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IMF, IBRD set a condition for debt relief

WASHINGTON: Key policymakers for the World Bank and International Monetary Fund on Monday affirmed their willingness to step up debt relief for the world's poorest countries if those countries enact a strategy for poverty reduction.

"Our aim is not to cancel debt for its own sake but to lift people out of poverty," said Gordon Brown, Britain's Chancellor of the Exchequer, who sits on the development committee that drafts policy recommendations for the two international institutions, principally for the World Bank.

Brown, in a statement to the committee noted that the initiative enacted last year to reduce or cancel debt to highly indebted poor countries, known as HIPC, "offers countries which are serious about tackling poverty a permanent exit from their debt problems and resources to fuel their poverty reduction programmes."

He said progress in implementing this programme had been slow and added: "We need to ensure that the initiative is implemented consistently and more speedily."

US Treasury Secretary Lawrence Summers, who also sits on the committee, echoed those remarks.

Summers said the US administration Ñ which has been criticised because Congress has failed to appropriate sufficient funds for the programme Ñ "remains strongly committed to obtaining the funding necessary for the United States to play our part." But "beneficiaries need to establish and implement more targeted and effective poverty reduction strategies," he added.

However, World Bank President James Wolfensohn, in a memo to the development committee, said donor countries should meet their pledges and do even more.

"Even if all pledges materialise as envisaged, the enhanced HIPC framework remains significantly underfunded," Wolfensohn said.

French Finance Minister Laurent Fabius said the programme must be accelerated to maintain the credibility of the institutions.

"Each donor country must honour its commitments and the institutions must work together with the eligible countries to put poverty reduction strategies in place ... We must do everything possible to see that this commitment rapidly becomes reality for eligible countries," said Fabius.

The IMF's monetary and finance committee made up of 24 affluent nations, including seven of the richest, ended its spring session Sunday calling for reform of lending policies for states with grave financial problems. However, it rejected proposals that would have placed limits on IMF's ability to demand structural reforms in countries it lends money to.

One of the themes of the protests in the streets of Washington is that IMF conditions can only be met by poor countries at the cost of their social sector programmes. The structural adjustments demanded by the IMF involve withdrawal of subsidies that lighten the burden of the common man. IMF also demands taxation measures that have been seen to work to the detriment of the poor.

The Development Committee of the World Bank started a meeting here early Monday morning, with delegates arriving hours before the first protestors hit the streets. Later in the afternoon, James D. Wolfensohn, President of the World Bank, was due to hold a press conference.

Pakistan's finance minister Shaukat Aziz who is here at the head of a large delegation including the Governor of the State Bank, Ishrat Hussain, and the Secretary General of Finance, Chaudhri Moeen Afzal, is also meeting the press in the evening at the Pakistan embassy.

The International Monetary Fund concluded a protest-marred opening session on Sunday with a statement repeating past pledges to seek greater debt relief for the world's poorest countries and to reform the IMF so that it can better prevent future financial crises.

The fund's policy-setting International Monetary and Financial Committee nine-page communique listed the agency's current work on debt relief and internal reform without introducing any major new ideas.

Asked what impact thousands of demonstrators chanting for the abolition of the IMF had on the meetings, British Chancellor of the Exchequer Gordon Brown, who chaired the sessions, said the finance ministries were even more determined to press forward with the goal of a better-functioning IMF.

In addition to massive protests against the sessions, the IMF discussions took place against the backdrop of a huge plunge in US stock prices, which wiped out dollars 2 trillion in wealth last week.

The communique directed the IMF's 24-member executive board, which runs the agency on a day-to-day basis, to explore ways to monitor world economies more closely. It said work would continue on efforts to fix ways to measure the performance of banks and other financial institutions and to monitor the buildup of countries' foreign debts.

On debt relief, the policy group repeated its goal of having more countries qualify this year for reduction in debt payments. So far, only one country, Uganda, has seen any cuts in its debt bills from the initiative, which was announced with great fanfare last June by US President Bill Clinton and other leaders at an annual economic summit.

Four other nations are in the process of qualifying for relief.

About 10,000 largely peaceful protesters failed to prevent the IMF's main policy-making committee meeting on Sunday but there were violent clashes, during which police said they made about 20 arrests, according to the sources.

The statement also welcomed an improvement in the world economy this year, saying there is a prospect of stronger growth in most regions of the world.

As protesters flooded the streets of Washington on Sunday, confrontation sprang up at police blockades designed to make downtown Washington a no-go area for the demonstrators.

On Saturday, police arrested more than 800 protesters who they said had been marching without a permit. They also raided and closed down a warehouse used by protesters as their headquarters, saying fire officials had found it to be unsafe.

The IMF's 24-member International Monetary and Financial Committee, meeting behind police barricades and in a building surrounded by angry, chanting protesters, hailed what it said had been the rapid recovery of the global economy in 1999 and prospects for an even better performance this year.

The committee reiterated 'the critical importance of open and competitive markets" as a key component in growth and stability and called for improved access to industrialised countries for exports from developing nations.

It also welcomed a new proposal from the IMF executive board to safeguard Fund resources by requiring borrowing countries to publish annual central bank financial statements that are independently audited according to international standards.

Despite improving global economic conditions, the IMF has come under sharp attack not only from protesters but from nongovernmental organizations, academicians and US lawmakers.

The Fund is pilloried by some for harming the interests of the poor, by others for squandering public money to bail out imprudent investors and by still others for offering bad advice to countries in crisis.

In their review of national economies, IMF policymakers called for "prudent" monetary and fiscal practices in the United States to maintain the expansion and said Europe should strive to preserve its improved momentum through low inflation.

In Japan, according to the committee, the accent should be on "supportive" macroeconomic polices to sustain a recovery, suggesting IMF opposition to any move by the Japanese central bank abandon its near-zero interest rate policy.

Elsewhere in Asia, notably China and India, policies still need to be directed toward supporting recovery from the 1997-1998 financial crisis.

Developing countries have expressed concern at proposals to reform the International Monetary Fund and World Bank, particularly any changes that would make it more difficult for them to obtain loans or have to pay them back faster.

They also rejected conclusions of a US congressional committee that the IMF should limit itself to short-term lending and the World Bank should halt loans to middle-income countries and become a development agency.

"We find some of these proposals unacceptable and have serious concerns about them," said German Suarez, chairman of the Group of 24 developing countries. "But we support efforts to reform" the IMF and World Bank and "strengthen cooperation between them."

Suarez spoke at a news conference after a daylong meeting at the IMF of the G-24, which comprises Asian, African and Latin American nations and represents developing countries in negotiations on international monetary matters.

Habib Abu Sakr, the G-24 vice chairman and a senior Lebanese finance ministry official, said the G-24 "finds no contradiction between our position" defending the interests of poor nations and "the people who are demonstrating.'

In their communique, the G-24 expressed 'serious concern for the reform' of the IMF and World Bank in ways that would deprive" poor nations of access to resources.

They said obtaining foreign aid for development of their economic often is dependent on the IMF and the World Bank serving as a catalyst that unlocks such financing.

The G-24 said it has "strong reservations about any significant shortening' of the period to repay IMF loans, particularly when a country has balance of payment problems that cannot easily be corrected.

The world's leading financial officials, hoping to calm investors jolted by a record plunge in US stock prices, have pledged cooperation to promote global prosperity.

The finance ministers and central bank presidents of the world's seven wealthiest countries also promised to keep pushing ahead with reforms of the International Monetary Fund and World Bank.

The sessions were led by Treasury Secretary Lawrence Summers and Federal Reserve Chairman Alan Greenspan with their counterparts from Japan, Germany, France. Britain, Italy and Canada. APP