IMF Chief Asks Writeoff of Some Loans

The head of the International Monetary Fund pleaded for more money to meet the crisis over Third World debt Thursday and said banks had to consider forgiving some loans.

“We need a substantial quota increase,” Michel Camdessus of France, the IMF managing director, told a news conference at which he called for radical measures.

He said the IMF, which supervises the world economy and makes loans to troubled debtors, was short of funds from the quotas that its 151 members pay in to lend to those in need.

The IMF and World Bank began annual meetings in West Berlin as protesting environmentalists carried a coffin to symbolize vanishing rain forests, for which they blame the institutions’ development policies.

Extraordinary security surrounded the monetary talks after Red Army Faction guerrillas claimed that they had mounted a shotgun ambush on a West German finance ministry official on Tuesday. Hans Tietmeyer, secretary of state at the ministry, was unhurt.

Both Camdessus and officials from developing countries said more radical solutions should be tried to resolve the crisis over the Third World’s $1.2-trillion debt. The crisis began in 1982 with a threatened default by Mexico.

Mentioned ‘in Whispers’

There was “growing fatigue in the system,” Camdessus said, “fatigue of debtor countries and fatigue also from creditors.”

And the time has come for banks to consider writing off some of the loans, a subject that was not long ago mentioned only in whispers in international financial circles. “I think this has to be considered, has to find its place in the menu,” he said.

The IMF has about $115 billion at its disposal in funds contributed by members. But Camdessus said this needed to rise by 50% just to keep pace with growth in the world economy over the last five years.

IMF resources had to be doubled if the fund wanted to pay off loans made in the 1980s.

His call for more money was backed by the Group of 24, which represents the interests of developing countries. Its officials met Thursday.

Camdessus said the current method of dealing with the problem of debtors in Latin America and elsewhere had worked so far although progress was slow. But all parties had to adapt.

In 1982, when Mexico’s problems threatened the banking system, Third World debt totaled $840 billion compared to the present $1,200 billion.

Camdessus was optimistic on the world economy generally, noting that industrial nations’ expansion could reach 4% in 1988, although it may decline somewhat next year.

He was not particularly worried by a recent rise in the value of the dollar but said this trend could slow down the reduction of the huge U.S. trade deficit.

West German Finance Minister Gerhard Stoltenberg said on his arrival in West Berlin that he did not expect leading industrial nations to come up with any initiative on the dollar here.