The initiative is lacking
The great triumph of last year’s IMF/World Bank meeting was the unveiling of an agreement on debt relief for heavily indebted poor countries. But now that the promises are coming due, the international financial institutions are claiming poverty. This is special pleading - they have more than enough resources to cover the entire $45 billion multilateral share of the debt. The familiar cycle of debt and default will repeat itself, Adam Lerrick argues, unless the reform required of borrowing nations is matched by reform in the agencies themselves.
Author: Adam Lerrick
As 2000 drew near, luminaries including president Bill Clinton, bishop Desmond Tutu and pope John Paul II pressed the overfed First world to liberate a group of starving nations from what one of their number, Jesse Jackson, called the new economy's chains of slavery. Their gift was the forgiveness of all that these countries had borrowed and, for years, had been clearly unable to repay.
Now that the rosy glow has dissipated and the reckoning is due, debt relief in its entirety continues to make sound economic sense. This was the message, passed with a unanimous voice, when the Meltzer Commission sent down its report on international Financial institutions (IFIs) to the US Congress.
Charity aside, idealism aside, the debt is uncollectable, the money is long gone, and lenders must move on from denial to a new life as donors.
The 42 HIPCs (heavily indebted poor countries), concentrated in sub-Saharan Africa, are indeed desperately poor and growing poorer. Average per capita real income for their 700 million citizens is $300 a year, down from $400 in 1980, and populations are projected to double within three decades.
Their unhealthy 255% ratio of net present value of debt to exports is matched by an unhealthy life expectancy of 51 years.