[stop-imf] FT: IMF's plan for bankruptcy gaining favour

[Robert Weissman]

IMF's plan for bankruptcy gaining favour
By Alan Beattie in Washington
Published: September 17 2002 
Financial Times


The International Monetary Fund said on Tuesday that its radical plan
for an
international bankruptcy procedure for sovereign governments was gaining
support ahead of its annual meetings next week.

Launching the IMF's annual report, Anne Krueger, its second-in-command, also
sounded notes of warning over the global economy and Brazil, one of the most
fragile large economies. "There are obviously downside fragilities" to the
global economic recovery, she said, adding that it could be slower than
previously thought.

German newspapers have reported leaks that the fund will reduce its global
growth forecast from 4 per cent to 3.7 per cent for next year when it
releases new projections next week.

Ms Krueger said she expected the fund's ministerial steering committee to
instruct it to draw up changes to its constitution to allow bankrupt
governments to negotiate with their debtors. "I am confident we will get the
endorsement . . . to move forward," she said.

The fund and its dominant Group of Seven shareholder governments are
pursuing a twin-track approach to sovereign bankruptcies, trying to persuade
emerging market governments to add special clauses to their bonds to aid
restructuring at the same time as working on the "sovereign chapter 11" plan
for a new judicial procedure.

The US, the IMF's largest shareholder, has shown more interest in the first
of these, but is keeping its options open on the second, regarding it as a
longer-term project and stressing the risks in putting it before Congress.
On Tuesday US treasury officials said that, contrary to recent reports, this
policy stance was unchanged.

Ms Krueger said Brazil's macroeconomic situation was "clearly sustainable",
but she warned that the high interest rates on its bonds might require
policy to be tightened if they did not fall.

The IMF has authorised a $30bn rescue package for Brazil. The programme
commits Brazil to keeping its primary fiscal surplus - the government
surplus before interest payments - at 3.75 per cent at least. The IMF's
annual report showed its Brazil package helping almost to triple the
commitments made under the fund's main lending instruments to about
$50bn in
fiscal year 2002.

Ms Krueger said in Argentina, by contrast, recent actions by congress
suggested a lack of political consensus about what needed to be done.




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