Finance ministers representing Third World countries warned their richer counterparts last night that unless they receive a dramatic increase in financial assistance, an already precarious world economic situation will deteriorate further.
In advance of a two-day meeting beginning today of the International Monetary Fund's policy-making Interim Committee, the poor nations demanded a doubling of IMF quotas (member deposits) to about $130 billion. They also urged annual issuance of 12 billion Special Drawing Rights (SDRs), an IMF credit made available to member nations. This would be equivalent to about $13 billion.
The poor nations, meeting as the Group of Twenty-Four (G-24), issued a communique last night making these demands, while acknowledging that a significant decline in inflation and interest rates that has taken place recently has given them the opportunity to stimulate economic growth. But they said that this potential stimulus must be combined with more aid on easier terms.
"Unless this is done, the growth prospects of developing countries will remain bleak and their debt and balance of payments difficulties will be aggravated," the communique said.
There is no prospect of a doubling of IMF quotas. The Interim Committee is expected to approve an increase of no more than 50 percent--and even that level is being resisted by the United States as too much.
The separate question of a new issue of SDRs is expected to be put on the agenda of the annual meeting of the IMF in Washington in September, but there is little chance of an issue as large as the G-24 suggested.
However, as R.N.Malhota, IMF executive director for India, told a press conference, there is less resistance in the United States and Europe to some new SDR creation, because there has been a squeeze on the poor nations' total financial reserves.
In stressing what they called "the urgency of a world recovery program, the G-24 nations, led by M. S. Hamad, Egyptian minister of finance, also suggested a redistribution of the quotas that would improve the voting power of the poor nations within the IMF.
At IMF headquarters, as finance ministers and central bankers began arriving in Washington for the Interim Committee and Group of Ten (leading industrial nations) ministerial meetings, both of which start today, there was continued informal discussion of various proposals to consolidate or refinance some Third World loans. These are loans to countries that have problems so deep-rooted they can't be solved merely by rescheduling, or by additional IMF and commercial bank loans.
But IMF officials suggested that there is no general solution to this kind of problem. "Each country is an individual situation and must be tackled with individual, well-tailored solutions," said one official.
The huge debtor countries in Latin America have large resource bases, and will have fewer problems--despite the size of their debts--than some of the African or Eastern European countries, IMF officials note.
But there are sharp differences even among the Latin American countries. Thus, an internal IMF analysis shows that while Mexico's $82 billion external debt represents about 50 percent of its GNP against 35 percent for the equal dollar amount of Brazilian debt, the interest burden for the Mexicans represents only 35 percent of export income, against about 45 percent for Brazil.
"So while Mexico, in terms of GNP, has absorbed a much higher debt burden than Brazil, its export capacity renders the payment of interest probably easier to support," according to an IMF official.
Meanwhile, citing the increased importance of trade to the over-all U.S. economy, C. Fred Bergsten told the House Banking Committee that increased authorization for the IMF would be, in effect, "one of the most important jobs bills" to be voted on by Congress this year.
Bergsten said "there is no tradeoff between the domestic and international components" of a necessary recovery program.