IMF has no answer to currency crises

WASHINGTON -- The International Monetary Fund failed yesterday to find agreement on how to prevent or at least better manage future Asian-style currency crises.

Finance ministers and central bankers from the seven major industrial countries couldn't even agree on measures for ending the recession being experienced by a third of the world because of steep currency devaluations.

Instead, the 182-nation IMF's policy-setting interim committee issued a 10-page final communique at the conclusion of its spring meeting pledging to continue efforts to resolve competing proposals put forward by the United States and other industrial countries.

It hailed as its one major achievement the creation of new contingent credit lines that could provide billions of dollars for warding off financial panic to countries pursuing sound economic policies.

But agreements could not be reached on involving the private sector in sharing the cost of future bailouts or policing the borrowing practices of emerging countries.

The United States, led by Treasury Secretary Robert Rubin, favored a more market-oriented, case-by-case approach for private sector involvement.

Britain and other nations preferred specific rules defining the obligations of investors if their bets on emerging markets went bad.

Other issues left on the table included ways to better manage wild swings in currency values both in developing countries and industrial nations. Japan and Germany pushed for more coordinated efforts among countries to manage currency levels; the United States objected.

Even in areas where there was widespread agreement, such as the need to provide greater debt relief for the poorest countries, the IMF could not resolve how much of its gold reserves should be sold to help finance the process, or how much money wealthy nations would be willing to contribute to the effort.

Seth Amgott, Washington representative for Oxfam, a humanitarian relief organization, expressed disappointment that more progress was not made on the debt issue.

"They have shown repeatedly that they are good at producing rhetoric on debt relief. It is an open question whether we will get the resources and if there is the political will," Amgott said.

However, IMF Managing Director Michel Camdessus told reporters at a news conference late last night that the debt relief issue, which has been debated since 1996, would be resolved soon.

Debt relief was also expected to be taken up when President Clinton and other leaders of the world's seven largest economies hold their annual economic summit in mid-June in Cologne, Germany.

Regarding the current economic problems, Japan and Europe rejected U.S. suggestions that they needed to do more to stimulate growth, prompting a blunt response from the United States.

In his speech yesterday to the IMF directors, Rubin noted that America's trade deficit has soared to record levels, resulting in the loss of more than 300,000 U.S. manufacturing jobs, as a result of the nearly two years of global turmoil.

Japan's trade surplus was increasing and Europe's trade balance was remaining essentially unchanged during this time, he complained.

Rubin's unusually frank message reflected U.S. frustration at failing to win greater commitments by Japan and Europe to spur their domestic economies to take pressure off America's huge trade deficit.

The Group of Seven finance ministers and central bank presidents had pledged after talks Monday to strive for greater cooperation to promote global growth.

But their comments yesterday underscored that there was no agreement on just what that vague promise meant.