WSJ: IMF To Pay for Some Debt Relief (fwd)

[Robert Weissman <rob@essential.org>]

THE WALL STREET JOURNAL
 April 19, 1999

IMF Is Expected to Win Approval To Sell Gold to Finance Debt Relief

By MICHAEL M. PHILLIPS 
Staff Reporter of THE WALL STREET JOURNAL

WASHINGTON -- The International Monetary Fund, 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 worth of gold to finance debt
relief for the world's poorest countries.

But the so-called interim committee, which will consider the idea April 27,
probably won't specify when or how much of the IMF's 103 million troy
ounces might go on the block. The committee represents IMF member
countries and guides the organization's policies; the panel's endorsement of
a sale makes it all but certain to take place.

IMF managers have recommended selling five million ounces, while the
U.S., the IMF's biggest backer, would support a sale of as much as 10
million ounces.

Global momentum is building for more generous reductions of developing
nations' debts to governments of rich countries, the IMF and World Bank.
Activists, including charities and church groups, argue that such huge debts
hinder economic progress, and that debt-relief programs are too skimpy.

Even the IMF and World Bank admit the programs "may not be
significantly reducing debt service from current levels paid," according to
an IMF/World Bank document reviewed by the IMF's board of directors
on Friday.

Debt-Relief Proposals

In recent months, seven wealthy countries have put forth separate
debt-relief proposals. British Chancellor of the Exchequer Gordon Brown
said last week that his government supports at least $1 billion in gold sales.
Germany, long opposed to IMF gold sales, is still undecided but has
"slightly relaxed" its position, Finance Minister Hans Eichel said Friday.

And last month, U.S. President Clinton called on industrialized countries,
the World Bank and the IMF to provide poor nations with an additional
$70 billion in debt relief, funded partly by gold sales. Leaders of the Group
of Seven major industrialized nations will probably settle on a unified
debt-relief plan at their summit in Cologne, Germany, in June.

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
IMF/World Bank document said.

IMF gold holdings, provided by member countries decades ago to help
establish the financial solidity of the multilateral lender, are a tempting
resource. The IMF's stash is second only to the 262 million ounces held by
the U.S. government. At the current price of about $284 an ounce, a
10-million-ounce IMF sale would generate $2.8 billion.

Opposition in Congress

Such a sale, however, would require approval from the U.S. Congress,
where lawmakers critical of IMF rescues of Brazil and other troubled
nations are already voicing their opposition. "I don't think Congress should
or will provide quick, unqualified approval for IMF gold sales," Rep. Jim
Saxton, a New Jersey Republican who sits on the Joint Economic
Committee, said after Mr. Clinton announced his support for gold sales.

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,
such as South Africa, that produce gold.

"We do have to take care, and we are concerned about any market
implications that a decision to sell gold may have," Jack Boorman, a senior
IMF official, said last week.



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