To see what other people thought of various poverty-related issues, our team created a blog (in essence an online journal that allows users to comment on the entries) at http://adollaraday.blogspot.com. On this site, we have collected several of the best blog entries and comments, and placed them in various sections. In these blog sections, posts refers to original blog entries, while comments refer to user comments to these entries.

This blog section containst one post, about the use of debt relief in developing nations.

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The Post (November 13, 2005):
While I was reading about international aid (sometimes known as Official Development Assistance) from developed countries to poorer ones, I noticed that one thing that may be even MORE beneficial to poor governments than loans and grants is debt relief. Read More... Apparently, many devloping countries are wracked by huge, unsustainable amounts of debt to rich countries - results of a 'debt crisis' in the 1980s caused by increased interest rates and wild rises and falls of commodities.

The debt situation in many countries is so bad that in some, more than 30% of the Gross Domestic Product goes toward 'servicing' the debt. In some, for every $1 of Development Assistance, $2.30 is paid in interest on loans.

In response to this massive problem, the World Bank and the International Monetary Fund set up the HIPC (Heavily Indebted Poor Countries) Initiative to allow countries with unteneble debts to receive relief. So far, it has provided relief to 28 countries. Ten more are close to receiving relief. However, many criticize the HIPC plan because it is too difficult to get into the program. Countries must submit detailed documents and show a stable economic situation for at least a year before any debt relief is provided. Furthermore, the HIPC program demands structural adjustments that many say hurts the country - Zambia, for example, was forced to cut the education budget.

But the HIPC Initiative has produced good results in some countries - Benin was able to increase its education budget after participating in the HIPC. It is interesting to see how programs such as this, that are designed solely to help countries rid themselves of poverty, can deliver such widely varying results. Collapse...

Comment #1: (Respondent #1)
I read in the newspaper recently that the U.S. has promised Pakistan, in the wake of its killer earthquake, "$3 billion in aid, rescheduled $3 billion in debt and canceled an additional $1 billion in debt." Read More... I'm wondering, from the donor's perspective, what are the pros and cons of each donation type? I don't know the answer. Does any one have any ideas? Collapse...

Comment #2: (Respondent #2)
I have read somewhere else that most of this aid is in the form of 'low interest' or 'no interest' loans. I would love to know if that is correct. Read More... A lot of 'aid' to undeveloped countries takes the form of low interest loans. Often (though not always), that is an unfortunate squandering of resources. Donor nations insist on irrational constraints on the use of funds (since it is their money) and the beneficiary nation often does not feel that it proper to 'look the gift horse in the mouth'. Yet, the debt stays on the books and continues to compound long after the benefits are proven ephemeral. Collapse...

Comment #3: (Respondent #2)
According to Bloomberg News (Nov 21) the total aid pledged to Pakistan is $5.8 billion with $3.8 billion of it consisting of low interest loans. Read More...

Also, the US is listed as having pledged $510 million (not counting the World Bank and the Asian Development Bank which have each pledged $1 billion). Collapse...

Comment #4: (Respondent #1)
I stand corrected, [Respondent #2]. The numbers I cited were the U.S.'s gift to Pakistan as a reward "for being a vital partner in Mr. Bush's campaign against terrorism," according to the New York Times. Read More...

On the one hand, you have to wonder about our priorities: why so little for humanitarian relief? On the other hand, debt relief is debt relief--do we really care why it was given if in the end it benefits a needy country?

I suppose the key question here is what strings, if any, are attached to the donation--any donation. Collapse...

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