redbloodedamerica:

No Relief from Debt Relief

Thank you, Bono.  Thank you, Bob Geldof.  Thank you, IMF, World Bank- and religious societies all over the world.  Thanks to you, heavily indebted poor countries got debt relief in 2005.  So now their debts are sustainable and the future is bright.

Ah…I hate to say this, but it’s dead wrong.

Yes, we all cheered when the debts were wiped clean in 2005, because we saw a bright future.But what do you think corrupt governments in those countries saw?  They saw that they could borrow, spend and get away with it, so they concluded:  It’s a pleasure doing business with you! 

Yes, the IMF and the World Bank told them you shouldn’t run up debts again.  But economic incentives speak louder than words, so soon spending started to drift upwards again, and they began to run up new dollar-denominated debt.  

One fifth of low-income countries now have debts above 60% of GDP, compared with almost none in 2012.  Several of them now have debt levels close to where they were when they got debt relief in the first place.  Almost half of all low-income countries are now in a debt crisis or highly vulnerable to one.

So it seems that debt relief was just a transitional phase between unsustainable debts – and unsustainable debts.