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UK's Chancellor Gordon Brown urges use of IMF gold for 100% debt relief

Posted to the IUF website 20-Dec-2004

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NEW YORK, Dec 17 (Reuters) - Gordon Brown, U.K. Chancellor of the Exchequer, repeated his proposal on Friday that developing nations' debt to the International Monetary Fund be written off by revaluing the institution's gold reserves.

Brown's proposal has fallen on deaf ears among many global policymakers, leading some analysts to believe he would back down. But in a speech to the Council on Foreign Relations in New York, Brown again gave his backing to the idea, which he said would be part of a broader drive to wipe out all developing countries' multilateral debt.

"I suggest that IMF debt write-off be financed using IMF gold and that donor countries make a unique declaration that they will, on this occasion, repatriate their share of World Bank and African Development Bank debts owed by eligible developing countries," he told the CFR. It will take a "bold act" to offer 100 percent relief for the total $80 billion debt owed to these three institutions, Brown said.

Under a 1971 agreement, most IMF gold is valued at just $40 to $50 an ounce, about a tenth of the current market price of more than $438 an ounce . The IMF holds 103.4 million ounces of gold. Britain wants the bullion revalued to release billions of dollars for debt relief.

Brown said rich nations should make a "historic" offer in 2005 to wipe out the debts that cripple developing nations. This should include increasing aid, tearing down trade barriers and tariffs and opening up their markets. To this end, his plan for a temporary International Finance Facility (IFF) would raise an extra $50 billion a year by issuing bonds using donors' long-term funding commitments as collateral -- effectively securitizing national aid budgets.

Brown said these measures are urgently needed if the Millennium Development Goals of halving world poverty, reducing infant mortality by two-thirds and providing primary education to every child by 2015 are to be met. At present, these goals will not be met for at least 100 years, Brown said. Brown also said that developing nations must do their bit too, like increasing transparency in government, legal institutions and financial and economic spheres.