P.M. applauded on call for world monetary reform

Press, 1 September 1982, Page 2

P.M. applauded on call for world monetary reform

NZPA staff correspondent London

The Prime Minister. Mr ; Muldoon, yesterday called ■ for a new' Bretton Woods- : type conference to hammer ;out fresh rules for the international monetary system. He put forward the proposal. which he has fore- • shadowed in recent speeches in New Zealand, when he led .off discussion on the International Monetary Fund at 1 the Commonwealth Finance iMinisters' meeting in Lon•don.

' ' The Bretton Woods conference. held in 1944 at Bretton Woods. New Hampshire, was ■attended by the heads of Allied countries. It led to the setting-up of both the I.M.F. and the World Bank. It is .best known for the fixedexchange policies which helped stabilise currency rnovements and foster economic growth until the system collapsed in the early 19705. ; Mr Muldoon, a former chairman of the World Bank, hopes Ministers will back his idea at the I.M.F. and World Bank meeting in Toronto next week. He got strong support yesterday from Nigeria's Finance Minister. Mr Victor Masi, and other Finance Ministers. ‘ Mr Muldoon said the Commonwealth Secretary-Gen-dral. Sir Shridath Ramphal. had urged him to take a Strong line, "and that is helpful." Mr Muldoon said he was pleasantly surprised” by the enthusiasm with which his proposal had been taken up. “There was spontaneous applause at the end of my speech, .which means 'they got the message and they liked it," he told New Zealand journalists later. ' Mr Muldoon, singling out the United States and the I.M.F. for particular criticism in recent speeches, says artificially high domestic interest rates in the United .States have helped desta- / bjlise the currency system - which had seen the demise of

the Bretton Woods system of fixed and managed exchange, and nothing coherent had been put in its place. . Also, he blames I.M.F. policies of setting hard conditions on how the economies of poorer countries should be managed, in return for loans, for adding to international difficulties.

Mr Muldoon said yesterday the reason he wanted another Bretton Woods-type conference was that other forums were too restrictive in their membership and “tripped over" the political considerations member countries had to deal with. He said, "If you take the seven members of the (Western) summit, whenever they meet, one or other of them has an election coming up and they say, ‘This sounds like a pretty good idea except that I can’t agree to it because I couldn’t sell it at home in terms of our election’."

The organisation for Economic Co-Operation and Development (0.E.C.D.) had split this year into three - the United States, Japan, and Europe — for domestic political reasons, he said.

"But if you have a conference of over 140 countries and they sat down as at Bretton Woods and over some time hammered out new rules for particularly the’ fund (1.M.F.) and international financial discipline, any government could go to its parliament and say, ‘This has been agreed on a world scale, let. us be part of it’,” Mr Muldoon said. Mr Muldoon said the strongest support had come from Nigeria’s Mr Masi who had gone a step further and suggested the meeting should set up a Commonwealth committee to do the preliminary work on the proposal so that it could get moving. Asked if he thought countries such as the United States and Japan might be wary of the proposal, Mr Muldoon said, “I think you' would have to say that for countries of that type this involves a certain detraction from their leadership, and finally what I would have in mind involves a certain loss of sovereignty.” Mr Muldoon said he would like to see the I.M.F. go further and impose a discipline on protectionism, Speaking of the plight faced by developing coun-

tries. he told journalists. "It is a question of recognising that, for the poorer countries. you do not have a cvclical situation at all. '“You have a permanent situation in which the minimum required for any reasonable standard of living is far in excess of what they can earn plus what they get by way of aid. ' "So. if they go into a debt situation, as they inevitably do. there is no way they can ever pay it off. It just gets bigger." Mr Muldoon said he had seen a report that Tanzania had to use 80 per cent of its total exports to pay for imported oil, while debt servicing took 19 per cent. Earlier, Mr Masi, replying for the delegates to Sir Geoffrey Howe's speech of welcome when the meeting opened at Marlborough House, had urged that rigid conditions attached to I.M.F. and World Bank lending should be eased substantially so that more aid could be made available for developmental purposes and for financing balance of payments deficits.

He said that the 1.M.F.. World Bank, United Nations Conference on Trade ' and Development (U.N.C.T.A.D.). and the O.E.C.D. should start talks with a view to developing guidelines which would establish a presumption in favour of automatic rescheduling or writing-off of certain loans, or converting existing loans to low-income countries into outright grants. Much of the trouble in the world economy was caused by the fierce and continuing battle between the Organisation of Petroleum Exporting Countries (0.P.E.C.), on one hand, and developed consumer nations and major oil companies on the other, Mr Masi said.

Sir Shridath said that the world economy was teetering on the brink of a depression that could be worse, than that of the. 30s.

“For the weakest national economies and, therefore, for hundreds of millions of people, little short of catastrophe looms,” he said. “The search for world economic recovery so desperately needed remains stalled, and we drift towards the abyss of economic disaster, continuing the presence that our fate is our own.”