In Brief : Banks List Terms of 3rd World Help

Banks are willing to make a new effort to help poor countries grow out of their debt problems, but only if international lending agencies do more and the debtors follow sound economic policies, a group of major commercial banks said today.

If this cooperative approach does not work, the result could be upheaval in the Third World, the chairman of the bank group, First Chicago Corp. chairman Barry Sullivan, said.

“Banks will continue in the future to assist any country committed to opening and modernizing its economy. But there must be solid actions taken to implement and maintain sound economic policies. Where this is not done, political and social turmoil may well be the result,” he told reporters.

Sullivan was introducing a new report by the Institute of International Finance, an information exchange for about 160 international banks.

The report, entitled “The Way Forward for Middle-Income Countries,” said banks would be prepared to consider loan pledges for more than a year at a time if the International Monetary Fund and the World Bank did the same.

Banks need incentives to agree voluntarily to reduce the mountain of Third World debt. Creditor governments or the World Bank could guarantee interest or principal, and tax rules and banking regulations could be adapted to encourage debt reduction, the report said.