[b]O[/b]ne of the biggest reasons that very poor countries can't provide decent education and health care is that they are stuck in a cycle of debt owed to the International Monetary Fund, the World Bank and regional development banks, much of it dating to the 1970's. Most have paid back in interest more than they originally borrowed but haven't been able to touch the principal, and the cycle continues. Nigeria, for example, borrowed $5 billion, has paid back $16 billion and still owes $32 billion on the same debt.
Everyone involved agrees that this is unjust, and the members of the club of nations known as the G-8, whose finance ministers are meeting in Washington on Friday, have endorsed the concept of debt relief. But concrete proposals have been lacking until very recently. Now the United States is proposing to cancel the debts of the world's 30 poorest countries, and Britain has joined in. The rest of the G-8 should endorse this plan.
One motivation for President Bush's efforts in this area is that he wants the world to greatly reduce Iraq's debt. He has run into objections from other nations who rightly do not want to see a country like Iraq, with the world's second-largest oil reserves, treated better than, say, Burkina Faso. But Mr. Bush's proposal is also consistent with his longstanding campaign to get the banks to give money, rather than lend it, to the poorest nations.
Current efforts to reduce these debts are failing. The Heavily Indebted Poor Countries Initiative began in 1996, and was expanded in 1999, with the purpose of eliminating $100 billion in debt from dozens of poor nations. But it has been too slow and limited. It has not reduced debts to manageable levels.
Poor countries deserve more help to get out from under loans made by banks awash in oil money; a great deal of that loan money went to corrupt dictators. Today, sub-Saharan Africa pays $1.30 in debt service for every dollar it gets in aid, four times what it spends on health care.
Rich countries have yet to agree on who should pay. Britain has offered to contribute 10 percent of the needed money, but other G-8 countries are not likely to be similarly generous. The Bush administration's solution, that the I.M.F. and the World Bank cover the costs, is the best one. Surprisingly, leaders of those institutions, who had previously opposed financing debt cancellation, now say they are willing. One reason is that the I.M.F. owns more than 103 million ounces of gold, a holdover from the gold standard days that it values at about 10 percent of the market price. By selling a small part of that gold at market rates or by simply revaluing it, the I.M.F. could finance debt cancellation painlessly.
The IMF was a goodie-goodie bank funded by American taxpayers with the noble idea of investing in "developing countries". Instead, it became a corrupt piggybank for loony projects by 3rd world tinpot leaders, who knew they never would be able to pay it all back. We should cut these countries a break especially the ones who are trying to institute democratic governments and market economies.And make it clear to the bureacrats who funded this stupidity never to do anything like it again.