The International Monetary Fund is preparing to offer special loans to countries whose economies are disrupted by the year-end Y2K computer bug, finance officials said yesterday.
"We expect the IMF this weekend to agree to establish a special short-term facility to respond . . . to international liquidity problems relating to Y2K that may arise in some countries," U.S. Treasury Secretary Lawrence H. Summers told reporters.
Under the program, an oil-exporting country in which the computer glitch temporarily shuts down production might request a loan to smooth out the disruption of dollar earnings, an IMF official said.
The idea is to reassure financial markets that there will be help for any countries that get hit by the bug and otherwise might not be able to make payments on their international debt.
But "it's hoped that there won't be any need," said the IMF official, alluding to the fact that no one knows what damage the computer problem may cause.
The Y2K--for year 2000--problem stems from the fact that many older computers, unless they are modified, will treat the new year as 1900 rather than 2000 when their internal calendars click from "99" to "00." As a result, some computers, and the operations they control, could fail.
Concern about potential Y2K problems already has affected international financial markets. Some governments and corporations have begun to build stockpiles of cash out of concern that Y2K-fearful investors won't want to buy financial instruments offered toward the end of the year. And analysts say these preparations already are helping increase U.S. interest rates across the board.
The industrialized world has spent many billions of dollars trying to eradicate the bug. Due to those efforts, many experts expect only minor disruptions in the richer countries.
Poor countries, however, appear to be much less prepared. As a result, many lenders and investors are pulling money out of developing-country markets where significant Y2K problems appear more likely. The IMF's sister organization, the World Bank, has been helping many developing countries fix the Y2K problem. To date, the bank has approved about $35 million in grants, technical aid, and financing for seminars aimed at addressing it, said Carlos Braga, manager of the banks' Information for Development Program.
In addition, the bank has cleared a total of about $160 million of Y2K-related loans to Malaysia, Argentina and Sri Lanka. Applications for other loans are pending.
Current thinking in the IMF is that its Y2K loans would be in addition to any other IMF help a country was getting. They would be short-term loans and would carry a premium charge.