News on Gold Sales, Russia (fwd)

[Robert Weissman <rob@essential.org>]

>From Neil Watkins of the Preamble Center:

1) Latest on Gold Sales for HIPC
2) Poverty Rises in Russia

IMF PANEL LIKELY TO PASS GOLD SALES TO FINANCE DEBT RELIEF

The IMF, at the meeting next week of world finance ministers who oversee the 
lender, is likely to win authorization to sell some of its $29.25 billion of 
gold to finance debt relief for the world's poorest countries, report the Wall 
Street Journal (p.B8) and Wall Street Journal Europe (p.15). But the Interim 
Committee, which will consider the idea on April 27, probably won't specify
when 
or how much of the IMF's 103 million ounces might go on the block.

IMF managers have recommended selling five million ounces, while the US, the 
IMF's biggest backer, would support a sale of as much as 10 million ounces.
The 
question, however, is how to pay for relief without reducing other aid. 

"Replacing new aid by an equivalent amount of debt relief might achieve debt 
sustainability, but could be seen as a cruel hoax if it did so without
providing 
any gain in resources available for poverty reduction," the story cites an 
IMF/World Bank document reviewed by the IMF's executive board on Friday.
IMF gold holdings are a tempting resource, says the story, but such a sale
would 
require approval from the US Congress, where lawmakers critical of IMF rescues 
of Brazil and other troubled nations are already voicing their opposition.

Meanwhile, says the story, although gold traders have been expecting an influx 
of IMF metal for some time, IMF officials want to be careful not to drive its 
price down suddenly, disrupting markets and cutting revenues for developing 
countries that produce gold.

The news comes as UK Chancellor of the Exchequer Gordon Brown and
International 
Development Secretary Clare Short yesterday sought to bolster international 
efforts to bring debt relief to the world's poorest countries by calling on
the 
EC to make a significant donation to the cause, the Guardian (p.11) reports.

Reform of the Heavily Indebted Poor Countries (HIPC) debt relief initiative
will 
figure prominently on the agenda [of the upcoming IMF/World Bank spring 
meetings], writes OXFAM's Kevin Watkins in the Guardian (p.12). The UK, the
US, 
Germany, and France have offered proposals for reform. The consensus is that 
debt relief should be provided within three years instead of six. The case for 
deeper debt relief has also been acknowledged.

Instead of insisting on compliance with IMF programs, creditors should offer
pro-poor incentives for countries willing to transfer savings from debt relief 
into schools, clinics, and water supplies, which can make a real difference to 
people's lives, Watkins says.

Japan would bear the heaviest burden if the various debt forgiveness proposals 
are carried out, Yuri Yamamoto of the Nikkei Weekly (p.2) also comments. Of a 
total of $20 billion in bilateral aid loans by G7 nations, Japan's yen loans 
make up about 40 percent, making it easily the largest creditor. Confronted 
with initiatives by G7 counterparts, Japanese officials would like to avoid
the 
image of an unforgiving creditor, but Japan's plan is not expected to
include a 
simple cancellation of ODA assistance claims.

Just wiping out past debts doesn't really help heavily indebted poor
countries, 
World Bank Vice President for Africa Jean-Louis Sarbib says in an interview
with 
the Nikkei Weekly (p.2). What is needed is for creditor nations to have a 
comprehensive framework for debt forgiveness backed by a solid aid philosophy.


30 MLN RUSSIANS FACE EXTREME POVERTY, WORLD BANK TO WARN

Up to a fifth of Russians may be living in extreme poverty by next year, the 
World Bank will warn next month, reports the Financial Times (p.1). According 
to a preliminary analysis carried out by the Bank due to be published in May, 
the full effects of last August's financial crisis on economic growth and 
household incomes will continue to worsen this year and will increase
poverty to 
a peak in early 2000..

The worst-affected Russians will not be pensioners but families with children, 
particularly those living in small and medium-sized towns who have less access 
either to rural land to grow food or to large cities with alternative
employment 
opportunities, the analysis suggests. It assumes a decline in the size of the 
Russian economy of 8.3 percent in the current year-considerably beyond the 
forecasts of other organizations. It also assumes inflation of 60 percent.

But even its more modest projections suggest a growth of those in extreme 
poverty to 18.5 percent in 2000. Michal Rutkowski, sector leader of the Bank's 
social protection department, noted that there was already a trend towards an 
increase in extreme poverty in Russia well before the August crisis, from 11 
percent of the population in 1994 to 15 percent in 1997.

The analysis showed the need for far more detailed targeting of government 
social programs, Rutkowski said. The World Bank has launched pilot projects in 
three Russian cities, the story notes.

Meanwhile, the EBRD is adjusting to the Russian financial crisis by
shifting its 
focus from long-term project finance towards providing short-term working 
capital to Russian exporters, the FT (p.3) says in a separate report. Speaking 
at the bank's annual meeting in London over the weekend, EBRD Chief Economist 
Nicholas Stern said the bank would continue to invest in Russia, but that the 
volume of its investment would depend on the business climate.

In other news, the IMF executive board, which holds the key to more than $2 
billion in new financial aid to Russia, will discuss the Russian crisis in
early 
May, Agence France-Presse reports Russian Deputy Finance Minister Mikhail 
Kasyanov said yesterday. Also speaking at the EBRD annual meeting, Kasyanov 
said, "We would expect the IMF board of directors to discuss the problem in
the 
first half of May."

World Bank President James Wolfensohn last week pledged $2.3 billion in
loans to 
Russia in 1999-2000 provided that Moscow first concluded a definitive
agreement 
with the IMF, notes the story.

Separately, a Wall Street Journal (p.A19) story on capital flight says that an 
estimated $1.5 billion that has been flooding out of Russia every month since 
long before last summer's financial collapse. The loss comes to about $120 a 
year a person, or about a fifth of the official average wage, and as of
April 2, 
it had depleted the central bank's foreign-currency and gold reserves to a 
four-year low of $10.7 billion, about $6.7 billion of which was cash.

The problem cannot fail to worry the IMF, which has a mission in Moscow 
negotiating the details of a new loan package. If, as Russian officials have 
suggested, the IMF lends $4.8 billion, it will be enough to finance just more 
than three months of capital flight at its present level. Martin Gilman, the 
Fund's chief representative in Moscow, has said the IMF would be willing to 
support only a program that could persuade average Russians to keep their
money 
in the country and in rubles, the piece adds.

Separately, Boris Berezovsky, the financier suspected by Russian
prosecutors of 
setting up a Swiss company that illegally transferred $250 million in hard 
currency earnings from Aeroflot, returned to Moscow from France and denied the 
accusations, the New York Times (p.A4) reports. "I flew back to Russia without 
any doubts and I am convinced that I am not guilty before Russian law," 
Berezovsky is quoted as saying.

Meanwhile, the lower house of parliament called for a criminal investigation 
into how Russia's Central Bank invested billions of dollars in foreign
currency 
reserves in recent years through an obscure offshore firm, the Washington Post 
(4/17, p.A11) adds. The State Duma asked for a probe into whether current and 
former Central Bank officials sent foreign currency reserves abroad that
earned 
large profits that were not returned to Russia.

Further, Henry Owen, co-chairman of the Bretton Woods Committee, writes a
letter 
to the editor of the Washington Post (p.A18) saying that IMF chief Michel 
Camdessus avoided both the disadvantages of Russian default and the even
greater 
disadvantages of wasting additional money in Russia before Russian actions,
not 
promises, give clear assurance that concrete Russian reforms are being put
into 
effect. "In doing so, Mr. Camdessus has kept faith both with his shareholders 
and with the US Congress, which approved the recent $18 billion for the IMF
on a 
clear understanding that those funds would not be used to subsidize Russian 
failures and errors, as they were in the past. We should applaud him for
taking 
this sensible initiative," he says

Also, columnist William Safire writes in the New York Times (p.A27) that Gov. 
George W. Bush of Texas reluctantly began to expound on his foreign-policy 
mindset. On Russia, Bush is against more IMF money to Moscow, Safire says.