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Communiqué of the International Monetary and Financial Committee of the
Board of Governors of the International Monetary Fund

October 11, 2008 

1. The International Monetary and Financial Committee held its
eighteenth meeting in Washington, D.C. on October 11, 2008 under the
Chairmanship of Dr. Youssef Boutros-Ghali, the Minister of Finance of
Egypt. The Committee welcomes Dr. Boutros-Ghali, the new IMFC Chairman.
The Committee expresses its deep gratitude to Mr. Tommaso
Padoa-Schioppa for his invaluable role as the Committee's Chairman in
securing the membership's support for critical IMF reforms, and extends
its best wishes.

2. Yesterday, October 10, the G-7 met and agreed the following plan of
action:

• "Take decisive action and use all available tools to support
systemically important financial institutions and prevent their failure.

• Take all necessary steps to unfreeze credit and money markets and
ensure that banks and other financial institutions have broad access to
liquidity and funding.

• Ensure that our banks and other major financial intermediaries, as
needed, can raise capital from public as well as private sources, in
sufficient amounts to re-establish confidence and permit them to
continue lending to households and businesses.

• Ensure that our respective national deposit insurance and guarantee
programs are robust and consistent so that our retail depositors will
continue to have confidence in the safety of their deposits.

• Take action, where appropriate, to restart the secondary markets for
mortgages and other securitized assets. Accurate valuation and
transparent disclosure of assets and consistent implementation of high
quality accounting standards are necessary.

The actions should be taken in ways that protect taxpayers and avoid
potentially damaging effects on other countries. We will use
macroeconomic policy tools as necessary and appropriate. We strongly
support the IMF's critical role in assisting countries affected by this
turmoil. We will accelerate full implementation of the Financial
Stability Forum recommendations and we are committed to the pressing
need for reform of the financial system. We will strengthen further our
cooperation and work with others to accomplish this plan."

3. Today the International Monetary and Financial Committee strongly
endorsed the above commitments.

4. The Committee recognizes that the depth and systemic nature of the
crisis call for exceptional vigilance, coordination, and readiness to
take bold action. It underscores that the Fund has a critical mandate to
foster the multilateral cooperation needed to restore and safeguard
international monetary and financial stability. The Committee considers
that, using its emergency procedures, the Fund stands ready to quickly
make available substantial resources to help member countries cover
financing needs. The Committee calls for further intensive Fund
engagement across the membership to discuss and develop robust policy
responses to the crisis.

5. Moreover, the Committee notes that many emerging market economies,
which have implemented sound policies in recent years, may experience
spillover effects from the financial crisis. The difficult global
financial environment, including elevated food and fuel prices, adds to
the challenges for emerging market and developing countries to preserve
macroeconomic stability, sustain growth, and make progress on poverty
reduction. For these reasons, it is critically important that
collaborative action be coordinated between advanced and emerging
economies.

6. The Committee calls on the Fund—given its universal membership,
core macro-financial expertise, and its mandate to promote international
financial stability—to take the lead, in line with its mandate, in
drawing the necessary policy lessons from the current crisis and
recommending effective actions to restore confidence and stability. It
asks the Fund to focus discussion, and enhance cooperation, with a wide
range of perspectives with the FSF, the G-20, and others on this issue
in an inclusive setting. The Committee asks the IMF to start this
initiative immediately and to report to the IMFC at the latest at its
next meeting.

7. The next regular meeting of the IMFC will be held in Washington, D.C.
on April 25, 2009. The attachment summarizes the Committee's
discussion on other key points.

ATTACHMENT

Supporting Growth and Tackling Global Challenges

1. The Committee emphasizes that macroeconomic policies in the advanced
economies need to provide essential stimulus in the face of the risk of
a pronounced economic downturn, as confidence in the financial system is
restored. Given the decline in commodity prices from their recent peaks
and the expected slowing activity in many countries, policymakers should
consider the most appropriate policy actions depending on national
conditions. The Committee welcomes the recent coordinated monetary
policy actions undertaken by several central banks. In a number of
economies, fiscal policy has provided timely support to boost activity.
Further fiscal initiatives should take account of medium-term
consolidation objectives and, if undertaken, should give priority to
dealing with financial problems. While macroeconomic policy priorities
vary considerably across emerging market and developing economies, the
Committee notes that the risk of a marked slowdown owing to financial
market strains and sluggish export markets is becoming the primary
concern for many of them. The Committee calls on the IMF to stand ready
to assist members to prepare timely, effective, and appropriate policy
responses to alleviate the impact of negative spillovers from the
financial crisis.

2. The Committee is concerned that the progress made by low-income
countries in achieving macroeconomic stability, fostering growth, and
reducing poverty is being undermined by the adverse global environment.
Many low-income countries, particularly in sub-Saharan Africa, have been
severely hit by higher food and fuel prices. The Committee calls on
low-income countries to pursue strengthened adjustment efforts with
increased donor assistance, in particular grants, to limit the effects
on real income and poverty. The Committee welcomes the mission statement
on low-income countries, and considers that the Fund should continue to
play its part in the areas of its core expertise. The Committee welcomes
the reforms to the Exogenous Shocks Facility, which allow it to be used
more quickly and adequately.

3. The Committee notes the challenges posed by higher commodity prices
in many countries, even though food and fuel prices have receded from
their recent peaks. It recommends that shifts in international food and
fuel prices be passed through to domestic markets, backed by targeted
measures and adequate safety nets to protect the poor and taking into
account country-specific circumstances.

4. Progress toward a more multilateral trading system has never been
more important given risks to global growth. The Committee therefore
calls on members to resist protectionist pressures, and reiterates its
strong support for a prompt and ambitious conclusion of the Doha
Development Round of trade negotiations.

5. The Committee emphasizes that it remains important to guard against
global imbalances. The multilateral strategy for addressing global
imbalances remains relevant, even though short-term measures will need
to focus on stabilizing financial markets.

Advancing the IMF's Surveillance Agenda

6. The Committee underscores the central role of Fund surveillance in
providing clear, advance warning of risks, helping members understand
the interdependence of their economies, and promoting globally
consistent policy responses. The Committee takes note of the conclusion
of the Triennial Surveillance Review, and endorses the Fund's first
Statement of Surveillance Priorities.  HYPERLINK
"http://www.imf.org/external/np/cm/2008/101108a.htm" \l
"P44_8021#P44_8021"  1  The Committee calls on all members to work
together cooperatively and with the Fund toward achieving the economic
and operational objectives that it sets forth. The Committee calls on
the Fund to press ahead with the enhanced early warning of risks and
vulnerabilities, including through enhanced financial sector liaison,
analysis of macro-financial linkages, and scenario analysis, and by
completing the extension of its vulnerability exercise to advanced
economies. The communication of these risks and vulnerabilities should
be concise, authoritative, and timely, including through an enhanced
World Economic Outlook and Global Financial Stability Report. Work
should also be undertaken toward a reshaped Financial Sector Assessment
Program that is better integrated with the Fund's surveillance mandate,
and embraces regional perspectives. The Committee looks forward to
regular reporting by the Managing Director on the progress made against
surveillance priorities.

Reviewing the IMF's Lending Role

7. The Committee stresses that Fund financing has a critical role to
play in giving confidence to members—subject to adequate
safeguards—by helping them cope with the challenges of globalization
in general and the current financial crisis in particular. It emphasizes
that the Fund is ready to make full use of the flexibility already
embodied in its lending instruments, particularly in the emergency
procedures and provisions for exceptional access. But additional efforts
are needed to review the Fund's lending instruments, which might need to
be adapted to the evolving needs of the membership. The Committee
welcomes the ongoing review of the Fund's lending role, and supports the
plan to advance work in the following five areas: (i) reviewing the
analytical framework for Fund lending and its coherence, including the
scope for innovation in and streamlining of lending instruments, and
exploring new modalities for Fund financing; (ii) creating a new
liquidity instrument; (iii) re-examining Fund conditionality;
(iv) reviewing the Fund's lending facilities for low-income members;
and (v) increasing access limits and financing terms for using Fund
resources. The Committee urges the Executive Board to take this agenda
forward expeditiously. The Committee strongly recommends that decisions
be taken on an accelerated basis in those areas where there is strong
consensus and particular urgency—such as the establishment of a new
liquidity instrument—and on the full range of issues by the time of
the 2009 Annual Meetings.

The Santiago Principles—Generally Accepted Principles and Practices
for

Sovereign Wealth Funds

8. The Committee welcomes the development of the Santiago Principles by
the International Working Group of Sovereign Wealth Funds (SWFs). The
Principles represent a collaborative effort by SWFs from across
advanced, emerging, and developing country economies to set out a
comprehensive framework, providing a clearer understanding of the
operations of SWFs. Their adoption on a voluntary basis signals strong
commitment to the Principles and their implementation should further
enhance the stabilizing role played by SWFs in the financial markets,
and help maintain the free flow of cross-border investment. The
Committee welcomes the intention of the International Working Group to
consider establishing a Standing Group to keep the Principles under
review and explore the scope for collecting and disseminating aggregated
information on SWF operations. It emphasizes that continued Fund
support, if requested, should be consistent with budgetary constraints.
The Committee also stresses the importance of clear and
nondiscriminatory policies by recipient countries toward SWF
investments. It looks forward to the completion of the work of the OECD
in this area, and encourages continued dialogue and coordination between
the OECD and SWFs.

Other Issues

9. The Committee welcomes the approval by the Board of Governors of the
Resolution on quota and voice reforms, including the amendment of the
Fund's Articles of Agreement to enhance voice and participation in the
Fund. It notes that this is an important first step toward a realignment
of members' quota and voting shares. These realignments are expected to
result in increases in the quota shares of dynamic economies, and hence
in the share of emerging market and developing economies as a whole. The
Committee also looks forward to further work by the Executive Board on
elements of the new quota formula that can be improved before the
formula is used again. The Committee also welcomes the approval of the
amendment broadening the Fund's investment authority as part of the
Fund's new income model. The Committee urgently calls on all members to
work toward the early completion of the domestic legislative steps
required for making the quota and voice reforms and the Fund's new
income model effective.

10. The Committee recommends members' acceptance of the amendment of the
Articles of Agreement for a special one-time allocation of SDRs.

11. The Committee welcomes the ongoing re-assessment of the Fund's
governance. This involves the follow-up by the Fund's Executive Board to
the IEO Evaluation of Aspects of IMF Corporate Governance; the work of
the committee of eminent persons on IMF governance reform, chaired by
Mr. Trevor Manuel; and the engagement of civil society and other
concerned audiences. The Committee underscores that governance reforms
will require joint and collaborative efforts by all organs of the Fund.
It looks forward to a progress report at its next meeting.

ANNEX

SURVEILLANCE PRIORITIES FOR THE INTERNATIONAL MONETARY FUND, 2008-2011 
HYPERLINK "http://www.imf.org/external/np/cm/2008/101108a.htm" \l
"P57_13854#P57_13854"  2 

In pursuit of its mandate to promote international monetary and
financial stability, IMF surveillance will be guided through 2011 by the
following priorities:

Economic priorities

The global economy faces a period of severe financial distress and
slower growth alongside the challenges of sharp commodity price changes
and global imbalances. The following interrelated policy objectives will
be key to return to an international environment more conducive to
sustainable noninflationary growth:

• Resolve financial market distress. Restore stability and minimize
the adverse impact of the current crisis in financial markets on the
real economy;

• Strengthen the global financial system by upgrading domestic and
cross-border regulation and supervision, especially in major financial
centers, and by avoiding the exposure of capital-importing countries,
including low-income countries, to excessive risks;

• Adjust to sharp changes in commodity prices. React to commodity
price shifts in domestically appropriate and globally consistent ways,
with emphasis on keeping inflationary pressures in check in boom phases
and minimizing risks that could arise when prices fall;

• Promote the orderly reduction of global imbalances while minimizing
adverse real and financial repercussions.

In coordination with other International Financial Institutions, the IMF
should promote a common understanding of the forces and linkages
underlying these challenges; draw key lessons from different experiences
to share across the membership; provide clear advance warnings of risks
to global economic and financial stability; and advise on how best to
use policy—in particular monetary, fiscal, exchange rate, and
financial sector policies—in support of these objectives.

Operational priorities

• Risk assessment. Refine the tools necessary to provide clear early
warnings to members. Thorough analysis of major risks to baseline
projections (including, where appropriate, high-cost tail risks) and
their policy implications should become more systematic;

• Financial sector surveillance and real-financial linkages. Improve
analysis of financial stability, including diagnostic tools; deepen
understanding of linkages, including between markets and institutions;
and ensure adequate discussion in surveillance reports;

• Multilateral perspective. Bilateral surveillance to be informed
systematically by analysis of inward spillovers; outward spillovers
(where relevant); and cross-country knowledge (as useful); and,

• Analysis of exchange rates and external stability risks. In the
context of strengthening external stability analysis, integrate clearer
and more robust exchange rate analysis, underpinned by strengthened
methodologies, into the assessment of the overall policy mix.

The Executive Board has set the above priorities to foster multilateral
collaboration and guide IMF management and staff in the conduct of
surveillance. These priorities look ahead three years, but may be
revised if circumstances warrant. They will guide the Fund's work within
the framework for surveillance provided by the Articles of Agreement and
the relevant Board decisions, including the 2007 Decision on Bilateral
Surveillance. Moreover, traditional areas of strength (such as fiscal
policy and debt sustainability analysis) and relevant country-specific
issues should not be overlooked.

The Executive Board is responsible for conducting, guiding and
evaluating surveillance in order to ensure the achievement of these
priorities. Management and staff are responsible for delivering on the
operational priorities, subject to members' cooperation in line with
commitments under the Articles of Agreement. To foster progress toward
economic priorities, management and staff are responsible for providing
candid high-quality analysis and effective communication. The Managing
Director will report: (i) regularly on actions toward priorities and
readily visible results; and (ii) at the time of the next Triennial
Surveillance Review on progress in attaining these priorities;
management's and staff's contributions; and factors that impeded
progress.

INTERNATIONAL MONETARY AND FINANCIAL COMMITTEE ATTENDANCE

Chairman

Youssef Boutros-Ghali

Managing Director

Dominique Strauss-Kahn

Members or Alternates

Ibrahim A. Al-Assaf, Minister of Finance, Saudi Arabia

Sultan N. Al-Suwaidi, Governor, United Arab Emirates Central Bank
(Alternate for Obaid Humaid Al Tayer, Minister of State for Financial
Affairs, United Arab Emirates)

Stefan Ingves, Governor, Sveriges Riksbank, Sweden (Alternate for Anders
Borg, Minister of Finance, Sweden)

Wouter Bos, Minister of Finance, Netherlands

Duvvuri Subbarao, Governor, Reserve Bank of India (Alternate for
Palaniappan Chidambaram, Minister of Finance, India)

Alistair Darling, Chancellor of the Exchequer, United Kingdom

Carlos Fernández, Minister of Economy and Production, Argentina

James Michael Flaherty, Minister of Finance, Canada

Aleksei Kudrin, Deputy Prime Minister and Minister of Finance, Russian
Federation

Christine Lagarde, Minister of Economy, Industry and Employment, France

Mohammed Laksaci, Governor, Banque d'Algérie

Hervé Nzé Nong, National Director, Bank of Central African States,
Gabon (Alternate for Blaise Louembe, Minister of Economy, Finance,
Budget and Privatization, Gabon)

Guido Mantega, Minister of Finance, Brazil

Tito Mboweni, Governor, South African Reserve Bank

Jean-Pierre Roth, Chairman of the Governing Board, Swiss National Bank
(Alternate for Hans-Rudolf Merz, Minister of Finance, Switzerland)

Shoichi Nakagawa, Minister of Finance, Japan

Henry M. Paulson, Jr., Secretary of the Treasury, United States

Bernard Clerfayt, Secretary of State, Belgium (Alternate for Didier
Reynders, Deputy Prime Minister and Minister of Finance, Belgium)

Floria María Caricote Lovera, Director of Public Credit, Ministry of
Finance, Venezuela (Alternate for Alí Rodríguez Araque, Minister of
Finance, República Bolivariana de Venezuela)

Peer Steinbrück, Minister of Finance, Germany

Wayne Swan, Treasurer of the Commonwealth of Australia

Giulio Tremonti, Minister of Economy and Finance, Italy

Tarisa Watanagase, Governor, Bank of Thailand

YI Gang, Deputy Governor, People's Bank of China (Alternate for ZHOU
Xiaochuan, Governor, People's Bank of China)

Observers

Mohammad Alipour-Jeddi, Head, Petroleum Studies Department, Organization
of the Petroleum Exporting Countries (OPEC)

Joaquín Almunia, European Commissioner for Economic and Monetary
Affairs, European Commission (EC)

Agustín Carstens, Chairman, Joint Development Committee (DC)

Mario Draghi, Chairman, Financial Stability Forum (FSF)

Heiner Flassbeck, Director, Globalization and Development Strategies
Division (UNCTAD)

Angel Gurría, Secretary-General, Organisation for Economic Co-operation
and Development (OECD)

Hervé Hannoun, Acting General Manager, Bank for International
Settlements (BIS)

Jomo Kwame Sundaram, Assistant Secretary-General for Economic
Development, United Nations (UN)

Juan Somavía, Director-General, International Labour Organization (ILO)

Jean-Claude Trichet, President, European Central Bank (ECB)

Robert B. Zoellick, President, World Bank Group

  HYPERLINK "http://www.imf.org/external/np/cm/2008/101108a.htm" \l
"P44_8022#P44_8022"  1  The Statement of Surveillance Priorities is
attached, and also can be found at   HYPERLINK
"http://www.imf.org/external/np/pdr/surv/2008/index.htm" 
http://www.imf.org/external/np/pdr/surv/2008/index.htm .

  HYPERLINK "http://www.imf.org/external/np/cm/2008/101108a.htm" \l
"P57_13855#P57_13855"  2  Adopted by the IMF Executive Board on October
7, 2008.