When a country really needs financial help, it turns to the community of nations. Iraq, for instance, burdened by unsustainable foreign debt, got an agreement last year to wipe out 80% of its Paris Club debt. Indonesia, after the December 26 tsunami, got $3.3 billion of debt relief from the Club within a few weeks of the disaster.
The private sector seems far less well disposed towards countries in dire straits. When Argentina launched its long-awaited debt exchange offer in January, leading private-sector foreign creditors, from Germany or Italy or the US, united in rejecting it out of hand.
Indeed, although Argentina has next to no bilateral debt, its hopes also lie with the community of nations. Once the exchange period is over, the IMF must determine whether Argentina has cured its default and can enter into an IMF programme.
If the Fund says yes, Argentina can stay on the road of sustainable growth. If it says no, it will end up defaulting to the IMF. And the controlling shareholders of the IMF, of course, are the very countries that constitute the Paris Club.
The richest nations often use their economic might to help out countries in distress.