Release From the Debt Trap
The world's seven richest nations tried over the weekend to agree on further ways to relieve the heavy debts of the poorest nations. They failed. But not without reinforcing a growing consensus, first forged in 1996, that such debt relief is necessary for world stability.
Britain has championed debt relief, mainly for Africa, and keeps offering new ideas for other rich nations to follow. It announced at this meeting of G-7 finance ministers that it's willing to pay 10 percent of the debt payments for the poorest nations.
Since the G-7 began limited debt relief eight years ago, 27 nations have received some help, while 14 saw full relief. But wariness remains about 100 percent relief, for two reasons:
Some nations might repeat the cycle of building up debts and then seeking relief. And poor nations that manage their debts well are, perversely, not rewarded.
The US offers the idea of the World Bank forgiving much debt, but then not offering new loans, only grants. That might work if the G-7 gave more grant money to the bank.
A few debt-relieved nations, such as Benin, have shown they won't squander such largess, and will use the resources on education and healthcare, not presidential jets. But more nations need to improve their governance, especially in antigraft efforts.
Debt relief is essential for Africa's progress. Step by step, it and the G-7 can find a way out of the debt trap.