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Aid and Debt



Saturday, November 6, 1999; Page A24

THEO SOMMER, a respected German commentator, recently described the United States, when it acts alone, as "a weighty and unpredictable rogue elephant." On the whole, that barb looks a little blunter after Thursday's deal in Congress on foreign aid. Having earlier refused to appropriate money for peacekeeping, for controlling loose nukes and for the Wye River peace accord, the House Republicans largely relented. Yet on the question of debt relief for the world's poor nations they remained thoroughly roguish.

The Clinton administration had asked for $370 million to forgive some of these loans. Only the poorest countries are eligible for this relief, and only those that pursue sound economic reform will get it. The money--peanuts in the context of the United States' $1.7 trillion budget--would therefore reward need and virtue. Still, House Republicans agreed to pony up only $110 million. Tom DeLay, the House majority whip, explained that it was wrong to "rob the Social Security surplus to underwrite the national debt of Nepal."

That sentiment, though bewildering, is nonetheless mild compared with the House's attitude toward the administration's other debt-related request. The administration wants to allow the International Monetary Fund to value its gold stocks at the market rate rather than the artificially low one it currently uses; this would yield a paper profit of around $2 billion that could be used to write down debts. Allowing the IMF to do this would cost U.S. taxpayers nothing. Blocking the gold revaluation, on the other hand, would cost poor countries dearly. Not only would $2 billion less be available to poor debtors, but also the loss of that money might cause other creditors to give up on debt relief.

In order to work, debt relief has to be coordinated multilaterally. If five creditors forgive a poor country's debt while one refuses to do so, the poor country is obliged to use the freed-up cash to pay what it still owes to the recalcitrant creditor: Those that forgive debt are merely transferring resources to those that do not.

If Congress prevents this country and the IMF from playing their part in debt relief, it may deter the whole world from doing so. That sort of action encourages even sympathetic allies to regard the world's biggest superpower as the world's biggest rogue state.

© Copyright 1999 The Washington Post Company

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