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News Release

IMF Gold Should Fund More Debt Relief for Poorest Countries

April 17, 2002

Contact:    Nancy Birdsall    (202) 416-0700
    John Williamson    (202) 328-9000

Washington, DC—The international community should sharply increase debt relief for the world's poor countries to help alleviate global poverty and launch a new "aid architecture." The additional debt reduction should be financed by mobilization of more of the IMF's undervalued gold as well as increased foreign aid. This new plan is presented in Delivering on Debt Relief: From IMF Gold to a New Aid Architecture by Nancy Birdsall, president of the Center for Global Development, and John Williamson, senior fellow at the Institute for International Economics, with the assistance of Brian Deese, a researcher at the Center. The new study is being released on the eve of this spring's IMF/World Bank meetings and just as a bipartisan congressional coalition is introducing the first major debt relief legislation in three years.

The proposed new plan would have three main features:

  • Limiting annual debt payments of all poor countries to 2 percent of their GDP;
  • Extending eligibility for debt relief to all poor countries, including larger ones such as Indonesia, Nigeria, and Pakistan; and
  • Creating a contingency fund to protect these countries against external shocks that would undermine the debt relief programs and throw their development off course.

To pay for these proposals, the authors recommend mobilizing a further portion of the IMF's gold stock of about $20 billion, mainly to fund relief of debt to the IMF itself. They also call for stepped-up debt relief contributions from the United States and other industrialized countries.

Delivering on Debt Relief: From IMF Gold to a New Aid Architecture proposes deepening and expanding the scope of present debt relief and offers a strategy for financing those steps that could cost as much as $80 billion over 10 years. It also describes how an invigorated debt reduction effort could help build a new economic aid "architecture," characterized by increased efficiency and increased accountability of both aid recipients and aid donors.

The book provides an independent assessment of the present debt reduction plan, the "enhanced Heavily Indebted Poor Country (HIPC) Initiative," which was launched three years ago following a global lobbying campaign by an international coalition of faith-based groups and other nongovernmental organizations. It traces several ways in which debt reduction may be more efficient than increased aid disbursements in supporting the growth of poor countries—debt reduction enables countries to better "own" their own development programs; it reduces the transaction costs of supplying aid; it offers budget support which is often more valuable than new projects; it limits donor tying of aid; and it encourages private investment. But the authors also point to the danger of diverting resources from countries that might make better use of the funds to those that have built up large debts in the past. Their proposals seek to minimize this danger.

The release today of the Birdsall-Williamson study coincides with the introduction of the first major piece of legislation on developing-country debt since Congress approved a large US contribution to international debt relief three years ago. The bill introduced today—"The Debt Relief Enhancement Act of 2002"—was sponsored by a bipartisan and bicameral team of legislators including Senators Joseph Biden (D-DE) and Rick Santorum (R-PA), and Representatives Chris Smith (R-NJ) and John LaFalce (D-NY).

"Delivering on Debt Relief provides a bold plan that deserves the attention of policymakers worldwide," noted Congressman John LaFalce, top Democrat on the US House Financial Services Committee.

The Birdsall-Williamson book is the first major publication of the Center for Global Development, a development policy research institute launched in late 2001. The Center is closely allied with the Institute for International Economics with which it conducts collaborative projects, such as the current study, and makes joint staff appointments.

About the Authors

Nancy Birdsall is president of the Center for Global Development. She was formerly with the Carnegie Endowment for International Peace and director of the Economic Reform Project there. She was the executive vice president of the Inter-American Development Bank (1993-98) and before that director of the Policy Research Department at the World Bank. She is the author of numerous publications on labor markets, human resources, economic inequality, the relationship between income distribution and growth, and other development issues. She serves on various boards, including the Population Council, and is special adviser to the administrator of the United Nations Development Program.

John Williamson, senior fellow at the Institute for International Economics since 1981, was on leave as chief economist for South Asia at the World Bank during 1996-99. He was a professor of economics at Pontifica Universidade Católica do Rio de Janeiro (1978-81), University of Warwick (1970-77), Massachusetts Institute of Technology (1967, 1980), University of York (1963-68), and Princeton University (1962-63); adviser to the International Monetary Fund (1972-74); and economic consultant to the UK Treasury (1968-70). He is author or editor of numerous studies on international monetary and developing world debt issues, including Exchange Rate Regimes for Emerging Markets: Reviving the Intermediate Option (2000), The Crawling Band as an Exchange Rate Regime (1996), What Role for Currency Boards? (1995), and The Political Economy of Policy Reform (1993).

Brian Deese is a research assistant at the Center for Global Development. He was previously a junior fellow at the Carnegie Endowment for International Peace.

About the Center

The Center for Global Development is a nonprofit, nonpartisan institution dedicated to reducing global poverty and inequality through policy-oriented research and active engagement on development issues with the policy community and the public. A principal focus of the Center's work is policies of the United States and other industrialized countries that affect development prospects in poor countries, and of the international institutions such as the World Bank and the IMF that are so central to the world's development architecture.

The Center's Board of Directors includes distinguished leaders of nongovernmental organizations, former officials, business executives, and some of the world's leading scholars of development. The Center also receives advice from an Advisory Committee that comprises respected development specialists and activists. The Board of Directors bears overall responsibility for the Center's programs. The Center's President, Nancy Birdsall, works with the Board, the Advisory Committee, and its own senior staff in setting research and program priorities, and approves all formal publications. The Center is supported by an initial significant financial contribution from Edward W. Scott, Jr., and by funding from philanthropic foundations and other organizations.

About the Institute

The Institute for International Economics, whose Director is C. Fred Bergsten, is the only major research center in the United States that is devoted to global economic policy issues. Its staff of about 50 focus on macroeconomic topics, international money and finance, trade and related social issues, and international investment, and cover all key regions—especially Europe, Asia, and Latin America. The Institute averages one or more publications per month; holds one or more meetings, seminars, or conferences almost every week; and is widely tapped over its popular Web site. In 2001, it celebrated its twentieth anniversary and moved into its new headquarters at 1750 Massachusetts Avenue, NW. The Institute has recently helped create the Center for Global Development, an independent but closely affiliated institution that will address poverty issues in the developing countries and policies toward them in the United States and other industrial nations.