June 11, 2005
CLEAN SLATE:
G8 agrees to debt relief for poor nations (ED JOHNSON, 6/11/05, Associated Press)
Finance ministers from the Group of Eight industrialized nations agreed Saturday to a historic deal canceling at least $40 billion worth of debt owed by the world's poorest nations, Britain Treasury chief said.Gordon Brown said 18 countries, many in sub-Saharan Africa, will benefit immediately from the deal to scrap 100 percent of the debt they owe to the World Bank, the International Monetary Fund and the African Development Bank.
As many as 20 other countries could be eligible if they meet strict targets for good governance and tackling corruption, leading to a total debt relief package of more than $55 billion. [...]
The package agreed to Saturday was put forward by the United States and Britain following talks in Washington last week between President Bush and British Prime Minister Tony Blair.
Britain originally wanted rich countries to assume the repayments for the poor countries but eventually agreed with the U.S. position that the debts be scrapped outright.
Bush also made a significant concession, agreeing that rich nations would provide extra money to the multilateral bodies to compensate for those assets being written off and would ensure that future aid packages would not be affected.
The agreement will initially cover 18 nations eligible for debt relief under the HIPC initiative, including Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana and Mali.
The basic idea is good, but the lending institutions should be stuck with the bill as a disincentive to future irresponsible lending. Not that it would stop them... Posted by Orrin Judd at June 11, 2005 10:39 AM
The sine qua non of any debt relief must be governmental reform, particularly the creation of the institutions necessary to engender wealth creation. Such matters as a judiciary that protects property and contractual rights and a non-kleptocratic local governance are essential. Otherwise, it is simply a matter of throwing money down a rat hole.
Lending institutions around the world have been encouraged and, in many cases, dragooned by First World governments to lend money to these Third World septic tanks as a furtherance of politics. When a US government feels a need to pander to its domestic Third Worlders and professional do-gooder populations, it is a lot easier to get Citibank or Bank of America to lend a few hundred million to Togoland than it is for the Congress to appropriate the money and then explain it to the taxpayers.
The lending is irresponsible. But if someone has to pay the bills shouldn't it be the government not the good faith depositers in American banks? Let the pandering pondscum that make up our political class go home to the taxpayers and justify their multi-billion dollar bailouts. After all, without them, the situation wouldn't have happened.
Posted by: bart at June 11, 2005 12:36 PMno, it should be the lender, not their victims.
Posted by: oj at June 11, 2005 12:39 PMThe governments that demanded this lending go on should be the ones who pay. If they have to go back to the taxpayers and explain why they have to be hit up to the tune of tens of billions of dollars to enable Third World trash heaps to avoid obligations imposed on them by the local autocrats so much the better.
OJ, what you fail to realize is that government forces a lot of the business world to do unprofitable and uneconomic crap which have some charitable purpose. It uses the regulatory process to do this. Whether it is mandating that lawyers defend indigent clients for free or whether it is the demand that Federally chartered commercial lenders make loans to dubious entities to serve some 'public purpose', it is an abuse of government power and should be stopped. I'm all for debt relief under the right conditions. But the money has to come from somewhere. I say let the politicians face the music and not be allowed to continue to compel financial institutions to violate their fiduciary responsbilities to their depositers.
Posted by: bart at June 11, 2005 1:35 PMAgree that the lenders should take the hit as a disincentive to poor lending in the future.
In the private sector a bank whose loan portfolio shrinks substantially would lay off a lot of loan officers and related staff. I'm not hopeful but perhaps the same will occur with these multinational lenders and get them out of this business more.
Posted by: AWW at June 11, 2005 3:00 PM