[PEN-L:8307] CSM: G-7's debt proposal criticized

[Robert Naiman <naimanr@xxxxxxxxxxxx>]

a nice piece, except that "structural adjustment" is equated to "more spending on social needs"[!] and he misses the point on 3 years -- no way they will back date it, the IMF gambit is that "debt relief will now come after 3 years, not 6" but under the IMF scheme 6 years of structural adjustment are still required and the debt relief can be revoked in the final 3 years if the IMF is not complied with.
-Robert Naiman
-------------
The Christian Science Monitor
June 24, 1999, Thursday

Rich man's plan seen as stingy

David R. Francis, Staff writer of The Christian Science Monitor

G-7's program to forgive $50 billion in debt in 33 countries criticized

BOSTON -- A new plan by the world's richest nations to cut the official
debt of the world's poorest nations is
getting bad reviews.

On the face of it, the plan announced last weekend in Cologne, Germany, by
the G-7 group of
industrial nations is aimed at helping 430 million people in some 33 highly
indebted countries. Most of
these are in sub-Saharan Africa. The US claims it provides for slashing up
to 70 percent of official
debts.

But to some economists and to those activists who lobbied the G-7 for debt
relief, the plan itself is
highly deficient, partly a political document, and still fuzzy as to how it
will be implemented.

"It is not a significant reduction," charges Charles Aniagolu, spokesman in
London for the Jubilee
2000 Coalition, a worldwide alliance of nongovernmental organizations and
religious groups pressing
for debt relief.

The coalition presented the G-7 leaders with a petition signed by 17
million people from rich nations
urging debt cancellation.

"There is a lot less [in the plan] than meets the eye," holds Mark
Weisbrot, an economist at a
Washington think tank, the Preamble Center. "You have to always read the
fine print."

"Big step forward ... but about half of what is needed," says Seth Amgott,
spokesman for Oxfam,
another member of the coalition.

That, of course, is not how the G-7 - the US, Japan, Britain, France,
Germany, Italy, and Canada -
see it.

A fact sheet offered by the United States Treasury describes the Cologne
initiative as providing "deeper, broader, and faster debt relief in return
for firm commitments to channel the benefits into improving the lives" of
the people in the debt-burdened nations.

To critics, the plan's requirements for "structural adjustment" - more
spending on social needs, less on
military - in countries getting debt relief will do damage greater than the
benefits.

But to the G-7, the economic guidance of the International Monetary Fund
(IMF) and World Bank
are vital if their money isn't to go down the tubes in corruption and
unwise management.

"If a country doesn't have the right economic policies, it isn't going to
help much to get debt
forgiveness," says William Cline, chief economist at the Institute of
International Finance, a
Washington group representing the world's largest private financial
institutions.

In today's dollars (net present value), the US figures the amount of debt
relief would more than triple
from $ 13 billion under the current framework to as much as $ 50 billion.
Total debts in nominal
dollars would fall from about $ 127 billion to as low as $ 37 billion.

Moreover, the number of countries expected to qualify for relief would rise
from 26 to 33. These
would include such nations as Ethiopia, Niger, Nicaragua, Tanzania, Uganda,
Ghana, Rwanda,
Benin, Honduras, Laos, Senegal, and Mozambique.

Another G-7 goal is to reduce the time needed for a nation to qualify for
relief from six years to three
years if it has been implementing reforms. But details are unclear. For
instance, will the time be
back-dated for countries already engaged in IMF-approved programs?

Besides relief on government-to-government debts, the IMF and World Bank
will be required to
ease the burden of the debts owed to them. However, these two multilateral
agencies have policies
prohibiting any debt forgiveness. As a way out of this quandary, they are
expected to grant fresh
long-term loans at a rate below inflation - 0.5 percent.

The plan calls for the IMF to sell as much as 10 million ounces of its gold
reserves to raise the money
it needs. This has alarmed the gold industry. The sale would require
approval of Congress, and some
members from mining states are threatening to block the deal.

But an IMF spokesman says that 10 million ounces amounts to a mere three
hours of trading on the
London gold market. If phased in over some years, it should have little
impact, he says.

Some members of Congress are pushing bills that would require the US to do
more on debt relief.

"The Cologne approach is not as comprehensive as the need demands," says
the backer of one such
bill, Rep. James Leach (R) of Iowa, who chairs the key House Banking
Committee. "Countries such
as Bangladesh and Haiti might be 'redlined' from participation, and from an
African perspective,... the
amount of relief will not be deep or fast enough to deal with the social
chaos resulting from the spread
of AIDS."

Next week, Congresswoman Cynthia McKinney (D) of Georgia plans to introduce
a bill that would
cancel all US bilateral debts to 41 poor countries.

Michel Camdessus, IMF managing director, says the IMF aims for agreement on
the plan by the
annual meetings of the IMF and World Bank to be held in September.



GRAPHIC: PHOTO: GIVE 'EM A BREAK: Last week 20,000 demonstrators at the
summit of
the world's richest nations formed a chain around downtown Cologne,
Germany, to urge more debt
relief for poor countries. BY REUTERS

LANGUAGE: ENGLISH

LOAD-DATE: June 23, 1999
------------------------------------------
Neil Watkins
watkinsn@xxxxxxxxxxxx
The Preamble Center
1737 21st Street, NW
Washington, DC 20009
Tel - (202) 265-3263 x280
Fax - (202) 265-3647
Web - http://www.preamble.org

To join the Preamble Center's listserv for announcements and updates on new
research and activities,
access http://www.preamble.org/subscribe.htm.


-------------------------------
Robert Naiman <naimanr@xxxxxxxxxxxx>
Preamble Center
1737 21st NW
Washington, DC 20009
phone: 202-265-3263
fax:   202-265-3647
http://www.preamble.org/
-------------------------------