[stop-imf] R. Myers: A Significant Aid Victory]

[Robert Weissman]

Subject: 2.A Significant Aid Victory
Date: Wed, 26 Jun 2002 16:54:15 -0400
From: Robert Myers <rmyers1@erols.com>


Dear Friends and Colleagues,

        Allan Meltzer, about 75 years old, is still a very good,
committed and active economist. He has just had another success,
relating to a G-7 agreement to convert about 20% of future subsidized
World Bank (IDA) lending into grants. This makes him a hero, at least to
me and to the millions of poor people who will benefit from his
tenacity. John Taylor, an academic economist now with the US Treasury,
also deserves praise for sticking to his principles in spite of charges
and counter charges like "stupid" and "crazy." The World Bank, the
British and much of the press, have made light of the significance of
the grants-instead-of-loans idea even though the fight, pro and con, has
been intense. In announcing the loans-to-grants agreement, Paul Blustein
(The Washington Post--6/14/02, p. E3) said, "…it matters
little…[because] … IDA loans are already provided on such generous terms
that they resemble giveaways." This is monstrously disingenuous.
        Suppose that in 1992 Tanzania borrowed a large interest-free IDA
Education Credit and received a $1 million disbursement in the first
year. At the 1992 TSH/$ exchange rate (300:1), this disbursement would
have financed TSH 300 million of education expenditures. However now, at
the end of the grace period, a TSH one billion payment (and equivalent
reduction in local expenditures) would be required to repay the 1992
disbursement, given the present devalued exchange rate. How many sane
people would argue that requiring a TSH 1 billion repayment for a loan
of TSH 300 million is a "giveaway"?  Especially compared to a grant,
where the required repayment and reduction in local expenditures would
be zero.
        Warm Regards, Bob Myers