A Strategy for Global Debt

Detailed debt data are notoriously unreliable. For the purposes of this paper, however, it is the broad trends that arc important and these are more reliably reacted by the World Bank's statistics.

Simply because, in a narrow sense, more is saved in the way of debt service payments than is lost in the way of new disbursements. Of course, while the balance of payments remains in deficit there will still be a net inflow of real goods and services.

Many debt indicators actually suggest that the debt problems of the least developed countries are more marked than those of the 'major borrowers'. One of the principal differences, however, is that a larger proportion of the debt of the least developed countries is official rather than private debt.

Rescheduling conventionally applies to the principal rather than interest payments.

For a review and analysis of balance of payments policy in the context of developing countries, see Graham Bird. 'Balance of Payments Policy'. in Tony Killick (ed.). The Quest for Economic Stabilisation: The JMF and the Third World ( London: Heinemann and the Overseas Development Institute, 1984).

For a clear and detailed review of the issues involved see John Williamson , A New SDR Allocation? Policy Analyses in International Economics ( Washington, DC: Institute for International Economics . March 1984).

As of 1983, SDRs accounted for only 4.7 per cent of total international reserves. Meanwhile total nominal reserves increased by only 8 per cent during 1980-83 and real reserves fell by almost 20 per cent. The reserve/import ratio which was 29 per cent in 1975 had fallen to 23 per cent by 1982 (see John Williamson, op. cit.).

For a discussion of the problems associated with the measurement of reserve adequacy see Graham Bird , World Finance and Adjustment: An Agenda for Reform (London: Macmillan, 1985). In any case, to the extent that the supply of reserves is demand-determined the issue of reserve adequacy becomes of less concern. If, however, the world can adjust to any level of reserves this can be used as an argument for an extra SDR allocation just as much as an argument against it, see John Williamson, op. cit.

Many analyses of the country risk analysis undertaken by the private banks show that a country's level of reserves has a positive impact on its credit-worthiness. For a review of approaches to country risk see Graham Bird , 'New Approaches to Country Risk', Lloyds Bank Review (No. 162, October 1986).

At present SDRs do not have to be repaid and therefore do not add to debt.

For a review of this and some proposals for reform, see Tony Killick (ed.), op cit.

For an attempt to estimate the benefits of SDR allocations to different groups of developing countries, see Graham Bird , 'The Benefits of Special Drawing Rights for Less Developed Countries', World Development (Vol. 7, March 1979) and 'SDR Distribution, Interest Rates and Aid Flows', World Economy (Vol. 4, No. 4, December 1981).

For a review of the arguments for and against the link and for an assessment of its impact on inflation see Graham Bird , The International Monetary System and the Less Developed Countries (London: Macmillan, 1982), Chapter 12. For an analysis of the inflationary consequences of an SDR allocation see John Williamson, op. cit.

For evidence of this see references in note 12 above.

For a defence of the argument that Fund quotas should be increased see Graham Bird , International Financial Policy and Economic Development ( London: Macmillan, 1987), Chapter 8.

Tony Killick (ed.), op. cit For a review of World Bank conditionality through its programme of structural adjustment lending (SALs) see, for example, Stanley Please , 'The World Bank: Lending for Structural Adjustment', in Richard E. Feinberg and Valeriana Kallab (eds.), Adjustment Crisis in the Third World ( London: Overseas Development Council, US-Third World Policy Perspective, No. 1, 1984).

The provision of insurance or guarantees is not a new idea. It already exists as part of the World Bank's co-financing activity, which could itself be usefully expanded, and in the guise of the intended Multilateral Investment Guarantee Agency (MIGA).

See John Williamson , op. cit, for a full description ofhow he arrives at these figures.