CONFIDENTIAL
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residual risk to official creditors, while rising proportionately to that of other
creditors, would fall in absolute terms. Resistance to any suggestion from the banks
that the public sector should be assuming the bulk of the risk on new lending (and
therefore an increasing share of a growing stock of debt) is an essential part of the
current strategy. Nevertheless, recent trends in net lending suggest that in
practice a transfer of risk to official creditors has been taking place (see September WDR). The preferred creditor status of the Fund and Bank (although not inviolable) has given some protection, but Paris Club creditors have had to stand in line with
(and in some cases behind) the banks.
5 The importance attached by official creditors to conditionality was rather undermined by the World Bank's announcement of new loans to Argentina on conditions
that fall far short of the programme targets being sought by the IMF. (The disagreement may give new impetus to the G-10 study of the respective roles of the
Fund and Bank in the debt strategy due to be completed next April.) The US
administration's later offer of a bridging loan to Mexico without strings or an
obvious take-out may only confirm the impression of the more cynical among debtors
that, when it comes to the crunch, conditionality binds only the unimportant.
faces a similar, if not so acute, conflict of parochial with wider debt strategy
interests in the case of Nigeria. There, offering the carrot of additional aid in
exchange for the debtor's adherence to a reasonably strict Fund programme may
nevertheless succeed in preserving credibility.
The UK
6 At Berlin, Japan announced a watered-down version of the Miyazawa scheme which in effect would offer the facilities of the Fund for mounting bond-for-debt (defeasance)
swaps without official creditor guarantees. The offer of tied parallel financing to middle income debtors at below market rates with disbursements closely linked to a
The Fund programme is also on the table although the amounts available are unknown. initiatives can be seen as part of a general attempt to broaden Japan's influence in international financial relations (viz, recycling, higher relative IMF quota). The
ldc claims of Japanese banks, who, because of tax and regulatory constraints, have less scope for disposing of their portfolios than other banks, now represent an increasing share of total ldc debt, so the Japanese also have their own domestic
interests in bolstering the existing strategy.
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