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$52-Billion Global Aid Plan Scrapped in Clash : Trade: International Monetary Fund members disagree over size of proposed funding package for developing nations.

October 03, 1994|From Bloomberg Business News

MADRID — A clash between leading industrial and developing member states of the International Monetary Fund killed a $52-billion aid plan meant to help poor nations participate in expanding global trade.

IMF members, split over the size of the aid plan proposed by the IMF's managing director, Michel Camdessus, also failed to extend a program for easy-term loans to ex-Soviet bloc states.

Failure to agree on the aid plan, debate over which occupied the full day of IMF and World Bank meetings here, was a severe setback for Camdessus, who faces reappointment in 2 1/2 years.

Camdessus had refused to budge on the amount of aid for poor nations in the face of criticism from industrial countries, led by the United States and Germany, two of the fund's largest shareholders, that the amount was inflationary.

"He's misjudged the mood of the people with the money," said a senior European development banker who spoke on the condition of anonymity.

Camdessus' plan had called for the creation of $52 billion in IMF credits called special drawing rights (SDRs), which members could convert into hard currencies. About $20 billion of that was reserved for poor and former Soviet nations, which the IMF believes will have insufficient foreign currency to participate in an expected expansion in world trade.

His twofold aim was to provide unconditional funds for developing countries and ex-Soviet bloc states and to bolster the role of the largely defunct SDR.

The G-7 instead proposed $23 billion in aid, with $10.3 billion for developing former Soviet countries.

A G-7 official said the United States, Britain and France all attempted to compromise.

But those efforts foundered because Camdessus was wedded to reviving the role of the SDR and because Germany was adamant that the original G-7 offer could not be bettered.

SDRs were last issued in 1981. Since then, some 40 countries from the poorest parts of the world and the fomer Soviet bloc have become fund members.

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