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U.S. calls on G8 to aid in Asian turmoil

Peter Morton, Washington Bureau Chief

Financial Post, Daily edition, Thursday, January 15, 1998

The U.S. is urging Canada and other industrialized countries to attend a special meeting on Asia's financial crisis.

The U.S. Treasury Department said yesterday it wants a meeting within the next month to develop ``new initiatives'' to bring stability to the region.

``The United States plans to convene a meeting of finance ministers from key countries around the world to explore implications of the current financial situation in Asia and ways to deal with these challenges,'' a Treasury spokeswoman said.

Such a meeting was first proposed by President Bill Clinton at the November summit of Asia-Pacific leaders in Vancouver.

Talks on the Asian crisis may be tied to those slated by finance ministers from the Group of Eight countries (Britain, Canada, France, Germany, Italy, Japan, Russia and the U.S.) in Britain in late February.

The U.S. administration and the International Monetary Fund are coming under increasing criticism for their handling of the crisis.

IMF managing director Michael Camdessus denied reports in yesterday's New York Times the IMF was partly responsible for the near-collapse of Indonesia's banking sector.

The main problem, Camdessus said, was that Asian governments were reluctant to believe their economies were in serious trouble. ``It takes time for governments to perceive the magnitude of the problem.''

The U.S. Congress also plans to hold hearings about the U.S. role in the Asian bailout. Treasury Secretary Robert Rubin and Federal Reserve chairman Alan Greenspan will testify before the House of Representatives banking committee Jan. 30.

The U.S. pays about 20% of the IMF budget. So far, the fund has lent nearly US$120 billion to troubled Indonesia, Thailand and South Korea.

The U.S. part of the bailout still requires congressional approval, and a key Democrat, Representative David Bonior, has threatened to oppose any U.S.-paid bailout of Asian countries.

Camdessus also said Indonesian President Suharto will sign a new deal for economic reforms, but without some more punishing aspects.

``The immediate priority is to arrest and turn around the tremendous loss of confidence, and stabilize the market through monetary discipline and a dramatic acceleration of long overdue structural reforms,'' he said.

The recovery plan calls for Indonesia to boost interest rates to support the rupiah but it does not deal with US$80 billion in foreign debt owed by Indonesia's private sector.

The IMF has backed away from its original demand the Suharto government bring in a 1% budget surplus by April 1, something that could cripple the already troubled economy.

Suharto has shelved 15 government-sponsored projects, although it is not clear yet whether he will axe a national car-building project being launched by one of his sons.

Source: This information is provided by the Financial Post.

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