By Thalif Deen
UNITED NATIONS, Oct 4 1995 (IPS)

Third World nations have renewed their attacks on the World Bank and the International Monetary Fund (IMF) for refusing to write-off the multi-billion dollar debt owed by the world’s poorest countries.

Gamani Corea, a former Secretary-General of the U.N. Conference on Trade and Development (UNCTAD), told IPS he simply cannot accept the World Bank argument against debt write-off.

“The Bank is refusing on the ground that any cancellation of debts will affect its image in capital markets and its ability to raise money,” he said.

This is not a very convincing argument, Corea said, because a bank’s ability to raise money does not depend on the soundness of its borrowers. The financial strength of the two Bretton Woods institutions depend on the fact that industrial nations are their guarantors, he said.

“Writing off bad debts will improve their books, not make them worse,” the Sri Lankan diplomat said.

World Bank President James Wolfensohn said Monday that neither the Bank nor the IMF will present any major new proposals for multilateral debt relief for LDCs despite considerable speculation about such a move.

Corea, who chaired a Non-Aligned Movement (NAM) Working Group on Debt, said that while some of the private debts and bilateral debts have been reduced, rescheduled or written-off, multilateral debts have remained untouched.

Corea praised a statement by Malaysian Prime Minister Mahathir bin Mohamad who lashed out at the World Bank for sitting on its multi-billion dollar reserves while refusing to respond to the cries of debt-ridden Third World nations.

Addressing delegates last week, Mahathir said that Bank continues to increase its profit levels and has built up a huge stockpile of reserves amounting to more than 16 billion dollars.

“Why are these reserves, built from payments by developing countries, not used for debt relief?,” he asked.

“While bilateral debts extended by donor countries have over the years been restructured or rescheduled — though with humiliating conditions imposed by the Paris Club of creditors — multilateral institutions, led by the World Bank, have steadfastly refused consideration of restructured debt owed to them.” he added.

Mahathir said the “debt millstone weighs heavily on the poor”– particularly the poorest nations of Africa.

Of the 48 poorest countries — officially designated as the least developed countries (LDCs) — 33 are in Africa.

The World Bank has classified 31 low-income countries as “severely indebted”: countries in which the ratio of the present value of debt servicing to exports is above 220 percent or where debt servicing to gross national product (GNP) is above 80 percent.

These countries include Burundi, Ethiopia, Guinea, Honduras, Liberia, Mali, Madagascar, Laos, Niger, Rwanda, Sudan, Vietnam, Yemen, Zaire and Zambia.

The “severely indebted” middle-income countries include Angola, Argentina, Brazil, Jamaica, Morocco, Peru and Syria.

Addressing a meeting of LDCs, Ambassador Ahmad Kamal of Pakistan said fresh initiatives should be taken to ensure full cancellation of all official bilateral debt of LDCs.

“There should be a reduction of debt stocks of countries with unsustainable multilateral obligations, including the provision of multilateral debt cancellation,” he added.

Ambassador Benny Kimberg of Denmark reminded delegates that his country pledged at the March Social Summit in Copenhagen to cancel all official development assistance (ODA) debts owed to Denmark by a number of LDCs.

“We also proposed that the multilateral development banks, through the soft-loan facility, extend grants rather than loans, and parts of the LDCs’ old debts to these banks be canceled under specific conditions,” he said.

In a 13-page declaration adopted last week, the 132 foreign ministers of the Group of 77 developing countries and China, criticised both donors and international financial institutions for their failure to resolve the debt problem of LDCs.

The ministers reiterated the urgent need for “the international community, particularly the donor countries and international financial institutions, to adopt an effective, comprehensive and equitable once-and-for-all solution” to the debt problem.

In a new 25-page report on the external debt crisis released last week, Secretary-General Boutros Boutros-Ghali said the debt owed by some low-income countries to multilateral financial institutions has become “of special concern to the international community.”

“Although many countries have indeed benefited from the implementation of the debt-reduction initiatives hitherto developed, the debt of several countries is still unmanageable while the debt of others might become unmanageable,” he warned.

“Certain avenues of relief, however, have already been closed off for many countries and others are not considered practical,” Boutros-Ghali said.

The report said the gross external debt of developing countries amounted to about 1.6 trillion dollars by the end of 1994, a 100- billion-dollar increase over 1993.

At a two-week meeting of LDCs here, one of the proposals under discussion was the “possible forgiveness of the multilateral debt burden.”

The total amount of debt owed by the poorest nations is about 160 billion dollars, almost 25 percent of which is owed to multilateral agencies.

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