Finance ministers OK massive aid to poor nations

September 25, 1990|By Stephen E. Nordlinger | Stephen E. Nordlinger,Washington Bureau of The Sun

WASHINGTON -- Finance ministers from throughout the world agreed yesterday to mobilize billions of dollars to shore up poor nations threatened by the Persian Gulf crisis, with a large part going to the front-line nations of Jordan, Egypt and Turkey.

Administration officials said $12 billion to $14 billion would be needed to bolster the economies of those three nations through the end of the year, far more than the $10.5 billion estimated three weeks ago.

As the chief reason for raising the estimate, officials cited skyrocketing oil prices -- which climbed $2.82 a barrel in New York yesterday to reach $38.25, the highest level in almost 10 years.

The administration fears that leaks will occur in the economic embargo against Iraq if the economies of Jordan, Egypt and Turkey are allowed to fall apart, driving business interests to undertake clandestine trade with Iraq.

Concern is also rising that the emerging democracies of Eastern Europe will be severely damaged by the climbing oil prices, delaying their efforts to adopt market-oriented reforms. Those countries will lose their access to low-cost oil from the Soviet Union in January.

Officials said the $20 billion in financial aid commitments the administration has received from Japan, West Germany and other industrialized nations, as well as from Kuwait and Saudi Arabia, appears to be insufficient to cover the cost of the military buildup and needed financial aid to the front-line and poor nations.

Those nations have been jolted by trade losses, higher oil prices and the huge loss of remittances from hundreds of thousands of workers who have fled Iraq and Kuwait.

Jordan, which had enjoyed close trade relations with Iraq, has been crippled, with the World Bank estimating its economy will shrink by 30 percent. Egypt and Turkey as well have been severely hurt by the loss of export markets.

In a report to the finance ministers, the World Bank said 60 nations would be "seriously affected" even if oil prices were to drop to $25 a barrel later this year, rising slightly to $29 a barrel next year.

Finance officials, led by Treasury Undersecretary David C. Mulfold, are to meet tomorrow to work out more precise figures on aid as well as the mechanisms for its distribution.

The officials will represent Japan, West Germany, Britain, France, Canada, Italy, Saudi Arabia, the United Arab Emirates, the exiled Kuwait government, South Korea and the 12-nation European Community.

They are in Washington to attend the annual meeting of the 152-nation International Monetary Fund and World Bank. President Bush is to address the gathering today.

Following an all-day meeting Sunday, in large part devoted to the Persian Gulf crisis, the fund's 22-member policy-making group, the Interim Committee, said yesterday thatthe IMF should respond "on an expedited basis to present difficulties" facing the poor nations.

"We recognize the urgency of the needs of the people who are affected," Canadian Finance Minister Michael Wilson, chairman of the committee, told a news conference. "The urgency is stated, the framework is provided, and now it is up to the IMF management to respond."

Michel Camdessus, the IMF managing director, said the emergency aid, to come from existing programs, could start flowing early next year, about the same timetable announced last week by Barber B. Conable, president of the World Bank. No specific figures have been attached yet to bank and IMF aid.

Differences have developed between the United States and some of its allies on a mechanism for distributing the money.

The administration favors an international pool of money and wants the United States to maintain as much control as possible to coordinate the aid.

But Japan and West Germany said the IMF and World Bank should be closely involved so that use of the money would follow previously imposed guidelines aimed at market-oriented reforms.

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