Business

IMF chief seeks fresh funds for poor countries

WASHINGTON, April 23 — The head of the International Monetary Fund yesterday renewed a push to fully fund a US$17 billion (RM52 billion) lending package for poor countries, which are threatened by high oil prices and the risk of euro-zone contagion.

Two days after the IMF secured US$430 billion to deal with economic spillovers from Europe’s debt crisis, IMF managing director Christine Lagarde said her next focus was to raise funds for the IMF’s Poverty Reduction and Growth Trust, which provides low-cost loans to poor countries in Africa, Asia and Latin America.

Lagarde urged wealthy countries, which made a profit from the IMF’s sale of 403.3 tonnes of gold last year, to reinvest the windfall into the PRGT.

“We need more money in that trust if we want to finance concessional loans for the low-income countries,” she said after talks in Washington with African finance chiefs.

IMF chief Christine Lagarde at the news conference following the African Consultative Group (ACG) meeting in Washington, April 22, 2012. — Reuters picIMF chief Christine Lagarde at the news conference following the African Consultative Group (ACG) meeting in Washington, April 22, 2012. — Reuters picThe IMF in 2009 set a target to raise US$17 billion to lend to the poorest countries. So far, 32 IMF member countries have reinvested profits from the gold sales into the fund.

Lagarde’s comments were aimed at easing concerns that the IMF and donor nations may turn a blind eye to poor countries as they home in on containing the euro zone crisis.

Elizabeth Stuart, a spokeswoman for Oxfam, said poor countries had exhausted their resources to deal with contagion from the rich world, while facing the first drop in aid since 1997.

“Governments are throwing money at the IMF to deal with the European crisis, but where’s the money for poor countries?” she asked.

Africa still hurting

The IMF in its World Economic Outlook last week called Africa “one of the regions least affected by recent financial turmoil”.

It forecast growth this year of 5.4 per cent in sub-Saharan Africa, up from 5.1 per cent in 2011.

Part of the continent’s resilience, the Fund says, lies in its success establishing new emerging markets for its exports outside of Europe. Europe now accounts for only one-fifth of the exports out of sub-Saharan Africa, down from two-fifths in the early 1990s.

But African finance ministers described a host of spillover effects from the euro-zone crisis, highlighting a drop-off in aid.

“Fifty per cent of our budget comes from abroad,” Burundi’s finance minister, Tabu Abdallah Manirakiza, said during a panel discussion on Saturday. The hit to aid, combined with rising oil prices, had struck his country’s economy hard, he said.

“The two shocks are having a very negative impact on the budget and economic growth.”

According to the Organisation for Economic Cooperation and Development, major donors’ aid to developing countries fell by nearly 3 per cent last year. The largest cuts came from Austria, Belgium, Greece, Japan and Spain.

Other vectors

But the decline in aid was only one of a number of negative shocks emanating from the euro zone, according to the ministers.

Mozambique’s finance minister, Manuel Chang, said his country was facing a decrease in remittances, a decline in foreign direct investment, and drops in both the quantity and price of exports, including aluminium, gas, wood, sugar, cotton and coal.

He said his government was taking a number of measures to create a better business environment and attract investment.

Speaking after Lagarde yesterday, Jean Baptiste Ntahwa Kuderwa, the Democratic Republic of Congo’s finance minister, said that a number of African countries would need aid if faced with an external shock.

But some representatives of poor countries saw fit to remind the organisation of the need to help all its members.

“The International Monetary Fund should address (the crisis in Europe), but not at the cost of the others,” Indian Finance Minister Pranab Mukherjee, the head of the Group of 24 poor and emerging countries, said on Wednesday. “There should not be concentration only on one problem,” he said. — Reuters

Comments