As rich countries hit deadlock on IMF gold sales, Turkey’s three-year stand by deal is criticised for its negative social impacts, and speculation rises over the emergence of an Asian Monetary Fund (AMF).
No go on gold sales…
Agreements for a 100 per cent multilateral debt cancellation financing plan failed to materialise during the spring meetings in Washington in April when the US administration opposed the UK’s proposal for the sale of IMF gold to fund the cancellation of debts owed to the Fund. Sincen then, there has been some movement in the US position following a proposal by Jim Saxton of the Joint Economic Committee of Congress to return a portion of IMF gold to member countries. Rich country members could then choose to use these resources to support a facility which would give condition-based grants to the poorest countries. This proposal is outlined in a recent study The debt of the poorest nations: A goldmine for development aid . Talks on IMF gold will continue at the G8 summit in Scotland in July. Civil society groups are doubtful that a meaningful agreement will be reached.
IMF gold reserves are widely acknowledged to be undervalued. A report by the Washington-based Center for Global Development estimates that the sale of around 15 per cent of its current gold at re-valued prices would generate approximately $7 billion. An NGO report signed by a number of member organisations from the 2005 Global Call to Action Against Poverty states that the viability of using IMF gold sales for debt relief was recognised by the IMF earlier in the year in a leaked paper that was never published. The NGO report calls for the phased sale of IMF gold reserves to fund debt cancellation for impoverished nations unable to meet the Millennium Development Goals by 2015, and states that gold sale prceeds should be used not just to cover debts owed to the IMF, but to other multilateral development banks as well.
civil society groups are not hopeful that an agreement will be reached
…but progress on Bank debt
At a June summit ahead of the G8 meetings US president George Bush and UK prime minister Tony Blair potentially reached some concessions regarding debt relief for 18 HIPC countries in Africa owing money to the World Bank and African Development Bank (ADB). Bush acknowledged that debt relief had to result in some additional money, a concession to European positions that debt relief should not result in a running-down of US resources. However, the agreement did not extend to the issue of IMF gold sales, and left crucial questions unanswered on the specifics of how much money would be released. Max Lawson from Oxfam asked “how many countries it will apply to, how much money will it release, and where is IMF debt in this agreement?”. For more detail see G8 cancellation of World Bank, IMF debt: “step forward”.
Turkish loan agreement approved
After approval of the IMF’s new $10 billion loan agreement for Turkey, critics charged that the programme will have serious social repercussions in a country where a quarter of the population lives below the poverty line, and real wages continue to decline. The three year stand-by deal, which makes $838 million immediately available to the country, succeeds a previous accord that expired in February and marks the second phase in the country’s recovery from a financial crisis that peaked in 2001. The deal is designed to consolidate economic reforms and boost foreign direct investment in Turkey. The Fund also agreed to delay about $3.8 billion in debt repayments coming due in 2006. Turkish authorities are hoping that the successful completion of the deal will weigh favourably in the minds of EU governments considering Turkey’s EU membership.
In anticipation of the agreement, the IMF’s Anne Krueger declared the need for “a more flexible labour market” in Turkey and that “labour market rigidities and high minimum wages act as a disincentive to hire new staff”. Krueger may have wanted to check her facts first. A recent report by the Turkish government reveals that only 48 per cent of the country’s total workforce is covered by the social security network. According to the Turkish central bank, following the series of financial crises in 1994, 2000 and 2001, real wages have plummeted by as much as 30% on 1994 levels.
East Asian autonomy
Statements made at the Asian Development Bank’s (ADB) annual meeting in May fuelled speculation regarding the re-emergence of the controversial Asian Monetary Fund (AMF). The AMF was originally proposed during Asia’s 1997-98 crisis but was quashed amid US and IMF fears of the creation of an IMF counterpoint in Asia.
Top ADB official Masahiro Kawai stated that currency-swap arrangements agreed to by the region have “the potential to become an Asian monetary fund”. These arrangements, otherwise known as the Chiang Mai initiative, were set up shortly after the Asian financial crisis by thirteen East Asian countries dissatisfied with the IMF’s lending conditions. Since then a number of high-growth Asian countries such as China, India and Malaysia have avoided borrowing from the IMF in order to avoid its structural and austerity conditionality, while others, such as South Korea, Thailand and Indonesia have allowed their IMF lending agreements to expire in recent years. Critics of the AMF idea argue that a regional fund would duplicate the IMF’s work and may be unwilling to impose the harsh financial conditions on Asian governments that could be required in an emergency. Supporters make the counter-argument that the IMF’s mishandling of the Asian crisis is proof of the need to end its monopoly on macroeconomic policy advice