Africa: IPS on Debt Plan Delay, 4/30/'96

Africa: IPS on Debt Plan Delay, 4/30/'96

Africa: IPS on Debt Plan Delay
Date Distributed (ymd): 960430

Title: AFRICA/FINANCE: Firm Debt Plan Slips Target Date/UPDATE by Rose Umoren

WASHINGTON, Apr 18 (IPS) - Contrary to expectations, both the World Bank and International Monetary Fund (IMF) confirm that there will be no firm multilateral debt plan for poor countries at their three-day spring meetings which open here this weekend.

At separate press conferences Tuesday and Thursday, the World Bank and the IMF said they had produced a 'framework', but that the plan was dogged by a raging debate among their most influential members. These are the United States, Japan, Germany, France, Italy, Britain, and Canada -- the Group of Seven (G-7) leading industrialised countries.

''The G-7 objections are critical, and we must resolve them first,'' said IMF managing director Michel Camdessus Thursday.

All that can be expected at the end of the meetings next Tuesday are ''relative principles and clarity to both organisations to get to work,'' the Bank's vice president for external affairs Mark Malloch Brown said here Tuesday.

Many, including some rich countries, had expected the two institutions to present a firm plan this weekend on reducing the some 60 billion dollars owed the World Bank, the IMF and regional banks by poor countries. African countries account for about 35 billion dollars of the debt. But Camdessus only said that ''hopefully, there will be a solution this year.''

IMF deputy managing director Allassane Ouattara sounded slightly more upbeat, though. ''We expect to have a concrete initiative by October,'' he said in an interview.

The G-7 has rifled through the 'framework' with strong objections, which from what the IMF and Bank officials have said, crystallise around three major issues. One issue is whether the rich countries should contribute to the plan and how much they should spend.

The 'framework' requires of the G-7 a two-fold direct contribution. The first is that they amend the Naples terms on bilateral debt by raising the maximum debt reduction from 67 percent to 90 percent. The other is that they contribute to an eight-billion-dollar fund from which multilateral debt relief would be financed.

''We have produced a framework,'' said Camdessus. ''We now need to hear from countries how they will contribute to it.''

The first public reaction from the top G-7 country, however, was not favourable. Asked about the plan Thursday afternoon, U.S. Treasury Secretary Robert Rubin made clear that Washington opposes anything that will require it to come up with additional resources. ''What we do support is the World Bank and the IMF doing this with their own resources, rather than calling on the member countries to donate additional resources for that purpose,'' he said.

A second issue is how to guarantee the availability of new concessionary financing for the poor countries, lest they return to insolvency after the relief. This is a point pushed especially by the IMF whose enhanced structural adjustment facility (ESAF) faces a five-year financing gap of about 1.5 billion dollars between 1999 and 2004.

Camdessus appears to be using this opportunity to push his year-old proposal that the G7 members allow him to sell ''a small fraction'' of the institution's huge gold reserves, estimated at about 40 billion dollars, to bridge the gap. Germany has been fingered by some as one of the members still opposed to this, worrying that the sale could damage the IMF's financial integrity.

Some other members prefer that the gold be pledged rather than sold, said Camdessus who did not elaborate.

The gold debate does not end there. Some of those who agree to the sale want the proceeds invested, with only the income from such investments going into ESAF.

The Bank and the IMF also want a commitment from the G-7 that they will stop cutting bilateral assistance, said Camdessus.

''The debate is still open,'' he said. ''But we are certain that by the annual general meetings (in October), the ESAF financing will be solved,'' he said.

The third major issue in the raging debate comprises the eligibility criteria. According to the 'framework', a country initially identified as eligible will have no debt relief until it has completed five out of six years of fresh structural adjustment and its performance consistently judged good.

But some G-7 members see no reason why past years of satisfactory performance should not be counted for a country like Uganda.

What is finally agreed ''will impact on how many countries will be eligible,'' said Brown.

This may already be happening. By Wednesday two of the three countries mentioned by Bank and IMF officials as ''generally known'' candidates were different from the eight identified as eligible in the early proposal.

''It is generally known that the two countries that will probably be eligible are Uganda and Bolivia,'' said Brown. A top IMF official, however, named Nicaragua as the second country.

But, ''it is too soon to say how many countries will be eligible,'' said Brown.

The direction of the debt proposal since it became public last month worries non-governmental organisations (NGOs) which had looked to these meetings as the culmination of their five-year campaign for multilateral debt solution.

''We are very worried that at the end, the proposal will become so watered down that it is meaningless,'' said Veena Siddharth, Oxfam International's economic and social advocacy officer here.

She told IPS that this weekend is critical, because pressure has to be mounted on the G-7 and the IMF especially, to map out concrete impartial criteria for relief.

''The eligibility criteria are very important,'' said Siddharth. ''If these are not properly defined, they will end up granting relief to a few favoured countries and close the case.''

Multilateral debt servicing by poor countries has steadily grown in the last decade, in part because by statute, the multilateral financial institutions do not grant debt relief.At the same time, as preferred creditors, they must be paid when due, no matter what. The result is that many poor countries such as Rwanda, Zambia, and Uganda have been borrowing from other sources to pay notably the IMF. (END/IPS/RU/YJC/96)

Title: AFRICA-FINANCE: World Bank/IMF Meet Leaves Poor Countries Hanging by Rose Umoren

WASHINGTON, Apr 23 (IPS) - This year's spring meetings of the World Bank and its sister International Monetary Fund (IMF) have ended here, leaving in their trail more questions about Africa's financial future than they have answered.

The three key African issues -- debt, new money, and structural adjustment policies -- were either not discussed or remain unresolved at the end of the Apr. 20-23 sessions.

The adjustment policies, which an increasing number of economic experts and non-governmental organisations (NGOs) have questioned in the absence of any sustained success, were not discussed, IMF Interim Committee chairman, Philippe Maystadt of Belgium, admitted.

But the failure of the meetings was clearest on the issue of reducing the multilateral debt of poor countriesm most of which are in Africa. The United States, Canada, Britain and other rich countries had claimed that there would be a concrete initiative this April. And poor countries had come to expect a solution.

But the meetings concluded with only hopes and requests by rich and poor members that there would be a concrete plan by October, when the World Bank and the IMF hold their annual meetings.

The Interim Committee and the Development Committee -- the policy- making bodies of the IMF and the Bank, respectively -- issued face-saving communiques, describing the joint debt proposal as an ''appropriate framework''. But both rich and poor countries said they found the proposal lacking.

The final communique, issued Tuesday by the Development Committee, says that ministers had ''requested that the Bank and Fund -- in close consultation with concerned bilateral creditors/donors/debtors, the Paris Club, and other multilateral institutions -- move swiftly to produce a programme of action.''

The ministers, however, endorsed what the communique described as ''six principles to guide further action.''

For one, ''the objective should target overall debt sustainability on a case-by-case basis'', the communique says. Action is ''envisaged only when the debtor has shown through a track record ability to put to good use whatever exceptional support is provided''. And ''new measures will build, as much as possible, on existing mechanisms.''

The other principles require that ''additional action'' be coordinated among creditors, ''with broad equitable participation''; actions by multilateral creditors ''will preserve their financial integrity and preferred status; and ''new external finance for the countries concerned will be on appropriately concessional terms.''

The lack of a concrete debt initiative was a defeat for World Bank President James Wolfensohn, who Saturday told journalists that he was confident the meetings would produce a firm deadline for adoption.

It was a triumph for the IMF, at whose insistence, according to NGOs and some Bank officials, the most damaging stud was inserted in the proposal: the insistence that modalities for multilateral debt relief be preceded by three actions by the rich countries.

These include the requirement that the Paris Club of creditor nations raise its ceiling on bilateral debt reduction from 67 percent to 90 percent.

Another calls on rich countries to contribute substantially to a trust fund of eight to 11 billion dollars, from which the multilateral debt reduction would be financed.

The third requirement -- exclusive to the Fund -- is that rich countries must approve and partly finance a plan to maintain its enhanced structural adjustment facility (ESAF) between 1999 and 2004 when it claims the facility would become self-sustaining.

Rich countries have rejected virtually all three conditions.

''We expect the IMF and World Bank, in cooperation with the regional banks to offer more specific proposals which the G-7 believes should involve the fullest use of their own resources to finance debt reduction,'' the Group of Seven most industrialised countries' (G-7) ministers say in their communique issued Sunday.

''Further action by the Paris Club (should) not be a prerequisite for multilateral action,'' added their chairman, U.S. Treasury Secretary Robert Rubin.

Of the four points in the IMF's ESAF plan aimed at raising some seven billion dollars for the bridge financing, none seemed near agreement among its dominant shareholders as the meeting ended.

Germany, in particular, is opposed to Camdessus' proposal to sell five percent of the Fund's gold reserves to raise some 1.5 billion dollars. Canada and Britain support this. The United States only said it would ''consider carefully'' the proposal.

Even more contentious are the three other points in the proposal: direct borrowing from such members as Japan, France, Italy, and the United States; direct bilateral donations of about 1.5 billion dollars; and a position that creditors to ESAF market funds do not take back their loans when due.

''At a time of serious budget constraints in many countries, including my own, this responsibility will inevitably have to fall primarily to the IMF, in particular through more efficient use of resources available to the IMF,'' said Rubin of the ESAF plan. He cautioned ''against a plan the viability of which depends on sizable bilateral contributions.''

Beyond rejecting the financial responsibilty the debt proposal thrust on them, the rich countries also shared the concerns expressed by developing countries under the Group of 24 (G-24) about the technical soundness of the proposal.

Britain, Canada and the United States, in particular, faulted the estimated time frame for debt reduction, a period the G-24 placed at nine to 10 years.

''We would urge the institutions ... to assure that the time frame for multilateral action is both reasonable and flexible, and that mechanisms are developed for co-ordination among the multilateral institutions and with the Paris Club,'' said Rubin.

''While a track record of commitment to reform must be established, I firmly believe that multilateral assistance needs to be provided as early as possible if we are to break these countries out of their unsustainable debt trajectories,'' agreed his Canadian counterpart Paul Martin.

The G-24 Sunday rejected the proposal, describing the periods for establishing a track record as ''excessively long and rigid.''

Future funding of the International Development Association (IDA), the concessionary arm of the World Bank, is also up in the air. The final communique says ministers agreed that ''the prospects for IDA funding be a key issue for discussion by the committee in a year's time.'' (END/IPS/RU/YJC/96)

Origin: Washington/U.S.-NIGERIA/[c] 1996, InterPress Third World News Agency (IPS) All rights reserved

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Message-Id: <> From: "APIC" <> Date: Tue, 30 Apr 1996 21:18:34 -0500 Subject: Africa: IPS on Debt Plan Delay