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Panel Orders IMF to Develop Debt-Prevention Mechanism - 2002-09-29

The International Monetary Fund's policy-making panel of 24 finance ministers Saturday ordered the organization to produce a tangible plan for controlling financial crises of the kind that has recently afflicted Argentina.

The panel called on the IMF and private sector banks to work out a method for faster and more complete debt restructuring for countries that get into trouble. The ministers want to prevent a repeat of the problem Argentina got into last December when it refused to pay its foreign debt and then actually defaulted on some of those credits. Some commentators refer to the proposed debt remedy as a kind of bankruptcy process for countries.

Gordon Brown, the British finance minister who chaired the meeting, called attention to what he called this time of testing for the global economy. He said 20 countries, accounting for half the world's output, have been at some point in the last year in recession. But Mr. Brown said it is clear that a global recovery is underway and that it will gather momentum in 2003.

The policy-making committee includes 12 industrial and 12 developing countries. Members include such disparate economies as Algeria, South Africa, India, Belgium, Angola, Switzerland, China, Russia, Chile, the United Arab Emirates and Indonesia.

The committee also discussed trade and called for a new deal between developed and developing countries so that all can share in the benefits of globalization. It called on rich countries to make good on their commitment to cancel the debt of the poorest countries, most of which are in Africa.

There was considerable discussion of Japan, the world's second biggest economy. A statement calls on the Japanese to move faster to recapitalize their debt-laden banking system so that Japan's economy can emerge from a decade-long recession.

The meeting was impacted but not disrupted by the anti-globalization protests on the streets of Washington. Participants were bussed into IMF headquarters, which was surrounded by police lines and barricades. The financial meetings continue through Sunday evening.