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Should aid be used for debt buy‐backs?
Author(s) -
Faber Mike
Publication year - 1992
Publication title -
journal of international development
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.533
H-Index - 66
eISSN - 1099-1328
pISSN - 0954-1748
DOI - 10.1002/jid.3380040208
Subject(s) - debt , government (linguistics) , external debt , unintended consequences , aid effectiveness , economics , interpretation (philosophy) , private sector , business , finance , developing country , economic growth , political science , law , programming language , linguistics , philosophy , computer science
There is disagreement between different aid agencies and non‐governmental organizations (NGOs) and amongst academics about the efficacy of using foreign aid to enable Third World governments to buy back portions of their own external debt. This article describes four hypothetical transactions and uses them to examine the main issues and arguments. The many different motives which may give rise to a buy‐back make it difficult to use any one technique to appraise their development effectiveness. The article then considers the use of buy‐backs to assist the private sector in LDCs and to reduce the claims of a donor government's own agencies. An interpretation is offered of the UK government's policies towards the use of aid for debt reduction supplemented by reference to the strategy designed for dealing with part of Zambia's debt and the description of the deficits of the Export Credit Guarantee Department (ECGD) as ‘unintended past aid’. In the light of these interpretations the original question is reconsidered.