IMF sells gold to hep debt of poorest nations
Wednesday 28 April 1999
The decision, reflecting a change of heart by Japan and Italy, will mean almost all the heavily indebted poor countries should start to see progress in reducing their repayments on old debts to the rich ones by the millennium. The Chancellor, who has been at the forefront of the recent drive to get the agreement, said: "There has been a breakthrough in attitudes."
An improved deal for the very poorest nations had seemed likely since the German government of Gerhard Schroder reversed his predecessor's opposition to the sale of IMF gold. But the decision in principle to sell up to $3bn-worth of the fund's gold has come earlier than expected, to the delight of campaign groups.
By the end of 2000 the debt relief programme will amount to around $50bn and cover up to 41 countries. This compares with an estimated reduction of $7bn in repayments under the earliest version of the programme.
The earlier refusal of some of its biggest shareholders to agree to sales of IMF gold had been the biggest obstacle to introducing a more generous plan. The proceeds of the gold sale will be invested, and the earnings used to finance the debt relief initiative.
The IMF also started its discussions of how to reconstruct the shattered Balkan economies after the war. Early estimates of the cost range from $10bn to as much as $100bn.
James Wolfensohn, president of the World Bank, said the bank was providing $70m in assistance to Macedonia and Albania. But Bulgaria and Romania would also need help recovering from economic damage, he said.
Behind the scenes, fresh pressure for internal reform of the IMF has built up at this week's meetings of the fund and World Bank in Washington. The spring cleaning could result in the departure of Michel Camdessus as managing director of the IMF before its annual meetings in September.
The meeting of the fund's Interim Committee - in effect its supervisory board - also expressed concern about the state of the world economy. Robert Rubin, US Treasury Secretary, said: "Serious challenges remain and I believe the balance of risks for the global economy remain on the downside." Mr Brown said that although some worries had not materialised, there was a "workmanlike" approach to the challenges.
The Interim Committee discussed proposals for its own restructuring yesterday. Although there is no consensus about specific measures yet, the reforms will make the IMF more accountable to a broader range of member countries, especially the developing countries. It has already been agreed that in future the president of the World Bank will attend IMF Interim Committee meetings. Other measures that will give the committee greater influence over fund decisions are likely.
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