The debt-relief plan described in the June 13 news story "G7 Clears Way for Debt-Relief Deal" sounds promising. The Group of Seven industrial nations supposedly is writing off as much as $70 billion in loans owed by poor countries.
However, the plan would keep poor nations on a debt treadmill. The G7 leaves the IMF in charge of debt management and as overseer of the socioeconomic development of the poorest countries, a role outside its mandate or capability. The article reports that the G7 supports financing debt relief through the sale of a portion of the IMF's multibillion-dollar gold reserves. However, the IMF and the U.S. Treasury have acknowledged that most gold sales will be used to finance the IMF's much-criticized lending facility for poor countries, the Enhanced Structural Adjustment Facility (ESAF), and not for debt relief.
Supporting gold sales to fund ESAF in the name of debt relief will produce disastrous consequences. According to the IMF's 1997 and 1998 reviews of ESAF, the facility failed to increase overall economic growth for poor countries. The same reviews revealed that external debts of poor countries doubled. Moreover, supporting gold sales to fund the facility will make it self-financed. This means that the IMF will no longer have to go to Congress for authorization on new funding, and Congress will lose oversight.
Rep. Sherrod Brown (D-Ohio) has introduced a resolution opposing gold sales to finance ESAF and supporting such sales only for direct debt reduction. Congress should not authorize gold sales for ESAF.
The writer is legislative assistant for Results, a grass-roots group working on poverty issues.