What the protests are mostly about: debts of poor nations

WASHINGTON - Collectively, the world's 41 poorest nations owe $200 billion in debt to rich countries and to institutions such as the World Bank and the International Monetary Fund. Demonstrators in Washington streets this weekend want that debt to be forgiven and forgotten.

The World Bank and the IMF are trying to make a dent toward reducing the mountain of debt by writing off up to $28 billion under a program the United States and its major trading partners agreed on last year amid great fanfare. The amount of debt forgiven could reach $90 billion by 2003.

The world's prosperous nations were prodded to act in part by Jubilee 2000, an international umbrella group of churches and aid organizations that champion the poor. The effort drew the support of Pope John Paul II, rock star Bono of the U2 group and former boxer Muhammad Ali. Many Jubilee 2000 members are among those gathering this week in Washington.

Relieving countries of crushing debt so they can use loan payments for health clinics and schools may seem straightforward. But differences abound over how the new initiative should work. The rich nations also have to raise money to do it.

The World Bank, which exists to help poor countries, argues that conditions must be attached to loan forgiveness so that money freed up from repayment will be spent on crucial needs improving people's lives.

''Just about everybody agrees that it's better to have a good poverty-reduction strategy in place,'' said James Wolfensohn, the bank president. ''This is why there has been slippage and delay.''

His objective is to get poor countries to where they can manage debt payments in the same way individuals make car or mortgage payments each month.

Wolfensohn opposes total forgiveness of the $2 trillion in debt that poor and middle-income countries owe to avoid discouraging future lending to these nations.

To many of the protesters, however, establishing a repayment strategy gives the lenders too much power to dictate terms and denies community leaders and other members of ''civil society'' a say in how the money is spent.

The debt initiative ''is a prime example of how the World Bank and the IMF can be made responsive to the needs of the very poorest people,'' said Seth Amgott, a spokesman for the international relief agency Oxfam. ''Poor countries should not be made to wait.''

Canadian Finance Minister Paul Martin agrees. He said Friday that nongovernment organizations such as Oxfam are ''are right when they say we are not moving fast enough or broadly enough on debt relief.''

Some economists contend, however, that without conditions and restrictions on forgiving loans - ''debt relief'' is the formal term - the money would be spent on corrupt leaders' limousines, civil wars, dealing with natural disasters or simply wasted.

Since the 1970s, many developing countries have borrowed billions for modernization projects that commercial banks would not touch. Repaying them consumes much of their budgets and leaves little for other spending.

So far five countries have qualified for debt relief, and for cheap loans that go with it, under the IMF-World Bank highly indebted poor countries initiative: Bolivia in South America and Mauritania, Mozambique, Tanzania and Uganda, all in Africa.

Uganda has provided an example of the rewards of debt reduction. The program has cut the country's annual debt service payments to $50 million a year from $150 million, and it has used the saved money to raise spending on education and to double enrollment in primary schools.

International finance officials originally hoped to have 11 countries ready for debt relief by the spring meetings of the World Bank and IMF and 25 by the end of the year.

Another 41 nations are eligible for the program, but natural disaster, civil disorder or changes in government mean it may take many more years for some of them to qualify.

Congress and legislators in other industrial countries also have been slow to approve money for debt relief so lenders can be compensated. The Clinton administration has asked Congress for $210 million to underwrite the U.S. share of the program this year, but so far the request has not been approved. The U.S. commitment over three years is $600 million.