In connection with multilateral debt, serious attention should be given to growth-oriented solutions to problems of developing countries with serious debt-servicing problems, including those whose debt is mainly to official creditors or to multilateral financial institutions. These institutions are currently providing new disbursements and using their concessional funds, particularly to support low-income countries in the process of economic reform. Other measures include the refinancing of interest on non-concessional loans with IDA reflows - "fifth dimension". The use of support groups should be continued in providing resources to clear arrears of countries embarking upon vigorous economic reform programmes supported by IMF and the World Bank.
This strategy features in the framework of Agenda 21 as formulated at UNCED (Rio de Janeiro, 1992), now coordinated by the United Nations Commission on Sustainable Development and implemented through national and local authorities.
Financing and cost-evaluation: An increase in official development assistance to 0.7% of GDP funding would amount to approximately a doubling of current levels, which are in the order of US$ 55,000 million to US$ 110,000 million per annum.
Debt relief: On the basis of a study by the World Bank, it should be possible to reduce debt owed to private banks by developing countries by about US$ 200,000 million for a cost of about US$ 25,000 million, through coordinated action. Debt owed to bilateral official creditors by severely indebted low-income countries amounts to some US$ 40,000 million. It has been suggested that most or all of this debt should be written off. Debt owed to bilateral creditors by severely indebted middle-income countries is in the order of US$ 80,000 million. A reduction of some US$ 40,000 million should be given consideration in order to make a substantial positive impact on the economies of debtor countries. Arrears owed to multilateral creditors suggested for clearing amount to some US$ 3,500 million. An annual subsidy of some US$ 2,000 million could be considered in order to reduce substantially debt service to be paid by severely indebted low and middle-income countries to multilateral creditors. In total, a one-time payment of US$ 28,500 million, a recurrent interest rate subsidy of US$ 2,000 million a year and a write-off of US$ 80,000 million are suggested. The budgetary cost associated with the suggested write-off would be significantly lower than the amount of the write-off when account is taken of the actual amounts due for repayment in the medium-term, the likelihood of default and other such factors.