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Date: Mon, 19 Apr 1999 13:25:18 -0400
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From: Robert Weissman &rob@essential.org>
To: Multiple recipients of list STOP-IMF &stop-imf@essential.org>
Subject: News on Gold Sales, Russia (fwd)

IMF panel likely to pass gold sales to financial debt relief

From Neil Watkins of the Preamble Center, [19 April 1999]

The IMF, at the meeting next week of world finance ministers who oversee the lender, is likely to win authorization to sell some of its $29.25 billion of gold to finance debt relief for the world’s poorest countries, report the Wall Street Journal (p.B8) and Wall Street Journal Europe (p.15). But the Interim Committee, which will consider the idea on April 27, probably won’t specify when or how much of the IMF’s 103 million ounces might go on the block.

IMF managers have recommended selling five million ounces, while the US, the IMF’s biggest backer, would support a sale of as much as 10 million ounces. The question, however, is how to pay for relief without reducing other aid.

Replacing new aid by an equivalent amount of debt relief might achieve debt sustainability, but could be seen as a cruel hoax if it did so without providing any gain in resources available for poverty reduction, the story cites an IMF/World Bank document reviewed by the IMF’s executive board on Friday. IMF gold holdings are a tempting resource, says the story, but such a sale would require approval from the US Congress, where lawmakers critical of IMF rescues of Brazil and other troubled nations are already voicing their opposition.

Meanwhile, says the story, although gold traders have been expecting an influx of IMF metal for some time, IMF officials want to be careful not to drive its price down suddenly, disrupting markets and cutting revenues for developing countries that produce gold.

The news comes as UK Chancellor of the Exchequer Gordon Brown and International Development Secretary Clare Short yesterday sought to bolster international efforts to bring debt relief to the world’s poorest countries by calling on the EC to make a significant donation to the cause, the Guardian (p.11) reports.

Reform of the Heavily Indebted Poor Countries (HIPC) debt relief initiative will figure prominently on the agenda [of the upcoming IMF/World Bank spring meetings], writes OXFAM’s Kevin Watkins in the Guardian (p.12). The UK, the US, Germany, and France have offered proposals for reform. The consensus is that debt relief should be provided within three years instead of six. The case for deeper debt relief has also been acknowledged.

Instead of insisting on compliance with IMF programs, creditors should offer pro-poor incentives for countries willing to transfer savings from debt relief into schools, clinics, and water supplies, which can make a real difference to people’s lives, Watkins says.

Japan would bear the heaviest burden if the various debt forgiveness proposals are carried out, Yuri Yamamoto of the Nikkei Weekly (p.2) also comments. Of a total of $20 billion in bilateral aid loans by G7 nations, Japan’s yen loans make up about 40 percent, making it easily the largest creditor. Confronted with initiatives by G7 counterparts, Japanese officials would like to avoid the image of an unforgiving creditor, but Japan’s plan is not expected to include a simple cancellation of ODA assistance claims.

Just wiping out past debts doesn’t really help heavily indebted poor countries, World Bank Vice President for Africa Jean-Louis Sarbib says in an interview with the Nikkei Weekly (p.2). What is needed is for creditor nations to have a comprehensive framework for debt forgiveness backed by a solid aid philosophy.