Bilateral debt write-off only solution for poorest
Economists at Sida argue in a report entitled “Debt Trap" that the only solution for the poorest countries is total cancellation of bilateral debt. (See DT 4/92)
The report concludes that in the most debt-ridden low income countries, debt service averages 24 per cent of total export income. Therefore “exporting their way out of the crisis" is simply not an option. In reality, available foreign exchange decreases as exports increase, since stronger exports weaken a country’s negotiating position when debt is to be rescheduled. And with each renegotiation, the debt burden grows.
Bilateral debt cancellation by Sweden according to the Trinidad Terms would mean writing off two thirds of the total debt owed by poor countries. Even if private creditors were included, this would cost the Swedish government less than SEK 1 billion.