ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Charade of Debt Relief

Charade of Debt Relief WHEN the Brady Plan was first announced, doubts were expressed in these columns about how much difference it would actually make to the third world's debt problem. It may have marked an advance over the Baker Plan in conceding the case for reducing not just the burden of debt servicing but also the burden of debt itself, though the basic objective evidently remained that of ensuring some net inflow of new capital into the countries burdened with heavy external debts. By envisaging debt reduction as well, the Brady Plan could be said to have shifted the emphasis in the matter of debt relief to the long-term. However, the fact remained that if the immediate purpose was to ensure a net capital inflow into the debt-ridden countries, the impact of whatever debt relief plan was worked out on current debt servicing (i e, outflow on account of repayment of principal and interest) had still to be the touchstone. The doubts expressed in these columns with respect to the Brady Plan related to its vagueness not only on the numbers envisaged but also on the size of net capital inflow aimed at in return for the conditionalities imposed on the debtor countries. Of course, the basic argument against the Brady Plan as also its predecessor, the Baker Plan, has been that it takes no account of the debtor country's debt-servicing capacity as reflected in its export earnings. Any plan that ignores this basic statistic is bound to come to grief.

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