Debt Relief: Helping or Hindering?

Paper Summary:

The paper discusses the policy of providing debt relief for poor countries, especially African countries. The paper explains how many believe that as wealthy countries hand out vast sums of foreign aid, they also put up enormous barriers to trade. Moreover, poor countries must take the lead in their own development and it is not beneficial for rich and powerful countries to control the environment in which poorer countries operate. The paper describes how finance ministers from the Group of Eight nations met to advance a G-8 debt relief initiative for poor countries. The paper maintains that the issue of aid and debt relief for the world's poorest nations will be on the G-8 agenda for years to come and will undoubtedly remain an issue of debate among politicians and economists.

From the Paper:

"The total African debt, excluding South Africa, reached $285.5 billion more than a decade ago, in 1993 (Sonko). This total comprised $118.9 billion for North Africa and $166.5 billion for Sub-Saharan Africa, SSA, and these figures represented changes of 3 percent in the total regional debt, a decline of 0.5 percent in that of North Africa and a 6 percent increase in that of SSA, since 1990 (Sonko). The total debt in 1993 represented only 16 percent of total developing country debt (Sonko). However, the magnitude of what is generally recognized as the "African debt burden" becomes clearer from the ratios that express the debt in relation to certain key economic variables (Sonko). Thus, in 1993 the debt/GDP ratio, which measures the debt in relation to the total economic output of a nation, equaled 73.3 percent for North Africa and 123.1 percent for Sub-Saharan Africa (Sonko). This means, for example in the case of SSA, the debt owed far exceeds the total value of goods and services of the entire region (Sonko). Therefore, as Dr. Karamo Sonko reported in the October 01, 1994 issue of African Business, that the "entire economy of Africa can be correctly regarded as less than adequate collateral for current and future debt"."

Sample of Sources Used:

• "2005 ranking the rich." Foreign Policy. 9/1/2005. Retrieved February 15 2006 from HighBeam Research Library Web site.
• Clements, Benedict. "Calculating the benefits of debt relief: how cutting the external debt burden can boost growth in low-income countries." Finance & Development. 12/1/2004. Retrieved February 15 2006 from HighBeam Research Library Web site.
• Ford, Neil. "The impact of debt relief." African Business. 10/1/2002. Retrieved February 15 2006 from HighBeam Research Library Web site.
• "LEAD: G-8 to hold 1st Russia-led talks, volatile oil prices key focus+."Kyodo World News Service. 2/10/2006. Retrieved February 15 2006 from HighBeam Research Library Web site.
• McGillivray, Mark. "Aid, debt relief and new sources of finance for meeting the millennium development goals." Journal of International Affairs. 3/22/2005. Retrieved February 15 2006 from HighBeam Research Library Web site.

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