Message-ID: <s2da633a.064@crs.loc.gov> Date: Mon, 13 Jan 1997 16:26:28 -0500 From: Jonathan Sanford <mailto:JSANFORD@CRS.LOC.GOV> Subject: Developing Countries' Options -Reply To: Multiple recipients of list DEVEL-L <mailto:DEVEL-L@AMERICAN.EDU>
Dear JC:You said "How can we keep the pressure from the world economy lords (i.e. banking institutions which manipulate the world bank and IMF) from suffocating the lives of those who pay the consequences of 'misguided' or blinded economic policies which only seem to pursue one and only one objective, namely, that the debtor countries PAY in FULL their "debts"?."
I'm afraid you don't understand what the World Bank and IMF are. They are not controlled by commercial banks. Rather, they are controlled by national finance ministries of the governments that own them. The governments tend to take the view that debts should be repaid. This is a policy stance, not a capitulation to creditor interests. Imagine what kind of a credit rating the US Government would have if it took the view that creditors need not be repaid if the interests of the debtors would be better served.
Furthermore, you need to look at recent events. Since the late 1989s, the IMF and World Bank have sponsored debt workout agreements for developing countries in which the creditors got back cents on the dollars. Debtor countries sought a resolution of their debt problems that was acceptable to their creditors (though involving a deep-discount settlement) because the alternative is no access to credit and a cash-on-the-barrel-head foreign trade situation. Brady Plan debt settlements have forgiven billions. The World Bank has initiated a debt reduction plan for heavily indebted poor countries at its last annual meeting. This would help countries with heavy debts to the multilateral agencies expunge their debts without having to repay them themselves. In many cases, the World Bank will pay itself back for its earlier loans to the poor borrowers. Personally, I think the plan doesn't go far enough. But that is a different question from the one you raised, where you argue that the IMF and World Bank are leading the charge for full payment of all international debts. Not true.
As far as the transfer of resources issue is concerned, you're always going to see debtors pay creditors more than they received. This is what interest does. The Roman Catholic church called this usury and once it was a mortal sin. But not since the Middle Ages, I believe. The only way one sees a permanent and continual net transfer of resources from creditor to debtor is either (a) default by the debtor or (b) continuous lending by the creditor greater each year than the amount of the repayments. Neither is a sustainable proposition over any meaningful period of time. One plays the creditor for a sucker. The other makes international finance a giant Ponzi scheme.
Jon Sanford