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World: World Bank, IMF Agree To Reduce Debt For Poorest Countries

Washington, 27 September 1999 (RFE/RL) -- The World Bank and the International Monetary Fund (IMF) are mounting a joint effort to support faster and more comprehensive debt relief to the world's most indebted nations.

The initiative will help deal with as much as $100 billion in debt owed by 36 of the poorest countries so they can focus their resources on alleviating poverty, and improving education and health services.

The program was announced yesterday (Sunday) during the start of the annual meetings of the 182-nation IMF and the World Bank. The decision was made at the first-ever joint meeting of the IMF's Interim Committee and the World Bank's Development Committee, which recommend policy to both lending agencies.

Gordon Brown, Britain's Chancellor of the Exchequer, said the debt-reduction program will be financed by revaluing 14 million ounces of gold. The IMF's stockpile of 103 million ounces of gold is valued at levels set in the 1960s, a fraction of gold's value today.

Brown, who also serves as chairman of the IMF's policy-setting Interim Committee, said at a news conference last night that several countries had also stepped forward Sunday with new pledges of financial support.

As of last week, he said, $550 million had been pledged to support the initiative. With new pledges yesterday, he told reporters, that figure is approaching $2.5 billion.

Brown said: "Let it be said of this historic meeting that those to whom the world's greatest wealth has been given are joined with those burdened down by the world's greatest debt."

The gold revaluation alone is expected to generate $50 billion in debt relief, in addition to about $30 billion already pledged. Individual nations are expected to pledge $20 billion.

At the same news conference, Michel Camdessus, the IMF's managing director, addressed a reporter's question about skepticism that the current initiative can be any more successful than previous efforts, which have been criticized as ineffective.

Camdessus noted that 87 countries have agreed to contribute funds to the debt-reduction program. Of these, 54 are developing countries, and 10 have been recipients of IMF assistance - countries that he said were not among "the better-off of the world." These nations include Azerbaijan, Bangladesh, Cambodia, Sri Lanka and Ghana, Camdessus said.

The IMF leader said: "It shows that these countries that have experienced this kind of IMF, World Bank therapy found it good for themselves and for the others."

Camdessus declined to say how much each country would contribute, saying announcements would be made by each government.

At yesterday's meeting, the IMF's Interim Committee also told Russia it must strengthen the integrity of its financial system. It acknowledged that Russia has improved its political and banking system, but said it was not acting quickly enough.

The committee also adopted a code of conduct, supported by the United States, that urges member nations' central banks to toughen their laws against financial crimes, particularly money laundering.

The administration of U.S. President Bill Clinton has been trying to deflect the criticism of its policy toward Moscow since reports emerged last month of a probe of financial corruption in Russia.

That probe includes the suspicion that as much as $15 billion in Russian currency that passed through accounts at the Bank of New York may be part of a money laundering scheme. Money laundering is transferring illegally acquired cash through many bank accounts until its source is obscured and the money appears to be legitimate.

Some news accounts say there is fear that the source of some of the laundered money may have been IMF aid to Russia. The fund has said there is no evidence that this is the case.