Reason: Islamabad is teetering on the brink of `defaulting in its debt repayments due to 1998, but less than $1 billion in its foreign exchange kitty. Unless the IMF comes to its rescue with a generous loan (which has become difficult given the sanctions), Islamabad will default - a nightmare scenario for international creditors.

But being the helpful folks they are when their money is at stake, western creditors have been working overtime to prevent a default. An IMF team was in Islamabad recently trying to find a way out, and find a way out it will.

Those who doubt the determination of western governments to recover every cent of every dollar due to their rapacious private financial institutions need look nofurhter than the recent IMF bailouts in South Korea, Thailand and Indonesia. Most of the $400-billion debt that these countries are saddled with were due to overseas private financial insitutions who should normally have been made to pay for their own lending mistakes. But the IMF has been used instead to become the chief debt collector on behalf of international banks.

A similar situation existed in Latin America in the early 1980s when western banks stood to lose tens of billions of dollars they had recklessly lent to Latin American countries, which led to these economies collapsing under a mountain of debt. Here again, western governments, with their control over institutions such as the IMF, came to the rescue of their banks.

In some countries where fresh lending was not an option, ingenious debt-for-equity swaps were resorted to by which foreign creditors were repaid with shares in well-run companies in Latin America - a move which further entrenched their position in these economies, and made themeven more indebted over time.

International debt as it is created and nurtured today is a lot more dangerous than nuclear weapons. Entire regions and continents, not to speak of countries, have been decimated by large capital outflows to the developed world in the form of debt repayments.

India has earned for itself the dubious distinction of rapidly advancing into the ranks of the most indebted countries in the world. Its current external debt of nearly $100 billion represents a five-fold increase from $20 billion in 1980.

It has become fashionable in international circles to blame developing countries for not managing their debt properly resulting in misutilization, wastage, etc. While developing countries certainly contribute to the problem, such criticism masks the much more significant role played by developed nations in perpetuating it.

For major international banks like Citibank, Bank of America, Chase Manhattan, Barclays, etc - who are also the biggest private lenders to developing countries -as much as 50 per cent of their profits come from currency speculation. Higher profits of course mean higher tax revenues for western governments, which partly explains their zeal in protecting the interests of their banks when their excessive lending to developing countries land them in trouble.

Large-scale capital exports have helped the developed world replace the easy pickings it once enjoyed from colonies in Asia, Africa and Latin America, but which it lost when these became independent around the mid-1900s. For two centuries Britain, as did most colonial powers, enjoyed a `free lunch' when it paid for its imports from colonies like India, not merely out of its own exorbitantly priced manufactured exports to the colonies, but through tax revenues collected from the colonized.

But these transfers dried up when the colonies became independent. At the same time, import substitution policies in a number of newly independent countries threatened the pre-eminent position enjoyed by manufactured exports ofthe industrialised world. With rising incomes, the consumption by western consumers of tropical products such as tea, coffee, cocoa, tropical timber, etc - which to this day cannot be grown in the temperate climes of developed countries - increased leading to higher imports from the so-called Third World. All these developments threatened major problems for developed countries on the current account front.

This was when large-scale capital exports came to their rescue. Conditionalities attached to capital exports often reap the lbenefits that direct taxatiosn provided for in colonial times. Frequent devaluations of Third World currencies imposed under the Stabilization and Structural Adjustment Programmes (SAPs) or triggered off by the speculative attacks of rogue currency traders ensure that developed nations continue to enjoy their time-honoured tradition of a `free lunch'. The more developing countries export (as they are told to do under SAPs, the WTO presciptions, etc), the less developed countrieshave to pay for it thanks to competitive monopolistic control of commodity markets by Western commodity traders, etc. Often, the repayment of foreign loans in a given year by a highlyindebted country is as much as the foreign exchange earned by it from exports to the creditor nation.

(Third World Network Features)