The Hindu Business Line : Welcome write-off

WITH THE IMF and the World Bank deciding to cancel the debt of some of the poorest countries, the stage is now set for actual implementation, and the beneficiary economies to do their bit to improve the living standards of their long suffering citizens. With the industrialised nations (G-8 members) promising full financial support to multilateral institutions such as the IMF and the World Bank (and also the African Development Bank), which would have to sacrifice resources, the write-off should be smooth. In fact, the scheme was held up because of doubts among countries such as the Netherlands and Belgium that the G-8 members would, at the last moment, hesitate to keep their word on supporting the Fund/Bank.

To start with, the IMF/Bank have targeted 18 countries for relief; with all but four (Nicaragua, Honduras, Mauritania and Madagascar) in Africa, the entire initiative — debts of around $40 billion will be written off — is focused on one continent. This is as it should be as Africa is among the poorest regions of the planet. Yet, Africa is only a part — important, no doubt — of the phenomenon of global poverty, and regions in Asia and Latin America, which have been left out, will continue to suffer till their debt is written off. This prospect is almost official, going by the statement that a further 20 economies "could also become eligible" for debt cancellation, which would increase the resource write-off obligation to around $55 billion.

While no doubt the write-off will be implemented without any major hiccups, what with all leading economic players supporting, the second part of the compact — that the beneficiaries will do everything to get out of an unsustainable debt situation — is likely to run into problems. The 18 economies selected for debt relief have reportedly "met specific economic and structural conditions" mandated by multilateral agencies, the expectation being that the funds saved from the repayment burden (according to one estimate, around $100 million a day) will be redirected to "productive investments in better healthcare, education, social development and economic growth for their people". This is a noble hope but, equally, old habits die hard and even the poorest nation resists external meddling.

This raises questions about the effectiveness of the write-off — the implication being that a lot of money could be wasted. But it is also a fact that unless action is taken on a global scale to reduce poverty and control the damage being done to millions of human minds and bodies, the rich-poor divide will only worsen. This is unthinkable for a world galloping ahead technologically and economically, and everything must be done to tackle the scourge of under-development, which harms not only the present but the future as well. Seen in this perspective, the Millennium Development Goals cannot but be backed whole-heartedly, one aspect of which is to reduce by 2015 the proportion of people living on less than $1 a day to half the 1990 level and also halve the number of people suffering from hunger. The initiative to write off country debt is integral to that larger effort.

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