PERSONAL AND CONFIDENTIAL
4.
There have been no major changes affecting the fortunes of middle income debtors over the last few weeks. Midland and now Lloyds have followed Natwest's example in increasing provisions against bad debt. Barclays will probably soon follow suit. The Argentine commercial bank package has been virtually completed, with banks taking advantage of the incentive payment to come in quickly. Disappointingly, none opted to convert its exposure into exit bonds, but I am sure that the idea is not dead: it is simply that more thought needs to be given to making such bonds more attractive. Brazil seems to be edging towards an agreement with the IMF which will open the way to further rescheduling but, disappointingly, Nigeria, on which we have expended much political capital, is still some way from reviving its IMF programme. The Jamaican Prime Minister has meanwhile produced a debt relief initiative of his own, which will undoubtedly need to be discussed
at CHOGM.
5. Our dispute continues with the Treasury about whether it is worth standing on our own when weak proposals are put to the IMF or IBRD Boards. In the case of an IBRD Structural Adjustment credit for Zaire the Prime Minister ruled that we should be consistent in the IBRD Board (where the Secretary of State casts our vote) with our previous abstention in the IMF Board, where the Chancellor decides our vote. The Secretary of State had since discussed the more general issue with the Chancellor. He continues to believe that little point is served in our getting out in front without some other G5 members' support because it neither affects the outcome of the IMF Board discussion nor has a decisive influence on Fund staff approaches to other programmes. The Chancellor believes that we should stand up for our principles, and that in due course others will see that we are right. Rodric Braithwaite hopes have a meeting with Sir Geoffrey Littler after the holidays to discuss this problem further.
6. In the meantime, debt has
debt has once again been through the mill at ECOSOC with no clear result, and is a major focus for attention at UNCTAD VII which is now in its last week. So far UNCTAD has produced no surprises on debt. We expect trouble over aid targets and the
Common Fund for commodities; but these lie happily outside the scope of this letter.
Yours sincerely
TL Richardson
Economic Relations Department WH 413
270 2670
JD2ADP
PERSONAL AND CONFIDENTIAL