Simon Maxwell

Debt is a Red Herring: It's Really About Aid and Trade!

Debt is a Red Herring: It's Really About Aid and Trade!, ODI Blog, June 2005

The debt deal announced by the G7 finance ministers is definitely a success, and reflects well on the political leadership provided by Tony Blair and Gordon Brown, as well as a skilful and powerful campaign by NGOs. That being said, I found myself at the weekend pondering six points.

First, it's worth remembering that taking on debt is in itself a good thing, if the money is well used and if the borrower can afford the repayments. The IDA, the soft loan window of the World Bank, has just benefited from a 30% replenishment to enable it to lend to poor countries, and Gordon Brown is busy campaigning for the International Finance Facility, which involves the UK government borrowing money to finance aid. It's important not to demonise debt. By the way, about 40% of IDA's resources come from countries repaying past loans, some of them countries like China and Korea that have used earlier loans to graduate to middle income status..................

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