A small crowd gathered at the Paul Peck Alumni Center at Drexel University yesterday to hear Melissa Thomas, a professor at Johns Hopkins University, speak about the effectiveness of international debt-relief programs in improving the quality of life in third-world countries.
Debt relief is provided to a group of impoverished countries in the hopes of improving economic stability and the availability of social services though programs such as the Heavily Indebted Poor Countries initiative and the Multilateral Debt Relief initiative
Despite the availability of loans, government corruption and financial mismanagement in the impoverished country often prevent the efficient use of these funds, said Thomas.
She cited Cameroon as a prime example of an African country that owed a significant amount of debt in the mid-90s but was able to eventually improve its financial position through debt-relief programs.
Having worked in Cameroon on behalf of the World Bank, Thomas cited terms of trade shocks - the decline in the world prices of the products Cameroom produces - as well as economic mismanagement and expansionary fiscal policy as leading reasons for the decline.
Thomas concluded her lecture by raising the possibility of a future debt crisis as low-income countries continue to borrow, particularly from newly emerging donors such as China.
Although in many cases debt-relief programs manage to prevent impending financial disaster, in the end they serve as little more than a crutch, Thomas said.
Ultimately, she argued, they provide a temporary sense of economic stability to poor countries, but bring no lasting solution to the problem of world poverty.
*This article was edited on Saturday, May 31, 2008 at 3:33 a.m. to reflect the corrections that ran in the June 5, 2008 issue of The Summer Pennsylvanian.
