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IMF/World Bank: Poorest Nations Benefit From Debt Relief

Washington, 4 October 1999 (RFE/RL) -- The news from World Bank-IMF annual meetings last week was mostly good for the world's poorest nations.

On Sept. 26, the bank and the International Monetary Fund announced a joint initiative that could ease the debt these countries owe to the two lending institutions by as much as $100 billion.

The IMF went so far as to revalue 14 million ounces of its gold stockpile to raise about half the amount needed to offset the cost of the program, and the rest will be made up by pledges from the fund's 182 member states. Most of this money has been pledged, and World Bank President James Wolfensohn says he is busy raising the rest.

Then on Wednesday, U.S. President Bill Clinton told the World Bank/IMF gathering that his administration is prepared to erase up to 100 percent of the debt these countries owe the United States. These nations -- in sub-Saharan Africa, Southeast Asia and Latin America -- owe the U.S. more than $5 billion.

Clinton's move expands on his administration's commitment to forgive up to 90 percent of this debt, as announced in June in Cologne, Germany at the summit of the Group of Seven world industrial powers. The U.S. initiative is bound to prod other major lending countries -- particularly France and Japan -- to take similar action.

Not good enough, says Oxfam America, a private organization dedicated to alleviating poverty and injustice worldwide.

Lydia Williams, a policy analyst for Oxfam America, applauds the debt relief, but says the conditions, and how quickly the beneficiaries must meet the conditions, are counterproductive.

"In the past, the conditions have not always been beneficial in reducing poverty, and in many cases, IMF conditions have led to actual cuts in basic services, and we think that's counterproductive. We'd like to see -- while we're certainly not calling for unconditional debt relief, we want to make certain that the conditions that are attached to debt relief are actually going to result in progress toward achieving the goals of getting all children in school and ensuring that everyone has health care."

Williams also says the IMF decides on such conditions without consulting the people in the debtor countries. It is these people, she contends, who can put direct pressure on their governments to make sure that money freed up by debt relief is channeled to improving society, not enriching political leaders.

As for the timing of the debt relief, Oxfam America says a poor, heavily indebted nation should simply be allowed to agree to financial and government reforms and be granted the debt relief immediately. Instead, it says they're being asked to implement the reforms before they see any benefits.

"We are concerned that under the existing conditions, it may take countries many years before they actually qualify to get the debt relief. Under the existing program, countries have to wait up to six years to get the relief because they have to meet very tough IMF conditions. And we think this is just too long. We think that as long as countries can demonstrate a commitment to using the resources for poverty reduction, that they should get the relief right away. The situation is too dire in these countries to make them wait six years. So we think the money, the debt relief, needs to come sooner rather than later."

Overall, however, Williams says Oxfam America believes that the IMF and the World Bank have taken an important step with the debt-relief program, and the organization looks forward to working with the two institutions.