IT'S BACK

Well, so much for rock stars and other high profile sets.

The news is out: "Rock stars helped convince the international community to write off more than $100 billion of African government borrowings a decade ago, " according to the WSJ. Now like a noted Jack Nicholson's movie character, it's back.

The key phrase here is a decade ago. Accompanying the article is a picture of Kofi Annan, the former Secretary General of the UN and Irish Rock star Bono celebrating the debt relief. In the words of the Journal: "Now the big debts are back, and it's getting tougher for countries to pay them off."  Debt levels of GDP ranged from 86% to 73% and after forgiveness sank to 9% in the case of Mozambique only to rise again to the current 61%.

In the case of Ghana its debt level of GDP hit 82% in 2005 before the IMF relieved the country of half the debt burden. Quoting a British economist who specializes in African economics, referring to the debt relief program, the Journal notes, "In some cases like Ghana, the increase has been quite alarming. This certainly isn't the future the international institutions had in mind."

Some of these economies are commodity based and have swooned along with the commodity markets, after initially doing well in the previous commodity run-up.  Most central banks are so-called lenders of last resort. Raising funds in capital markets is tough, but that was the announced hope when the debt relief went into effect. In short, make them more independent.

Ghana exports cocoa, gold and oil. Like that old saying, it worked for a while. But the while is now over. A strong dollar cuts many ways. And emerging markets is just one of them, especially when coupled with slowing growth.

But there's another lesson here: debt relief at best has a checkered past. Research shows over and over what one gets for nothing is never appreciated. It also sets up the old moral hazard. If we get in trouble, they will bail us out again.

The African situation is further evidence of the dangers meddling bureaucrats at places like the World Bank and the IMF pose. And, oh yea, let's not leave out those well-meaning rock stars and members of  the high profile set.