Clinton debt relief proposal calls for IMF sale of gold reserves

[Robert Weissman <rob@essential.org>]

New York Times
March 16, 1999


          Clinton Is to Offer Some Nations a Chance to Avoid
          Paying Debt

          By DAVID E. SANGER

                 WASHINGTON -- President Clinton will propose extensive debt 
forgiveness on Tuesday
                 for some of the poorest nations, agreeing to relieve 
repayment obligations of some
          countries in Africa and other regions if they enact broad reforms, 
administration officials said
          Monday.

          Clinton is to announce the program during a meeting here of 
African finance and foreign ministers.

          But it will require approval by Congress, other donor nations and 
multinational institutions like the
          International Monetary Fund. Those negotiations could easily take 
a year or more. The fund has
          traditionally been reluctant to endorse such programs for fear 
they breed expectations among
          borrowing nations that if they wait long enough, they will not 
have to repay their loans.

          But pressure has grown to provide relief to countries that must 
commit huge portions of their
          budgets to pay back debts, which leaves very little for education, 
health care or basic services.

          Clinton's proposal, one senior official said, would "provide deep 
relief earlier to a broader range of
          countries in ways that help promote true economic reform."

          While details are vague, the plan would expand the number of 
countries that could benefit from debt
          forgiveness to nearly 50, from 41. Countries like Ghana, Congo, 
Laos and Honduras could all
          benefit, but only if they met certain economic targets, which have 
yet to be established.

          American officials said the United States was willing to forgive 
debts of more than $3 billion if other
          donors -- who are owed nearly $70 billion more -- agreed. But the 
impact on the federal budget,
          the White House said, would be less than $200 million. While the 
accounting is complex, most of
          the debts have already been written off as virtually 
uncollectable, so the added cost to the
          government of full forgiveness is considered relatively small.

          While the administration has often talked about debt forgiveness 
for countries on the road to
          reform, it has never before proposed a broad change in the rules. 
Congress has often been reluctant
          to finance aid programs for the poorest nations, and it is unclear 
whether Clinton has the political
          influence to persuade Congress to rewrite the rules, even at 
relatively little cost to the taxpayers.

          Part of the proposal calls on the IMF to sell part of its gold 
reserves, which were given to it more
          than 50 years ago when the fund and the World Bank were formed. 
Interest generated from
          investing the proceeds of that sale could be used to pay off some 
of the money owed to the fund.
          The United States is the most influential voice in the fund, but 
past calls for a sale of the gold have
          been in vain.