I.M.F. says it needs $13B in new cash

Press, 1 October 1983, Page 10

I.M.F. says it needs $13B in new cash

NZPA-Reuter Washington The International Monetary Fund, after a week of deliberations that have done little to solve its liquidity crisis, now estimates that it will need 13 billion dollars in new cash over the next three years. As this year’s annual 1.M.F.-World Bank conference ends today, the Fund’s managing director, Mr Jacques de Larosiere, must decide whether his order two weeks ago to halT negotiations on new credits for debtor countries can now be rescinded or whether the lack of funds means that it must be extended.

Miguel Boyer, chairman of this year’s meetings, and Spain’s Economy Minister, met a small group of journalists yesterday to reveal that in addition to a loan of SUS 6 billion sought from the main industrialised countries and Saudi Arabia for 1983, the Fund has now calculated that it needs a further SUS 7 billion to plug a liquidity gap between 1984 and 1986. It was the failure of European central banks, led by West Germany, two weeks ago to go ahead with their SUS 3 billion share of the 1983 loan that prompted Mr de Larosiere to call the credit halt.

Mr Boyer said that the United States could be expected to put up about 20

per cent of the SUS 7 billion in loans sought in coming years, while he hoped that Saudi Arabia would contribute about SUSI.S billion. A delay in approval by the United States Congress of the SUSB.4 billion American share of a 47.5 per cent increase in I.M.F. quotas, its basic source of funds, has been a serious cause of concern at this year’s meeting. President Rdnald Reagan said at the opening session on Wednesday that its passage was crucial to the stability of the entire financial system. Asked if the SUS 7 billion extra cash now needed might make it more difficult to win Congressional approval for the quota in-

crease, Mr Boyer said, “There is a great deal of concern that these figures may seem excessive at a time when there is also concern due to the U.S. fiscal deficit. “But I feel that on the basis of President Reagan’s speech, the message is strong that he is committed to the role of the I.M.F. and World Bank and that statement might exert pressure on Congress.” Third World delegates have been bitter in their criticism of the Western countries for failing to provide more aid funds. As they complained at the meeting yesterday about scarcity of aid, a United States Congressional committee added to their woes. In what has become a yearly ritual, such impoverished countries as Vietnam, Bangladesh, and Afghanistan pleaded for more funds from the international aid agencies in the half-empty, flag-bedecked hall of a Washington hotel. Afghanistan’s Central Bank Governor, Mr Mehrabuddin Paktiwal, said that the set-back suffered over the last two years of recession by non-oil-exporting developing countries would hurt for years to come. It was now costing those poor countries more than SUSIOO billion a year to repay interest and other

costs on their debts, eroding already low standards of living.

The Sri Lankan Finance Minister, Mr Ronnie de Mel, said that some of his colleagues had been so disappointed, “they have deemed our gathering this year as the beginning of the parting of ways between industrial and developing countries.” But the reluctance of the world’s rich countries, led by the United States, to commit more aid money was dramatised with a vote yesterday in Congress against crucial United States help for Brazil and Mexico, the top two debtor nations. A key House of Representatives banking sub-com-mittee unanimously voted for a resolution to delay the United States Export-Im-port Bank from providing SUS2 billion to make it easier for the two nations to buy American goods. Between them Brazil and Mexico owe foreign lenders SUSI 73 billion. Brazil has fallen behind in its debt repayments and the I.M.F. is mounting an SUSII billion international rescue effort that includes the Ex-Im Bank plan. The panel’s vote, which supported an argument that the credit was a bad precedent, does not technically block the deal but it puts pressure on the bank to avoid such arrangements.