Debt sustainability framework unchanged

31 January 2007

A recent review of the World Bank and IMF’s debt sustainability framework for low income countries concluded that the system, which seeks to inform countries about what level of external debt is suitable for them based on the value of exports, was “broadly appropriate”. Brussels-based NGO Eurodad said: “The shift from a ‘snap-shot’ evaluation of debt sustainability to a dynamic assessment, and from a static CPIA ranking to a 3-year moving average, although interesting fall most definitely short of the necessary move to an overhaul which would finally take on board the ‘needs-based’ approach civil society has been advocating all along.” A report from the new economics foundation (nef), which uses a rights-based approach and focuses on government revenue levels, finds that in order to cut debt to a sustainable level relief will have to be much higher. Using an “ethical poverty line” of $3 a day nef find that, on human rights grounds, around 50 countries need complete debt cancellation and a similar number require partial debt cancellation.