G7 ministers fail to agree private sector rescue role
Diane Coyle in Washington reports on plans to ease hardship and handle future crises
Tuesday 27 April 1999
Although they are determined that the private sector must share the burden in future IMF rescues, little progress is expected in the near future.
However, the G7 did reach agreement on plans to sell some of the IMF's $30bn gold reserves to finance a more generous programme of debt relief for the world's poorest countries. Details of the plan are likely to be announced by G7 leaders at their June summit, but the Chancellor, Gordon Brown, urged the sale of at least $3bn of IMF gold to generate extra funds for debt relief.
This was the first G7 meeting in almost two years at which there was a sense that the world economic position had begun to improve, senior officials said. Although there are fears about over-dependence on US growth, ministers were cautiously optimistic that the economic and financial crisis is over. European officials stressed that the EU was playing its part in boosting growth.
The meeting discussed the likely impact of the war in the Balkans. This is not expected to damage the world economy as a whole, but the International Monetary Fund and World Bank will begin to plan for the post-war reconstruction of the region.
The failure to agree on private-sector involvement in crises hinged on the question of whether the IMF ought to draw up a set of rules governing private lending to emerging markets, or whether crises should be settled on a case-by-case basis. Mr Brown strongly urges the former, while Robert Rubin, the US Treasury Secretary, favours the latter.
The US is determined that private lenders will share the burden. Larry Summers, the Deputy Treasury Secretary, said on Sunday that creditors must not expect "with absolute certainty" to be repaid on time.
However, the US is concerned about a possible lender backlash that would further slow the already paltry flows of new investment to emerging economies. The Institute of International Finance, an association of bankers, stressed this in response to Mr Summers' speech at its conference.
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