Case Study Analysis – “Aid, Debt Relief, and Trade: an Agenda for Fighting World Poverty”

1053 Words Apr 9th, 2012 5 Pages
Harvard Business School’s Case Study “Aid, Debt Relief, and Trade: An agenda for fighting World Poverty” outlines the steps, and missteps, that the world community has taken since World War II to address the efficacy of international assistance. The study focuses on international financial institutions (IFIs) and their ability to help poor nations break out of poverty and the possible obligations of rich, developed countries to assist the heavily indebted poor countries (HIPCs). Additionally, the study seeks to see if this assistance has been and can be parlayed into growth and investment for the HIPCs. The Bretton Woods Conference in 1944 spawned two IFIs, the International Monetary Fund (IMF) and the World Bank, in order to rebuild a …show more content…
Amid criticisms, the World Bank launched the HIPC Initiative which called on all creditors to provide a new start to the poorest and most heavily indebted countries by cutting down their excessive debt burdens to manageable levels. Since the initiative did not provide any growth assistance, the World Bank concluded that debt reduction alone is not sufficient instrument to affect the multiple drivers of debt sustainability. Sustained improvements in export diversification, fiscal management, new financing terms, and public debt management are also needed but these measures are outside the realm of the HIPC Initiative. In 2005 the Group of Eight (G8) leaders at the summit in Gleneagles, Scotland, called on the IMF and the World Bank to forgive 100% of their debt claims on 18 of the world’s poorest countries. The G8 also agreed to double aid to Africa by 2010 – the largest African aid deal in history. According to Kenneth Rogoff, the debt relief proposal was a farce, or “empty gesture,” in that it did not include “a better framework for future aid flow.” Jeffrey Sachs of Columbia University concurred. The main beneficiaries were the rich countries that acquired good political press at a trivial cost. If the G8 is “serious about helping the poor countries, they should start with finding a reliable way to support grant aid and promote accountability for donors and

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