unitex@rubbs.fidonet.org (unitex) (10/02/89)
Africa Is Seen As Priority For US Plan To Swap Debt For Aid
Posting Date: 09/30/89 Copyright UNITEX Communications, 1989
UNITEX Network, USA ISSN: 1043-7932
(Financial Times, August 11, 543 words, BYLINE: Nancy Dunne,
Washington)
The announcement last week of a Dollars 3 m (1.87 m Pounds
(pds)) debt-for-nature swap for Madagascar signals the
beginnings of broader involvement by the US foreign aid agency
which will allow the US to leverage its declining resources for
debtor country development projects.
In last week's transaction, seven commercial banks from five
countries, led by Bankers Trust Company, participated in the
swap with the Agency for International Development (AID),
underwriting up to Dollars 1 m of the funding costs.
The swap was part of the agency's debt-for-development programme
launched last year and soon to be followed by other initiatives
to "turn rocks into gold," according to Mr Richard Bissell, the
agency's assistant administrator for programme and policy
coordination. The agency was involved in two previous small
debt-for-nature transactions in Bolivia and the Philippines.
It is working with the private Debt for Development Coalition in
Washington to foster other projects in countries which have been
forced by the constraints of their debt to cut back on social
development efforts. Mr Jack Ross, director of the coalition,
said two projects are now in the works. One would provide
low-cost housing; the other, being negotiated with an East Coast
regional bank would set up an education programme.
Coalition members are American colleges and universities,
co-operatives, private voluntary organisations and research
institutes engaged in economic development programmes. It works
closely with non-government organisations in debtor countries to
identify potential programmes in the areas of education, public
health, nutrition, agriculture, small business enterprises,
research, housing, credit and natural resource management.
"We've been warming up on this," Mr Bissell said, since a 1987
tax ruling made it desirable for US commercial banks to donate
or sell heavily discounted debt for swaps. Many future projects
are likely to be in Africa where the banks are "very sensitive
to looming ecological tragedies."
The squeeze imposed by the US budget deficit has cut sharply into
US foreign aid funds, which dropped from a total Dollars 20 bn
in 1985 to Dollars 14 bn last year. Only Dollars 5 bn of the
latter was non-food, non-military aid, and the agency has moved
away from most of the costly infrastructure projects it once
helped to fund. The debt-for-development projects are expected
to be small enough for US aid money to make a significant
impact. "What you can do with a couple of million dollars in
Madagascar or Luanda or the Ivory Coast is very sizeable," Mr
Bissell said. "A couple of million dollars in place like Brazil
would get lost."
The Debt for Development Coalition has identified four methods to
use foreign debt in support of development projects:
Non-profit groups purchasing secondary market debt and converting
them to local currencies; resources could then be pooled to
support joint ventures.
Commercial banks or other firms donating debts as charitable
contributions to non-profit organisations.
Programmes to be crafted as important components in rescheduling
debt plans by creditor nations.
Private institutions converting their debt into equity
positions, including joint ventures.
* Origin: UNITEX --> Toward a United Species (1:107/501)
---
Patt Haring | United Nations | FAX: 212-787-1726
patth@sci.ccny.cuny.edu | Information | BBS: 201-795-0733
patth@ccnysci.BITNET | Transfer Exchange | (3/12/24/9600 Baud)
-=- Every child smiles in the same language. -=-