Third world debt relief may be in sight according to the Economist. The authors argue that debts owed by the world’s poorest countries are unpayable. These nations are servicing their obligations, but only because debtor institutions offer them new grants and loans to help them repay their old ones.
This recycling of funds keeps up appearances on the balance sheets of the International Monetary Fund (IMF) and World Bank, but it is complicated and inefficient, consuming the time and energy of creditors and debtors alike.
A new G-8 proposal would stop this cycle. The authors report:
Under the proposal, the institutions will stop collecting debts and cut the flow of new money to these countries by the same amount. Moreover, the World Bank has successfully convinced its donors to compensate it for writing off loans it could not have collected in full. However, this creates a new set of problems, say the authors:
Source: Bad loans made good — The IMF and World Bank meetings, Economist, October 1, 2005.
For text (subscription required): http://www.economist.com/displaystory.cfm?story_id=E1_QQGNSPV
For more on International:http://www.ncpa.org/pi/internat/intdex1.html”
FMF Policy Bulletin/ 08 November 2005
