KEY POINTS:
Highlights of US Treasury Secretary Henry Paulson's statement to a meeting of the World Bank's development committee in Washington today:
"We meet at a time when the global economic environment is undergoing the most serious stresses in recent memory. Financial market developments are having an acute impact on advanced economies and we can expect the crisis to have major ramifications for emerging markets and the poorest countries as well. These events will test the ability of the World Bank and the IMF (International Monetary Fund) to respond effectively, and it is imperative that they stand ready to deploy their resources to mitigate the impact of this crisis, especially on the poorest and most vulnerable.
Just a few months ago, we focused on the vital role of the international community in responding swiftly to the challenges posed by the large increase in food and fuel prices. The response was gratifying, with bilateral and multilateral donors committing substantial amounts of new assistance, and I commend (World Bank) President (Robert) Zoellick for leadership in helping coordinate a timely international response.
Now, these same countries are likely to face a host of new pressures stemming from declines in export demand, private investment and remittances. Emerging markets, too, are likely to face difficulty accessing private capital necessary to finance critical priorities, such as infrastructure.
The World Bank Group is well positioned to help respond to these challenges by maintaining or expanding trade lines, taking measures to maintain well-functioning domestic financial systems, and ensuring efficient, well-targeted social safety-net programs. And the role of the IFC (International Finance Corp.) may become especially critical in helping to unlock credit.
Across the globe, policymakers will be faced with difficult choices. As with the food price crisis, isolationism and protectionism will not offer a way out. Although we in the United States are taking many extraordinary measures to ease the crisis, we are not pursuing policies that would limit the flows of goods, services or capital, as such measures which would only intensify the risks of a prolonged crisis.
The World Bank and IMF will have a vital role in working with governments to help craft appropriate responses and discouraging inward-looking policies, and we look to their leadership in this critical area."
