The United States is pressing its allies to join in a massive multibillion dollar expansion of the International Monetary Fund, it was learned today.
According to responsible finance officials here, the Carter administration has thrown its weight behind two linked projects for supporting weak nations with big oil deficits.
One would create a new pool of money, or super tranche, totaling $16 billion. Half this sum would come from oil-soaked organizations of petroleum exporting countries. Notably Saudi Arabia and Kumwait. The rest would be put up by strong industrial countries, the U.S. Germany, Japan and others.
The second project calls for a record enlargement of th IMF's conventional resorces which are supplied by its 128 members. Their quotas or contributions would be increased by 75 or 100 per cent. A doubling of the quotas would expand the Fund from $45 billion to $90 billion, at least on paper. The amount that could be less than this because no borrower wants Indians rupees, Chilean pesos and many other third world currencies.
(In Washington, American as well as IMF officials stressed that negotiations for the $16 billion special fund were at early stage, staff writer Hobart Rowen reported.
("The Saudis still haven't made a pledge," said a Treasury official, "and everything is keyed to that."
(Washington officials also doubted that the IMF quotas would be doubled. Common Market countries have indicated they are opposed to a quota increase of more than 50 per cent over the level to be attained when the current round of quota enlargement is completed.
(Still to be worked out, if the $16 bullion special find is created, are the interest rates that borrowing countries will have to pay and the "conditionality" of the loans.)
Both schemes were designed by Johnnes Witteveen, the IMF managing director. The initial response from the principal nations involved is said to be favorable. The Japanese are reportedly reluctant about the super tranche but are expecte to follow Washington's lead.Similarly, Saudi and Kuwaiti finance officials are reported to have given the plan their blessing but their rulers have been slow to respond.
According to knowledgeable sources here, the U.S. is telling its allies that strengthening the Fund and also the World Bank should be the center piece of the economic summit set for London next month. This will be President Carter's first trip abroad and he can count on Premier James Callaghan's support for his view. Chancellor Helmut Schmidt of Germany also is understood to favor the projects. Premier Takeo Fukuda of Japan, however, is expected to say that his legislature, The Diet, might make difficulties.
The enlargement of the IMF is one answer to what used to be called the problem of recycling. The Arab states are running enormous surpluses in their international accounts because they can't buy goods and services to offsets the oil they sell. These surpluses are matchen by equally big deficits, particularly in the third world.
Up to now, the Arab surpluses have been recycled largely through western commercial banks whose loans finance third world deficits. But the volume of private credits to the so-called developing nations is coming close to prudent limits. Charirman Arthur Burns of the Federal Reserve Board, among others, has publicly abunded warnings. So a new source, outside the private banking system must be found, and the IMF has been nominated to fill this role.
The two plans will be examined at a meeting of 20 finance ministers, including U.S. Treasury Secretary W. Michael Blumenthal, in Washington April 28-9. They are expected to approve the super tranche and, perhaps, the big increase in quotas. The summit meeting chiefs together here on the May 8-9 is counted upon to gove both moves a decisive push.
If the timetable holds up, both plans will be adopted at the IMF annual meeting in September.
The proposals for enlarging the World Bank, the principal international aid agency, are less dramatic. Again, the U.S. is taking the lead in urging a large increase in the Bank's capital.
Officials here say that no firm figure has yet been adopted. But the Bank's president. Robert S. McNamara, has talked of expanding the $32.7 billion capital by another $30 billion.