What? Go vote down an EU constitution or something and be bitter about Europe.
George Smiley
quote:
Originally posted by Yoepus
What? Go vote down an EU constitution or something and be bitter about Europe.
The chances of me gettin to vote on the EU Constitution anytime soon are slim to none!
Anyway, what has that got to do with the UK's Africa plan and the Americans wanting to see the dead pile up in Africa?
Yoepus
quote:
Originally posted by George Smiley
The chances of me gettin to vote on the EU Constitution anytime soon are slim to none!
Anyway, what has that got to do with the UK's Africa plan and the Americans wanting to see the dead pile up in Africa?
Because it proves you Europeans are all talk an no action.
If you want something done you go to the USA to get it done.
If they don't agree they're stupid.
Then you might actually attempt to do it yourself, the people aren't for it, and you realize it was a stupid idea.
Dervish
quote:
Originally posted by Yoepus
Because it proves you Europeans are all talk an no action.
If you want something done you go to the USA to get it done.
Hahah your soooooo open with it that comment I could totally use that in a trival way.
But I'll resist the urge.
The only thing I'm worried about is the "giving from the poor of a rich country to the rich of a poor country" i.e. our taxes/budget getting used to give people new planes and such like.... I remember a case where a country got 20mil written off, next week the local dictator got himself a 20mil private jet...
EDIT:
quote:
Britain has granted Tanzania £45m for poverty reduction.
The decision followed talks between Britain's International Development Minister Clare Short and Tanzania's President Benjamin Mkapa in the administrative capital of Dodoma.
and then.....
quote:
The World Bank has asked Tanzanian President Benjamin Mkapa for an explanation after he ordered a £14m personal jet.
On another note Clare Short seems to everything she touches up (even quiting.... :rolleyes: ).
George Smiley
quote:
Originally posted by Yoepus
Because it proves you Europeans are all talk an no action.
If you want something done you go to the USA to get it done.
What?! Jesus Yoepus sometimes you can be ing dumb
BadBadNeil
Perhaps the goals shouldn't just be giving them money and food, which has been done for over 30 years with no real goal in mind. In situations like Darfur the goal should be to stop the government from supporting a militant organization who burns homes, kills, and rapes citizens. Perhaps then money and food wouldn't be needed for 3.5 million refugees and it could be used towards real needs, like modernizing the african people so they can finally help themselves rather than relying on handouts for the rest of their lives.
"More than 315 million Africans live on less than $1 a day. "
Well there is the problem right there. Cut tariffs on their exports, give buying incentives, help with business development. They need tangible things that will increase their wages and standard of living. When this comes then they will be able to afford their own food, clothing, medical care, etc.
George Smiley
quote:
Originally posted by BadBadNeil
Perhaps the goals shouldn't just be giving them money and food, which has been done for over 30 years with no real goal in mind. In situations like Darfur the goal should be to stop the government from supporting a militant organization who burns homes, kills, and rapes citizens. Perhaps then money and food wouldn't be needed for 3.5 million refugees and it could be used towards real needs, like modernizing the african people so they can finally help themselves rather than relying on handouts for the rest of their lives.
Eu aid is distributed via the Contonou Agreement. The Contonou Agreement has five pillars, the first pillar is a political one...
quote:
PILLAR I: A POLITICAL DIMENSION
The Agreement puts greater emphasis on the political dimension which concerns all of the Agreement's objectives and operations and represents global commitments on the part of the ACP States.
The key elements of this pillar are as follows:
* political dialogue;
* peace-building policies, conflict prevention and resolution
In this field, the partnership will concentrate in particular on regional initiatives and on building local capacities. It also includes provisions to ensure that financial resources are not diverted from development objectives;
* respect for human rights, democratic principles based on the rule of law and transparent and accountable governance
These three elements are vital for the partnership and sustainable development. A new procedure has been developed for cases of violation of these elements, stressing the responsibility of the country in question;
* good governance
A new specific procedure has been drawn up. It will be applied in serious cases of corruption, not only corruption involving funds from the European Development Fund (EDF) but also, more generally, in any country where the EC has a financial interest and where the corruption is an obstacle to development.
quote:
"More than 315 million Africans live on less than $1 a day. "
Well there is the problem right there. Cut tariffs on their exports, give buying incentives, help with business development. They need tangible things that will increase their wages and standard of living. When this comes then they will be able to afford their own food, clothing, medical care, etc.
What exports?! At a guess I would say Africa's greatest export is food stuff, and the EU has CAP and most other countries also subsidise their farmers, so what difference would it make if they had their tarrifs cut? They need investment and that means economic reform which is not possible whilst every they have to spend money on loans they have paid of dozens of times over. I know what your saying about certain countries where the money is spent on stupid stuff for the President but the EU as I pointed out above has criteria to fullfill before giving aid. It also has a watch dog to see what the money is being spent on
zig
The American administration is to busy delivering freedom and democracy to Iraqi oil, and its costing a fortune, and that in a nutshell is the reason.
occrider
Opposition to this is nothing new. It's stemmed back to 1999:
quote:
Problems Posed by IMF Gold Sales
Lack of Transparency
According to recent GAO testimony before the Joint Economic Committee,6 many of the details of the gold sales proposal are "non-public. " Furthermore, in addition to its direct cost, the effects of the gold sales on IMF finances are very difficult to evaluate because of the obscurity of IMF financial statements which have proven confusing even to IMF officials in the past.
For example, as a lending institution, the IMF does not refer to its loans from its main lending account as "loans," but as "currency purchases." The central IMF budget is treated as a classified document, and separates usable from nonusable resources in IMF operations, a distinction that is not typically made in the public presentation of IMF financial accounts.
As noted, the details of the gold sales proposal, including even the amounts available for debt relief, are confidential. A complete and transparent analysis of the gold sales proposal on IMF finances is impossible because this would require comparison of the confidential information of the gold sales proposal to data in a classified budget. This lack of transparency means that Congress is unable to make a fully informed decision on the gold sales proposal in consultation with independent experts and academics.
Although the available public information about the proposal is very inadequate, enough information can be assembled to show that the proposed gold sales raise funds by absorbing part of the hidden gold reserve not shown on the IMF's balance sheet.7 These gold "profits" could then be invested in securities, and the interest generated used for debt relief. By tapping this hidden reserve, the proposal can be presented as a "free lunch" in that assets worth billions of dollars could be made available for IMF use without an apparent cost to anyone. However, at least from one point of view reflected in the IMF's own charter, most of the proceeds raised through the gold sales can be viewed as disguised contributions from major donor countries, though this fact is veiled in obscure IMF accounting and procedures.
These concerns about IMF gold sales were recognized in 1975 in a joint bipartisan statement by Senator Ribicoff (D-Conn.) and Senator Taft (R-Ohio):
Either the gold belongs to the IMF, or it belongs to the member states,
which contributed the gold in proportion to their quotas. In either case,
the profits should be distributed to the member nations in proportion
to their quotas.
The IMF is not designed to be a relief agency, nor an investment
agency. If the nations owning stock in the International Bank for
Reconstruction and Development [World Bank] wish to increase their
subscriptions, or to increase their bilateral aid, out of IMF gold sale profits or
with any other funds, then well and good. However, such a decision should
be taken openly, by each nation, unencumbered by an artificial link between
the question of aid and the role of gold in international payments.8
Taxpayer Expense
As noted, IMF gold holdings reflect member contributions to, and transactions with, the IMF at a time when gold had a central role in the monetary system. After the collapse of the Bretton Woods system, gold was demonetized, but disagreements about the role of gold were reflected in a compromise amendment to the IMF charter in 1978 that severely limited the IMF's use of gold but permitted certain gold sales,9 including what IMF documents refer to as "restitution." Dictionaries define restitution as "restoring to the rightful owner of something that has been taken away, lost, or surrendered." While significant restitution of IMF gold to members in the near term has not been proposed, restitution does provide a useful benchmark of the opportunity costs imposed by alternative proposals.
Under IMF rules, the IMF could restitute gold to member countries at a price currently equivalent to $48, according to a formula based on member contributions in 1975. Under this formula the U.S. would receive 23 percent of the amount of any gold restitution. For example, if 10 million ounces were restituted, the U.S. would receive 2.3 million ounces. Under current market conditions, the U.S. would pay $110 million for this gold (2.3 million ounces multiplied by $48 per ounce), but then receive an asset worth $592 million, leading to a total net gain of $482 million.10 Restitution is a useful benchmark to use in evaluating other forms of gold sales in terms of potential costs to the taxpayers of the U.S. and other affected nations.
As noted, the gold held by the IMF is valued on the IMF balance sheet at equivalent to $48 per fine ounce, relative to a current market price of about $257. The undervalued IMF book value of gold creates a hidden IMF gold reserve of over $21 billion (see graph below). The recent IMF gold sales proposal would tap part of this hidden reserve to finance the debt restructuring plan. If 10 million ounces of gold were sold for about $2.6 billion at current market prices, about $2.1 billion of the total would be generated by the value of gold not shown on the balance sheet. This is the hidden cost to donor countries in terms of foregone profits. The effect would be the same if some other mechanism were used to tap into the gold reserve to finance debt relief.
Though the proposal has been presented as something of a "free lunch" by its sponsors, the hidden or obscured nature of its costs do not make them nonexistent. By tapping the value of gold not appearing on the IMF's balance sheet, these costs can be obscured, but once identified, these costs are quite significant. Relative to the restitution benchmark, the proposed gold sales will cost the U.S. and its taxpayers $482 million. For every billion dollars of IMF gold sales not in the form of restitution, the U.S. cost is $187 million.11 Furthermore, in addition to the proceeds from the gold value not on the balance sheet, the capital value of the gold, or $48 per ounce, goes directly to the main IMF account, the General Resources Account (GRA).
Potential taxpayer expense is an important issue especially in light of the highly concentrated financing of the IMF as a whole. The U.S. already provides 26 percent of the IMF's $195 billion of usable contributions; the G-10 countries as a whole provide 77 percent of the usable resources for IMF operations (see graph below). Many of these same nations will again make another disproportionate contribution if the proposed IMF gold sales were approved.
It is interesting to note that the remaining 171 members of the IMF contribute only 21% of its usable resources. Nearly half of IMF member nations maintain little or no reserve positions at the IMF. Many of these nations make required hard currency contributions to satisfy IMF membership requirements, and then immediately withdraw these contributions without affecting their voting rights. In short, the voting shares of countries has little relation to their financial participation.
IMF Loan Exposure
As an "ultimate reserve," IMF gold sales must be viewed in the context of the IMF's finances and lending policies. The lack of diversification in IMF lending, including a heavy concentration in certain countries that are questionable credit risks, is not very well known. As of April 30, 1999, about 70 percent of IMF outstanding loans from the IMF main account were owed by the IMF's five largest borrowers.12 Russia and Indonesia together account for one-third of all outstanding credits. Neither Russia nor Indonesia is regarded as a very good credit risk by international credit rating agencies. The pie chart below shows major IMF borrowers:
It may be argued that any concerns about IMF loan exposure are overstated and that historically the IMF has not experienced significant defaults. However, the lack of IMF transparency and de facto debt rescheduling make it difficult to empirically evaluate the past or present problems. Furthermore, the changes in the nature of IMF lending and the relaxation of loan limits have led to a very different current situation that is unprecedented.
Past guidelines used by the IMF had restricted the level of borrowing to a nation's quota level (100 percent of quota). This policy was presumably intended to promote loan diversification and limit IMF donor exposure. However, since these guidelines were relaxed, IMF loans may rise as high as several hundred percent of a borrower's quota contribution (around 500 percent in the case of Korea). Over its entire history, it is doubtful that the IMF has ever had such a sizeable proportion of its outstanding credit owed by such large and dubious credit risks, at least one of which has had to borrow from the IMF for the purpose of servicing its IMF loan. Thus, it is reasonable to question whether further erosion in the financial position of the IMF is desirable at this time by liquidation of reserves that could help cover potential loan losses and help create the confidence of its ability to do so.
Underlying the concentration of IMF lending to dubious credit risks is a major change in the nature of IMF lending. Over the last few decades, the IMF has transformed itself from a lender for balance of payments purposes to a longer-term lender for development and economic restructuring. This transformation reflects the collapse of the Bretton Woods system and the search for a new mission to justify IMF activities, but it also entails potentially greater risks. Recent IMF borrowers have broader and deeper systematic problems than the kind of balance of payments pressures financed by the IMF in the previous era. This evolution entails the potential for higher risk from longer loan maturity, type and use of loans, and the credit risk of borrowers. The graph below documents the trend in IMF lending since the collapse of the Bretton Woods arrangement.
The drift of the IMF towards becoming another development lender similar to the World Bank raises a number of important policy issues regarding the IMF's finances. The fact that IMF gold holdings could act as a loan loss reserve suggests that the greater risks of recent IMF lending should be balanced by retention of the gold reserve, at least for the foreseeable future.
Furthermore, given the changing view of gold by official institutions, the current proposal can be seen as a precedent for similar IMF gold sales in the future. This could lead to further pressures to erode more of the gold reserve in a way that is not in the interest of the taxpayers of donor countries.
The proposed gold sales would also enhance moral hazard in several ways. The perception that gold sales are something of a "free lunch" may ultimately encourage other IMF borrowers to favor or expect gold sales to relieve their debt burdens. IMF borrowers from the main General Resources Account (GRA) who are experiencing severe economic setbacks or difficulties may also come to expect some measure of debt relief financed by further gold sales.
Gold Sales and Debt Relief
Part of the proceeds from the IMF gold sales of the 1970's financed the Structural Adjustment Facility, later to become the Enhanced Structural Adjustment Facility (ESAF), a development lending program charging interest rates typically as low as 0.5 to 1 percent. The creation of this loan program marked the beginning of an important transition in the evolution of the IMF from its previous monetary role at the center of a fixed exchange rate system into a major lender for development and structural adjustment projects. By the 1990s, a large portion of IMF lending was devoted to various large-scale economic restructuring purposes, which were very different in nature from lending to bridge temporary balance of payments problems.
Unfortunately, the official development lending of which ESAF was a part seems to have become more of a hindrance than a help to many of the poor borrowing countries. The IMF recognizes that the total debt burden of many countries is larger than many of these borrowers are willing or able to service, and so the IMF has agreed to assist in financing the HIPC initiative. To help do so, the IMF would seek contributions from members and if these did not suffice, the IMF would attempt to win approval for gold sales. However, this juncture also provides an opportunity to reevaluate this IMF-sponsored activity and whether it should be continued.
Given the current controversy over debt relief, it is reasonable to question whether it is necessary or desirable for the IMF to sponsor something like ESAF, a lending program more appropriately conducted by the World Bank. ESAF has become part of the official debt burdening underdeveloped countries, and it appears that the proceeds from gold sales could be used to help maintain its operations for the next several years. If ESAF were terminated, over $2 billion in ESAF reserves might be made available for other purposes, including debt relief. The termination of ESAF would be a desirable first step in refocusing the IMF on short-term crisis lending and away from a continued evolution into another development bank.
Alternatively, the implementation of the gold sales proposal would help gloss-over the failures of the development strategies fostered by the official institutions. This proposal would also continue, if not reinforce, the IMF's current drift into development and structural lending, not only in ESAF but in the lending from the General Resources Account (GRA) of the IMF as well. An alternative policy approach would be to terminate ESAF as an activity more appropriately conducted by the World Bank than by the IMF. ESAF reserves might be made available for debt restructuring and relief.
IMF Reform and Gold Sales
The IMF makes loans that are all heavily subsidized in varying degrees by the use of below market interest rates. For example, the standard IMF loan rate, currently about 3.8 percent, is considerably below the standard international reference rates such as LIBOR (London Interbank Offered Rate). The IMF's alternative premium rate for circumstances typical in bailout situations is currently about 6.8 percent.
The IMF's subsidized interest rates were one focus of the debate over the 1998 IMF appropriation in Congress. These interest rate subsidies became an issue because they distort price signals, are economically inefficient, and deepen already pervasive moral hazard problems. Much of the debate on these issues was stimulated by the IMF Transparency and Efficiency Act, a reform measure that provided for the use of market interest rates on all IMF loans. At the final stage of the legislative process, JEC staff was asked to assist in drafting reform language regarding IMF interest rates on loans used in typical crisis situations. This language, a version of which finally became law, stipulates that IMF interest rates under these crisis circumstances must be adjusted for risk. A formula for a minimum interest rate was provided for the sole purpose of preventing excessive discretion, and not for pegging the interest rate.
However, it remains unclear whether the IMF recognizes that the reform legislation requires an adjustment for risk, and does not replicate existing IMF interest rate formulae. In any event, as an alternative method of financing the IMF's HIPC contribution, the IMF could use a true adjustment for risk on affected loans, and thus generate higher interest earnings for debt relief. These premium interest rates would no longer be as deeply subsidized, and could provide the approximately $100 million annually for debt relief that is called for. Another option would be to slightly increase the deeply subsidized standard IMF loan interest rate.
It is to be expected that the IMF will resist such suggestions to reduce interest rate subsidies. Exorbitant interest subsidies are central to IMF's current operations. Additionally, the IMF would presumably argue that it is not desirable to use interest earnings from the main IMF account and channel part of it to ESAF for debt relief. However, the gold and certain interest, both already associated with the GRA, have been considered as sources of funding for debt relief, and an argument that only some proceeds arising from the GRA can be tapped but not others is not very persuasive. Furthermore, it appears likely that the funds raised by the gold sales would ultimately end up in the GRA.
A very small rise in IMF interest rates could easily cover the costs of the debt relief initiative, as could the $2 billion in reserves already in the ESAF. However, these options would require the IMF to modestly reform its practices or use its own resources, but neither of these choices seems to have been seriously considered. Instead, a veiled way of tapping more resources by the IMF at taxpayer expense through gold sales has been the preferred course.
Market Disruptions
For an agency that presents itself as a stabilizing force in international markets, the effects of the IMF's proposed gold sales have been especially ironic. In the wake of clear signals from central banks, especially the Bank of England, that the status of gold was changing and that market sales were looming, the IMF and other proponents persisted in the proposal for additional market sales. While sorting out the precise impact of this proposal and its endorsement by the G-7 finance ministries is not possible, there is a widespread view that the IMF proposal has been a negative force in the gold markets (see graph below). After the IMF proposal was finalized, gold market prices drifted below the costs of production in at least one key producer country.
As the IMF Treasurer's Department itself pointed out only last year:
An important element in considering potential gold sales by the
IMF is that such sales -- or even the announcement of an intent to sell
-- could, at least in the short run, cause the market price of gold to
fall. Various official holders of gold that value their stock at or in relation to
the market price may view with concern a sharp decline in the
value of their holdings because of an announced program of gold
sales by the IMF.13
Conclusion
Proposals for use of taxpayer resources by the IMF should be fully explained in a transparent manner. The failure of the IMF and Administration to provide details on the proposed gold sales to Congress and the public does not permit fully informed consideration of this policy and possible alternatives. A complete explanation of this or any similar proposal should be provided to Congress and the public by the IMF or the Treasury. The costs of the proposal, and all costs associated with the IMF, should also routinely be delineated and provided to Congress, instead of the official pronouncements that there are no taxpayer costs associated with participation in the IMF.
Congressional concerns about lack of IMF transparency and IMF interest rate subsidies are reflected in enacted reforms that have become law. Approval of the proposed IMF gold sales could have the effect of delaying needed IMF reforms and be viewed as sanctioning IMF loan subsidies and current development policy under the IMF and ESAF. On the other hand, rejection of the proposed gold sales would send a strong message to the IMF that its current policies of loan subsidization and development lending lack support in Congress, and that genuine IMF reform is required.
1 Treasurer's Department (IMF), Financial Organization and Operations of the IMF, Washington, D.C., 1998, p.117.
2 Ibid., p.117.
3 Ibid., p.118.
4 Ibid., p.117.
5 Testimony of Harold J. Johnson, Jr., and Gary T. Engel, General Accounting Office, before the Joint Economic Committee, July 21, 1999, p.21.
6 Transparency and the Financial Structure of the IMF, hearing of the Joint Economic Committee, July 21, 1999.
7 A footnote to the IMF balance sheet does note the market value of gold holdings.
8 Comments of Senators Ribicoff and Taft, The Proposed IMF Agreement on Gold, Report of the Subcommittee on International Economics, Joint Economic Committee, December 17, 1975, p.11 (emphasis added).
9 Treasurer's Department, op. cit., pp.109-110.
10 Assuming a price of $48 per fine ounce for 2.3 million ounces would generate $110.4 million in revenue to the IMF. The 2.3 million ounces of gold held by the U.S. would be worth $592 million, resulting in a net profit of $482 million. This is based on a market price of $257.30 per fine ounce as of August 4, 1999.
11 This figure is derived from the United States' share of $230 million (or 894,000 ounces) out of total restitution amounting to $1 billion. This $230 million of gold minus $43 million in payments to the IMF leaves a net value of $187 million.
12 International Monetary Fund Financial Statements, Quarter Ending April 30, 1999, p.10.
Originally posted by Yoepus
What? Go vote down an EU constitution or something and be bitter about Europe.
Trust a texan to back bush up.
I agree, why cant he do anything good for a foreign country? If there was lots of oil in the staving areas of Africa, Bush would blatently set up a food for oil program and you know it.
Yoepus
quote:
Originally posted by Jackson
Trust a texan to back bush up.
I agree, why cant he do anything good for a foreign country? If there was lots of oil in the staving areas of Africa, Bush would blatently set up a food for oil program and you know it.
There is a lot of oil in Africa.
Your ignorance is equivalent to that you accuse of your americans.
