A Break for Poor Nations

The International Monetary Fund last week endorsed a plan to forgive the debt owed to it by the world’s poorest countries. The IMF action followed President Clinton’s promise Wednesday to seek to write off all bilateral debt owed by these countries to Washington. The president asked Congress to appropriate $1 billion for the next four years for this purpose.

The write-off plan is not unconditional. It would require the 36 qualifying debtor countries, those which rank among the poorest of the poor, to spend the money on health and education and to account for the spending. Congress should provide the funding. The payoff can work both ways.

The rich countries and the international lending organizations, including the IMF and the World Bank, have long recognized that the poor nations, most of them in sub-Saharan Africa, could not repay their debts, no matter how hard they tried. Some of the debtor governments spent more on interest payments than on domestic health care. But until now, the creditors were offering terms that only four of the 36 countries were able to meet.

Uganda, which is one of those four, provides a good example of how the debt-forgiveness plan should work. The government used the $40-million windfall to abolish school fees, raising school attendance to 90% from 50%. The government also allocated 5% of the savings to establish internal spending controls and audits. Tanzania, another country benefiting from the debt write-down, has earmarked the money for vaccinations and for wages for teachers and doctors.

Forgiving the debts should close a chapter on the decades-old practice of extending loans to Third World governments for political reasons, regardless of how corrupt they were, or for ill-conceived development projects that held no chance of producing the desired results.

The program must not clear the decks for a new round of indiscriminate lending and borrowing. Rather, future loans should be based on economic considerations, stimulating and rewarding reformist economic policies.

Britain has promised to match Clinton’s package, and the rest of the European Union countries and Japan should do so as well.

So far, Congress has appropriated only $33 million of the $370 million the administration has asked for fiscal 2000. This is not enough. Debt relief for the poorest countries is literally a matter of life and death. It should not be dragged out. This is the time.