Rejecting questions raised by Rep. Henry S. Reuss (D-Wis.), Treasury Secretary W. Michael Blumenthal has reiterated U.S. support for a recent $64 million loan to the government of Nicaragua by the International Monetary Fund.
He said in June 11 letter to Reuss, released yesterday, that denial of loans such as the one to the much-criticized Somoza regime on noneconomic grounds "could lead to extreme politicization of the IMF."
If the IMF had denied the request from the recognized authorities, it would be considered intervention in that state's internal affairs, Blumenthal said. "The current government of Nicaragua has been, and is, for better or worse, the recognized authority in the country," he added.
Reuss had suggested that the IMF withhold discretionary aid of the kind extended to Nicaragua from "member states whose difficulties are the result of war with each other or with themselves."
Blumenthal responded that he sympathized with Reuss' intention, but ruled it out both because it would be hard to define and interpret, and because it would force the IMF into political decisions.
"All nations would lose by the introduction of political disputes into the IMF, and it would be a particularly grave error for the United States to lead the way," Blumenthal said.
The IMF board unanimously on May 14 approved the Nicaraguan request for help under its regular rights as a member-borrower, and under a subsidized program known as Compensatory Financing Facility (CFF), designed to cover a temporary short-fall in export earnings.
On the first and larger part, the Somoza regime presented the kind of conprehensive stabilization pprogram required by the IMF
On the subsidized financing, an IMF team determined after a visit, Blumenthal said, that an export shortfall had taken place and this was "attributable to circumstances beyond the member's control" and not to the rebellion in Nicaragua.
Blumenthal conceded that capital outflows from Nicaragua "undoubtedly reflected political developments and the unstable internal situation." But he said that no member state could be denied IMF help, even subsidized financing of the CFF type, because its balance of payments problem resulted from capital outflows.