[saymaListserv] The Testimony on Truth and the Debts of Poor Countries
jhminshall at comcast.net
Fri Sep 30 12:45:56 JEST 2005
I have seen and heard much innacurate info from
Friends about The World Bank (WB) and The
International Monetary Fund (IMF). This article,
from the most recent issue of The Economist,
addresses how the two organizations will make it
possible for wealthier donor countries to pay the
debts previously contracted by poor countries.
Some of these debts were the result of corruption
and innacurate information provided to the
lenders, and other debts were the result of
countries' being actually unable to follow
through on well-intentioned commitments made.
Donor countries will , apart from the WB and the
IMF, continue to provide economic development
assistance to poor countries primarily in the
form of grants which do not have to be repaid,
while the financial assistance provided to
service the poor countries' debts by the WB and
the IMF will be discontinued.
I wrote in Friendly Woman , Winter 2001 Issue,
called "Women,Money, and Economic Power" that
this would be the outcome. It really is not
consistent with Friends' testimony on Truth to
demonize groups about which one has little actual
information. Janet Minshall
FINANCE & ECONOMICS
The IMF and World Bank meetings
Bad loans made good
Sep 29th 2005
From The Economist print edition
Donors not debtors will repay the World Bank's bad loans
ALL the routes to the headquarters of the World
Bank and the International Monetary Fund in
Washington, DC, were blocked on September 24th
and 25th by dozens of identical dumper trucks,
the kind normally used to spread salted gravel on
unpassable winter roads. Inside this heavy
security cordon, the ministers and officials
gathered for the Bank's and the Fund's annual
meetings were busy clearing a path of their own.
Agreement was needed on a proposal to cancel the
debts owed by the world's poorest countries to
the Bretton Woods twins and the African
Development Bank (AfDB). The proposal already had
the backing of the G8 group of rich nations. Last
weekend, according to Trevor Manuel, South
Africa's finance minister and chairman of one of
the key committees at the meetings, the G8
agreement "emerged as the G184 agreement",
supported by the entire membership of the Fund
and the Bank.
There are now 38 countries that the twins deem
poor and indebted enough to warrant forgiveness.
Between them, these countries owe $42.5 billion
to the World Bank's soft-loan arm, $10 billion to
the AfDB and $5 billion to the IMF. Eighteen of
these countries have already jumped through the
hoops designed to test their commitment to sound
policies. Their slates may be clean by the end of
Their debts, said Gordon Brown, Britain's
chancellor of the exchequer and chairman of the
IMF's ministerial committee, are unpayable. In
fact, these countries are servicing their
obligations, but only because the multilaterals
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
Bank and the Fund, making bad loans look better
than they really are. But it is also complicated
and inefficient, consuming the time and energy of
creditors and debtors alike.
The G8 proposal will end this elaborate charade.
The Bank, Fund and AfDB will stop collecting
debts and cut the flow of new money to these
countries by the same amount. This much is an
exercise in bookkeeping, not altruism. As Adam
Lerrick, an economist at Carnegie Mellon
University wrote recently, "All that debt
forgiveness really needs is an eraser."
But there is more. Backed by the British, the
Dutch and the Nordic countries, the World Bank
has successfully convinced its donors to
compensate it for writing off loans it could not
have collected in full. This compensation is
supposed to come on top of the regular
contributions donor countries make to the Bank,
such as the $18 billion already pledged for the
years 2006 to 2008. Beyond 2008, however, it is
impossible to know how much donors would have
coughed up in the absence of debt relief.
Therefore it is hard to gauge whether the money
they offer will be in addition to, or instead of,
money they would otherwise have given. In effect,
the Bank has swapped the risk that poor countries
will not repay their loans for the risk that rich
countries will not redeem their promises.
To allay these fears, the G8 finance ministers
all signed a letter to Paul Wolfowitz, the World
Bank's new president, promising to compensate the
Bank "dollar for dollar". A "baseline" will be
agreed, which is meant to define the
counterfactual, showing what donor countries
would have given had debt relief never happened.
It is not yet clear how this line will be drawn.
Nonetheless, Mr Wolfowitz was happy to declare
that "the path to complete debt relief now has
been cleared." Almost ten years after the
multilaterals first consented to the partial
forgiveness of their loans, the snow has finally
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