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IMF Managing Director, Horst Köhler
"Non-oil producing developing countries... are suffering most"
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Wednesday, 20 September, 2000, 16:13 GMT 17:13 UK
IMF pushes for debt relief
The IMF has defended its role in global financial crises
The new head of the International Monetary Fund has said he wants to bring debt relief to as many of the world's poorest countries as possible, as quickly as possible.

Horst Köhler also defended the IMF's role in resolving global crises, but said he recognised many of the worries about globalisation.

Mr Köhler told the BBC that he would be listening to the protesters, but he would be telling them that globalisation has also brought the benefits of economic growth.

Horst Köhler
Horst Köhler: Calling for action to help poor countries
He said that the international community faced two big challenges - making sure that the risks as well as the benefits of global capital markets were taken into account, and ensuring that globalisation worked for all, especially for the poor.

Mr Köhler is attending his first annual meeting of the IMF in Prague, where widespread protests about the impact of globalisation are expected at the weekend.

Debt relief

Many of the protests will be about the slow pace of debt relief for the very poorest countries, who are no longer able to pay.

debt relief chart
He said that the most concrete expression of the new concern by the IMF and the World Bank was its plan to speed debt relief, with 20 countries out of 41 eligible receiving a decision by the end of the year.

But many non-governmental organisations say that the IMF has still not committed enough of its own resources for debt relief, and argue that the process of relief is still too uncertain.

Oxfam's Tony Burdon told the BBC he feared that the IMF would not make any further concessions, having already failed to meet its original targets.

Mr Köhler said, however, that debt relief was not the quick road to poverty reduction some people wanted.

Big gap

Mr Köhler went out of his way to emphasise the downside as well as the benefits of the global economy.

Jubilee 2000 demonstration in London
The Jubilee 2000 international pressure group wants debt relief pledges to be honoured
He said the biggest challenge for the world was bridging the huge inequality gap between those areas which had been left out of global growth, and those which had seen an unprecedented increase in income and productivity.

Mr Köhler also warned that the growth of massive private capital flows to developing countries, while ultimately beneficial, carried some real risks of a bigger financial crisis when those funds were suddenly withdrawn.

Defending the euro

The IMF managing director also went even further than his chief economist in stating that the euro was "massively undervalued" on international currency markets and that the subject of intervention should not be "taboo".

He said that the IMF had to pay attention to the exchange rate, and should not be afraid to speak its mind.

On Tuesday the IMF warned that a sharp adjustment in the exchange rate of the euro could pose a big threat to the world economy.

But currency markets were sceptical about any intervention by the major industrial countries ahead of the US presidential election in November.

The euro continued to fall to record lows on international currency markets.

Action by rich countries

Mr Köhler also called for action by rich countries to help the poor, especially by opening their markets to developing countries' products, and also by providing more government aid.

oil price rise graph
But he said the oil crisis could have its biggest impact on developing countries.

In a BBC interview, he said that the oil price rise "cast a shadow" over the bright prospects for economic growth in the next two years.

While there was no need to panic, it was the non-oil developing countries who would suffer the most if oil prices stayed high.

He called on developing countries to ensure good governance and an end to corruption as crucial pre-conditions for progress on ending poverty.

Private sector role

Separately, the IMF executive board has issued a statement saying it is satisfied with plans for the private sector to play a greater role in reform, but said it was up to individual countries to negotiate individually with creditors.

"There has been welcome progress towards a convergence of views concerning the circumstances in which the use of IMF resources would be conditioned on action to secure private sector involvement," it said.

The IMF aims to provide financial support to crisis-hit governments.

But it has been criticised for encouraging unwise lending by private banks who feel secure in the knowledge that the IMF will always bail out a country in financial difficulties.

Mr Köhler, the first German to hold the post of IMF managing director, was selected after an acrimonious process earlier in the year which caused the post to be vacant for several months.

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See also:

19 Sep 00 | Business
IMF oil price warning
19 Sep 00 | Business
IMF calls for euro intervention
20 Sep 00 | Business
World Bank warns of poverty crisis
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