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Liberia’s Debt Relief Party

This week, Liberians celebrated in the streets – faces painted, drums blaring, and dancing with abandon.  They’re not rejoicing over some recent triumph by the Liberian soccer team or a local festival.  The streets of Monrovia were overflowing because of debt relief.  That’s right, debt relief.  On Tuesday, Liberia secured nearly $5 billion in irrevocable debt relief from the World Bank, IMF, African Development Bank, and bilateral creditors.  It’s a massive sum

Cash for Poor Countries, or Another Round of Subprime Lending?

This is a joint post with Benjamin Leo.

A special new lending facility was announced in July 2009 with the objective of providing up to $17 billion in new loans through 2014 and, to entice cash-strapped borrowers, the lender is waiving interest payments for the first two years. This may sound like dangerous new short-term teaser offers for sub-prime borrowers. But this isn’t coming from Countrywide Financial. It actually is a new IMF facility for low-income countries, including some of heavily indebted poor countries (HIPCs) who are just barely coming out of the last debt crisis.

The stated objectives of the new IMF facility are laudable: to offset the effects of the global economic crisis by boosting international reserves and supporting adjustment policies. And yes, the overall terms are more concessional than past IMF loans. Nonetheless, the net impact on national debt levels may be significant. And it was just four years ago that the IMF committed to cancel roughly $6 billion in bad loans to many of these very same countries.

Europe's Insistence on Naming European to Head IMF is Shortsighted

It's disappointing to see Europe attempting to preserve the outmoded mid-20th century custom of Europeans naming the head of the IMF, and in exchange letting the U.S. name the head of the World Bank. As the Economist today succinctly described the quickly emerging European consensus on France's nomination of Dominique Strauss-Kahn, a former finance minister of France:

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