By Emad Mekay
WASHINGTON, Apr 14 2005 (IPS)

The World Bank and International Monetary Fund (IMF) are not planning to announce debt relief measures during their current high-profile meetings, despite warnings from development groups that poor people are dying every day because they lack basic services and confirmation from economists that the IMF has the financial means to easily write off those debts.

Outgoing World Bank President James Wolfensohn told reporters Thursday that he did not expect officials from rich nations meeting at the semi-annual gathering of the World Bank and the IMF in Washington to make a final decision this weekend.

He said finance ministers may want to wait for a major announcement later this year by heads of state, potentially during the G-8 summit that will be held in Scotland from Jul. 6-8.

Most of the developing world debt is owed to members of the Group of Seven most industrialised nations: Britain, Canada, France, Germany, Italy, Japan and the United States. The G-8 includes Russia.

"I’ve said that this is like an overture in which you will hear the themes that are going to come out in the subsequent acts, but the actual arias are likely to be sung by the stars at a different time," Wolfensohn said. "So my expectation is that you’ll hear a good overture or prelude this time."

Wolfensohn and IMF Managing Director Rodrigo de Rato both said they expected serious discussion of the issue, including financing mechanisms for debt forgiveness. Chief among the proposals is a plan for the IMF to use its huge and undervalued gold reserves to defray the cost of debt relief.

Development groups and anti-debt campaigners expressed disappointment and said that delaying a decision would just cost more lives and cause greater suffering for poor people around the world.

"Since the G-7 met in February, another two million people have died due to poverty," said Oxfam International’s Advocacy Director Bernice Romero. "How long will leaders delay canceling debt and increasing aid?"

Currently, poor countries spend 100 million dollars every day on debt repayments. For example, Zambia, a heavily indebted African country, spent 150 million dollars more last year on servicing debt than it did on educating its children.

"Between 1970 and 2002, Africa received about 540 billion dollars in loans, and has already paid back over 550 billion dollars to wealthy creditors such as the G-7 countries, the World Bank and the IMF," said Neil Watkins, national coordinator of the Jubilee USA Network.

"But interest charges mean Africa’s debt stands at nearly 300 billion dollars," he said.

On Thursday, two U.S. think tanks released a joint report on the issue and urged the IMF to sell part of its gold to fund the plan.

By selling just 15 percent of its gold reserves, the IMF could raise as much as seven billion dollars, an amount that could write off 100 percent of the debt owed to the IMF by poor countries that have qualified for debt relief.

The IMF values this gold on its balance sheet at roughly nine billion dollars, on the basis of historical cost, well below its current market price of 45 billion dollars.

The Washington-based Centre for Global Development and the Institute for International Economics (IIE) said in their joint paper that the money could be found by selling 16 million ounces of gold at 425 dollars per ounce.

"Selling IMF gold constitutes a transformation of a sterile stockpile into a productive resource," the report says. "The gold is not only, or even primarily, a ‘Fund’ asset but a global resource – justifiably allocated to fulfill a global commitment and address a recognised global challenge."

The report points out that IMF gold has been used to ease poverty in the past. In the late 1970s, sales of IMF gold earned 3.3 billion dollars to help finance highly concessional loans – with interest rates well below that of conventional IMF loans – to low-income countries.

In 1999, the Board of the IMF authorised off-market transactions in gold to help finance IMF participation in the internationally agreed Heavily Indebted Poor Country initiative.

The transaction kept the gold off the open market, assuaging fears among gold-producing countries like Canada, Ghana, South Africa, Uganda and the United States that putting a large amount of gold on the market would lower world prices.

The authors of the report argue that this time around, new market changes have further lowered the risks of a large sell-off. The price of gold has risen by about 50 percent since 1999, easing concerns of gold-producing countries.

Canada and South Africa have endorsed gradual and limited gold sales for debt relief.

"The IMF champions transparency, but its own balance sheet fails the test," said the report. "Its assets include one that is overvalued, namely its loans to the world’s poorest countries which are fundamentally uncollectible, and one that is undervalued, its gold reserves."

The report notes that any sale would require approval of 85 percent of the IMF members’ votes. The U.S. holds 17 percent of the votes, makes Washington’s agreement key to the plan.

Anti-debt campaigners are continuing to push for the sale and for debt forgiveness in Washington on the fringes of the meetings, with many groups planning protests and educational activities to promote the idea.

"G-7 finance ministers must not leave these meetings without a firm agreement on canceling debt and this must include additional resources for poor countries," said Oxfam’s Romero.

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