The “Unrepayable Debt” of Small Countries

26 August 2004

Careful cancellation versus blanket cancellation

Almost everyone believes that “unrepayable debt” should be forgiven. I understand that the Japanese and the Germans governments, both generous suppliers of aid, believe that cancellation may do more harm than good, but others believe that careful cancellation is best. These latter include:

• Zambia Group Newsletter, which accepts the opinion of those noted below
• IMF and World Bank
• Nigel Lawson. (See his biography for the 1986 plans from UK, France, and IMF)
• Gordon Brown. (Chair of Finance Committee of IMF)
• Rosemary Richter (Chief Leader Writer for The Times. Though in favour of debt cancellation she believes that “blanket debt forgiveness …could do real harm”.)
• An economist, devoted to Zambia, who probably knows more than anyone about Zambian debt. (I asked him why cancellation was worthwhile, considering that debt servicing is covered by aid. He said to me, “There are technical reasons why cancellation is best.” I said, “Religious people get worked up about this debt.” He replied, “I wish they wouldn’t.”)

Those in favour of blanket debt forgiveness include a huge number of campaigning organizations, which may be called the “liberal left” or “International Left”. Their failure to point out the dangers of blanket forgiveness, or to mention the figure for aid, seriously damages their argument.

Gerry