POTOMAC MUSINGS-Unlike Moliere s Hero

Unlike Moliere's Hero D R Khatkhate The world debt problem has to be seen as a part of the world monetary system and as such its solution should be conceived in terms of wholesale reform of the monetary system itself WHEN the third world debt issue came to a head in 1982, there was for a while a loss of nerves on all sides. The storm was weathered through intervention by the International Monetary Fund, which helped to spread the maturity of Latin debt via rescheduling and inducing the creditor banks to increase some lending. For a while, the crisis seemed to have abated and there was ail round euphoria that the debt problem was on the track for a solution. A case by case approach was elevated to the high level of a sacred doctrine. But soon the world financial scene was overtaken by the shattering crisis in Mexico, Brazil, Argentina and Chile which were the giant borrowers in the world's money and capital markets. There were signals that the Latin debtor countries might stage a coup by joint default. As a consequence, there were stray thoughts about debt forgiveness which was an alias for discount on debt. However, this talk was denounced by the spokesmen of the industrial countries and anonymous non-spokesmen of the international organisations among which the World Bank figured most prominently. Now things are totally reversed. Right from James Baker, the US secretary of state down to the director of a small town creditor bank, all changed their tune, slowly, cautiously but unequivocally. Unlike Moliere's hero, they are all talking prose, knowing full well that it is not poetry. There is as a result a bandwagon effect. There are now flying around serious proposals by serious and responsible people from the academia, private research institutes, ex-staff members of the World Bank, representatives of the creditor banks and officials of some of the developing countries. Latest to catch the eye are the ones by James D Robinson III, president of the American Express Company, and Arjun Sengupta, Indian executive director of the IMF. The first of these was aired at the Overseas Development Council meeting held on February 29 in Washington DC and the second has been circulated informally among the World Bank and IMF bureaucracy, officiate of the third world and the industrial countries. Both of these proposals, though built up on other schemes by Percy Mistry and senator Bradley, are carefully thought out, based on sound judgment of the prevailing international economic situation, well related in analytical terms to the working of the international monetary system and formulated in concrete operational details.