[stop-imf] The World Bank's Development News Friday, March 10, 2000 (fwd)
Robert Weissman
rob@essential.org
Fri, 10 Mar 2000 11:33:52 -0500 (EST)
This summary is prepared by the External Affairs Department of the World
Bank. All material is taken directly from published and copyright wire
service stories and newspaper articles.
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Headlines for Friday, March 10, 2000:
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- ECUADOR TO RECEIVE $2 BLN INTERNATIONAL LOAN PACKAGE
- WORLD BANK'S COMPETENCIES SHOULD NOT BE CHANGED
- GERMANY CLAIMS UK BACKING OVER IMF CHOICE
- IFAD FOUNDER URGES MORE DEBT RELIEF
- PAPUA NEW GUINEA VOWS TO KEEP OK TEDI MINE OPEN
- ALSO IN EDITION: ANNAN 'DEEPLY CONCERNED' OVER HURRICANE-RAVAGED
MADAGASCAR.
NEW RAIN DELAY SOME AID TO MOZAMBICAN FLOOD VICTIMS.
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ECUADOR TO RECEIVE $2 BLN INTERNATIONAL LOAN PACKAGE
A little more than six months after it became the first nation to default
on Brady bond payments, debt-ridden Ecuador was finally thrown a $2
billion lifeline by a group of official lenders led by the IMF, Dow Jones
reports. The funds are to be made available over the next three years to
support a government program that seeks to virtually rebuild Ecuador's
economy, with dollarization a cornerstone of the recovery efforts.
Under the emergency financing plan, the World Bank will contribute $425
million and the IMF $300 million, with the IDB tapped for $620 million.
The remaining $700 million is to be provided by the Corporaci=F3n Andina de
Fomento, an Andes-based development bank.
The IMF said the loan package was intended to assist the implementation of
the government's dollarization plan, the resolution of the country's
banking crisis, and the strengthening of the nation's public finances. The
funds were also designed to protect social programs, ensuring there would
be sufficient funds in the government's budget to support health,
education, welfare, and pension initiatives.
Reuters also reports, noting that World Bank country officer Eduardo
Wallentin said there would be three components to the Bank's lending to
Ecuador-a banking sector loan, a loan to modernize the public sector, and
a larger credit to deal with social sector projects. He said the few
minor remaining sticking points were likely to be smoothed away in a week
or so, paving the way for the boards of the international lenders to
approve the loans. The Bank also said the loan credits would be stretched
over the next three years to support the government's economic and
structural reform initiative, reports Agence France-Presse.
Dow Jones continues that out of the total rescue package, $900 million
will be available to Ecuador over the next 12 months, the IMF said, which
will include a $300 million standby facility to go before the IMF board
within a month. "The loans are a combination of balance of payments
support and investment lending, with a strong social content," the IMF
said. Ecuador will likely have access to the financial package within a
month, during which time the lenders expect the Ecuadorean congress to
pass a raft of economic and structural measures "necessary to complement
Ecuador's reform program."
The international rescue package comes on the heels of a visit by US
officials from the State and Treasury Departments and the White House, who
worked with the administration in Quito to put the finishing touches on
the economic recovery plan. World Bank, IMF, and IDB officials had kept
in almost constant contact with Quito in the wake of the government's
default on its Brady bonds last September.
In the end, says the story, the IMF and the US administration relented on
their demands that Ecuador reach an early agreement with creditors, and
instead focused on helping the administration draft a recovery strategy. =
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A senior US Treasury official, who declined to be named, said "we welcome
the announcement" of financing for Ecuador as an endorsement of Quito's
recovery plan. "This ambitious economic program represents an important
step forward for Ecuador."
While the international relief package is a substantial boost to
Ecuadorean President Gustavo Noboa's administration, the new president
will now be placed under enormous pressure to deliver results, says the
story.
The Wall Street Journal (p.A11) also reports.
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WORLD BANK'S COMPETENCIES SHOULD NOT BE CHANGED German Development
Cooperation Minister Heidemarie Wieczorek-Zeul yesterday warned against
the proposals by the US congressional advisory commission headed by
economics professor Allan Meltzer to change the role of the World Bank
direction, reports the Frankfurter Rundschau (Germany). "The proposal to
drastically cut the competencies of the World Bank should in no case
become a reality", Wieczorek-Zeul said, describing the diminishing of the
Bank's role in development cooperation as potentially "disastrous".
The consequences of these proposals would be that the Bank would lose its
ability to be an active global development organization, she added,
saying, "The US Congress questions the joint World Bank-IMF reorientation
towards poverty reduction" which is linked to the enhanced Highly Indebted
Poor Countries (HIPC) debt relief initiative that seeks to combine debt
reduction with poverty reduction. "These proposals ultimately threaten
the global debt relief initiative to which the German federal government
has strongly contributed", she added. The Tageszeitung (Germany) and the
Wiener Zeitung (Austria) also report.
The news comes as Die Presse (Austria), Handelsblatt (Germany), Le Figaro
(France, p.10), and Le Monde (France, p.4) also report on the Meltzer
commission's recommendations for reforming the international financial
institutions.
Some of the principles on which these recommendations are based are not so
different from those of US Treasury Secretary Lawrence Summers, notes the
Economist (p.98). The problem lies in the tone, detail, and political
consequences. Its detailed proposals are impractical, and its emphasis on
radically trimming the institutions and on increasing future foreign
assistance assumes that a consensus for more aid is going to develop in
the US Congress. To anyone who tracks America's budget debates, that is a
faint hope, the story says.
Republicans are determined to follow through, particularly on the sections
about IMF reform, the article continues. They might attach legislation
demanding reform to the administration's request for more money for
poor-country debt relief. It is worse than ironic that in the ensuing
stand-off, it will be the poorest countries - whom the Meltzer Commission
is so keen to help - that may lose out.
The commission's report is radical stuff, comments Hamish McRae of the
Independent (UK, p.23), but will it fly? On the face of it, this depends
on American politics. Nothing is going to happen until after the
presidential election. Meanwhile, if the Fund and the Bank are wise, they
would bring forward their own proposals for reform, for by so doing they
are more likely able to influence the outcome.
It is true that the lending function of the World Bank has become much
less important over the last 30 years, McRae continues. Economic
development now is less an issue of scarce money, except in the very
poorest nations, and more one of scarce skills. Now it happens that the
Bank, for all its faults, has an enormous skills base. It has a lot of
clever and dedicated people, either on its staff or available to it. It
needs to shift from being mainly a lending organization, with skills
attached, to being mainly a skills organization, with a lending arm tacked
on. How you switch direction is a problem of culture, deployment and
management.
This points to privatization, says McRae. Giving grants or lending on
special terms through IDA could remain in the public sector, while the
core business would be returned to its shareholders. Private sector
disciplines would be imposed, and the World Bank would-to put it
bluntly-get the US Congress of its back, Rae suggests.
Also commenting, the Financial Times (p.10) says in an editorial that the
Meltzer report's ideas do go too far, but they are not crazy. Given
willingness to compromise, they could be the basis for discussion between
the two sides. The alternative is certainly worse. Continued bitter
partisan disagreement in the US must make the environment for these
institutions extraordinarily difficult. The world urgently needs a US
consensus on policy towards the international financial institutions, and
this report is at least the basis for a discussion.
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GERMANY CLAIMS UK BACKING OVER IMF CHOICE German Chancellor Gerhard
Schr=F6der yesterday said he was approaching a European consensus on
nominating EBRD President Horst K=F6hler to head the IMF, reports the
Financial Times (p.1). "We have gone a very good way towards reaching a
European consensus on this issue," he said as his government continued a
frantic lobbying exercise around European capitals.
Schr=F6der said he had been assured of the support of UK Prime Minister Ton=
y
Blair for K=F6hler, amid conflicting signals from the prime minister's
office and the Treasury, which is believed to have considered Italian
Finance Minister and former Prime Minister Giuliano Amato a more
impressive candidate. The US government has also indicated a preference
for Amato, the story says.
The Frankfurter Allgemeine Zeitung (Germany, p.1) adds that Schr=F6der also
said he had the support of Dutch Prime Minister Wim Kok. If K=F6hler can
get adopted as the agreed European candidate, it seems likely that he
would secure the job, the FT continues. Despite its strong reservations,
the US administration is believed to feel it cannot reject Europe's choice
a second time.
The rapid nomination of K=F6hler on the heels of the failed campaign for
German Deputy Finance Minister Caio Koch-Weser is bad strategy, comments
the Dagens Nyheter (Sweden). Much like the in previous campaign strategy,
Schr=F6der has found it more important to launch a new candidate rapidly
than working to establish broad international support in advance, and
therefore risks another failure.
The debate in Germany and in many European countries has focused on names
rather than what policies candidates would actually implement as the new
IMF managing director, the piece notes. "I still have not seen any
declaration of intent as to IMF reform presented by any Europeans yet,"
the paper quotes an observer from the banking sector as saying.
Meanwhile, says the article, there is a strong sentiment in Germany and
the rest of Europe against the US, whose government is seen as demanding
absolute power in the appointment, while at the same time asking Europe to
accept a larger international responsibility.
The comment comes as Reuters reports that Finance Minister Kiichi Miyazawa
said today Japan had no plans to withdraw former Japanese Vice-Minister of
Finance for International Eisuke Sakakibara as its candidate for the top
job in the IMF. Asked what Japan would do if the US and Europe decided to
endorse K=F6hler to lead the Fund, Miyazawa said: "It's not a matter on
which Japan can act on its own. There are other countries that support
Sakakibara, and we need to talk to them. But the situation has not yet
reached that stage."
Meanwhile, the Portuguese presidency of the European Union said on Friday
there was still no consensus within the 15-nation bloc on who to name as
candidate for managing director of the IMF, Reuters reports. "We cannot
say today that there is consensus but consultations are under way," a
spokesman for the Portuguese presidency told reporters.
The spokesman said at the moment K=F6hler was the only name under
discussion, but not all EU countries had indicated that they support him,
the story adds.
Meanwhile, a separate Reuters story reports US Secretary of State
Madeleine Albright reiterated today that Washington wanted a European to
head the Fund, but dodged any specific mention of likely European Union
candidate Horst K=F6hler.
"We have made quite clear that what is necessary is to have a strong head
of the IMF ... and we have said that the U.S. is for a European
candidate," Albright asserts, adding, "The important thing is to find one
that has the qualifications and the consensus," Albright told reporters
after meeting European Commission President Romano Prodi in Brussels.
Separately, the Journal of Commerce (p. 13) reports the White House said
Wednesday it would not comment until the 15-nation EU agrees on a nominee.
Meanwhile, the New York Times (p. C4) reports the question raised in
European capitals is whether K=F6hler is focused too narrowly on the former
East bloc and on the minutiae of the region's transition from Communism to
market economics. Aides have sought to portray K=F6hler as an
investment-oriented businessman running a for-profit bank.
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IFAD FOUNDER URGES MORE DEBT RELIEF
Former Pakistani Finance Minister Sartaj Aziz is back in Rome this week,
warning UN food agencies they are falling behind in their race to reduce
world hunger by half in the next 15 years, reports Reuters. One of the
founders of the International Fund for Agricultural Development (IFAD),
Aziz thinks a key strategy could be to expand debt relief for poor
countries by creating national poverty reduction funds.
"We could lose this historic struggle to overcome poverty by 2015, unless
a more effective international framework of 'reinvigorated
multilateralism' is put in place," he said in Rome, where he is due to
present his ideas today as part of IFAD's preparation of a report on rural
poverty in 2000.
Arguing for more debt relief, Aziz said that creditor governments' present
plan to write off loans to the 40 poorest countries would deal with only a
small portion of what is owed by developing nations. "The concept should
also be extended to other developing countries, provided the amounts
accruing from debt relief are devoted exclusively to poverty reduction,"
he said. "The amount of debt relief would be placed in a national poverty
reduction fund to be spent only on approved programs for poverty
reduction, in consultation with the World Bank, the regional development
bank concerned, or IFAD," he added.
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PAPUA NEW GUINEA VOWS TO KEEP OK TEDI MINE OPEN The Papua New Guinea (PNG)
government today vowed to keep operating the polluting Ok Tedi copper and
gold mine and to hold Australia's Broken Hill Pty (BHP) liable for some of
the environmental damage, reports Reuters. "We know BHP definitely wants
to pull out and we want to keep the mine going," PNG's Mining Minister Sir
Michael Somare said. "The landowners also want to keep the mine going, so
we might have to look for another developer."
Somare said PNG would start negotiating with BHP on damage liabilities
after it received a World Bank report. "We don't want BHP to just walk
out on us and they have made undertakings they will not just walk out on
us. They will be responsible for some of the things that the government
wants them to do. And this is a good attitude," he said.
The World Bank has said the best thing for the environment would be to
close the mine but immediate closure would be disastrous from a social
standpoint. Revenues from the mine, located near the poverty-stricken
South Pacific nation's border with Indonesia, accounts for about 10
percent of GDP and 20 percent of foreign exchange credits.
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ALSO IN EDITION: ANNAN 'DEEPLY CONCERNED' OVER HURRICANE-RAVAGED
MADAGASCAR. NEW RAIN DELAY SOME AID TO MOZAMBICAN FLOOD VICTIMS. ANNAN
'DEEPLY CONCERNED' OVER HURRICANE-RAVAGED MADAGASCAR. UN Secretary
General Kofi Annan said he was "deeply concerned" about the humanitarian
crisis caused by a pair of severe storms on Madagascar, AFP reports UN
spokesman Fred Eckhard said yesterday. Cyclone Eline on February 17 and
tropical storm Gloria on March 4 left 560,000 people in dire hardship,
including 10,000 homeless, the UN said. The storms came on top of a
long-running cholera epidemic which has killed more than a 1,000 people in
recent months on the Indian island state.
The spokesman said a call for international assistance for Madagascar
would be made soon, the story notes, adding that on Wednesday, French
President Jacques Chirac called on the EU to help in Madagascar. Several
UN sources have stressed that the problems of the island have been
neglected because they have been cast into the shadow by the media
spotlight on Mozambique, which is struggling to cope with the worst
flooding in living memory.
NEW RAIN DELAY SOME AID TO MOZAMBICAN FLOOD VICTIMS. Heavy rains in the
most ravaged areas of Mozambique today kept flood victims from receiving
relief supplies, the New York Times reports (p.A8). But American
helicopters loaded with rice touched down in the center of the country
after days of waiting in South Africa for instructions. Food could run out
soon, a spokeswoman for the World Food Program, Lindsey Davies, is quoted
as saying. The floods wiped out almost 4000,000 acres of staple food crops
and dealt "severe losses" to one-third of national cereal production.
The Washington Post (p.A18) adds that southern Africa's worst floods have
disfigured this country beyond recognition, washing away roads and
railways, crops and cattle. But while the international relief effort
underway centers on rebuilding Mozambique's infrastructure and providing
food, water and medicine to survivors, the resurrection of this country
extends beyond bricks and mortars, aid workers said.
Los Angeles Times also reports (p.A16).
BRIEFLY NOTED. Underfunded by the US and European governments, the UN
mission in Kosovo has stumbled, opines a Washington Post editorial
(p.A20). As extreme Serb and Albanian elements try to fill the political
vacuum, UN Secretary General Kofi Annan has called for the Security
Council to debate and define the notion of "substantial autonomy." Such a
discussion is necessary, the newspaper says. But even more urgent is a
credible strategy for bringing about internal political change in
Belgrade, it adds. . .UNICEF began a global campaign yesterday against
acts of homicidal violence against women who live in cultures where laws
and society fail to protect them, the Miami Herald notes (p.11A)
Ever since the introduction of Argentina's 1991 convertibility law, which
prohibits the printing on pesos without dollar reserves backing them up,
Argentine politicians have relied on tax increases as the remedy for
fiscal problems caused by unchecked public spending, notes the Wall Street
Journal (p.A15). The result has been the same as if the government
mandated a downsizing of the private sector in order to "oversize" the
public sector. But recently, says the story, the electorate in the
province of Cordoba began to swim against the tax tide; the governor has
cut the provincial tax rates by 30 percent. So the message from Cordoba is
different, concludes the article: take the risk, cut taxes first. .
=2EThousands of doctors and health care workers, peasants and university
students took to the streets yesterday in San Salvador (El Salvador) to
protest the privatization of health care, the Miami Herald reports (p.8A).
The Wall Street Journal (p.A11) reports China's economy is showing signs
of rebounding in the first months of 2000, analysts said. Value-added
industrial production grew 12 percent in February from a year earlier.
Pakistan's struggling economy may get a shot in the arm from US President
Bill Clinton's visit later this month if Islamabad makes the right
political offers, AFP reports analysts said yesterday, noting that a
resumption of IMF and World Bank funding would ease pressure on Pakistan's
debt repayments which are scheduled to begin from January 2001.
The EU said yesterday it sought a firm commitment from Turkey to press
ahead with political reforms on the path towards eventual membership of
the bloc, reports Reuters, quoting EU Enlargement Commissioner Guenter
Verheugen as saying, "Turkey could make fast progress now with its clear
strategy on structural reforms, backed by the IMF and World Bank.". . .The
IMF's board has approved Lithuania's new $80 million, 15-month
precautionary standby memorandum, Reuters reports, noting that the
agreement should unlock some $100 million in cheap World Bank funding.