NCPA - National Center for Policy Analysis

Forgive Them Their Debts?

June 22, 1999

The leaders of the world's seven largest industrialized countries have proposed to reduce the debt of countries which have been crippled financially. While details must still be worked out and the plan must obtain the approval of the U.S. Congress, the reduction could amount to some 70 percent of the $127 billion owed by 33 impoverished nations.

  • Critics point out that an earlier International Monetary Fund and World Bank debt-relief program failed to improve Africa's prospects.
  • Also, international financial reforms taken several years ago failed to head-off the Asian crisis.
  • Congress must approve White House plans to spend between $200 million and $300 million to write down U.S. loans -- plus a larger sum, as yet undetermined, to pay for the contributions of multilateral financial institutions.
  • Congress would also have to approve the IMF's plan to sell 10 million ounces of gold to help finance its portion of debt relief -- a proposal not popular with representatives of gold-mining areas.

It is almost certain the IMF and the World Bank will give their approval, which is necessary for the plan to proceed. But the outlook in Congress is much less certain, observers report.

Source: Bob Davis, "G-7 Moves to Revamp Financial Systems," Wall Street Journal, June 22, 1999.

 

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