• U.S.

THIRD WORLD LOANS: How to Spell Debt Relief

1 minute read
TIME

The rhetoric from the International Monetary Fund and the World Bank last week was unequivocal. Declaring debt relief for the Third World to be a “matter of urgency,” the two agencies put their support behind the plan proposed last month by U.S. Treasury Secretary Nicholas Brady. His program calls for a gradual reduction in the $350 billion owed to commercial banks by the 15 largest borrowers.

Under the relief plan, borrowers could exchange current loans for new ones that would be smaller in principal or would pay lower interest rates. To give bankers an incentive to accept such arrangements, the IMF and the World Bank are debating whether to provide partial guarantees for some of the borrowers’ interest payments.

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