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Reforming International Lending
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15641 |
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Section : |
CURRENT ISSUES
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| Issue
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2 / 1989 |
2,697 Words |
| Author
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Alvin Rabushka
Alvin Rabushka is a senior fellow at the Hoover Institution,
Stanford University. He is the author of several books on
U.S. tax policy. |
Global debt for low-and middle-income economies runs into the hundreds of billions of dollars. The World Bank reported in World Development Report 1987 that the ABM countries (Argentina, Brazil and Mexico) accounted for more than $250 billion of external debt in 1985. Of this sum, $38 billion was private nonguaranteed debt and $212 billion was public and publicly guaranteed debt, including International Monetary Fund (IMF) credit.
Other major debtors read like a Who's Who of the Third World countries that have turned in a disappointing economic performance since gaining independence after World War II. The list includes Bangladesh, Mali, Burma, Madagascar, Niger, India, Somalia, Kenya, Tanzania, Senegal, Pakistan, Sri Lanka, Bolivia, Liberia, Indonesia, the Philippines, Egypt, Ivory Coast, Papua New Guinea, Zimbabwe, Honduras, Nigeria, Thailand, Jamaica, Peru, Turkey, Ecuador, Tunisia, Colombia, Venezuela, and the socialist economies of Eastern Europe. In 1985, these and other developing countries owed another $400 billion to foreign banks and governments. Precious few dollars were in the form of private, nonguaranteed debt.
Servicing the hundreds of billions of dollars of external debt has encumbered Third World and East bloc governments with enormous problems. Economists use the term debt service ratios to indicate the percentage of goods and services exported from any country that must be allocated just to meet debt service payments. In 1970, debt services ratios were relatively modest, consuming less than 10 percent of export proceeds in all but 24 debtor nations. In 1985, only about a dozen developing countries basked in such fortunate economic circumstances. Thirty-one countries had debt service ratios from 10 to 20
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