Summit Plans Take Peso Crisis to Heart : Economy: U.S. and allied proposals would double a $29-billion IMF fund to cope with future problems.

From Associated Press

The United States and its major economic allies, jolted by Mexico's financial crisis, have readied proposals to be discussed at their annual summit aimed at averting or at least lessening the severity of such problems in the future.

A big part of the package would be the doubling of a $29-billion emergency fund at the International Monetary Fund to cope with future problems.

In addition to strengthening the safety net to deal with countries that experience financial difficulties, the proposals would also seek to strengthen the IMF's early-warning system to detect potential problems.

The proposals are part of an economic communique prepared for President Clinton and the leaders of Japan, Germany, Britain, France, Canada and Italy, who will gather June 15-17 in Halifax, Nova Scotia, for the annual summit of the world's seven-richest industrial countries.

Various government officials on Wednesday vouched for the authenticity of the draft, while stressing that it could be modified once leaders review it.

In addition to reform for the IMF and World Bank, the draft contains the usual vague pledges for closer coordination of economic policies to promote global growth and promises to continue assisting economic reform in Russia and the cleanup of the Chernobyl nuclear disaster in Ukraine.

But the most detailed portion of the communique deals with the IMF and World Bank, the result of a yearlong review of both institutions that the leaders had directed be undertaken at last year's summit in Naples.

That review was given added urgency after Dec. 20 when Mexico was forced to devalue the peso, triggering a full-blown financial crisis in Mexico and jolting markets in other developing countries.

While some officials have called for radical reform, including the merger of the IMF and the World Bank, the proposals prepared for the summit represent a much more incremental approach.

The major new element in the package would be the creation of a proposed "emergency financing mechanism," a new loan window at the IMF to be financed by doubling current resources of the General Agreements to Borrow, a line of credit created in 1962 that is funded by the United States and 11 other wealthy nations.

The U.S. commitment to the agreement is $6.7 billion. In proposing that the reserve be doubled, the draft communique suggests the 12 supporters of the agreement boost their commitments and that other wealthy nations be asked to contribute as well. The proposal does not mention countries that could be tapped for extra resources, but in the past, newly wealthy Asian nations such as South Korea, Taiwan, Malaysia and Singapore have been mentioned.

The IMF earlier this year offered Mexico a $17.8-billion loan package, the biggest in IMF history, to go along with $20 billion in U.S. support.

The proposals, first disclosed by a member of the Canadian Parliament, were attacked Wednesday by IMF critics, who charged that they fell far short of the massive reforms needed for the international lending institutions.

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