September 14, 2004
OUT FROM UNDER ODIOUS DEBT:
U.S. Wants to Cancel Poorest Nations' Debt: Other Countries Concerned Proposal May Leave Global Lenders Short of Money (Paul Blustein, September 14, 2004, Washington Post)
Bush administration officials are advancing a plan to cancel billions of dollars in debt owed by some of the world's poorest countries, a move that could boost the United States' image abroad but which institutions like the World Bank fear could leave them strapped for cash.The plan, disclosed by members of aid groups and government officials, would dramatically increase previous debt relief programs for at least 27 poor nations such as Uganda, Bolivia and Ethiopia.
The Treasury Department, which is putting the plan forward for discussion at a meeting in Paris this week, contends that the current approach has been too slow and piecemeal to truly free those nations from the burden of repaying money borrowed from the World Bank, International Monetary Fund and other global lenders. The Treasury is also proposing that for very poor countries, all future IMF and World Bank assistance come in the form of grants rather than loans.
The initiative, which would require broad support from the 184 member nations of the IMF and World Bank to be implemented, is getting a frosty reception from the governments of other rich countries and from the staffs of the lending institutions. Some critics oppose such drastic debt relief for certain countries as unwise and unfair to other indebted nations that don't qualify. Other opponents contend that the administration is trying to accomplish debt relief on the cheap, without imposing any direct cost on U.S. taxpayers, by fobbing off the cost on institutions like the World Bank, whose aid-giving ability may as a result be curtailed.
They should have thought of that before they loaned them the money. Posted by Orrin Judd at September 14, 2004 12:34 PM
A bank in the real world that made as many loans that don't get paid back as the IMF and World Bank do would have gone out of business a long time ago. The loans to the these poor countries are like bank loans to poor customers where the bank keeps refincing the loan instead of acknowledging that the customer is probably not going to pay them back.
Grants for specific projects (dams, roadways, power plants) make more sense than loans with terms the countries can't meet.
Gee, ya' think Bono's going to perform at the next Rupublican fund-raiser. Probably not.
Posted by: Jeff at September 14, 2004 1:01 PMWhat really makes sense is lower trade barriers.
Posted by: joe shropshire at September 14, 2004 1:11 PMHelp out poor countries and screw the IMF? Sounds like a win-win situation to me. As far as gratitude, though, you can get a preview from the reception the Bush administration got in that recent AIDS conference in Thailand.
Posted by: mike at September 14, 2004 1:19 PMThe best thing that the US Congress could do for impoverished third world nations is, as joe shropshire alludes to, ending all agricultural subsidies to American producers, and signing free trade agreements with them.
Unfortunately, it might also mean that third world nations would undercut second world nations' product prices; it's already happening, as places like Vietnam produce and sell coffee beans for a fraction of what Central and South American nations are used to getting.
Posted by: Michael Herdegen at September 14, 2004 1:21 PMThe plan would not only reduce the "aid-giving ability" of the IMF and World Bank; it would also reduce their bureaucracies -- a loan needs permanent monitoring, a grant is a one-shot thing that needs no follow-up. This is a giant step toward shutting down these international bureaucracies.
Posted by: pj at September 14, 2004 1:34 PMThe countries loaning the money are probably many of the same countries loaning us momey to fund our deficits. Expect retaliation in the Treasury markets if we strong-arm them into debt forgiveness.
Posted by: Robert Duquette at September 14, 2004 1:38 PM"... by fobbing off the cost on institutions like the World Bank, whose aid-giving ability may as a result be curtailed."
And that is supposed to be a bad thing?
OJ, that is what a Treasury bill is, a loan.
Posted by: Robert Duquette at September 14, 2004 3:48 PMYes, are you under the impression that China is buying Afghan T bills?
Posted by: oj at September 14, 2004 4:04 PMI'm with the crew who don't see why screwing over the IMF and World Bank is considered a negative feature of the plan.
Posted by: Annoying Old Guy at September 14, 2004 11:12 PMAWW, a bank that made as many bad loans as the IMF would be like, oh, say, Citibank.
Some of us are old enough to remember that these poor, suffering countries have already repudiated several trillions in debt already.
Doing it for them seems like painting the lily
Posted by: Harry Eagar at September 15, 2004 2:37 AM