Sunday, August 07, 2005

No Such Thing as Free Lunch

In a class on public finance and fiscal policy I dropped last semester, I asked my professor if he ever thought HIPCs' (Heavily Indebted Poor Countries) debts will ever be "forgiven." With hardly any hesitation he said, "What's the point of lending if you decide not to collect?" Maybe not in this lifetime.

Gavin Capps on the New Debt Trap
A portion of the multilateral debt of the qualifying countries will be written off, but the amounts involved are small and will lead to reduced aid disbursements for the ‘beneficiaries’. The eighteen eligible HIPC countries are due to have $40 billion worth of debt held by the World Bank, Africa Development Bank (AfDB) and IMF cancelled in full. If the other nine HIPC countries manage to qualify by reaching ‘completion point’, the total multilateral debt cancellation could rise to $51 billion and, in the least likely scenario, $55 billion may be written off if but only if all of the final eleven make it.
$55 billion is just this country's external debt alone. There really is no such thing as free lunch.

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