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Baker Unveils Plan to Ease Debt Crisis

October 08, 1985|JOHN BURGESS and HOBART ROWEN | The Washington Post

SEOUL, South Korea — Treasury Secretary James A. Baker III today outlined a three-point plan to ease the world's debt crisis, but the proposal was less ambitious than the Reagan Administration originally intended to offer to the world's finance ministers.

Baker told reporters in a briefing before his first address to the joint meeting of the International Monetary Fund and World Bank here that the United States plan would:

- Push commercial banks to boost their lending by about $20 billion over the next three years to cash-strapped countries.

- Call upon the World Bank and other multinational lending organizations to boost their lending by about $9 billion during the next three years.

- Encourage the debtor nations themselves to adopt more efficient internal economic policies that are geared more to the market and less to the state.

Baker was to formally present the plan in his speech to the international lending institutions later today but unveiled the broad outlines in a morning briefing.

However, the United States bowed to opposition to parts of the plan from other industrial countries as well as from some of the nations that were supposed to benefit.

Baker dropped the idea of a special $5.4-billion trust fund--crafted with equal contributions by the IMF and the World Bank--to aid the poorest countries, most of them in sub-Saharan Africa.

He also backed off a proposal to have the World Bank guarantee repayment of some commercial bank loans to developing countries--a tactic that the Treasury had hoped would encourage private banks to begin to lend to Latin America again even though bankers feel they already have made too many loans to the region.

Even in its less ambitious state, the Baker proposal reflects a major policy shift that has occurred in recent weeks in the Reagan Administration. The Administration now apparently believes that the world debt crisis can be solved only if governments and multinational institutions take a more active role.

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