Indonesia calls for multilateral debt reductions

JAKARTA (JP): Indonesia's Coordinating Minister for Economy and Finance Saleh Afiff on Tuesday asked the World Bank to use its profits to finance multilateral debt reductions for the debt- distressed developing countries.

Afiff also proposed at the annual meetings of the International Monetary Fund and the World Bank in Madrid that the IMF sell part of its gold reserves and use the proceeds to finance the debt reductions.

The proposals, which were based on the conclusions of the recent Non-Aligned Movement ministerial meeting on debt and development problems in Jakarta, were contained in Afiff's speech to the joint meetings of the Bretton Woods institutions.

A copy of the speech was made available to The Jakarta Post yesterday.

Afiff noted that the arguments of the IMF and World Bank against multilateral debt reduction do not hold water.

He said the reputation of the two institutions in international markets depends on capital guarantees from the members, and not on the security of outstanding loans.

Servicing multilateral debt has become a major burden for many debt-distressed low-income countries because it accounts for the bulk of their debt service payments, he added.

To be effective and meaningful, debt reduction has to include all categories of debt -- private, bilateral and multilateral, he argued.

"What is required is not further debt rescheduling but a once- and-for-all debt settlement, through meaningful reduction of all categories of debt," Afiff pointed out.

Exclusion

He contended that no major group of creditors should be excluded, meaning that it is illogical and ultimately counter- productive to exclude multilateral creditors.

Afiff said the Executive Board of the World Bank should be asked to consider a call for multilateral debt reduction from 25 least developed and severely indebted countries, which met recently in Jakarta.

The Indonesian minister said debt reduction obviously is not the only component of an overall solution to the debt problem.

"The NAM meeting in Jakarta accepted the imperative of each country putting its own house in order, to restore macroeconomic stability through fiscal and monetary discipline, to mobilize domestic resources....and to implement its own adjustment programs," he added.

Afiff also touched upon what he called asymmetry in relations between the developing and developed countries within the two institutions and called for more equitable and democratic relationships.

"In order to remedy the weaknesses in the present system, a truly representative inter-governmental review of the functioning of the Bretton Woods institutions and their future role in the changing world economy is needed," he said.

According to him, the initiation of such a representative inter-governmental review should be one of the major outcomes of the 50th anniversary meeting in Madrid. (vin)

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