1. The 57th meeting of the Development Committee was held in Washington, D.C. on April 17, 1998 under the chairmanship of Dato' Seri Anwar Ibrahim, Deputy Prime Minister and Minister of Finance of Malaysia.¹

2. Implications of the Asian Financial Crisis The Committee reviewed, in the context of a globalized economy, the implications of the Asian financial crisis for the World Bank Group. In a wide-ranging discussion, ministers recognized that the crisis risks damaging the region's remarkable development achievements, particularly its especially effective anti-poverty performance. Ministers expressed strong support for the active role played by the Bank Group and the International Monetary Fund, together with the Asian Development Bank, in the international effort to restore confidence and sustainable growth, and to help ensure stability in the international financial system. They especially appreciated their rapid and substantial response to the crisis, including significant financial assistance to underpin stabilization measures, programs of structural reform and technical assistance in key sectors in the most affected countries. Ministers also noted that while the region has vast potential for sustained high levels of economic growth through its own efforts, significant external support would still be required for a number of these countries over the foreseeable future.

3. Members welcome the efforts of the World Bank and the IMF to help governments address the social consequences of crises, including shielding targeted public expenditures, improving labor standards and strengthening social safety nets for the most vulnerable. They expressed strong support for the Bank's actions to help governments protect the poor, enhance the quality of social services, improve the design and financing of social funds, and promote sustainable environmental management. Ministers also welcomed the active support of the Bank and the Fund for design and implementation of financial and corporate restructuring and governance, and enhanced country capacity for better economic management and financial resiliency.

4. Ministers urged the Bank, in implementing the Strategic Compact and maintaining its support for all its members, to strengthen its ability to address rapidly situations of this kind and to help governments avoid such crises in the future. Thus, the Committee urged the Bank to assist countries in strengthening key institutions and structural policies, and to augment its skills and capacities in related areas, including particularly the financial sector, corporate restructuring and governance, and poverty reduction and social sustainability.

5. Given the breadth and depth of the issues involved in helping member governments confront such difficult situations, Ministers urged the Bank and the Fund, building on their long tradition of working together, to review and reinforce their partnership based on their respective mandates. This partnership has become even more important in light of the growing significance of structural factors in assisting member governments, and the increased demands on both institutions.

6. Implementation of the Debt Initiative for Heavily Indebted Poor Countries (HIPC) The Committee was pleased by the increasing momentum in the implementation of the HIPC Initiative. Ministers congratulated Uganda on its continued strong economic reform effort and on becoming the first country to reach its completion point under the HIPC Initiative, resulting in savings in nominal debt service of about $650 million (about $350 million in NPV terms). The Committee welcomed decisions made, since its last meeting, by the Executive Boards of the IMF and IDA/IBRD, to add Guyana, Cote d'Ivoire and Mozambique to the group of countries for which debt reduction packages have been agreed. In the case of Mozambique, this involved exceptional commitments by members of the Paris Club, and in particular Russia as Mozambique's largest creditor, as well as contributions from other countries and extraordinary assistance by IDA and the Fund to secure the large debt relief required. The six countries which have qualified for assistance under the Initiative would be eligible to receive estimated debt relief amounting to about $5.7 billion (the equivalent of $3 billion in NPV terms).

7. Ministers noted that Mali and Guinea-Bissau are expected to join this group shortly, and that the Boards' consideration of eligibility under the Initiative of other countries will occur as soon as their track records and progress in negotiation of Bank/Fund-supported programs warrant. Ministers encouraged potentially eligible countries to undertake such programs in a timely manner, so that by the year 2000 as many as possible could be included in the Initiative. Ministers welcomed the increasing number of countries which were contributing bilaterally to the HIPC Trust Fund. They also stressed the importance of additional contributions to the HIPC Initiative to assist all multilateral institutions to meet their share of the cost, including, in particular, the African Development Bank.

8. Multilateral Investment Guarantee Agency (MIGA) Ministers welcomed the successful conclusion of deliberations by the MIGA Board of Directors on MIGA's $850 million general capital increase (including a $150 million paid-in portion), as well as the agreement by IBRD governors to transfer $150 million as a grant to MIGA. These measures, reflecting agreements reached by the Committee at its last meeting, will relieve MIGA's short-term financial constraints and provide it with a sustainable capital structure for the medium to long-term, thus enabling it to respond to continuing growth in demand for its services. The Committee also welcomed the progress achieved by the MIGA Board on core policy issues, and urged the Board to continue its discussions and to reach clear understandings on the remaining issues as soon as possible.

9. Report of the Multilateral Development Banks (MDBs) Ministers expressed appreciation to the Presidents of the four regional development banks and the World Bank for their comprehensive report on MDB follow-up to the recommendations of the Committee's MDB Task Force. The Committee welcomed the progress made by the MDBs in implementing programs designed to strengthen the effectiveness of each institution. Ministers also welcomed the efforts made by the MDB Presidents to strengthen their collaboration on important areas – such as program evaluation and procurement rules – and their commitment to expand this cooperation, consistent with their respective mandates, in additional areas of high priority – such as governance, corruption and capacity building; financial sector fundamentals and reform; and infrastructure financing. Members also agreed on the importance of MDBs addressing the considerable challenges that remain in further strengthening this cooperation and suggested in particular that practical objectives be established for the next few years in areas such as evaluation. They urged the MDBs to continue to work closely with member governments to implement practical measures designed to ensure more effective in-country coordination, based on a shared strategic view, and enhanced development impact.

10. Members requested that the World Bank President inform the Committee at the spring 1999 meeting of progress achieved in strengthening World Bank cooperation with the regional development banks.

11. Ministers also noted that the Committee had made notable progress over the last two years on a number of important issues with broad systemic significance for all MDBs and the IMF, such as the HIPC Initiative and governance. This meeting's discussion of the implications of the Asian Financial Crisis is a further example, and ministers agreed that the Committee should continue to develop this practice, as recommended in the MDB Task Force Report, drawing on contributions where appropriate from other MDBs.

12. World Bank Net Income Dynamics Ministers considered issues raised by a decline in IBRD net income at the same time that potential demands on this income were increasing. They urged the Bank's Board of Directors to review, on an urgent basis, all available options and to make appropriate recommendations and decisions in the next three months.

13. Next Meeting The Committee's next meeting will be held on October 5, 1998 in Washington, DC.

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