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World: IMF And World Bank Focus On Debt Relief For Poor Nations

  • Robert Lyle

Washington, 23 April 1999 (RFE/RL) -- The external debt of the 40 largest debtor nations exceeds $200 billion, according to the World Bank, and there is a growing belief that one way to help poor nations which are trying to reform but are overwhelmed with debt is to relieve them of some of the burden.

The U.S. and the U.K., among the richest nations in the world, now say they would support selling off a small amount of the gold reserves held by the International Monetary Fund (IMF) to help finance debt relief for a large number of the poorest debtor nations.

IMF Managing Director Michel Camdessus and World Bank President James Wolfensohn say debt relief will be a major part of the agenda of the regular spring meetings of the two institutions which officially get underway on Monday.

Wolfensohn, at a press conference Thursday, said that despite achievements in reducing poverty around the world, the absolute number of the extremely poor is growing and could soon exceed 1,700 million people.

The problem is worse in countries which are now in financial crisis, he said:

"If you go to Russia, you will see an enormous increase since the transition -- an increase from maybe 2 million people to 60 million people living under $4 a day, which is the test you use in Russia. So you have enormous pressure in transition economies and you have enormous pressures in some of the poor developing countries and I wouldn't want you to leave here without knowing we still have the task ahead of us."

Wolfensohn told reporters that one thing essential for every country -- and especially those transforming from central planning to market based -- is to implement strong social safety nets to protect the most vulnerable of every society. That was one area, he said, where the fund and bank missed in the early stages of helping the transition nations:

"You need a social safety net. One of the things I think we did in the transition economies is that we got ahead of ourselves in calling on privatization without social safety nets."

Wolfensohn added that it was no comfort that the proportion of people in poverty has actually dropped from 30.4 percent to 29.7 percent in recent years.

Also at the top of the crowded agendas of the fund and bank over the next week is Russia. On Wednesday, Camdessus told reporters that Russia was the most difficult problem facing both institutions. He said there are still a number of major issues to be resolved before the fund can resume lending to Russia, but he was hopeful agreement could be worked out soon.

Wolfensohn, whose bank's loans generally require an IMF program to be in place, said his visit to Moscow last week indicated that there is a spirit there of wanting to get things done:

"I came back with a pretty constructive view of what the Primakov government is trying to do," said Wolfensohn. "Certainly in terms of the three outstanding tranches of loans we have for them totaling close to $1.8 billion and another billion dollars coming from the Japanese, which would parallel our own investing. We are very, very close to getting agreement with them on the pre-conditions of those loans."

The IMF's Camdessus said the fund will closely monitor Russian compliance with whatever conditions are imposed on new loans and Wolfensohn said the same will be true of the bank. Wolfensohn raised questions in Moscow, he said:

"I talked to them extensively about the issues of corruption, about wanting to make sure the money we put in goes to the place we want it to go and we're working carefully on that. And I found a rather pragmatic and purposeful atmosphere. I gather that Mr. Camdessus said yesterday that same spirit seems to be coming through in the fund's negotiations. It's certainly our hope that we'll be able to come to a deal with the Russians and maybe there will be some progress made in the next few days."

Another pressing item for the bank and fund is the economic impact of the NATO bombing attacks on the former Yugoslavia. Wolfensohn says that the costs of the war on the neighboring countries of Albania, Macedonia, Bulgaria, Romania, Bosnia and Croatia could easily exceed $2 billion even if the fighting ended within a month:

"We've done a study with the fund and Michel spoke about it. We've bracketed certain requirements at between $600 million and $1.5 billion depending on when the war ends. But I don't think either one of us is particularly confident about the extent of those numbers or the damage.

"And," said Wolfensohn, "these exclude of course (damages in) the former Republic of Yugoslavia and Kosovo, where the extent of damage you see nightly on CNN. So I think the numbers are pretty large. I wouldn't really go to the stake on the numbers I've given you. Just that they are very significant numbers and it will require attention from the world community."

Wolfensohn said the bank is working with the European Union to organize a donor conference soon to raise money for all the neighboring states, especially Albania and Macedonia.

Even more, he said, the fund and the bank will now have to take into account the impact of the war when they begin reviewing the economic needs of each of the neighbors in the coming year.

Wolfensohn says he'll begin that process when he meets in Washington this week-end with Romanian President Emil Constantinescu.