IMF 6/7/99 (fwd)

[Robert Weissman <rob@essential.org>]

>From the Preamble Center:

1) Latest on G-7 and debt
2)Indonesia Opposition would renegotiate IMF deal

1) G7 STRUGGLING TO AGREE NEW DEBT RELIEF DEAL The G7 is poised to
announce a deal worth up to $50 billion on debt relief for the world's
poorest nations, says the Guardian (p.11). The figure, expected to be
revealed at the group's annual economic summit in Cologne this month, is
likely to be in line with UK Chancellor of the Exchequer Gordon Brown's
stated plan to tackle Third World poverty, says the story.

British officials said they were "quietly confident" of a successful
outcome, but the US among others believes the UK's proposals to be
prohibitively expensive, reports the Financial Times (p.15). The G7 has
been urged by smaller countries and by the World Bank to back any new
debt-relief proposals with the money to pay for them, says the story. They
fear the G7 will claim the political credit for any initiative, while
leaving others to pick up the bill.

Meanwhile, debt campaign groups are already expressing disappointment at
the G7's efforts, says the story. Jubilee 2000, which has mobilized
high-profile support from entertainers predicts that the outcome will
provide less than $3 per person each year. "Despite flowery speeches and
grand gestures, G7 leaders are offering only crumbs of comfort tot he
world's most indebted nations,"  Jubilee 2000 Director Ann Pettifor is
quoted as saying. The Independent (p.15)  also reports.

The existing Highly Indebted Poor Countries (HIPC) debt relief initiative
is thought inadequate by governments and campaigners alike, continues the
FT. The estimates of "sustainable" debt on which it was based look
over-optimistic given the weakness of economic growth and commodity
prices. There is general agreement that the debt-to-export target of 200
percent should be reduced. The UK, the US, Canada, and Germany favor a
figure of 150 percent. The others are wary of such a big reduction, with
Japan reluctant to go below 170 percent. But the US and UK differ on the
appropriate targets for the fiscal burden of debt. The UK wants a target
of 200 percent for debt-to-government revenue. It would also abolish the
exports-to-GDP hurdle and demand only that governments collect 10 percent
of GDP in revenue. The US believes this would be much too expensive.

Another point of contention is the policy track record that countries have
to establish to qualify for relief. Canada, Germany, and the UK would cut
the current six-year requirement but the US would prefer to offer greater
interim assistance during that period.

The G7 is also expected to back complete write-offs of aid-related loans.
Japan and France are ready to cancel all their ODA loans to the poor
countries, Kyodo News reports, but only if other major industrial nations
take steps to enhance debt relief. The two countries, whose combined
claims account for some 69 percent of the G7 total, have called on others
to make contributions equivalent to their loan waiver.

Separately, South African Archbishop Desmond Tutu this weekend criticized
the IMF and the World Bank for failing to help free developing nations
from international debt, the Washington Times (p.A4) reports. "The poor
countries are shackled to poverty, illiteracy, disease, hunger and death,"
he is quoted as saying.

Also, Bono of the rock band U2 met with World Bank officials at its DC
headquarters on Friday to discuss the debt of poor countries, the
Washington Post (6/5, p.C3) reports.

The Guardian (p.9) says in a leader that after all the promises and grand
rhetoric, there is a real chance that the G7 summit will produce very
little, possibly nothing,. At present, backroom trading is at risk of
reducing reform of HIPC to the lowest common denominator.

Only a strong alliance for reform can deliver debt relief, says the
leader; last time, the UK, the US, Canada, and the World Bank forced
through HIPC in the face of Italian, German, and Japanese opposition. No
such alliance exists this time.  Brown and the Treasury have played a
bold, radical hand, but without political pressure from Prime Minister
Tony Blair, the US is slipping out of its commitments, France is
complaining about the cost, and Germany is backsliding. But debt relief is
too important to be jeopardized by political considerations.  The
agreement the G7 leaders finally sign in Cologne in two weeks will affect
millions of lives-and deaths-in sub-Saharan Africa.


2) INDONESIAN PARTIES TO RENEGOTIATE IMF PROGRAM

A number of political parties in Indonesia have pledged to renegotiate the
agreement reached with the IMF and other multilateral bodies, reports
Bisnis Indonesia. They also plan to ask for [acknowledgment of] their
responsibility for the current crisis.

The representative of the Crescent Star Party (PBB), Farid Prawiranegara,
said that if his party wins in the elections that start today, it plans to
renegotiate with the IMF and the World Bank. "The IMF made a wrong
political assessment during the Suharto era. If they were politically
wrong, they were also economically wrong," Farid said in a televised
discussion on the economic visions of political parties.

Also present were PDI Perjuangan's (PDI-P) Kwik Kian Gie, PKB's Yusuf
Faishal and PK's Eman Sukirman. PK also called on the IMF to be
accountable for the crisis in Indonesia. The IMF would be asked to refrain
from making political intervention and allow a state to uphold its
sovereignty, Eman said. In the future, he urged, any loan from the IMF
would carry the principle of profit sharing and not merely imposing high
interest rates. That way, "the risks would be borne together."

In a separate report, Bisnis Indonesia says World Bank Country Director
for Indonesia Mark Baird said the Bank was set to accept any party that
won the election, so long as Indonesia remains firm in her commitments. In
clarifying its agreement last month to lend $1.1 billion to Indonesia, he
recalled that the Bank had imposed the condition that it would allow human
rights and other groups to monitor the funds. Baird ruled out any
possibility of renegotiations with a new government as such matters had
more to do with the letter of intent to the IMF than they had to do with
the Bank.