Debt, sluggish growth, surging oil rates confront IMF, WB chiefs
 

WASHINGTON, Friday (AFP)

IMF and World Bank policymakers convene here this weekend to assess prospects for a faltering global economy menaced by natural disasters, rising energy costs and discord over debt-relief initiatives.

But their meetings Saturday and Sunday under heavy police guard could well be overshadowed by Hurricane Rita, another powerful storm threatening major oil and gas installations in the Gulf of Mexico and Texas coast just weeks after a devastating blow to the sector from Hurricane Katrina.

Katrina drove up crude oil and gasoline (petrol) prices worldwide at a time when global growth, according to the International Monetary Fund’s latest survey, was already faltering in the face of higher energy costs.

“Higher oil prices are a clear and present danger,” IMF senior economist Raghuram Rajan warned this week.

Rajan said Katrina put “US consumer confidence at risk as gasoline prices soar,” an ominous development for the world at large given the weight of the US economy.

Policymakers representing the 184 member nations of the IMF and World Bank are also under mounting pressure to ease the crippling debt burden carried by the world’s most impoverished nations.

But on this issue, considered crucial to a United Nations drive to halve the proportion of people living in extreme poverty by 2015, the Fund and the Bank are very likely to drop the ball this weekend.

Both World Bank president Paul Wolfowitz and IMF managing director Rodrigo Rato on Thursday said backing for a highly touted initiative to cancel 40 billion dollars in debt owed by 18 developing nations was not expected here.

Most of the debt is owed to the World Bank, with a small part due the IMF.

Group of Eight nations — Britain, Canada, France, Germany, Italy, Japan, Russia and the United States — reached agreement in principle on the debt-cancellation scheme at a July summit in Scotland. But details were left to be worked out. Creditor nations now want to know, for example, who will be responsible for repaying the debt and ensuring that the World Bank will be able to continue lending money to poor countries.

The G8 deal, according to Oxfam International, only guaranteed that the World Bank would receive three years of financing to compensate for the debt repayments it will forgo.

But several countries outside the G8 reportedly fear that big contributors, notably the United States, will fail to make good on their commitments, thereby hampering the World Bank’s ability to make future loans. A US Treasury official told the Washington Post that such fears were “absurd.”

Rato said a deal could come “in the next few weeks.”

“I think we will be able to reach a final consensus soon, in the near future,” he said.

Activists insisted the controversy showed that grand promises made by the richest and most powerful countries could not be trusted.

“Again and again the rich countries procrastinate and delay. They must do the debt deal this weekend,” Oxfam International campaigns director Bernice Romero said.

Debate will intensify this weekend over long-standing demands by developing nations for a stronger voice in IMF decision-making, an issue highlighted in a just-released IMF review.