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Last Updated: Monday, 31 October 2005, 13:51 GMT
Poor nations may tap new IMF fund
Man filling up car in Bangladesh
Rising fuel costs have caused social unrest in Bangladesh
Low income countries affected by high oil prices and other external economic pressures could get extra support from the International Monetary Fund (IMF).

The IMF is proposing to give the world's poorest countries access to more funding to deal with economic shocks such as soaring energy prices.

The initiative, agreed in principle, follows an extensive review by the IMF of its support for developing nations.

Aid agencies said no policy conditions should be attached to the new funding.

Quick access

One development agency expressed concern that the funding could be used to force countries to open their markets.

The scheme - being considered at an IMF board meeting on Monday - would give countries facing balance of payment problems quick access to loans.

If past history is anything to go by, this new facility will once again be used as a lever by the IMF to ratchet further free market reforms
Pete Hardstaff, World Development Movement

The initiative is being supported by the US, UK and other leading industrialised nations.

The new funding is intended to complement existing financial support for post-conflict countries and poor nations affected by natural disasters and the impact of globalisation.

Critics have claimed that, under the current system, funding is not being made available quickly or widely enough.

In a key change, countries not currently receiving support through the IMF's Poverty Reduction and Growth Facility would be able to get funding.

Safety net

The existing facility - the IMF's main mechanism for helping developing countries - has been in place since 1999 and makes poverty reduction and boosting economic growth key factors in lending policy.

The IMF has previously said that the new fund, whose size has not been disclosed, would act as a "potential safety net" for countries not already receiving financial assistance.

The 40% rise in world oil prices over the past year has posed acute problems for developing countries, many of which are big oil importers.

Rising fuel prices has sparked social unrest in a number of countries including Indonesia and Bangladesh.

'Free market stick'

Anti-poverty campaigners said they wanted assurances that the money would not be conditional on countries introducing economic reforms such as opening up markets and privatising industries.

Oil pump
Oil prices have risen 40% in the past year

"If past history is anything to go by, this new facility will once again be used as a lever by the IMF to ratchet further free market reforms out of the poorest countries," Pete Hardstaff, the World Development Movement's policy director, told the BBC.

"We wait for the IMF to say that this will categorically not be the case."

Assistance in the wake of the 1990s Asian financial crisis had backfired, Mr Hardstaff claimed, because too many conditions had been attached.

"While we recognise the need for ways of addressing short term balance of payment problems, if this is going to be yet another way to force free market reforms out of the poorest countries, then it is not welcome."

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