Protection of the Poor and the Millennium Development Goals
Chapter 11: The Concept of Sustainability of International Financial Institutions
The very aim and purpose of any debt reduction – be it arbitrarily granted by some creditors or based on a mechanism respecting the foundations of the Rule of Law – is quite obviously enabling debtors to fulfil their remaining and reduced obligations smoothly and in time. Standing on their own feet, debtors must be able to keep out of debt problems during the foreseeable future. Their debt obligations must remain manageable, or sustainable. Meaningful sustainability estimates are thus the economic base of any economically successful solution. Unfortunately the BWIs have not provided proper sustainability estimates, thus prolonging the debt problem. Logically the BWIs justified their earliest adjustment programmes as necessary in order to reach sustainability. The IMF approved 88 arrangements between January 1979 and December 1981, all with the officially declared aim to support adjustment policies, particularly measures to reach a sustainable balance of payments position (Crockett, 1982). The ‘Baker Plan’ wanted to bridge a short period of payment problems to allow SCs to grow into sustainability. Paris Club debt reductions officially purport to want to restore sustainability. The only explanation of the unuseful cut-off point seems to be the idea that debtors are restored to full sustainability after Paris Club treatment, a very unrealistic assumption as the Paris Club’s sorry record of debt management proves. Several SCs have visited the Paris Club on what may be called a regular basis to be granted a definite solution of debt problems each time. As mentioned in Chapter 6, Ecuador had to ask...
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