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World Bank, IMF Talk Debt Relief

Economy: Officials focus on ways to avoid crises and reduce poverty in developing countries that have been harmed by the global slowdown.

November 19, 2001|TRACI CARL | ASSOCIATED PRESS

OTTAWA — Concerned that the economic fallout from the Sept. 11 terror attacks has hit the poorest countries the hardest, World Bank and International Monetary Fund officials met Sunday to discuss debt relief and ways to reduce poverty in the developing world.

The meeting came one day after finance ministers from 19 countries and the European Union pledged to help countries at risk, including war-scarred Afghanistan and developing nations harmed by the global economic slowdown.

With Argentina facing a possible debt default and Mexico considering an IMF line of credit of as much as $16.4 billion designed to prevent an economic emergency, the IMF and World Bank policymakers were focused on ways to prevent crises, instead of having to react to them.

"I think it's very important we recognize the extent to which Sept. 11 changed not only our own economy," Canadian Finance Minister Paul Martin said. "The real burden is being borne by the poorest of the poor."

There was little sign of anti-globalization protesters a day after 14 were arrested during marches and scuffles with police along barricades that blocked off streets surrounding the meeting sites. Police fired rubber bullets, tear gas and pepper spray Saturday when a few of the hundreds of protesters pushed through some barricades.

The protesters want world leaders to forgive Third World debt and stop the financing of projects they claim harm the environment or hurt the poor. They also demanded that the IMF and World Bank create rules for international lending to avoid costly bailouts when countries default on bad loans.

In Argentina, the government appears close to a deal with local creditors that seeks to replace much of its existing short-term debt with new, longer-term securities and reduce its 2002 payments by at least $4 billion.

Although some warn that the debt restructuring amounts to default, Martin and U.S. Treasury Secretary Paul H. O'Neill expressed support for Economy Minister Domingo Cavallo's plans.

Claudio Loser, the IMF's director of Western Hemisphere affairs, said Sunday that Cavallo met with IMF Managing Director Horst Koehler to discuss the debt restructuring. Argentina made no request for additional financial assistance, such as an acceleration of payouts under an existing IMF aid package.

"It's a very difficult situation; we all know that," Loser said.

O'Neill told World Bank officials Sunday that they need to embrace a more selective approach to lending and provide support to countries that can prove they will use loans to make progress in the fight against poverty. He also said the bank needs to be more "rigorous in measuring the results" of its lending.

Saying poverty in the developing world is "something we can no longer accept," Canada's Martin called for richer countries to provide money to help poor nations create the conditions for growing free-market economies such as proper banking and regulation systems, education for all and good health care.

"It's taken us 50 years to make a free market work in Canada, the United States and Europe," Martin said. "We've got to put in place the same structures internationally that make it work at home."

After Saturday's G-20 meeting, which kicked off a weekend of talks involving the IMF and the World Bank, the finance minister said the international community was ready to help in the rebuilding of Afghanistan once the U.S.-led military campaign ends and a new government takes over.

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