Global economy to continue growing in 2006, bit high oil prices creating risks - G8
MOSCOW Feb 13 INTERFAX - Global economic growth will remain high in 2006, reads a communique issued following a G8 finance ministerial meeting in Moscow on Saturday.

"Overall global growth remains solid and this is expected to continue in 2006," the document reads.

"Risks remain, including high and volatile energy prices," it says.

"We agreed that further progress needs to be made in implementing policies that contribute to the gradual resolution of global imbalances and promote sustainable growth of the global economy," it says.

The ministers opposed the artificial energy price restraints, Russia’s finance minister Alexei Kudrin told the reporters after the meeting.

Stable energy supplies

The world economy has generally adjusted to high oil prices, which have jumped 30% in a year, the ministers said. However, if this situation continues for the long-term or there are new price hikes caused, for example, by geopolitical risks, this could have a negative impact.

French Finance Minister Thierry Breton said tensions in Iran and Palestine and problems with gas supplies to the EU through Ukraine were among such risks.

The increasing oil prices on the global market could be explained not so much by an increase in demand as by its insufficient supply on the global scale, International Monetary Fund Managing Director Rodrigo de Rato said following the G8 meeting.

"There are more and more signs that the increase in the price of oil is not only related to demand. We are facing more and more supply constraints," Bloomberg quoted de Rato as saying.

The ministers urged more dialogue between energy resource producers and consumers on global energy policy.

The communique says that the G8 welcomed the decision to make energy security a key issue for discussion in St. Petersburg.

The ministers asked energy forums, such as the International Energy Agency and the International Energy Forum, to help increase the transparency of information on demand and supply and the direction of investment in exploration, production, transportation and oil refining and to help increase energy efficiency.

The communique from the ministers said more work was needed to coordinate energy policy and promote price stability through a properly functioning market.

Continued efforts to discuss energy security could help diversify production and consumption, develop alternative sources of energy and protect the environment, the communique says.

The G8 countries ask the World Bank to work with low income countries to develop energy strategies that comply with their conditions.

The G8 welcomes the creation of the Exogenous Shocks Facility under the International Monetary Fund, reads a communique issued following a G8 ministerial meeting in Moscow on Saturday.

"We welcome the creation of the IMF's Exogenous Shocks Facility (ESF) to provide policy support and address financing requirements of energy-poor developing countries. We welcome financial commitments already made to the ESF and encourage other donors, including oil producing countries, to make contributions," the document reads.

The ministers also reaffirmed their commitment to replenish the Global Environment Facility.

The G8 ministers talked about setting up an energy reserve for poor countries in case of crisis, Canadian Finance Minister Jim Flaherty said at a press conference. The ministers supported the idea of a joint gas database, similar to the existing oil database, he said.

Imbalances in world economy & trade

The ministers agreed that further progress was required in economic policy measures that would help gradually even out the global imbalances and encourage stable world economic growth (such imbalances include the high U.S. balance of payments deficit and the low rate of EU economic growth).

Rato said the United States alone could not be blamed for destroying the world economic balance. Europeans must also increase the potential for economic growth, he said.

The G8 finance ministers said that achieving the ambitious results of the Doha Round before the end of 2006 would have a considerable impact on strengthening economic growth and reducing poverty. Further efforts are required following the WTO ministerial meeting in Hong Kong.

The G8 asked all participants in the talks to reach agreement on a comprehensive package of decisions that would ensure significant progress in agriculture and industrial production, in services, including financial services and intellectual property, and with regard WTO regulations. This package should take into account the concerns of developing countries, especially the least developed.

These countries also require considerable help in developing their foreign trade, which will help them make use of the advantages provided by the general liberalization of international trade, the communique says.

The G8 noted the IMF's work to promote the best experience in developing financial system backup plans for emergency situations.

As expected, national currencies were not discussed at the meeting.

G8 acknowledges bird flu pandemic risk

The G8 acknowledges the risk of an avian flu pandemic and its potential economic and financial impacts, reads a communique issued following a G8 ministerial meeting in Moscow on Saturday.

"We welcome progress made at the donors' conference in Beijing in securing financial support for the national and international efforts to minimize the risk posed by a pandemic influenza and confirm our commitments made at this conference," the document says.

It was reported earlier that the donor countries decided to allocate about $1.5 billion to combat the potential bird flu spread.

"We call on the donor community to provide financial support to poor countries fighting the epidemic through the existing mechanisms, recognizing that donor coordination and harmonization in this area are critical," the communique says.

The G8 ministers praised the IMF's work on promoting best practices in contingency planning for financial systems.

"We welcome the work under way on Advance Market Commitments for vaccines and look forward to a specific A proposal at the next meeting in April," the document reads, Debt cancellation.

Debt cancellation

Russia, as a G8 member, plans to continue implementing the global tasks that were put forward in 2005 in Britain, including debt cancellation for the poorest countries, Putin said. Moscow will undertake additional financial obligations in this area, he said.

Russia is ready to pay over $500 million in extra funds to the International Development Association.

The matter concerns Russia's preparedness to make another ahead-of- schedule payment to the Paris Club of creditors in the amount of up to $11.9 billion," Putin said, inviting the G8 ministers to express their opinions on this account.

The Russian leader pointed out that "some of the creditor countries experience a shortage of free financial resources now."

These countries "might use the money received from Russia to fulfill their obligations to the IDA to compensate for the cancellation of the poorest nations' debts," he said.

"In case Russia makes these payments ahead of schedule, this money will not be accounted for in your countries' current budgets," Putin said addressing the G8 ministers.

In addition, Russia "has made a preliminary decision to join the financing of the IMF program for providing aid to the poorest countries that suffered from external shocks," he said.

"To this end, [Russia] will make a voluntary contribution in the amount of 30 million special drawing rights, which is equivalent to about $43.5 million," he said.

The communique states that the G8 is pleased that sound economic indicators and an improved tax and budget situation ill enable Russia to join the other countries in the group in financing development by increasing their efforts in this area.

The finance ministers welcomed the IMF board's decision to grant 100% debt relief to 19 countries in 2006.

The G8 also supported the idea that Russia repay part of its debts ahead of schedule.

G8 welcomes progress in fighting money laundering

The G8 welcomes progress in combating money laundering and the financing of terrorism and pledges to continue its support for regional cooperation in this area, reads a communique issued following a G8 ministerial meeting in Moscow on Saturday.

"We also commend the active role and strong leadership by Russia in the creation of a regional FATF-style organization with the participation of countries of Central Asia and China," the document says.

"We reiterate our resolve to fight money laundering and terrorism financing through implementing the 2005 A action plan within the framework of the G8, the FATF, and other fora," it says.

"It is important to expand the geography of such work, placing particular emphasis on the Central Asia region," Putin said.

G8 countries could take a more substantial part in the work of a Eurasian group similar to the FATF.

The G8 finance ministers will meet again in Washington in April.