Correction, Please!.(Correction Notice)

Another banker bailout

ITEM: A report from AllAfrica.com carried by the Pacific News Service on June 14 praised the "long-sought debt relief for Africa," saying: "The agreement on 100 percent debt relief for developing countries announced by finance ministers from the eight largest industrial nations (G-8) ... initially benefits 14 nations in Africa. Britain put the price tag for writing off the debts of the 18 eligible countries at $40 billion, plus an additional $11 billion for the soon-to-be eligible nine. The annual savings to the 18 countries will be about $1.5 billion. The money is needed for health services and education."

CORRECTION: In actuality, the bad loans to the world's poorest nations, most of which are in Africa, have long since been written off. Moreover, it takes a case of incurable naivete to believe that this debt forgiveness will result in better health care or education.

The latest spasm of assistance rewards insiders within those unscrupulous governments who siphoned off the original loans and bails out international institutions that have lending schemes in place. In the meantime, the African poor can expect to get relatively poorer--despite the pleas of aging rock stars who demand a say in how Western governments should spend other people's money.

The game has been repeated so often that it is all but transparent. As the Wall Street Journal put it on June 8: "Lenders stopped expecting repayment on this money years ago. In fact, since 1985 the HIPCs [highly indebted poor countries] have been regular recipients of new funds to cover their debt service, as Carnegie Mellon economist Adam Lerrick shows in a new paper from Congress' Joint Economic Committee. This has put the HIPCs further into debt. But the process continues so the World Bank and International Monetary Fund can boast--preposterously--that they've never made a bad loan."

These lenders, said the Journal, "have also figured out that they can wring more foreign aid out of donor countries if they call this process 'debt relief.' So rather than writing down their worthless assets the way normal banks do with their bad commercial loans, these government lenders now want the [industrialized nations] to cover their losses, including interest due. Mr. Lerrick calculates that this means the banks would get $130 for every $100 of nominal debt."

The original funding, from the taxpayers in the developed world, was given to corrupt leaders in the so-called developing world. While the results have been abysmal, the profligacy will again be rewarded.