eir full interest payments at present, let alone repaying capital. The interest is therefore capitalised and added to the total burden of the debt. As long as this process goes on, the debt burden will rise exponentially. The only way out of this vicious spiral is if the interest charges are reduced, so that the debtor
countries can
can meet their current obligations and start to make inroads into the capital they have to repay.
Some creditor countries profess to be reluctant to incur the budgetary cost involved in the proposal. Clearly, this is not to be undertaken lightly. But since there is no realistic prospect of actually securing anything like full repayment if rates are not reduced, we have to regard the cost as one that has been incurred already. The question is how we face up to it. My proposal is that we should do so in an orderly way over a reasonable period of years.
Another concern that has been voiced is that debtor countries which accept such concessionary terms might be cutting themselves off from future commercial lending. Eventually, of course, the Sub-Saharan countries should indeed look to the market for the funds they need. But at present, and for some time to come, the brutal truth is that most of these countries are unbankable. For the foreseeable future, they will depend largely on concessional aid flows of various kinds. Lightening the burden of servicing the existing stock of debt will help, rather than hinder, a return to normal financing. It should also encourage more direct investment by the private sector.
I understand the concern that allowing interest rate relief would give the wrong signal to the countries in question. However, it has always been an integral part of my proposal that this facility should only be made available to countries which are implementing satisfactory economic reform policies. The Sub-Saharan countries should have no doubt of our determination on that score.
This is a specific measure designed to deal with the specific case of Sub-Saharan Africa. It is not a model for the debtor countries more generally. Nor, indeed, could it be. As I have said, the middle income countries Owe their debts, predominantly to the
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