- The International Monetary Fund has proposed a dramatic
new approach to helping countries that are drowning in debt - they will
be allowed to declare bankruptcy, forcing creditors to negotiate more lenient
repayment terms.
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- The new bankruptcy policy came from the lending institution's
policy-setting committee of finance ministers and is seen as a milestone
in overhauling the global financial system. The effort has been in the
works since the Asian economic crisis of 1997-98 pushed 40per cent of the
world's economy into recession.
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- The bankruptcy proposal, announced by Britain's Chancellor
of the Exchequer, Gordon Brown, and the IMF's managing director, Horst
Koehler, faces stiff opposition from large banks that make loans to developing
countries. Banks oppose making it easier for those countries to win new
repayment terms.
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- The United States originally favoured a limited approach
by which a majority of creditors could agree to accept lower repayments
from countries in dire circumstances. A single creditor can in most instances
now block reduced repayment terms.
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- A week ago the US indicated it supported a two-track
approach that included its proposal and the more sweeping IMF plan.
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- Mr Koehler said hard work lay ahead in developing the
details to put the bankruptcy process into place. The IMF would listen
to the concerns of banks and other creditors, he said.
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- The proposal will be presented to IMF directors in April.
The plan would ultimately require approval from each of the organisation's
184 members.
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- At the annual meeting in Washington, Argentina was at
the top of the agenda. It defaulted on the bulk of its $US141billion ($260billion)
in foreign obligations in December. Argentina has yet to win an IMF agreement
for new loans; it has complained that the terms the IMF is seeking to impose
are unreasonable.
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- The IMF's policy group said it was ready to help Argentina,
but only after the country adopted a sustainable economic program.
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- http://www.smh.com.au/articles/2002/09/29/1033283388008.html
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