Baker Strongly Opposes Debt Relief for Third World
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WASHINGTON — Treasury Secretary James A. Baker III told Congress today that he strongly disagrees with proposals to forgive some of the Third World’s debt, now more than $1 trillion.
“I believe this path leads both debtors and creditors off the cliff,” he said. “This approach would irreparably politicize the debt problem.”
Forgiveness would distract both debtors and creditors from the need to make reforms, would encourage repudiation of debt and would shift the risk on bank loans to taxpayers, including U.S. taxpayers, he added.
He argued for a U.S. contribution to increase the capital of the World Bank, the largest single source of aid loans to Third World countries. He said pulling out of the World Bank or the Inter-American Development Bank, as some critics have suggested, would reduce U.S. influence and make it more likely that they would act contrary to U.S. interests.
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