[Shadow_Group] Fw: Canada Resists British Plan to Revalue IMF Gold Reserves

[shadowgroup-l at lists.resist.ca]

----- Original Message ----- 


http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20041004/RWORBANK04/TPBusiness/?query=IMF<http://www.theglobeandmail.com/servlet/ArticleNews/TPStory/LAC/20041004/RWORBANK04/TPBusiness/?query=IMF> 
Canada Resists British Plan to Revalue IMF Gold Reserves


By Barrie McKenna
The Globe & Mail, Toronto, Monday, October 4, 2004

WASHINGTON -- Canada has thrown up a major new roadblock to a debt-cancellation deal for the world's poorest countries by vigorously resisting a British plan to inflate the value of the International Monetary Fund's vast gold reserves.

Finance Minister Ralph Goodale said Ottawa wants guarantees the plan won't undermine gold mining companies in Canada and elsewhere. He and other finance officials from around the world met for three days of talks in Washington, where the World Bank and the International Monetary Fund were holding their annual meetings.

"We need absolute assurances that [revaluing the gold] should not be disruptive to the international gold industry or international markets for gold," Mr. Goodale told The Globe and Mail.

"It must be handled in a way that does not cause disruption to the gold mining industry in Canada."

Mr. Goodale made the comments after the IMF's top policy-making group failed on the weekend to finalize a deal to cancel billions of dollars worth of debt owed by the world's poorest countries.

Also at the meetings, officials expressed growing concern that $50 (U.S.)-a-barrel oil could unravel an otherwise improving global economic outlook.

Coming into the twice-yearly gathering, there had been growing optimism among aid groups that the world's wealthiest countries would strike a new debt-relief deal, possibly even agreeing to wipe out 100 percent of the debts.

But a communiqué released Saturday by the IMF's international monetary and financial committee made no mention of the gold plan or debt cancellation. On Friday, Canada and other Group of Seven industrialized nations pledged only to report back by year-end on the progress of their debt-relief efforts.

"The committee has decided that further work on this must be done so that we have a proper framework for debt sustainability," said British Finance Minister Gordon Brown, who chairs the panel.

Speaking to reporters, Mr. Brown said there is now a "growing consensus" that 100-per-cent debt cancellation should be the ultimate objective. But working out details could delay a final agreement into 2005, he conceded.

After the meeting yesterday, Mr. Brown, along with South African Finance Minister Trevor Manuel, flew back to Ottawa with Mr. Goodale for a dinner meeting with Canadian Prime Minister Paul Martin to discuss African debt.

As with previous meetings, the sometimes divergent interests of countries at the table frequently intruded on efforts to achieve broader common goals.

As one of the world's leading gold producers, Canada could be a significant loser if a move by the IMF to recalculate the value of its gold reserves at prevailing market prices destabilizes the market. The IMF values its reserves at a fraction of the market price, which is now at roughly $420 an ounce.

Anything causing more gold to go on the market would depress prices and hurt the profitability of gold-mining companies, which pay significant royalties and taxes.

Some critics have suggested that Canada is being hypocritical because its own central bank has been busily dumping gold reserves in recent years, and that also has a dampening effect on the price of gold.

The IMF's 103 million ounces of gold is one of the biggest stashes of the precious metal in the world.

Several countries expressed concern that the gold-revaluation plan could undermine the long-term financial stability of the IMF and the World Bank.

Canada was far from alone in its opposition to elements of a debt-relief deal. France and Germany, for example, have expressed reservations about U.S. proposals to put the elimination of Iraq's $120-billion debt on a fast-track ahead of many needier countries.

Mr. Goodale pointed out that nearly all countries at the meetings agreed that anything they do collectively must involve more than just paper shuffling -- that it must put cash in the hands of poor countries. Debt relief should also treat all countries equally, encourage economic reforms, and not undermine the stability of the IMF and its sister organization, the World Bank, he said.

Mr. Goodale acknowledged that progress in global financial talks can sometimes be "slow and painful" -- a frustration often expressed by Mr. Martin during his long tenure as finance minister.

Nonetheless, Mr. Goodale suggested a little work was done at the meetings toward a new debt-relief regime.

He also said that Canada's objections to the gold-revaluation plan were largely "technical," and could be overcome pending further study.

The other major item on the agenda of the weekend meetings was the surprising recent increase in U.S. crude oil prices, which closed Friday above $50 a barrel for the first time.

The IMF pledged to come to the aid of countries battered by higher oil prices. G7 finance ministers called Friday for oil-producing countries to boost output, and appealed for more efficiency by consuming countries.

"Downside risks to the recovery have recently increased, stemming in part from the increase and volatility in oil prices," the IMF said in a statement released Saturday. "These reflect geopolitical tensions, strong global demand, and market dynamics. The IMF stands ready to assist members that may be adversely affected."

Britain's Mr. Brown told reporters that the world needs oil price stability and "reasonable prices."

Meanwhile, Mr. Goodale warned that it could be at least two to three months, and perhaps longer, before the United States reopens its border to Canadian cattle and certain beef products. Mr. Goodale, who raised the issue during a meeting Saturday with U.S. Treasury Secretary John Snow, said the two sides have agreed to sit down for talks in a "couple of months."


 

---------------------------------------------------------------------------------------------------------------
"I am only one, but I am one.
I cannot do everything, but I can do something.
And because I cannot do everything, I will not refuse to do the something that I can do.
What I can do, I should do. And what I should do, by the grace of God, I will do."
---Edward Everett Hale 

 
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://lists.resist.ca/pipermail/shadowgroup-l/attachments/20041009/4ee70294/attachment.html>