- The Washington Times - Sunday, September 29, 2002

Finance leaders directed the International Monetary Fund yesterday to develop a dramatic new approach to resolving debt crises that have engulfed countries from Asia to South America.
The goal is creation of a process by which nations with unmanageable debt could declare bankruptcy and force creditors to negotiate more-lenient repayment terms.
The order for the 184-nation IMF came from the lending institution's policy-setting committee of finance ministers.
The step is a milestone in overhauling the global finance system. The effort has moved in fits and starts since the Asian currency crisis of 1997-98 pushed 40 percent of the world's economy into recession.
The announcement by Britain's chancellor of the exchequer, Gordon Brown, and the IMF's managing director, Horst Koehler, was likely to be the biggest achievement of this year's annual meetings of the IMF and World Bank.
The meetings came against a backdrop of rising worries about the uncertain economic recovery from last year's recession. Chief concerns are plunging stock markets, Latin America's debt crisis and possible war in Iraq.
The finance ministers who serve as the IMF's board of directors sought to allay those fears. Treasury Secretary Paul H. O'Neill said "handwringers" were ignoring positive economic developments.
But efforts to project an optimistic front were undermined by mixed signals by financial officials from Japan about how Tokyo planned to deal with its troubled banking sector and revive the world's second-largest economy.
As in the past, the meetings attracted thousands of anti-globalization protesters who contend the institutions' policies favor wealthy nations.
The bankruptcy proposal faces stiff opposition from large banks that make loans to developing countries. Banks oppose making it easier for those nations to win new repayment terms.
The Bush administration originally favored a limited approach by which a majority of creditors could agree to accept lower repayments from countries in dire circumstances. A single creditor can, in most instances now, block reduced repayment terms.
A week ago, the administration indicated it supported a two-track approach that included its proposal and the more sweeping IMF plan.
Mr. Koehler said hard work lies ahead in developing the details to put the bankruptcy process into place. The IMF will listen to the concerns of banks and others creditors, he said.
The proposal will be presented to the IMF's directors in April. The plan ultimately would require approval from each of the organization's 184 members.
Mr. O'Neill and Mr. Brown yesterday also expressed optimism that despite the current economic turmoil, the world was on track for higher growth.
Intruding upon that optimism was a disagreement in the Japanese delegation. Finance Minister Masajuro Shiokawa publicly rebuked his top aides yesterday for a statement that contradicted an assertion he had made the day before about his talks with Mr. O'Neill.
Mr. Shiokawa had said he held out the possibility that Japan would use government money to shore up Japan's troubled banks. The dispute left other nations wondering just what policies Japan would now pursue.
As another response to the protesters in the streets, Mr. Brown said a group of 15 rich countries would soon announce commitments to fill a $1 billion financing gap in a program that provides debt relief for the poorest nations.
That did not impress debt-relief advocates. Julia Tilford, a spokeswoman for Oxfam International, said the new money was a "patch-up job for what is a failing initiative" that needed fundamental reforms.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide