G-20 leaders in Washington agree on series of measures to face financial crisis

Saudi king underlines undisciplined globalization, inadequate control of financial sectors contributed to rapid spread of crisis around globe

Bush calls for modernization of financial systems

IMF approves $7.6 billion aid package for Pakistan

Leaders of the World's largest economies concluded their economic Summit in Washington on the current global financial crisis.

The world's 20 top economies reached a deal to better regulate global financial markets and take steps to halt a global economic slide in an emergency summit hosted by US President George W Bush in Washington, according to DPA.

The declaration includes a call for better regulation of the world's financial system and to bolster government spending aimed at spurring economic growth at a time when the global economy risk sliding into recession.

"We are determined to enhance our cooperation and work together to restore global growth and achieve needed reforms in the world's financial systems," said the Group of 20 (G20) leaders, which includes the world's advanced economies as well as the leading emerging economies.

The leaders resolved to reform international financial market regulation and for nations to live up to those standards, including "aligning global accounting standards."

This in particular is aimed at the "complex" investment instruments which have been at the centre of the financial crisis that recently swept through financial markets.

However, there was no mention of agreement on the creation of a new international financial market watchdog.

The leaders did however agree to enhance the "legitimacy and effectiveness" of existing financial institutions such as the International Monetary Fund, the World Bank and the Swiss-based Financial Stability Forum.

The G20 leaders agreed to meet again by April 30, which will be after US president-elect Barack Obama has taken office.

The Economic Summit of Group of Twenty (G-20) started with the participation of the Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz Al Saud and the group's leaders.

Upon arrival at the venue, the King was received by President George W. Bush of the United States of America.

The King delivered the following speech:

In the name of Allah, the Merciful, the Gracious,

Mr. President George W. Bush,

Your Excellencies, Presidents,

Ladies and Gentlemen,

Peace and Allah's mercy and blessings be upon you:

I thank you, Mr. President, for calling for this critical meeting of this important group, which is considered the broadest international forum and the most representative of the global economy. Globalization and the increasing interdependence of countries have made it necessary to include major developing countries in the membership of this group, making its role all the more vital for dealing with global economic issues. In past years the G-20 has demonstrated its ability to foster agreement between the industrial and developing countries, and on this basis, to participate in calling for reform of the International Monetary Fund, the application of international standards, providing a forum for constructive discussions concerning demographic changes, energy security, trade, and other critical issues.

I am pleased to participate in this summit and have the opportunity to exchange opinions concerning the best policies to deal with the global financial crisis. I expect our meeting to produce positive results that will contribute to addressing this crisis and reducing its harmful effects, as well as helping to restore normal growth in the global economy and establish firm foundations for the global financial system that will prevent such a crisis from occurring in the future.

Ladies and Gentlemen,

This global economic crisis, which is unprecedented in terms of scope, character, the speed of its spread, and the dangers it poses, underscores the importance of international coordination and cooperation to find appropriate solutions to the crisis and its effects. This crisis revealed that undisciplined globalization and inadequate control of the financial sectors contributed to its rapid spread around the globe. Among the most important lessons it has taught us is that markets cannot regulate themselves; therefore, there is an urgent need to strengthen surveillance agencies and systems for the financial sectors and to strengthen the role of the IMF with respect to the surveillance of these sectors in the industrial countries.

It is no secret that this crisis has spread to the whole world and its adverse effects are apparent in the real economy, meaning that its impact will be deeper, more dangerous, and longer lasting unless all countries, in accordance with their circumstances and needs, take the necessary appropriate measures. What makes us optimistic is that many countries—including those participating —have taken unprecedented measures aimed at restoring confidence in financial markets. We must also stress the importance of taking into consideration the adverse effects that the policies adopted by a particular country may have on other countries.

Unfortunately, however, the suffering of poor countries will increase, making them unable to bear the effects of this crisis. Their economic conditions will deteriorate, making it more difficult for them than at any time in the past to achieve their Millennium Development Goals. It is therefore our hope that the donor countries, the IMF, the World Bank, and other international financial institutions will fulfill their role in this crisis by supporting the developing countries, particular the poor countries, helping them to face the effects of the crisis on their economies. We must work together to continue efforts aimed at the liberalization of trade and investment, which in recent decades has helped to improve living standards and raise millions out of poverty.

Ladies and Gentlemen,

Our region is not immune to the effects of this crisis, and we in turn shall strive to adopt the economic policies necessary for the continued growth of our economies and to play a constructive role in the global economy. To this end, we will continue the program for government investment in spending on basic projects and services, striving to enhance the absorptive capacity and role of the private sector. We expect this program for the government and oil sectors to exceed $400 billion over the next five years.

We shall also continue our coordination with the Arab countries to reduce the adverse effects of this crisis on our region. And we will continue to fulfill our role in ensuring the stability of the oil market and assisting developing countries, in cooperation with the international community, to ensure the recovery and growth of the global economy.

Saudi Arabia is aware of the pivotal and critical role it plays in the global economy and in ensuring the stability of the international oil market. Our country’s oil policy is based on balanced principles, taking into consideration the interests of both the producing and consuming countries. For this reason Saudi Arabia has made many sacrifices, including maintaining costly additional productive capacity amounting to about 2 million barrels per day, seeking to promote global economic growth in a manner that serves the interests of all parties. We have also established, in cooperation with other friendly countries, the International Energy Forum Secretariat in Riyadh to foster dialogue between the producing and consuming countries. We look forward to the cooperation of the consuming countries by not adopting policies that adversely affect the oil sector.

Saudi Arabia is also generously providing assistance to developing countries, with the amount it provides exceeding the percentage established by the United Nations for assistance from industrial countries.

We shall continue our policy of providing assistance to developing countries bilaterally and through multilateral, regional, and international institutions. The initiative we announced in Jeddah this year, "Energy for the Poor," reflects this policy. We would like to thank the World Bank for its efforts to activate this initiative, and we call on the donor countries to support it.

Finally, I would like to reiterate my thanks to President Bush for inviting the G20, which has played an important role in building consensus on a number of economic issues. I stress the importance of enhancing the role of this group given that its membership is more representative of the global economy in the international economic system, so as to continue its efforts, with the required flexibility, to enhance cooperation and coordination between the members of the group through the exchange of opinions on issues of local and global interest.

Leaders of the World's largest economies concluded their economic Summit and issued the following declaration.

The declaration says:

1. We, the Leaders of the Group of Twenty, held an initial meeting in Washington on November 15, 2008, amid serious challenges to the world economy and financial markets. We are determined to enhance our cooperation and work together to restore global growth and achieve needed reforms in the world's financial systems.

2. Over the past months our countries have taken urgent and exceptional measures to support the global economy and stabilize financial markets.

These efforts must continue. At the same time, we must lay the foundation for reform to help to ensure that a global crisis, such as this one, does not happen again. Our work will be guided by a shared belief that market principles, open trade and investment regimes, and effectively regulated financial markets foster the dynamism, innovation, and entrepreneurship that are essential for economic growth, employment, and poverty reduction.

3. During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.

4. Major underlying factors to the current situation were, among others, inconsistent and insufficiently coordinated macroeconomic policies, inadequate structural reforms, which led to unsustainable global macroeconomic outcomes. These developments, together, contributed to excesses and ultimately resulted in severe market disruption.

5. We have taken strong and significant actions to date to stimulate our economies, provide liquidity, strengthen the capital of financial institutions, protect savings and deposits, address regulatory deficiencies, unfreeze credit markets, and are working to ensure that international financial institutions (IFIs) can provide critical support for the global economy.

6. But more needs to be done to stabilize financial markets and support economic growth. Economic momentum is slowing substantially in major economies and the global outlook has weakened. Many emerging market economies, which helped sustain the world economy this decade, are still experiencing good growth but increasingly are being adversely impacted by the worldwide slowdown.

7. Against this background of deteriorating economic conditions worldwide, we agreed that a broader policy response is needed; based on closer macroeconomic cooperation, to restore growth, avoid negative spillovers and support emerging market economies and developing countries. As immediate steps to achieve these objectives, as well as to address longer-term challenges, we will:

* Continue our vigorous efforts and take whatever further actions are necessary to stabilize the financial system.

* Recognize the importance of monetary policy support, as deemed appropriate to domestic conditions.

* Use fiscal measures to stimulate domestic demand to rapid effect, as appropriate, while maintaining a policy framework conducive to fiscal sustainability.

* Help emerging and developing economies gain access to finance in current difficult financial conditions, including through liquidity facilities and program support. We stress the International Monetary Fund's (IMF) important role in crisis response, welcome its new short-term liquidity facility, and urge the ongoing review of its instruments and facilities to ensure flexibility.

* Encourage the World Bank and other multilateral development banks (MDBs) to use their full capacity in support of their development agenda, and we welcome the recent introduction of new facilities by the World Bank in the areas of infrastructure and trade finance.

* Ensure that the IMF, World Bank and other MDBs have sufficient resources to continue playing their role in overcoming the crisis.

Common Principles for Reform of Financial Markets

8. In addition to the actions taken above, we will implement reforms that will strengthen financial markets and regulatory regimes so as to avoid future crises.

Regulation is first and foremost the responsibility of national regulators who constitute the first line of defense against market instability.

However, our financial markets are global in scope, therefore, intensified international cooperation among regulators and strengthening of international standards, where necessary, and their consistent implementation is necessary to protect against adverse cross-border, regional and global developments affecting international financial stability. Regulators must ensure that their actions support market discipline, avoid potentially adverse impacts on other countries, including regulatory arbitrage, and support competition, dynamism and innovation in the marketplace. Financial institutions must also bear their responsibility for the turmoil and should do their part to overcome it including by recognizing losses, improving disclosure and strengthening their governance and risk management practices.

9. We commit to implementing policies consistent with the following common principles for reform.

* Strengthening Transparency and Accountability: We will strengthen financial market transparency, including by enhancing required disclosure on complex financial products and ensuring complete and accurate disclosure by firms of their financial conditions. Incentives should be aligned to avoid excessive risk-taking.

* Enhancing Sound Regulation: We pledge to strengthen our regulatory regimes, prudential oversight, and risk management, and ensure that all financial markets, products and participants are regulated or subject to oversight, as appropriate to their circumstances. We will exercise strong oversight over credit rating agencies, consistent with the agreed and strengthened international code of conduct. We will also make regulatory regimes more effective over the economic cycle, while ensuring that regulation is efficient, does not stifle innovation, and encourages expanded trade in financial products and services. We commit to transparent assessments of our national regulatory systems.

* Promoting Integrity in Financial Markets: We commit to protect the integrity of the world's financial markets by bolstering investor and consumer protection, avoiding conflicts of interest, preventing illegal market manipulation, fraudulent activities and abuse, and protecting against illicit finance risks arising from non-cooperative jurisdictions. We will also promote information sharing, including with respect to jurisdictions that have yet to commit to international standards with respect to bank secrecy and transparency.

* Reinforcing International Cooperation: We call upon our national and regional regulators to formulate their regulations and other measures in a consistent manner. Regulators should enhance their coordination and cooperation across all segments of financial markets, including with respect to cross-border capital flows. Regulators and other relevant authorities as a matter of priority should strengthen cooperation on crisis prevention, management, and resolution.

* Reforming International Financial Institutions: We are committed to advancing the reform of the Bretton Woods Institutions so that they can more adequately reflect changing economic weights in the world economy in order to increase their legitimacy and effectiveness. In this respect, emerging and developing economies, including the poorest countries, should have greater voice and representation. The Financial Stability Forum (FSF) must expand urgently to a broader membership of emerging economies, and other major standard setting bodies should promptly review their membership. The IMF, in collaboration with the expanded FSF and other bodies, should work to better identify vulnerabilities, anticipate potential stresses, and act swiftly to play a key role in crisis response.

10. We are committed to taking rapid action to implement these principles. We instruct our Finance Ministers, as coordinated by their 2009 G-20 leadership (Brazil, UK, Republic of Korea), to initiate processes and a timeline to do so. An initial list of specific measures is set forth in the attached Action Plan, including high priority actions to be completed prior to March 31, 2009.

In consultation with other economies and existing bodies, drawing upon the recommendations of such eminent independent experts as they may appoint, we request our Finance Ministers to formulate additional recommendations, including in the following specific areas:

* Mitigating against pro-cyclicality in regulatory policy;

* Reviewing and aligning global accounting standards, particularly for complex securities in times of stress;

* Strengthening the resilience and transparency of credit derivatives markets and reducing their systemic risks, including by improving the infrastructure of over-the-counter markets;

* Reviewing compensation practices as they relate to incentives for risk taking and innovation;

* Reviewing the mandates, governance, and resource requirements of the IFIs;

and * Defining the scope of systemically important institutions and determining their appropriate regulation or oversight.

11. In view of the role of the G-20 in financial systems reform, we will meet again by April 30, 2009, to review the implementation of the principles and decisions agreed.

12. We recognize that these reforms will only be successful if grounded in a commitment to free market principles, including the rule of law, respect for private property, open trade and investment, competitive markets, and efficient, effectively regulated financial systems. These principles are essential to economic growth and prosperity and have lifted millions out of poverty, and have significantly raised the global standard of living. Recognizing the necessity to improve financial sector regulation, we must avoid over-regulation that would hamper economic growth and exacerbate the contraction of capital flows, including to developing countries.

13. We underscore the critical importance of rejecting protectionism and not turning inward in times of financial uncertainty. In this regard, within the next 12 months, we will refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organization (WTO) inconsistent measures to stimulate exports. Further, we shall strive to reach agreement this year on modalities that leads to a successful conclusion to the WTO's Doha Development Agenda with an ambitious and balanced outcome. We instruct our Trade Ministers to achieve this objective and stand ready to assist directly, as necessary. We also agree that our countries have the largest stake in the global trading system and therefore each must make the positive contributions necessary to achieve such an outcome.

14. We are mindful of the impact of the current crisis on developing countries, particularly the most vulnerable. We reaffirm the importance of the Millennium Development Goals, the development assistance commitments we have made, and urge both developed and emerging economies to undertake commitments consistent with their capacities and roles in the global economy. In this regard, we reaffirm the development principles agreed at the 2002 United Nations Conference on Financing for Development in Monterrey, Mexico, which emphasized country ownership and mobilizing all sources of financing for development.

15. We remain committed to addressing other critical challenges such as energy security and climate change, food security, the rule of law, and the fight against terrorism, poverty and disease.

16. As we move forward, we are confident that through continued partnership, cooperation, and multilateralism, we will overcome the challenges before us and restore stability and prosperity to the world economy.

Action Plan to Implement Principles for Reform

This Action Plan sets forth a comprehensive work plan to implement the five agreed principles for reform. Our finance ministers will work to ensure that the tasks set forth in this Action Plan are fully and vigorously implemented. They are responsible for the development and implementation of these recommendations drawing on the ongoing work of relevant bodies, including the International Monetary Fund (IMF), an expanded Financial Stability Forum (FSF), and standard setting bodies.

Strengthening Transparency and Accountability

Immediate Actions by March 31, 2009 * The key global accounting standards bodies should work to enhance guidance for valuation of securities.

Finance Ministers should assess the adequacy of these proposals, drawing upon the analysis of regulators, the expanded FSF, and other relevant bodies.

Medium-term actions

* The key global accounting standards bodies should work intensively toward the objective of creating a single high-quality global standard.

Enhancing Sound Regulation

Immediate Actions by March 31, 2009 * The IMF, expanded FSF, and other regulators and bodies should develop recommendations to mitigate pro-cyclicality, including the review of how valuation and leverage, bank capital, executive compensation, and provisioning practices may exacerbate cyclical trends.

Medium-term actions

* To the extent countries or regions have not already done so, each country or region pledges to review and report on the structure and principles of its regulatory system to ensure it is compatible with a modern and increasingly globalized financial system. To this end, all G-20 members commit to undertake a Financial Sector Assessment Program (FSAP) report and support the transparent assessments of countries' national regulatory systems.

Immediate Actions by March 31, 2009 * Regulators should take steps to ensure that credit rating agencies meet the highest standards of the international organization of securities regulators and that they avoid conflicts of interest, provide greater disclosure to investors and to issuers, and differentiate ratings for complex products.

Medium-term actions * Credit Ratings Agencies that provide public ratings should be registered.

Risk Management

Immediate Actions by March 31, 2009 * Regulators should develop enhanced guidance to strengthen banks' risk management practices, in line with international best practices, and should encourage financial firms to reexamine their internal controls and implement strengthened policies for sound risk management.

Medium -term actions * International standard setting bodies, working with a broad range of economies and other appropriate bodies, should ensure that regulatory policy makers are aware and able to respond rapidly to evolution and innovation in financial markets and products.

Promoting Integrity in Financial Markets

Immediate Actions by March 31, 2009 * Our national and regional authorities should work together to enhance regulatory cooperation between jurisdictions on a regional and international level.

Medium -term actions * National and regional authorities should implement national and international measures that protect the global financial system from uncooperative and non-transparent jurisdictions.

Reinforcing International Cooperation

Immediate Actions by March 31, 2009 * Supervisors should collaborate to establish supervisory colleges for all major cross-border financial institutions, as part of efforts to strengthen the surveillance of cross-border firms. Major global banks should meet regularly with their supervisory college for comprehensive discussions of the firm's activities and assessment of the risks it faces.

Reforming International Financial Institutions

Immediate Actions by March 31, 2009 * The FSF should expand to a broader membership of emerging economies. * The IMF, with its focus on surveillance, and the expanded FSF, with its focus on standard setting, should strengthen their collaboration, enhancing efforts to better integrate regulatory and supervisory responses into the macro-prudential policy framework and conduct early warning exercises.

World leaders agreed to "substantive" measures to reform the international finance system to ensure the global economy does not suffer from another crisis caused by faulty loans and risky banking policies, US President George W Bush said, according to DPA.

"This was a very successful summit," Bush said at the conclusion of an emergency conference in Washington designed to stave off a rapid collapse of the world economy.

Bush said the countries agreed to regulations to bring about great transparency to regain the confidence of investors, and to prevent dubious loans or hidden credit default swaps, but in a way that does not impede economic growth and free markets.

"I'm a free market person," Bush said, adding that even though nations' economies were "being hit very hard, there is a common understanding that all of us should protect pro-growth economic policies."

The European Union (EU) had called for restructuring of global financial institutions before the Washington meeting.

Joaquin Almunia, the EU Commissioner for economic and monetary policy, announced this at the Second Brussels International Economic Forum.

The International Monetary Fund (IMF) signed an agreement with Pakistan to provide an assistance package worth $7.6 billion to bailout the Asian country of its failing economy.

Both the entities reached the agreement, according to a press release issued by IMF.

The package falls under the institution's emergency financing mechanism procedures.

IMF Managing Director Dominique Strauss-Kahn said its support to Pakistan is part of a broader package that includes financing from other multilateral institutions and regional development banks. He called on the international donor community to move quickly to support Pakistan as it implements its economic program.

The 23-month stand-by arrangement with Pakistan is subject to approval by the IMF's executive board.

Pakistan sought the IMF funding after facing severe debt-repayment problems and massive imbalance in its foreign exchange reserves.

Pakistan's benchmark stock index has lost more than 45 per cent of its value this year while the value of the rupee has fallen more than 20 per cent in the past six months. Food prices have risen by more than 30 per cent.

The IMF has recently provided a series of financing agreements to help countries in need, including Hungary and Ukraine.

President of the Islamic Development Bank (IDB) Dr Ahmad Mohammed Ali has highlighted the strength of the Saudi economy and its sound bases.

In a statement to Saudi Press Agency (SPA), he said the available surpluses for the Saudi economy have enabled it to confront the adverse impact of the global financial crisis.

He noted that the statements issued by the Saudi Arabian Monetary Agency (SAMA) have had a positive impact on the financial institutions and individuals.

Meanwhile, Dr Ali said the IDB, which has been adherent to the Islamic rules and teachings, has never been affected by the global crisis and all of its assets and financial capabilities are safe.

He expected that the Arab capitals deposited at the international banks and financial institutions will return to the Arab region following the global financial crisis.