International Finance Facility: The Global Marshall Plan?
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Code : ITF0027
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Region : :Global |
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Commitment to Poverty Alleviation Astudy revealed thatAfrica borrowed about US$540 billion between 1970 and 2002 (Exhibit 1), and at the end of 2002, it had paid back US$550 billion, in principal and interest. But the continent still has a debt of US$300 billion,mainly due to accumulated interest.6 The heavy debt-servicing burden was one of the factors that offset the benefits of developmental assistance as it reduces the resources available for tackling poverty. To address the problemof unsustainable debt of poor countries, the enhancedHIPC Initiativewas launched in 1999 by theG-7 nations, in associationwith IMF andWorld Bank. The aim was to provide debt relief to all the eligible countries, who have shown their commitment to poverty reduction by adhering to all themacro economic parameter specified under the HIPCinitiative... International Finance Facility: The Marshall Plan? Brown’s International Finance Facilitywas likened to theMarshall Plan of US. After the SecondWorldWar,most of the European countries were struggling to rebuild themselves. The War had ruined their industries and plundered their economies. With hunger and discontent plaguing postwar Europe, the then US Secretary of State, George C.Marshall, proposed an aid programto rebuild the ruined continent, and the planwas popularly known as theMarshall Plan.According to the Plan, UStransferred one percent of its national income for four years, totaling $13 billion ($75 billion in 2004terms)12 , to rebuild postwar Europe. Brown’s proposal planned to do the same... The Challenges The overall success of the proposed IFF would be determined by factors, such as the number of donors participating in the IFF and their continuous commitment to the Facility during its 30-year life.Critics point out that IFF is basically a form of borrowing that would increase the current aid to the poor countries and later would divert some portion of the future aid in order to pay off the debts.Or as few others define, “Itmortgages a country’s future annual aid donations in favor of giving a lump sumupfront.”15 TheWorld Bank warned in an assessment of the IFF, “Because of the added cost . . . of establishing and running the IFF, of itsmarket transactions, and interest paid on its bonds, flows diverted fromaid budgets to pay IFF bonds could be substantial... |
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