After weeks of delay, congressional and Treasury Department negotiators yesterday struck a deal that enables the International Monetary Fund to revalue part of its gold stock to help finance cancellation of debt owed by desperately poor countries.
Treasury agreed that only about 60 percent of interest from the transactions' profits would be available for use immediately, while the rest could be freed up pending more congressional review next year.
Administration officials had said failure to get clearance could undo a globally negotiated program to forgive up to $27 billion in debt. Agreement had been stalled by GOP skepticism about the financial accountability of debtor countries and hostility toward the IMF.
"We certainly are encouraged by this development," IMF spokesman Tom Dawson said yesterday. He declined to comment in detail.
The deal grew out of negotiations Monday night involving Treasury Secretary Lawrence Summers, Rep. Richard K. Armey (R-Tex.) and Sen. Phil Gramm (R-Tex.). Gramm yesterday called it a "major victory."
Leaders of the seven major industrial countries agreed in June to cancel up to $27 billion in debts owed by as many as 41 countries, many of them in Africa. To qualify, the countries must commit to funnel the savings into such programs as health and education.
Wealthy nations now are juggling accounts and budgets to line up financing. Part of it would come from transactions in which the IMF would revalue about 13 million ounces of gold that it carries on its books at below-market value. That move requires congressional permission.
The transactions would generate about $3.1 billion in profit. Interest from that would go into debt relief, with the 60-40 split between this year and next. The deal reached yesterday restricts how the money can be used and what the countries must do to qualify.
In addition, the bill provides that $300 million that the United States already put into an IMF reserve account can go to the program. There is also $110 million in new money for cancellation of debt owed directly to U.S. government agencies such as the Export-Import Bank.
To date, Congress has contributed nothing to another part of the program, a fund to help international lenders such as the African Development Bank clear debt from their books.
Staff writer Dan Morgan contributed to this report.