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World: IMF Director Confident About Economic Prospects

  • Robert Lyle



Hong Kong, 18 September 1997 (RFE/RL) - The Managing Director of the International Monetary Fund (IMF), Michel Camdessus, says he is confident about prospects for the global economy.

He also says that a lot will be accomplished at this year's annual meetings of the fund and the World Bank.

The formal plenary sessions begin next Tuesday, but fund and bank officials along with most of the world's finance ministers and central bank governors, are already gathering in Hong Kong for a series of meetings and seminars leading up to the main event.

Camdessus told reporters in Hong Kong today that among the major reasons behind his confidence is that the nations in transition are now "truly and actively completing the process of transformation" and that their economies are now heading toward sustainable growth.

He added that this year -- for the first time in seven years -- the countries in Central and East Europe and Central Asia, will have as a group an average positive growth of near two percent.

The fund, in its semi-annual World Economic Outlook released earlier this week, said that next year's growth in this region should top four percent.

Camdessus said he was also very confident that the member nations of the fund will finally agree to an equity allocation of the fund's currency known as the SDR, or Special Drawing Rights.

That is especially good news for most of the nations of the region because while they are fully participating members of the IMF, they are among 38 countries which have never been given any SDRs.

The last allocation of SDRs was completed in 1981, long before most of them joined.

Fund management has long sought an equity allocation to give the newer members their fair share in the organization's basic equity, but the richer nations continually blocked it in disagreement over the amount to be created and how it would be apportioned among the members.

Sources say that the United States and Germany have agreed to a compromise allocation of 21,400 million SDRs (about $29 billion worth) to be distributed so that each member country would have SDRs equal to 29.3 percent percent of its individual quota, or membership fee.

Russia, for example, would get around 1,250 million SDRs (about $1.7 billion worth.)

While SDRs are only used within the fund for its operations, they can be used between member country central banks as a form of overdraft protection, a major side-benefit the new members have never enjoyed.

Camdessus says he is confident that the equity SDR allocation will be coupled with a general increase of national quotas designed to boost the fund's financial strength and reserves.

Each nation's quota is set to reflect the size and strength of its economy and a portion of the value of that quota must be paid into the fund as a condition of membership. Sources say that while Camdessus himself has been pushing for a doubling of quotas, he is having to accept a 40 percent increase -- the most the rich nations are willing to adopt.

The size of the quota also determines a nation's voting power within the fund, so coupled with these two measures will be a slight adjustment of quotas to reflect new economic circumstances. The exact shift is still being discussed, but Japan has long felt it should move ahead of Germany to the number two position in the fund behind the U.S.

Camdessus' confidence may be rubbing off on some of the member nations as well. Officials in Hong Kong say Russia intends to notify the IMF during these meetings that it will join the donor nations supporting the special IMF/World Bank program to forgive some of the debt of poor nations which are reforming but are too deeply in debt to have any hope of getting out.

Nations have been slow in offering to donate to this effort and officials hope Russia's participation, even if at a modest level, should shame a few western nations to ante up. Moscow yesterday joined the Paris Club of official creditor nations.
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