The rate is still very low at 0.75% in the US, and, in addition, there is no perception or expectation that rates are about to rise in other advanced economies such as Japan or the EU. Taken together then, interest rates in advanced economies look set to stay extremely low. So, for now at least, emerging markets may not need to worry too much about capital inflows drying up. But in the medium to long term a problem may loom for emerging markets.
CGD Policy Blogs
Cared for by her grandmother in a village in Nigeria, Ngozi Okonjo-Iweala is emphatic that her experiences as a child are what led her into a career in public service and development. “I lived some of the issues that people are concerned about in development,” she explains in the video below, part of a new CGD podcast.
My earlier post on congressional funding for multilateral institutions betrayed little optimism about the Senate’s willingness to restore devastating funding cuts imposed by the House of Representatives. I had no idea.
The newly released Senate funding levels are just barely an improvement over the House’s draconian cuts, slashing the president’s multilateral budget in half. When cuts of 50 percent mark an improvement, you know you’re in trouble.
This week, Chad became the 36th poor country to benefit from the world’s collective response to the debt crises of the 1980s and 1990s. It took years to reach this point, but in the end, Chad received over one billion dollars in irrevocable debt relief under the Heavily Indebted Poor Country (HIPC) Initiative.
The current rules for what counts as aid are a mess. Richard Manning, a former chair of the DAC (the OECD’s donor club), said last year that the system allows donors to “get away with murder” by counting loans as aid even if they are made on commercial terms. He has led a commendable campaign for reform.
The G20 took the extraordinary step last week of joining a meeting of the Paris Club, the informal forum where 19 member countries coordinate on debt reschedulings and write downs for countries that are in debt distress. The monthly meetings of the club (always in Paris) have long been known to be tight lipped, closed door, and well, clubby.
In the last few days, a delicate dance of reconciliation between Myanmar and its estranged foreign creditors reached its final measures. At the Club de Paris---the collective negotiating forum for creditor governments such as Japan and the United States---a press release just announced a debt deal with the poor and long-isolated Asian nation. The creditors committed to what is by Paris Club standards an exceptionally generous deal: cancelling half the debt in arrears---Myanmar defaulted in 1998---and instituting a 15-year repayment schedule for the remainder, including a 7-year grace period. Because the interest rates on most of these the loans are low, typically about 1%, this stretching out of repayment further reduces the debt's economic cost ("net present value" or NPV). Overall, the NPV will fall 60%. Meanwhile the World Bank and Asian Development Bank made their first loans to Myanmar in more than 20 years, in the process erasing their own arrears issues with the country.
I argued three months ago that donors should refinance rather than cancel Burma's $11 billion debt. The logic: the reforms underway in Burma, while remarkable and welcome, are also delicate, reversible, and incomplete. The country's famed opposition figure Aung San Suu Kyi called early this year for the suspension rather than termination of the economic sanctions against her country.
I was delighted to learn this morning that the Nobel Committee awarded this year’s peace prize to not one but three highly effective female leaders: Liberian President Ellen Johnson Sirleaf, activist Leymah Gbowee of Liberia and rights activist Tawakkul Karman of Yemen.