[stop-imf] Canada resists British plan to revalue IMF gold reserves

[robert weissman]

> The Toronto Globe and Mail
> Canada resists British plan to revalue IMF gold reserves
>
> Creates major new roadblock in deal to cancel debt of world's poor nation=
s
>
> By BARRIE McKENNA
> With files from reporter Carly Weeks
> Monday, October 4, 2004 - Page B1
>
> Bruce Little
>
>
> WASHINGTON -- Canada has thrown up a major new roadblock to a
> debt-cancellation deal for the world's poorest countries by vigorously
> resisting a British plan to inflate the value of the International
> Monetary
> Fund's vast gold reserves.
>
> Finance Minister Ralph Goodale said Ottawa wants guarantees the plan won'=
t
> undermine gold mining companies in Canada and elsewhere. He and other
> finance officials from around the world met for three days of talks in
> Washington, where the World Bank and the International Monetary Fund were
> holding their annual meetings.
>
> "We need absolute assurances that [revaluing the gold] should not be
> disruptive to the international gold industry or international markets fo=
r
> gold," Mr. Goodale told The Globe and Mail.
>
> "It must be handled in a way that does not cause disruption to the gold
> mining industry in Canada."
>
> Mr. Goodale made the comments after the IMF's top policy-making group
> failed
> on the weekend to finalize a deal to cancel billions of dollars worth of
> debt owed by the world's poorest countries.
>
> Also at the meetings, officials expressed growing concern that $50
> (U.S.)-a-barrel oil could unravel an otherwise improving global economic
> outlook.
>
> Coming into the twice-yearly gathering, there had been growing optimism
> among aid groups that the world's wealthiest countries would strike a new
> debt-relief deal, possibly even agreeing to wipe out 100 per cent of the
> debts.
>
> But a communiqu=E9 released Saturday by the IMF's international monetary =
and
> financial committee made no mention of the gold plan or debt cancellation=
.
> On Friday, Canada and other Group of Seven industrialized nations pledged
> only to report back by year-end on the progress of their debt-relief
> efforts.
>
> "The committee has decided that further work on this must be done so that
> we
> have a proper framework for debt sustainability," said British Finance
> Minister Gordon Brown, who chairs the panel.
>
> Speaking to reporters, Mr. Brown said there is now a "growing consensus"
> that 100-per-cent debt cancellation should be the ultimate objective. But
> working out details could delay a final agreement into 2005, he conceded.
>
> After the meeting yesterday, Mr. Brown, along with South African Finance
> Minister Trevor Manuel, flew back to Ottawa with Mr. Goodale for a dinner
> meeting with Canadian Prime Minister Paul Martin to discuss African debt.
>
> As with previous meetings, the sometimes divergent interests of countries
> at
> the table frequently intruded on efforts to achieve broader common goals.
>
> As one of the world's leading gold producers, Canada could be a
> significant
> loser if a move by the IMF to recalculate the value of its gold reserves
> at
> prevailing market prices destabilizes the market. The IMF values its
> reserves at a fraction of the market price, which is now at roughly $420
> an
> ounce.
>
> Anything causing more gold to go on the market would depress prices and
> hurt
> the profitability of gold-mining companies, which pay significant
> royalties
> and taxes.
>
> Some critics have suggested that Canada is being hypocritical because its
> own central bank has been busily dumping gold reserves in recent years,
> and
> that also has a dampening effect on the price of gold.
>
> The IMF's 103 million ounces of gold is one of the biggest stashes of the
> precious metal in the world.
>
> Several countries expressed concern that the gold-revaluation plan could
> undermine the long-term financial stability of the IMF and the World Bank=
.
>
> Canada was far from alone in its opposition to elements of a debt-relief
> deal. France and Germany, for example, have expressed reservations about
> U.S. proposals to put the elimination of Iraq's $120-billion debt on a
> fast-track ahead of many needier countries.
>
> Mr. Goodale pointed out that nearly all countries at the meetings agreed
> that anything they do collectively must involve more than just paper
> shuffling -- that it must put cash in the hands of poor countries. Debt
> relief should also treat all countries equally, encourage economic reform=
s
> and not undermine the stability of the IMF and its sister organization,
> the
> World Bank, he said.
>
> Mr. Goodale acknowledged that progress in global financial talks can
> sometimes be "slow and painful" -- a frustration often expressed by Mr.
> Martin during his long tenure as finance minister.
>
> Nonetheless, Mr. Goodale suggested a little work was done at the meetings
> toward a new debt-relief regime.
>
> He also said that Canada's objections to the gold-revaluation plan were
> largely "technical," and could be overcome pending further study.
>
> The other major item on the agenda of the weekend meetings was the
> surprising recent increase in U.S. crude oil prices, which closed Friday
> above $50 a barrel for the first time.
>
> The IMF pledged to come to the aid of countries battered by higher oil
> prices. G7 finance ministers called Friday for oil-producing countries to
> boost output, and appealed for more efficiency by consuming countries.
>
> "Downside risks to the recovery have recently increased, stemming in part
> from the increase and volatility in oil prices," the IMF said in a
> statement
> released Saturday. "These reflect geopolitical tensions, strong global
> demand and market dynamics. The IMF stands ready to assist members that
> may
> be adversely affected."
>
> Britain's Mr. Brown told reporters that the world needs oil price
> stability
> and "reasonable prices."
>
> Meanwhile, Mr. Goodale warned that it could be at least two to three
> months,
> and perhaps longer, before the United States reopens its border to
> Canadian
> cattle and certain beef products. Mr. Goodale, who raised the issue durin=
g
> a
> meeting Saturday with U.S. Treasury Secretary John Snow, said the two
> sides
> have agreed to sit down for talks in a "couple of months."


--
Asia Russell
Health GAP
asia@healthgap.org
tel +1 267 475 2645
http://www.healthgap.org