Some observers argue that the crushing weight of interest payments on such large external debt

will forever prevent debt-burdened countries from developing. They call for the IACs’ private banks

to forgive much of the developing countries’ external debt.

Several observations are in order. First, much of the external debt that was incurred by developing

Countries has not been productively used. Therefore, it is accurate to state that the interest

Owed on this debt represents a tremendous burden to most of these countries since they are not

Enjoying rates of return on the investments they made, that are anywhere near the rates of interest

That they have to pay on money borrowed for those investments.

However, if private banks in the IACs, subsidized perhaps by their own governments, are forced

To forgive most or even a significant part of the Third World debt, there will be less lending to those

countries in the future. After all, the cliche “Once burned, twice shy” is appropriate. Private banks

Will be extremely reluctant to loan to nations whose previous loans they have had to write off.

One more statistic must be mentioned. In many developing countries with crushing extemaldebt

Interest payments to make, annual expenditures on the military — new arms and equipment —