Financial powers committed to debt relief
WASHINGTON (AP) – The world’s economic powers, which ended three days of meetings Sunday, insisted they are moving closer to a deal on debt relief for Iraq and other poor nations even though an agreement has proved elusive. Despite failing to settle differences on that issue, financial officials did join in urging oil producers to boost supplies and help moderate prices, which have climbed over $50 a barrel.
“Policy-makers need to monitor carefully – and be prepared to address – the near-term effects of higher oil prices on their economies,” said Rodrigo Rato, the International Monetary Fund’s chief. “A high oil bill places an especially heavy burden on the poorest countries.”
Still, the outlook for the global economy remains quite good, he said, with growth estimated by the IMF to clock in at 5 percent this year, the best showing in three decades. “All of our members have decided it’s a strong moment for the world economy in 2004,” Rato said Sunday.
Representatives attending the weekend meetings of the IMF and World Bank, as well as Friday’s gathering of the Group of Seven countries, again urged all nations to move toward flexible currency policies.
That was an appeal for China to drop its system, which American manufacturers contend contributes to huge U.S. trade deficits and the loss of U.S. factory jobs.
Democratic presidential candidate John Kerry has said President Bush has not been tough enough with China and not done enough to protect American manufacturers, which have shed nearly 3 million jobs in the past four years.
The administration says its diplomatic efforts to lobby China to change its currency policy are beginning to show results.
On debt forgiveness for poor countries, the administration has a plan that essentially would mean the poorest countries would not have to repay existing loans. New loans, though, would be cut by the amount of increased debt forgiveness those countries received.
A competing proposal from Britain would pay for expanded debt relief by revaluing the IMF’s gold reserves according to world prices and by getting wealthy nations to commit more money.
Treasury Secretary John Snow played down the differences, saying Sunday that “the details aren’t important.” He expressed hope for a compromise, given the growing support on the larger idea of debt forgiveness.
“I want everybody to know that the United States is fully engaged with our other partners in trying to make sure we find answers to this critical problem,” Snow said. “We’re prepared to go to debt forgiveness of up to 100 percent.”
Debt relief for the poorest nations began with a program in 1996 that was expanded in 1999. Some officials were hopeful the debt relief issue could be resolved by year’s end.
“The fact that powerful members of the bank and the fund are behind this (debt) initiative is a good thing for Africa,” said Goodall Gondwe, finance minister of Malawi and former head of the IMF’s Africa department. “We expect something will come out of it.”
International aid groups and debt relief advocates also want to see the debt issue resolved soon. “This weekend saw a lot of words from rich country leaders about the need to drop the debt,” said Caroline Green, spokeswoman for Oxfam. “Now they must put their money where their mouth is.”
Also at the meetings, the United States tried to win support for wiping out as much as 95 percent of Iraq’s $120 billion in foreign debt.
France and Germany, however, say they are only willing to provide 50 percent debt relief for Iraq this year. But they were willing to return to the issue in three years when, they hope, Iraq is more stable.
Vocal opponents of the U.S.-led invasion, France and Germany are resisting the administration’s effort to forgive Iraq’s debt because they want such help linked to more generous debt relief terms for poor countries in Africa and elsewhere.
The meetings took place under tight security. In August, the United States said the IMF and World Bank were on a terrorist target list of major financial institutions.
The World Bank’s president, James Wolfensohn, said it was important that policy-makers not get distracted by the terrorist threat and lose focus on critical issues such as alleviating poverty.
“It is absolutely right that, together, we fight terror. We must,” Wolfensohn said. “The danger, however, is that in our preoccupation with immediate threats, we lose sight of the longer-term and equally urgent causes of our insecure world: poverty, frustration and lack of hope.”
This year, demonstrations attracted only small numbers of activists. That contrasted with 2000, when hundreds of protesters were arrested at the meetings.
At Friday’s gathering of the G-7 countries, China received a first-time invitation to attend the exclusive club of rich countries – and there signs that more would come in the future for the world’s seventh-largest economy. The G-7 countries are the United States, Japan, Germany, France, Britain, Italy and Canada.