The Low-Income Trap

The Low-Income Trap Urgent steps are needed to end the cycle of poverty and debt

Fanwell Kenala Bokosi

A sharp increase in the foreign debt of developing economies has raised concern that another crisis is looming. This is particularly true in Africa, where external debt in many countries has reached unsustainable levels. The burden of adjustment, when it comes, will inevitably fall on the most vulnerable—women, children, and the poor. That is why the international community must develop and implement new ways to restructure debt and measures to protect heavily indebted nations from the vicissitudes of the international credit markets. Borrowers and creditors alike must agree on responsible lending practices that have the support of democratically elected governments and civil society.

Developing economies in Africa and elsewhere benefited from debt relief under two programs sponsored by international lending institutions—the 1996 Heavily Indebted Poor Countries Initiative and the 2005 Multilateral Debt Relief Initiative. When debt relief allowed...