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Friday, February 23, 2024
CARACAS, Feb 6 1998 (IPS) - The group of 24 developing nations (G-24) meeting this weekend in Venezuela will sound an alert on the negative impact on the global financial system of the U.S. Congress’ rejection of the planned rise in funds for the International Monetary Fund (IMF).
Before setting off for Caracas, IMF managing director Michel Camdessus tried to convince the U.S. Senate Budget Committee Thursday that the approval of the 18 billion dollars in funding was essential.
The three-day G-24 meeting which opens Saturday aims to reach a combined approach towards the crisis sweeping east Asia, the opening of capital markets, the debt burden of the poorest countries and the establishment of direct dialogue with the industrialised North.
The high-level officials participating in the gathering include ministers and central bank presidents, international lending institution authorities, UN officials and representatives from non- member developing countries attending as observers.
William Larralde, the current president of the G-24, told IPS that the U.S. Congress’ rejection of the increase in funds could block the 45 percent rise in contributions agreed on last September by the governments of the IMF’s 182 member countries.
Since the increase must be approved by an 85 percent majority within the IMF, the United States’ 18 percent share gives it virtual veto power.
But a voting down of the rise in contributions would mean that “at a moment of crisis of the magnitude of the one we are currently experiencing, the IMF would be left without resources to deal with the situation,” said Larralde, also vice-president of Venezuela’s Central Bank and the main organiser of this weekend’s meeting.
Since 1971, the G-24 has represented the minority share-holders of the World Bank and IMF, accounting for 46 percent of its total resources.
Venezuela’s presidency of the G-24 ends in April. The group is also made up of Algeria, Argentina, Brazil, Colombia, Congo, Egypt, Ethiopia, Gabon, Ghana, Guatemala, India, Iran, Ivory Coast, Lebanon, Mexico, Nigeria, Pakistan, Peru, the Philippines, Sri Lanka, Syria and Trinidad and Tobago. Yugoslavia is no longer a member.
Since the start of the current crisis in July, the IMF has provided a 100 billion dollar rescue package to bail out troubled southeast Asian economies, an amount similar to the investment that has fled the region’s five countries in crisis.
Another senior Central Bank official, Hernan Oyarzabal, said a blocking of IMF funds would also hold up an initiative approved two years ago to cancel the public and multilateral debt of the poorest countries, which has yet to show significant results.
Although “the inviability of those countries due to their debt burden has been recognised,” the governments of industrialised countries find it hard to obtain legislative authorisation to write off that debt, said Oyarzabal.
So far only Bolivia, Burkina Faso and Ivory Coast have benefited from the initiative, while an additional 15 or 20 countries are supposed to join them through more flexible requisites and a speeding up of the process.
According to Larralde, the industrialised North is becoming more and more “selfishly near-sighted” with respect to development aid. “The financing of development has gone out of fashion,” even though the economic collapse of the poorest countries would shake the entire world, thanks to the globalisation process, he said.
“Efforts today are concentrated on managing large-scale crises, which involve greater resources than those needed to resolve the foreign debt problem at a global level,” said Larralde.
The Venezuelan official added that the attitude of the U.S. Congress was part of an on-going discussion in industrialised countries on the “moral risk.” The question has been raised, he said, of who really benefits from enormous rescue packages that go towards bailing countries out of financial crises like the one sweeping Asia today.
Doubts are growing as to whether such bail-outs safeguard the interests of the citizens of the country in crisis or of the country’s creditors – the very speculators who create the crises by pulling out in the first place.
Nevertheless, Larralde said the response to the Asian crisis has contained a “totally new” positive element: “a relative level of international solidarity” shown by industrialised nations, and even more notably by developing countries such as China, Asia’s emerging mammoth.
Key Democratic and Republican legislators in the United States criticise the IMF as inflexible and nontransparent, and argue that the Asian bail-out only favoured speculators.
Although the G-24 not only agrees with such criticism but has been a victim of those alleged IMF shortcomings, it believes the solution does not lie in blocking new funds in the midst of a crisis like today’s, but rather in an in-depth review of the institution’s functions and improved crisis prevention mechanisms.
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