IMF Committee Recommends Policy To Allow Developing Nations With Large Debts To Declare Bankruptcy To Negotiate Reduced Repayment Terms
A committee of finance ministers for the International Monetary Fund on Saturday directed the fund to draft a new policy that would allow developing nations with "unmanageable debt" to declare bankruptcy and "force" creditors to negotiate reduced repayment terms, an order that marks a "milestone in overhauling the global finance system," the AP/Washington Times reports. Under current guidelines, a single creditor can in most cases block reduced repayment terms (AP/Washington Times, 9/29). A number of lawmakers, AIDS advocacy groups and African groups have called on international lender institutions such as the IMF and the World Bank to forgive the debts of developing nations, which they said would allow the nations to allocate more funds toward HIV/AIDS and other health programs (Kaiser Daily HIV/AIDS Report, 7/18/01). Some advocates have encouraged African nations to end debt repayment and spend the funds on health, education and social programs, such as anti-AIDS efforts (Kaiser Daily HIV/AIDS Report, 8/5). U.S. Treasury Secretary Paul O'Neill said that he would "push strongly" for the new IMF policy and a second proposal that would "pro[d]" countries and creditors to adopt reduced repayment terms (Blustein, Washington Post, 9/29). However, the IMF policy faces opposition from banks and other lenders that often serve as the creditors in loans to developing nations. IMF Managing Director Horst Koehler said that the fund will consider the concerns of banks and other creditors when they draft the policy. IMF directors will consider the policy proposal in April. The policy requires approval from each of the fund's 184 member nations (AP/Washington Times, 9/29).
$1B Pledged for Debt Relief
The World Bank and the IMF, which held their annual meetings this weekend, also have pledged $1 billion for the Heavily Indebted Poor Countries program (Agence France-Presse, 9/29). HIPC provides debt relief for 34 of the world's poorest nations. However, debt relief and AIDS advocates said that the $1 billion would not help developing nations to redirect funds from debt repayment and to other efforts such as HIV/AIDS programs. The debt relief advocacy organization Jubilee 2000 requested that an increase in HIPC debt relief to as much as $150 billion, but finance ministers from industrial nations rejected the proposal. Marie Clarke, national coordinator for Jubilee USA Network, said that developing nations should spend their funds on HIV/AIDS programs rather than debt repayments (Los Angeles Times/Contra Costa Times, 9/29). AIDS activists this weekend protested near the IMF and World Bank meetings with stickers that stated, "IMF -- cancel poor country debt, fight AIDS" (MacInnis, Reuters, 9/29).