Reducing Third World Debt: Private vs. Public Strategies

Publication Date: April 1989

Publisher: Heritage Foundation (Washington, D.C.)

Author(s): Melanie S. Tammen

Research Area: Banking and finance

Keywords: Economy

Type: Report

Abstract:

The Brady Plan’s emphasis on debt reduction rather than new loans to debtor countries is welcome. But its call for IMF or World Bank funds to lessen the risks to American and other commercial banks negotiating such reductions is a subsidy to such banks that is unfair to American taxpayers. Worse, it is a prescription of more of the same medicine that caused the debt crisis. This is especially true in light of the fact that debtor countries and creditor banks have been using various mechanisms requiring no IMF or World Bank funds to manage the debt situation successfully.