Erasing Third World Debt Would Be a Mistake
June 18, 1999
As the so-called "G-7" rich nation leaders prepare to meet in Germany this weekend, the International Monetary Fund (IMF) and the World Bank are floating the idea of forgiving billions of dollars in Third World debt. The massive debt cancellation could wipe out obligations on the part of poorly run governments totaling up to $70 billion.
Critics point out, however, that this seemingly magnanimous gesture isn't quite as selfless as it sounds. The bad loans were made by the very agencies who want to cancel them: the IMF, the World Bank, and their retinue of state agencies. In effect, they would be writing off money owed ultimately to taxpayers who fund them. Analysts note:
- The countries in questions -- places like Uganda, Myanmar and Mozambique -- are poor because they have a history of hideous misrule.
- Private lenders -- intolerant of bad government -- won't touch them, but government lenders blithely shovel in more millions to shore up bad government habits.
- The debt canceling proposal has no strings demanding reform; thus, it's the same bureaucrats simply spending other people's money.
Critics suggest if debt relief is enacted it should be accompanied by an end to the money flow. Otherwise, they say, IMF and the World Bank will simply be erasing old mistakes so they can make new ones.
Source: Editorial, "Debt Relief: Chapter 11," Wall Street Journal, June 18, 1999.
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