Ministers warn poor states not to pile up debt

Singapore, Sept 18: Poor countries that have had their debts written off must beware of borrowing so much new money that they plunge back into crisis, Finance Ministers warned on Monday.

Ministers are concerned that a new breed of creditor governments, particularly China, is extending loans on commercial terms to impoverished nations, blunting the benefit of writing off tens of billions of dollars of old debt.

''We cautioned against excessive borrowing after the relief, which may lead to the re-emergence of debt distress,'' the Development Committee of the World Bank and International Monetary Fund said in a communique.

U.S. Treasury Secretary Henry Paulson said urgent action was needed to stop an ''irresponsible'' new wave of lending to the developing world.

''We are already receiving anecdotal evidence of creditors providing large loans, the terms of which are unknown, to countries that have recently received debt relief,'' Paulson told the committee.

''We need effective incentives or penalties to deter irresponsible borrowing or lending,'' Paulson said. ''This is an urgent task that requires our joint attention.''

REUTERS

Related Stories