Developing Countries: Switching Some Multilateral Loans to Grants Would Lesson Poor Country Debt Burdens

Last year, President Bush proposed that the World Bank and other development banks replace half of all future loans to the world's poorest countries with grants. The goal of the proposal was to relieve poor countries' long term debt burdens. The World Bank estimates that the proposal would result in a financial loss of $100 billion dollars to it during the next 40 years. GAO found that the proposal would help poor countries reduce their debt burdens and that the World Bank would lose only $15.6 billion, which could be financed through relatively small increases in donor contributions. This testimony is based on an April report. (See GAO-02-593.)