Washington, 14 October 1998 (RFE/RL) --Agreement on approval of the U.S. share of new funds for the International Monetary Fund (IMF) is expected to be worked out today in Washington.
The agreement would pave the way for the U.S. share of $14.5 billion for the IMF's general quota (membership fee) increase and the American share of $3.5 billion for a special borrowing facility that can be made available to the IMF in times of unusual need.
But the money would not be allowed out of U.S. government coffers until a series of conditions set down by the Republican party leaders of Congress are accepted by the IMF and its largest members.
The entire membership of 182 nations approved the 45 percent increase in quota's one year ago to expand the IMF's basic capital base to more closely reflect the size of the global economy.
The financial crisis, which had just started in Asia when the increased quota was approved, has since spread around the world, especially to places like Russia, and the fund is even more in need of the resources.
But quota increases require approval of 85 percent of the members voting power and because the U.S. has a nearly 18 percent vote, it can in effect veto the general increase. For months, the U.S. House of Representatives has refused to approve the American share, demanding a broad series of conditions.
The global financial crisis has put the pressure on to get the new quota increase into place, so negotiations between the Republican congressional leaders and Clinton administration officials had intensified in recent days.
U.S. Deputy Treasury Secretary Larry Summers says he thinks the final agreement will "come up with something that's going to work for everyone." He said American officials have been conferring with the other major members of the IMF -- the G-7 group of major industrial nations -- and that "we're likely to end with an agreement everybody can feel comfortable with."
While the final package has not been revealed, the congressional leaders have said it will probably include not only demands for greater transparency by the fund -- something agreed upon by both sides -- but would impose conditions to hit countries like Russia which have suffered a sudden loss of market confidence.
The provision would require that loans to such countries carry an interest charge of three percent above market rates and would have to be repaid within one to 2.5 years.
Another condition would apparently eliminate longer-term and subsidized loans -- such as the ESAF program -- which has provided below-market rate loans to such poorer countries as Albania, Armenia, Azerbaijan, Georgia, Kyrgyzstan, Macedonia and Tajikistan.
Another provision would require that to get IMF loans, a country would be required to set up schedules for liberalizing trade, eliminating government-directed lending and adopt bankruptcy laws fair to all creditors.
Unanswered is the question of what will happen if the rest of the 181 member nations in the fund refuse to accept all the U.S. Congress' conditions.
Fred Bergsten, a former U.S. Treasury official who now heads the independent policy study organization Institute for International Economics, told the Wall Street Journal that there could be a backlash. "The U.S. can bludgeon its way through in a tight situation like this, but there will be a price to pay -- perhaps in some other international monetary negotiations, perhaps in some trade negotiations," he said.
Officials of other nations, especially the G-7, have kept especially quiet so as not to derail the U.S. internal negotiations. But more than one says privately that while the international community needs the U.S. participation, the American Congress cannot bind other members to follow its dictates.