Challenges Endanger International Monetary Fund Clout
Carl Hartman, Ap, THE JOURNAL RECORD
In recent years the IMF has been providing outside help, protection from creditors and has offered reassuring though often unpleasant advice to member nations that can't pay their debts or fall behind on interest payments.
But in just the last few weeks, challenges have been mounted to the IMF's program of economic austerity for countries that are given its permission to stretch out their debt payments.
%E -President Fidel Castro of Cuba, no longer a member of the fund, urged Latin American countries to stop repaying their debts. He had previously arranged delays in repayment for Cuba's own debts to the Soviet Union and other countries.
%E -President Alan Garcia of Peru said he will pay banks in the United States and elsewhere no more than $1 out of every $10 that Peru can earn by selling its goods in other countries. That would mean about $300 million in payments this year instead of the $3.5 billion or so that creditors expect.
%E -The dean of Latin American economists, 85-year-old Raul Prebisch, proposed that debtor countries put aside money to pay their debts but turn over only half of it to the creditors, keeping the other half for investments at home. Prebisch comes from a more important debtor country, Argentina, and has been a trusted adviser of President Raul Alfonsin.
%E -Latin American leaders meeting privately in Mexico discussed similar plans. A cap on payments would especially worry the international financial world if it came from Mexico, the No. 2 debtor after Brazil. A plan carefully crafted by the fund has already put off some of Mexico's repayments for as long as 14 years, and Mexico's handling of its financial problem has been held up as a model.
If debtor countries start bypassing the fund and its plans, many experts say, banks and the rest of the international financial system will lose an anchor that they see as important in preserving monetary stability. By requiring austerity policies in return for its help, these experts say the fund puts the debtor nation in better shape to repay the debts.
The problems extend past Latin America.
Nigeria, the largest African country, has resisted devaluing its currency as well as a deal with the IMF to reschedule its debt payments. …