News Release

IMF and G7 Meet: Debt Cancellation and Exchange Rates


Watkins is the outreach coordinator for Jubilee USA Network. Clarke is the national coordinator of Jubilee USA Network. Clarke said today: “As G7 finance ministers gather in Washington today, we issue an urgent call to G7 nations, and in particular our own government, to work in the spirit of multilateral cooperation and compromise to achieve a deal on 100 percent debt cancellation for impoverished nations at this meeting, or soon thereafter. Debt costs lives, and it is morally unconscionable to delay. The sale of IMF gold is an approach to financing poor country debt cancellation that should please all G7 nations. This approach would not affect the IMF’s ability to lend nor would it cost taxpayers in rich countries additional money. Unlike other possible resources within the institutions, the gold provides additional resources for impoverished nations while requiring the IMF to finance its fair share of debt cancellation.”

She added: “The consequences of a long delay on 100 percent debt cancellation for impoverished nations are grave. Every month, 240,000 people die of AIDS and almost one million children die of preventable diseases.”
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Weisbrot is the co-director of the Center for Economic and Policy Research and co-author of the recently released report “Going Down With the Dollar: The Cost to Developing Countries of a Declining Dollar.” He said today: “When the G7 finance ministers meet in Washington, followed by the IMF and World Bank meetings, exchange rates will be on the agenda. The IMF has been warning that the dollar is overvalued, but they should do more. The institution was established 60 years ago to manage global exchange rates, and these are seriously out of alignment right now.”

He added: “Developing countries now hold an amount of reserves that is on average more than 10 percent of their GDP, and in many cases exceeds 20 percent of GDP. The current overvaluation of the dollar, and thus its impending decline, means that those countries that hold large amounts of dollar reserves will not see the expected return from holding those reserves. The dollar is widely recognized to be seriously over-valued. The United States current account deficit expanded to $660 billion in the second quarter of 2004, or 5.7 percent of GDP. This deficit can only be brought down to a manageable level through a sharp decline in the value of the dollar. Looking at a sample of reserve holdings among developing countries, we find that the drop in the dollar will lead to a loss in the value of reserve holdings of between 1.8 percent and 5.6 percent of GDP, for the typical country examined.”
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For more information, contact at the Institute for Public Accuracy:
Sam Husseini, (202) 347-0020; or David Zupan, (541) 484-9167