UNIVERSITY OF PENNSYLVANIA - AFRICAN STUDIES CENTER
Africa: Debt, IMF and US Congress
Date distributed (ymd): 991106
Document reposted by APIC
Issue Areas: +economy/development+ +US policy focus+
This posting contains an urgent action alert from the Jubilee 2000/USA coalition calling for immediate pressure on members of the US Congress to secure approval for revaluation of gold stocks by the International Monetary Fund for a dedicated acount for debt relief. Jubilee 2000/USA reports that the latest proposal, if approved, will -- unlike earlier proposals -- not provide additional funds for IMF structural adjustment. And, as explained in a September press release from Jubilee 2000/UK, this is also an entirely different proposal than earlier moves for IMF sales of gold stock, which was opposed by gold producing countries such as South Africa.
[Note to non-U.S. readers: Although the call for action contained below is appropriate for US residents, this posting is provided both for your background information and for possible forwarding to those of your US contacts you think would be interested.]
JUBILEE 2000/USA ACTION ALERT!
For more information contact
222 East Capitol Street, NE
Washington DC 20003-1036, USA
Tel: 1-202-783-3566; Fax: 1-202-546-4468
CALL YOUR SENATORS BEFORE MONDAY AT 3PM!
CALL REP. DICK ARMEY'S OFFICE!
Decisions this week in Congress mainly did not go our way (see below). BUT, there is still a chance to get Congressional approval for a small, **yet extremely vital**, debt relief measure, one that enables relief of $2.3 billion in debts owed the IMF (International Monetary Fund) by 36 impoverished countries. That may sound small but, actually, this would be an important foot in the door, and it would do a lot to encourage similar actions by other wealthy governments.
==> That's why it's urgent that you call (and ask members of your group to call) your Senators, Senate leadership, and Rep. Dick Armey to say:
I WANT CONGRESS TO AUTHORIZE THE IMF TO USE RESOURCES IT ALREADY HAS TO FINANCE DEBT RELIEF.
I WANT CONGRESS TO AUTHORIZE THE IMF TO REVALUE ITS GOLD STOCKS IN ORDER TO MAKE MORE DEBT RELIEF POSSIBLE
[Please note that this would *not* lead, under an agreement reached Wednesday, to financing for the IMF's structural adjustment lending program. Rather, the money would go into a dedicated account for debt relief.]
The U.S. is the only country that belongs to the IMF that hasn't yet granted the necessary approval (under the Cologne Debt Initiative) for the IMF to relieve debt. In fact, the entire Cologne agreement is riding on what Congress does before it adjourns. If the IMF is not able to relieve debt, the entire Cologne debt program could be jeopardized.
Jubilee 2000/USA considers current official debt relief programs, which came out of the June 1999 G7 Summit in Cologne, Germany, to have shortcomings. The Campaign is committed to remaining vigilant in matters of implementation of this Initiative and to demanding the expansion of debt cancellation measures even further, to benefit enough countries and in accordance with our Platform. Yet, the Initiative is an important step forward.
ACTION - ACTION - ACTION - ACTION:
House Majority Leader Dick Armey is one key to getting Congressional approval of IMF debt cancellation. THIS IS AN URGENT PLEA to flood Armey's office with calls. (Calls are vital from any and everyone. But, know anyone in living in Armey's district in the Dallas TX suburbs? Call them [or e- mail them] and ask them to call too)
Washington office: (202) 225-7772 (leave a message is necessary) District office: (972) 556-2500
Call your Senators BEFORE MONDAY AT 3:00PM EDT, and
urge them to amend the Foreign Aid bill on the floor
to authorize the revaluation of IMF gold and the transfer
of funds within the IMF in order to pay for debt relief.
Neither of these come at any additional cost to the
US taxpayer, so it shouldn't throw off the rest of
the foreign aid agreement if this is added.
Capitol Switchboard: (202) 224-3121
More contact info at http://www.senate.gov
Administration and Congressional negotiators agreed on a foreign aid package Wednesday night [November 3]. The agreement includes full funding for the Wye River Middle East Peace Accord, and added funding for Kosovo, an additional $150 million for development assistance [for IDA funding], another $75 million for peacekeeping and another $90 million for debt relief with the requirement that it be spent only on bilateral (owed just to the US) debt reduction.
Following is a quick assessment of what the debt relief provisions mean:
Debt Relief -- What Happened, What Needs to Happen:
Measure***Request by Clinton***Agreement to date by Congress
Portman rainforest***$50 million***$13 million
Bilateral (HIPC Countries)***$110 million***$110 million
HIPC Trust (Multilateral)***$210 million***$ 0
Allow IMF to revalue gold***authorize***no authorization given SCA-2 (transfer of funds within the IMF to pay for debt relief)***authorize***no authorization given
Total for FY2000***$370 million***$123 million
The President's full request was for the Congress to also provide an advance appropriation for the next three years of an additional $600 million to cover the next three years.
What this budget does is to provide bilateral relief needed for countries that will be coming forward for HIPC debt relief for next year only (about 29), but there is no multilateral relief financing at all. Congress only approved (see above) $123 million and only for bilateral debt relief.
This, along with with the fact that -- unless the Senate rescues this bit on Monday -- we lack the authorizations for the IMF gold revaluation and for the transfer of funds the IMF means that the agreements in Cologne may fall through. That's because it is highly unlikely that other major creditors like France, the UK, Germany and Japan will go ahead with providing debt relief to these countries without the IMF being able to also cancel debts owed to it. (The US has about an 18% vote in the IMF - and a vote of 85% of the IMF Board is required to approve these things - so the US effectively blocks action unless the authorization is granted from Congress.) The Administration has made clear that it wants to leverage relief via such international initiatives, and will not be providing debt relief on its own.
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[Jubilee 2000 Coalition-UK:
September 7, 1999
IMF takes Jubilee 2000 advice and agrees to revalue gold
After three years of claiming that the idea was foolish and impossible, the IMF has suddenly reversed its position and accepted the view of Jubilee 2000 and other campaigners that it should revalue its stock of gold. This would provide more than enough extra capital to write off all of the debts of poorest countries to the IMF.
"It's a cruel joke for the world's wealthy governments to protest that they can't afford to cancel the debts," wrote Jeffrey Sachs in a June article for Jubilee 2000. "The IMF is sitting on $22 billion of unrealized capital gains on its gold reserves, since it values its gold at $47 per ounce rather than the true market value of $262 per ounce."
Part of the IMF's capital base is 3217 tonnes of gold. The IMF had planned to simply sell some of this gold to pay for its share of HIPC debt cancellation. But opposition by gold producers and by the United States Congress meant that approval for gold sales seemed increasingly unlikely.
Jubilee 2000 and other analysts had frequently said that it was not necessary to resell the gold -- giving the gold a realistic value would be enough. The IMF repeatedly said that the idea was impossible. But on Monday 7 September the Dutch finance ministry announced that the IMF had decided simply to revalue the gold.
According to an analysis by the US financial news service Dow Jones, the IMF plans to use a sale and repurchase as its way of revaluing gold. The plan is to sell 10 million ounces of gold -- just over 300 tonnes, or one-tenth of the gold reserve -- but to sell the gold to central banks at market value, then immediately buy back the gold at that same price. Those 10 million ounces are thus revalued from $46 an ounce to $256 an ounce, an increase of $210 an ounce, which increases the IMF's reserves by $2.1 billion. This process does not affect the gold market or the gold price, because the gold never enters the market. The extra reserves are then invested and the proceeds are available for use.
Although the proposal to revalue gold has been well
received, the entire process is still subject to substantial
criticism. Much of the new money will not be used for
debt relief, but to fund new IMF structural adjustment
lending under the ESAF programme. Many campaigners
and development groups, especially in developing countries,
oppose ESAF, and will campaign to require the IMF to
use the money to cancel loans rather than fund further
From: "APIC" <email@example.com> Date: Sat,
6 Nov 1999 17:24:18 -0500
Subject: Africa: Debt, IMF, and US Congress
Editor: Ali B. Ali-Dinar, firstname.lastname@example.org