Aid worth £100bn 'fails those it is meant to help'

Aid worth £100bn 'fails those it is meant to help'

Debt relief deals worth a total of $100bn have failed to tackle the problems of the poor countries they are meant to help, according to new research.

G8 leaders promised debt write-offs worth $40bn at last year's Gleneagles summit as part of a worldwide push to 'make poverty history'; but the authors of a report presented at the annual conference of the European Economic Association in Vienna this weekend say that, for many countries, indebtedness is a symptom of deeper issues.

Nicolas Chauvin of Princeton University, and Aart Kraay of the World Bank, examined the debt relief programmes offered to 62 poor countries since the late 1980s. They found that, in general, writing off debt has little impact on public spending or gross domestic product per capita, and many recipients slide back into the red again and again.

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'We find very little evidence that debt relief has had any impact on the level or composition of public spending. Nor do we find that debt relief has led to improvements in policy or increases in investment rates,' the paper says.

'To put it plainly, in these countries debt is not the real problem but a symptom of deeper structural problems,' said Chauvin. 'Unless debt relief changes these underlying problems, it is likely that it will be followed by debt re-accumulation, in turn necessitating further debt relief.'

Twenty of the countries in the study received six or more write-offs in the 15-year period, trapped in a vicious circle by what the authors call 'persistent country characteristics', and returning for help repeatedly. Nicaragua had a total of 10 waves of debt relief, while Mali, Tanzania and Senegal all had eight.

Chauvin said the research didn't prove that debt relief was a waste of money - but it did show that multi-billion-dollar debt cancellation alone was unlikely to be effective.

The authors also found that, in general, debt relief hadn't been directed to the poorest countries in the world, or to those that are the most indebted.

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