essential that donor countries continue to confront the needs of developing nations facing the daily ravages of poverty, hunger and disease. As the IMF has evolved over the past 60 years, the international community has called upon the organization to play a role in both of these key areas.
The transformation of the scale and nature of capital flows has required the Fund to take on a sharper focus in the area crisis prevention, and has demanded new thinking on how to resolve crises when they occur. Many lessons have been learned from the emerging markets crises of the 1990s, and many reforms have been implemented that have strengthened the international community's defenses. More work remains to be done, but we have been helped by the current strength of the global economy—which despite the recent surge of oil prices still is likely to show solid growth and subdued inflation in 2005.
This relatively benign global outlook provides an important window of opportunity for further progress in addressing global imbalances and reinforcing the basis for more balanced and sustainable global growth. This requires active efforts by the United States to reduce its fiscal and external deficits, and by the European Union and Japan to promote more vigorous growth through structural reforms. In middle income countries, continuing efforts are needed to deepen progress in reducing vulnerabilities and to set the stage for sustained growth in output, job creation and poverty reduction. And in low-income countries, all of us—the international community and the countries themselves—should work for faster progress to put in place economic policies that produce growth and poverty reduction.
The IMF has a central role to play in this work. The Fund needs to ensure its advice is focused on candid discussions of exchange rate policies and a strong focus on financial sector vulnerabilities, as well as balance of payments and fiscal sustainability. We are actively monitoring capital market developments and are continuing to sharpen our tools for assessing vulnerabilities, including through an increasingly systematic assessment of debt sustainability and a strengthened focus on national balance sheets and sound debt management. And, we are undertaking, in collaboration with the World Bank and other international bodies, more rigorous assessments of the health of financial systems.
The low-income countries present the international community with an ongoing challenge. Over a billion people live on less than a dollar a day, and hundreds of millions are affected by malaria, HIV/AIDS and other diseases. The international community has made a commitment to help the poorest countries achieve real breakthroughs against poverty in the decade through the UN's Millennium Development Goals. The 2002 Monterrey conference agreed on a way to reach this goal: the rich countries will provide aid and trade opportunities; the multilateral institutions will offer policy advice, technical help and financing; and the poor countries themselves are committed to improving their governance and focusing on more effective poverty reduction programs. Now is the time for the rich countries to fulfill their commitments on aid and trade.
The world community has demonstrated its tremendous capacity for caring in the wake of the tsunami disaster. Now is the time to also open our hearts and wallets to those suffering the burden of everyday life in so many other countries. International cooperation is the only road to achieving a globalization that benefits all people.