Science - June 16, 2005

Comment / Debts cancelled

The debts of the eighteen poorest countries were cancelled last week. Under the leadership of the British Chancellor of the Exchequer, Gordon Brown, the G8 decided that these countries would not have to pay back their debts to the World Bank and the IMF. A cause for celebration in the developing world?

Professor Arie Kuyvenhoven, chair of development economics:

‘Of course it is a wonderful development; finally steps are being taken to increase the amount of development assistance throughout the world. While I regard this as positive news, I still have a number of comments.

‘The position of the IMF and World Bank, for example: they now have to write off their debts, but if these are not replaced by something else, their ability to help other countries will be reduced. Surely this is not the intention. The rich countries will have to increase their contributions to prevent this happening, but a country like Germany is not in favour of this. It points to its budget deficit and says that Brussels will not let it increase this further. So it’s still not clear how the gap will be closed.

‘There are also countries that have missed out. Some did not fulfil the requirements of ‘good governance’, but there are others that feel they are now being punished for having behaved too well in the past. Kenya, for example, had hardly any debts and so does not profit from the cancellation. These countries really should be rewarded somehow for their good policies.

‘I am not so worried about whether the money is reaching those who most need it. We are reasonably sure that this is now happening. Countries have had to compile ‘poverty reduction strategy papers’ in recent years, outlining their strategy for investing in education, health and agriculture. Most of the countries whose debts have been cancelled are adhering to the criteria.

‘A final comment is of course that the eighteen countries really should never have had high debts in the first place. We don’t give poor people in the Netherlands loans, but a gift in the form of social security payments. Poor countries should receive help, not loans.’ / KV