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IMF gets support for bankruptcy plan
By MARTIN CRUTSINGER, AP Economics Writer WASHINGTON (September 17, 2002 3:21 p.m. EDT) - A landmark proposal that would make it easier for countries in economic crisis to restructure their foreign debt should receive a major endorsement at the upcoming annual meeting of the International Monetary Fund, a top IMF official said Tuesday. IMF Deputy Managing Director Anne Krueger said she expected her proposal for creation of an international bankruptcy procedure for countries to be endorsed in broad terms by finance ministers representing the agency's members at the end of this month. IMF officials expect its policy-setting panel will direct IMF staff to prepare the amendments to the IMF's charter that would be needed to put the bankruptcy process into operation. The wording on the change in the IMF's Articles of Agreement, under this schedule, would be debated at the spring meetings of the agency next April. "I am confident we will get an endorsement ... to move forward," Krueger told reporters at a briefing. Krueger said the proposal had "come a long way in 10 months," referring to last November when she first put forward a new process to help countries facing severe financial difficulties and an unsustainable debt burden. Krueger's plan would essentially give nations the same opportunity that companies have to file for bankruptcy, beginning a court-supervised process that allows them to continue operations while they develop a plan with creditors to restructure their debt. The Bush administration was initially cool to the idea, arguing that the approach would take too long to put into place because it would require the 184 nations who are members of the IMF to agree to changing the institution's charter. Treasury Secretary Paul O'Neill and his top aide on international economic issues, Treasury Undersecretary John Taylor, originally came out in support of a less far-sweeping approach that would encourage countries to insert new language into bond agreements that would allow a super majority of bond holders to agree to restructure debt in the event a country encounters financial difficulties. U.S. officials argued that such an approach could be implemented quickly while it could take years for the IMF to win approval of an amendment to its charter. However, since Kreuger advanced the plan last November, Argentina was forced to declare the largest government debt default in history, stopping payments on a large portion of its $141 billion in foreign debt last December. And this summer the IMF was forced to rush to the assistance of Brazil with a record $30 billion loan, hoping to calm investor fears that Latin America's largest economy was about to default on its foreign debt. Krueger said there was an emerging consensus that a two-track approach was needed which would include both the new bond clauses plus a more sweeping approach that would put in place the equivalent of an international bankruptcy process. She cautioned that there remained substantial work to be done on the precise wording of the new approach, which officials hope to be able to present at the spring meetings of the IMF and World Bank next April. "Some of the last pieces are very important," she said. "That discussion is still going on." Krueger's remarks came as she presented the IMF's annual report, which covered a 12-month period that ended last April. The report showed that the recession that hit the United States and then spread to other countries had increased demands on the IMF, which provides loans to countries to help them deal with economic troubles. For the 12 months ending in April, the IMF approved almost $50 billion in credit lines for member countries, almost triple the $17 billion in loans it had approved in the previous 12-month period. The IMF and the World Bank will condense their normal weeklong annual meetings to just two days on the weekend of Sept. 28-29. The decision to sharply curtail this year's discussions was taken in an effort to hold down the cost of providing security for the meetings, which will draw large numbers of anti-globalization protesters. |
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