Friday, June 05, 2015

Then and now

With the "news" (which was reported 7 days ago) that Greece is bundling its June payments to the IMF, the reports can't resist pointing out that the last country to bundle was Zaire (Democratic Republic of the Congo). But before having too much of a chuckle at that comparison, consider some analyses of Zaire's difficulties written long before there was a Eurozone crisis.

First, a 1997 Wall Street Journal opinion piece by Gregory Fossedal --

From 1976 to 1981, the IMF increased Zaire's debt burden, lending $52 million (coupled with $235 million from the Paris Club) in exchange for a series of 1978 "reforms." Zaire placed IMF and other foreign officials in key positions in the central bank, finance ministry and office of debt management. "Belgium is sending 30 to 40 customs inspectors to stop bribery and smuggling," U.S. News and World Report said in 1979. "Europeans run the vital river-transport system. France is considering sending tax experts, and a United Nations team is moving in to make some order out of the budget."

A country being loaded up on IMF debt and European experts being sent to run things. Hmmm.

Then a New York Times article from 1988, as the debt crisis created by years of the above had come to a head --

From 1977 to 1987, Zaire rescheduled its debt eight times. Although Zaire only drew down $3 billion worth of new loans during that decade, its debt increased to $7 billion from $2 billion. The $2 billion difference largely went for rescheduling fees, capitalization of interest and late-payment penalties.

Debt going up with the country actually getting new funds? Hmmm again.

Now of course, Zaire had one huge problem: its western-backed dictator, Mobutu. But Mobutu was himself part of a vicious cycle caused by official debt accumulation that brought little benefits to the citizens. One would hope that with that benefit of history, we could see the limited value of stringing a country along on debt with fanciful prospects of repayment. That Zaire-Greece comparison may be worth a few chuckles. But the joke is on the residents of the Global Debt Ward.

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