 Servicing Debt
Many poor countries continue to lose billions of dollars servicing their foreign debts.
The assistance funds sent to recipient countries soon return to creditor countries as debt payments (the revolving door effect).
Donors claim that they have increased the levels of promised assistance sending funds that actually come back as debt payments. This process does not have any actual positive effect on the situation of recipient countries. This is why debt cancellation is needed for aid to have any impact. The governments of rich countries made a commitment at the 2002 Monterrey summit on Financing for Development that debt cancellation would be implemented together with the use of new resources. But in 2005 cancelled debts were accounted as being part of the donors’ aid. The face value of those debts (which is higher than their real value) is included in accounting books but this that does not add any resources to the beneficiary countries.
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