The Third World debt crisis will probably last for at least the rest of this decade, requiring continuation of "the present emergency-lending regime," according to a new study published yesterday by the Brookings Institution.
But its authors, Richard S. Dale and Richard P. Mattione, say that new restraints eventually must be placed on both the banks that lend money and the poor nations that borrow. At a press conference, Mattione said that these constraints, including flat limits on the total amount any nation can borrow, should begin to be phased in by the middle of the decade.
The Brookings report, "Managing Global Debt," said that "the issue of global debt has emerged once again, during economic and financial conditions uncomfortably similar to those of the 1930s."
It said the current emergency lending system, supervised by the International Monetary Fund, needs to be strengthened and steps taken to reduce the chances that similar crises will recur.
But it agreed with a report published last week by the Institute for International Economics that said radical reforms--such as stretching out Third World debt--would be counterproductive.
Mattione also cautioned that the longer-term restraints that he and Dale favor must be delayed until tensions have eased--and then applied by regulators who are allowed considerable discretion. For example, the report says that "the case for disclosure (of bank involvement in foreign loans) is a strong one." But to exact such disclosure now might exacerbate the trend toward withdrawal of the commercial banks from international lending.
Their conclusion that the "emergency-lending regime" run by the IMF will endure is based on the assumptions that the present global recovery will not by itself resolve the Third World debt problem and that commercial banks are likely to desire a "much smaller role in financing developing countries than they have in the recent past."