And they generally pay higher wages than local employers do. Moreover, foreign direct investment is not only a critical source of management know-how but also promotes foreign trade, stimulates growth, and creates jobs. Although free trade and foreign direct investment are part of the solution to the poor countries' problems, their benefits do not necessarily accrue to the neediest individuals. The debt burden The IMF has been pointing out for nearly two decades that the debt burdens of many poor countries are unsustainable and that debt relief is justified not only on humanitarian grounds but also on economic grounds, because it would strengthen incentives for governments to improve their policies and for enterprises to invest by ensuring that the returns would flow to the country itself rather than to its foreign creditors. On this point, the IMF and the NGOs are in full agreement.
Differences of opinion remain, however, with respect to the conditions attached to debt relief.
Many NGOs call for immediate, unconditional debt cancellation on humanitarian grounds. Although we share the concerns behind this demand, we would argue that debt relief is not an end in itself but a means to an end, the true objectives being durable poverty reduction and sustainable economic growth. Debt relief alone cannot deliver this, since the resources it would make available to poor countries may be wasted. If appropriate conditions are not attached to debt relief, the benefits for the poor might be trivial and short-lived, while the prospects for a country's return to creditworthiness would remain dim. It is in the best interests of both creditors and debtors that debt relief occur as swiftly as possible in combination with serious efforts to tackle the problems that contributed to the accumulation of excessive debt in the first place.