11:33 PM Apr 22, 1996

WOLFENSOHN SAID AT A SATURDAY PRESS CONFERENCE

SAYS HE EXPECTS THAT A FIRM DEADLINE FOR THE ADOPTION OF A NEW DEBT COUNTRIES WILL BE SET AT THE BANK'S ANNUAL SPRING MEETING THIS COMING WEEK.

His remarks follow an increasingly gloomy atmosphere surrounding a joint plan by the Bank and the International Monetary Fund (IMF) to reduce the debt burden of the mostly African countries.

"My hope is that there will be a time limit put on this by the conclusion of the meeting," Wolfensohn said at a Saturday press conference here.

He stressed that despite carping about the plan between Bank and Fund officials and by finance ministers from the Group of Seven (G-7) wealthy nations, the fact that the initiative was been formally proposed was a "very significant step forward."

"I'm confident that we'll get something done," he stressed.

Wolfensohn's remarks came as finance ministers and central bankers arrived here for the annual spring meetings of the World Bank and the IMF. The Group of 24 (G-24) -- which represents developing nations at these meetings -- is meeting this weekend, as is the Group of 10 (G-10) industrialised nations, to press their concerns about the international financial situation.

Meetings of the Interim Committee and the Development Committee -- the policy-making bodies of the IMF and the World Bank -- are to take place beginning Monday.

The item of greatest interest on the agenda is the multilateral debt initiative and the Bank-Fund plan for reducing the debt burden on what the two institutions call "severely indebted low- income countries," or SILICs.

Over the last several years, SILIC governments and development non-governmental organisations (NGOs), such as Oxfam, have said the debt burden on many of these nations has become unsustainable and were making it impossible for them to attract investment capital.

While their bilateral donors -- mainly the G-10 -- have used the Paris Club to reduce up to two-thirds of their bilateral debt, until now there has been no legal way to reduce the debt owed by them to the international financial institutions (IFIs).

Currently, half of many of these countries' debt servicing goes to the IFIs, a fact which has made it increasingly urgent to deal with the problem.

After becoming Bank president 10 months ago, Wolfensohn pledged to work with his IMF counterpart, Michel Camdessus, to come with a joint plan.

Their initiative, details of which have leaked out over the past week, calls for between seven and eight billion dollars in new assistance for the 20 countries whose debt, in the opinion of the two agencies, has become unsustainable.

In Africa, these include Burundi, Cameroon, Congo, Cote d'Ivoire, Ethiopia, Guinea-Bissua, Madagascar, Mozambique, Niger, Rwanda, Sao Tome-Principe, Zambia and Zaire. In the Americas, the eligible countries include Bolivia, Guyana, and Nicaragua. In Asia, the one country which might qualify is Burma.

Under the plan, the World Bank would put some of the money it gains from repayments of loans into a special trust fund which would also include special contributions from donor countries.

The IMF would work through its Enhanced Structural Adjustment Facility (ESAF), which provides no-interest loans to the world's poorest countries implementing economic reform programmes, ESAF now faces a financing gap of about 1.5 billion dollars between 1999 and 2004.

If that gap can be overcome by additional donor contributions or the sale of a small portion of the Fund's 40 billion dollars in gold reserves, ESAF will become self-sustaining, according to Camdessus.

A third element of the plan calls for the Paris Club of donors to agree to increase the percent of outstanding debt it can forgive to 90 percent.

In exchange for all of this, the eligible country would have to implement a rigorous structural adjustment programme for at least three and up to six years, depending on how far along it already is in the process of economic reform, before it can receive relief.

Already, however, the plan has provoked complaints, notably from among the seven major industrialised nations, who say that it puts too much of the burden on them and too little on the international financial institutions.

Specifically, some donors have expressed unhappiness about having to provide debt forgiveness of 90 percent before the IMF or the Bank kick in their own relief, while others say it is too much to ask the donor countries to contribute any new money.

"What we do support is the World Bank and the IMF doing this with their own resources, rather than calling on the member countries to donate additional resources for that purpose," U.S. Treasury Secretary Robert Rubin said here this week.

Some NGOs have also complained that debt relief should be extended beyond the 20 countries already identified and that the relief should be accorded much earlier in the process of adjustment.

"What is most troubling about the current proposals is that they require countries to commit to six additional years of structural adjustment policies -- the same policies that have devastated the social sectors and added to gross inequalities everywhere they've been applied -- before even being considered for any kind of multilateral debt relief," says Soren Ambrose, spokesman for the '50 Years is Enough' Campaign, a NGO coalition which opposes Bank-Fund adjustment programmes.

But Wolfensohn insisted Saturday that this was not accurate, noting that both the time lines and the contributions remain to be decided.

"You shouldn't underestimate (the) achievement" of developing a joint Bank-Fund plan, he said. "So far, no one has attacked the principle (of multilateral debt relief). The debate has now shifted to how you're do it."