CONFIDENTIAL
10
should act as trustee for funds from donor governments, and is also subject to
agr ent on the price for the debt. The commercial banks have reportedly rejected
Costa Rica's financing proposals which were presented in early June.
Club task force visited Cuba from 8 July.
The Paris
24 The meeting of IDB Governors in June failed to reach agreement on the conditions
for the Seventh Replenishment and formal negotiations will not now resume until
15 October in Guatemala. The dispute centres on the voting structure in the
Executive Board, with the US continuing to insist on increased power to delay or
veto loans in return for a substantial replenishment with paid-in capital. In the
absence of agreement IDB management have proposed that the IDB proceeds with $3 bn
of loan approvals planned for this year, with resources provided from funds carried
over from 1986 and increased borrowing against the stock of callable capital.
South and East Asia
25 At its annual meeting in The Hague in June, the Inter-Governmental Group on
Indonesia agreed to increase funding for 1987-88 to $3.15 bn (20% more than the
1986/87 figure and 25% more than the World Bank had recommended). The scale of the
increase, together with the high proportion of untied funding, was taken by the
Indonesians as further evidence of international confidence in the present economic
strategy. The June OPEC accord in Vienna also provided the Indonesians with good
news. The production quota for H2 1987 has been raised from 1.133 mbd to 1.19 mbd,
and the $18 p/b price appears to be holding: the authorities remain confident that
the current account deficit will be substantially reduced from the 1986 figure of
$4.1 bn. In response to a net outflow of approximately $1.1 bn from Indonesia over
the past two months, some rupiahs 800 bn ($500 mn) of deposits have been withdrawn
by four large state-owned firms from the commercial banks, to try to force a major
sell-off of dollars. As a result overnight rates jumped to 40%, and $800 mn is
reported to have been switched back into local currency. Firmer oil and commodity
prices continue to assist the nascent recovery in the Malaysian economy, and the 28
target for real GDP growth in 1987 looks increasingly realistic.
26 The Philippines government has agreed to drop demands for better terms on its
$13.2 bn rescheduling package in return for undertakings by some creditor banks to
participate in the country's debt-equity conversion programme. The authorities now
appear convinced that they will save much more through sales of Philippine
Investment Notes (PINs) than the estimated $5 mn they would have saved had they been