Group of 7 Seeks Boost in IMF Lending Power : Economics: The move could help finance East European democracies’ shift toward the free market system.
Finance ministers of the United States and its six largest economic allies agreed Sunday on a proposal to boost the resources of the International Monetary Fund by 50%, paving the way for sharply increased lending to the emerging democracies of Eastern Europe.
Although the decision still must be endorsed by the IMF’s 23-member Interim Committee, the ministers--known informally as the Group of Seven--have a majority of the voting power in the 152-country organization, which is weighted according to a country’s economic clout.
The IMF currently has about $120 billion in total lending capital, as a result of the last major increase in its resources, in 1983.
The Interim Committee, which serves as the IMF’s major policy setting body, is scheduled to meet here today.
The seven also threw their support behind a U.S.-proposed plan for prodding Third World countries that are in arrears on loans from the IMF into catching up on their payments. Eleven developing countries are now about $4 billion behind in payments.
The group cleared still another hurdle when Britain and France apparently worked out a compromise on what rank they will hold in the organization’s pecking order once the increase in lending resources takes effect.
The shift was necessitated after Japan won agreement to take the No. 2 spot in the IMF, just below the United States.
Under the accord, Japan and West Germany will split the No. 2 spot, and Britain and France will share a lower rank.
Sunday’s session, held in the U.S. Capitol, was the second the Group of Seven has held in a month. The ministers--and central bank governors from the same seven countries--met in Paris on April 7 and expressed concern about the decline of the Japanese yen.
There was little talk about the yen at Sunday’s session, however.
The statement that the seven issued following their afternoon-long meeting essentially repeated the same language they used in a similar document a month ago.
The increase in IMF lending resources is expected to go in part to help finance the shift by East European democracies toward free market economies.
The U.S. share of the boost will be $12 billion, but the procedure is a technical one that does not require any budget outlays.
Controversy over the arrears plan and the ranking issue had been holding up formal action on the proposed increase in the IMF’s lending pool. Third World leaders expressed hopes Sunday that the money would not be diverted from their countries.
Besides the United States, the seven include West Germany, Japan, Britain, France, Italy and Canada.