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Former USSR: IMF Committee Fails To Allocate SDRs To Newer Members

  • Robert Lyle

Washington, 29 April 1997 (RFE/RL) - Despite the support of the vast majority of the membership of the International Monetary Fund (IMF), the fund's policy-making Interim Committee failed Monday to approve an allocation of its currency, the SDR, to countries which joined since 1970.

Thirty-nine member countries, including almost all the nations of Central and Eastern Europe and the former Soviet Union, have never received any of the SDR's or Special Drawing Rights which make up the basic equity of the fund.

Nations which joined the fund before 1970 received an initial allocation and then subsequent amounts created to keep basic equity among the members. But for nearly 30 years, no new allocations have been made. Not having an allocation does not prevent a member from taking loans and other normal activities, but it does limit the country's ability to carry out a wide array of financial transactions within the framework of the fund, such as certain exchanges of currencies.

For years, fund management has pushed for this equity allocation, but the richer nations have steadfastly refused. Even when the Interim Committee last autumn told the fund's Board of Executive Directors to bring a specific proposal to this spring's meeting, the United States was only willing to accept half the level suggested.

IMF Managing Director Michel Camdessus proposed creation of 26.6 billion SDRs, to be distributed to all member nations so that each country would have a proportional amount.

Supported by a large majority of the committee, Camdessus did scale back the proposal to 22.4 billion SDRs (about $31 billion) to be distributed among the member nations so that each would have SDRs equal to 30 percent of its individual quota, or membership fee.

However, a small number of the richest nations, led by the U.S., refused to approve an allocation of more than 20 billion SDRs, (around $28 billion).

The United States, with some support from France, Great Britain and sometimes Germany, was able to block the move because it would require the approval of more than 80 percent of the quotas in the fund. The United States, with 17.78 percent of the voting power, needs only one other large member to effectively veto major questions like special SDR allocations.

Still, fund officials are not giving up and will continue to talk with American officials to try to close the gap in time for the full annual meeting of the IMF in Hong Kong in September.

The chairman of the Interim Committee, Belgium's Deputy Prime and Finance Minister Philippe Maystadt, said he was "disappointed" but determined to "solve" the stand-off in the coming months.

While not approving an allocation of SDRs to the countries which are in transition from central planning to market economies, the Interim Committee did praise the large number which have made good progress in controlling inflation and pushing ahead on structural reforms.

It noted too that "sharp contrasts in performance persist among these countries, highlighting the benefits of steadfast commitment to stabilization and structural reforms." In other words, say IMF officials, the countries which moved quickly into major reforms and have stuck to their programs have been doing increasingly better than their neighbors who have gone more slowly.