Poor Countries Worry About Receiving Aid As the West Moves to Help the Soviet Union
AMONG developing countries at the recent meeting of world financial leaders here, India was the lucky one.While India basked in plaudits for financial responsibility and pledges of new funding, many developing nations felt their needs and efforts at free-market reforms overshadowed by pledges to help the Soviet Union rebuild its economy. "The debt overhang is still an albatross around the neck of many African countries," cautioned Tanzanian Finance Minister Steven Kibona in a reminder echoed by officials across the third world. The World Bank and International Monetary Fund (IMF) tried to reassure developing nations that the Soviets would not continue to dominate center stage. Lewis Preston, World Bank president, said aid to the Soviet Union would not be "a diversion from our existing clients." However, the Soviet Union wasn't the only nuisance for developing-world finance officials. Facing growing capital demand amid a savings scarcity, international finance officials signaled a new impatience with hefty third-world defense buildups and called for a reallocation of military spending to civilian goals. Combined with a cutback in agricultural subsidies in the developed world, that could help meet a projected worldwide demand for $100 billion in additional new capital next year, the IMF said. Despite the advise on defense spending, IMF and World Bank officials said defense cutbacks would not become a condition for assistance. Still, the Group of 24 developing countries, in a communique, testily told the financial institutions to mind their own business. Developing countries, as usual each year, called for a new issue of special drawing rights, an international credit created by the IMF. The United States and other industrial nations say a new issue would be inflationary and must be accompanied by more third-world enthusiasm for free-market reforms. US officials resisted a British initiative to retire the official debt of the most desperate countries. Instead, the 10 wealthiest countries urged private creditors to help needy nations. Already, some developing nations, such as Mexico and Venezuela, are turning more to private capital than to the World Bank and the IMF. Still, private credit remains out of reach for all but the most creditworthy, bankers say. "Major banks are being very selective in their credit extensions," says an official with a large American bank.