Forgiving the Debt of Third World Countries

Paper Summary:

This paper discusses the new initiative named The Heavily Indebted Poor Countries (HIPC) Initiative, which was proposed by the World Bank and the International Monetary Fund in 1996 after it became obvious that not only were the world's poorest countries unable to pay back loans made in the 1970s, but that the debt was creating a situation of increasing and continuing poverty. The paper discusses how the loaning systems of the 1970s were partially to blame for now ever-increasing debt and how this initiative will help re-establish economic autonomy is some of these third-world countries.

From the Paper:

"The roots of the debt problem can be traced back to the lending policies of the 1970s, when high oil prices hit the developing countries hard; in order to keep their governments and economies going, they turned to richer countries, foreign banks and international organizations for loans. International lenders, flush with cash from "petrodollars" from oil-producing states, assumed that sovereign debt was a good risk because there was a prevalent belief that governments do not default on their loans."

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