The Canadian Ecumenical Jubilee Initiative represents approximately 30 churches, inter-church coalitions and church-related organizations who have joined together to sound a strong, new call for justice, peace and the integrity of creation. Together we have articulated a vision of what Jubilee might mean for us, for our churches, for Canadians and for the global community. This vision–a theological framework and program of education and action-highlights three Jubilee themes:
Release from Bondage,
Redistribution of Wealth and
Renewal of the Earth.
For us the Jubilee 2000 campaign for debt remission is only the first of several initiatives we plan to take over the next three years. We are also undertaking initiatives in solidarity with predominantly women workers in export processing zones and we plan to undertake actions for wealth redistribution and on ecological issues.
Our Jubilee debt remission campaign follows the initiatives taken internationally with the Jubilee 2000 debt petition. In our debt campaign we are supported by a number of secular organizations and coalitions in Canada including the Halifax Initiative, the Canadian Council for International Cooperation, the National Anti-Poverty Organization and the Council of Canadians. Our campaign materials have been modified and enriched through extensive discussions we have held within our Jubilee Working Group and through communications with our partners in the South.
1. WHAT DO WE MEAN BY “UNPAYABLE DEBT OF THE POOREST COUNTRIES”?
The Highly Indebted Poor Country initiative is inevitably a reference for our debt campaign. On the positive side the HIPC has put the issue of debt relief squarely on the international agenda. However, the HIPC initiative is clearly inadequate as it is too slow and provides too little debt relief for too few countries and has unacceptable conditions attached. As our colleagues in the Nicaraguan Jubilee campaign have stated “HIPC is designed to link `debt relief’ to the acceptance of IMF and other conditionalities expressing neoliberal recipes for global `integration’. In this way the historical pattern continues and there is no Jubilee.”
We are monitoring the various HIPC cases. We use the example of Mozambique widely in our educational material, pointing out that Mozambique will be paying nearly as much debt service annually after its HIPC treatment as before. We use this experience to argue that HIPC only cancels the “uncollectable” portion of eligible countries’ debts.
a) extent of debt remission
Our campaign is calling for cancellation of 100% of the bilateral, multilateral and private debts of the most impoverished nations. [see Appendix A for the text of our petition]. We do not believe that this demand is too ambitious or outside the realm of public discourse. On the contrary, Canada’s Finance Minister, Paul Martin, has been cited by the business editor of the Times of London (5 Oct. 1998) as conceding that “nothing less than total cancellation of debt in Africa will be sufficient.” We believe that it would be problematic if the international campaign were to ask for less than the 100% write-off that one G-8 country has already conceded is necessary. We also believe that to ask for anything less than 100% remission for low income countries would be inconsistent with the Biblical notion of Jubilee.
In an afternoon long meeting with the Finance Minister organized by the Halifax Initiative we presented our request for the total cancellation of bilateral and multilateral debts owed by the poorest countries. Our current estimates are that 41 HIPC-eligible countries owe the Canadian government about CDN$1.2 billion (approximately US$792 million at current exchange rates). The Halifax Initiative has asked the Finance Department to provide more current data on the value of bilateral debt for an expanded list of 55 countries in net present value terms so that we can have more accurate data on the actual cost of writing off these debts.
Having firmly established with the Minister of Finance that we are seeking 100% debt remission for low-income countries we reject calls for a “new improved formula” for the HIPC Initiative as inadequate. We believe the Jubilee debt initiative can win far more substantial debt remission. In our view, calling for a reform of HIPC is a mistake and ill-timed as it contradicts our Jubilee initiative position calling for 100% debt remission without any SAP conditionality. A call for a 100% write-off is not utopian or unrealistic and flows from our beliefs and values that a Jubilee is achievable.
Concerning multilateral debts – the Minister’s staff, including the then Canadian Executive Director to the World Bank and the assistant to the Canadian Executive Director to the IMF, have raised questions concerning the ability of the World Bank and the IMF to absorb large write-offs. Although they did not reply in the strident terms that Mr. Wolfensohn has used at a news conference in Hong Kong and again at the Lambeth Conference of Anglican bishops in accusing the international Jubilee 2000 campaign of wanting to put the World Bank out of business, they did raise some concerns. They said that there are other calls on the use of World Bank reserves and that there is resistance by middle income less developed countries who pay commercial rates on loans from private banks and from the IBRD to seeing World Bank reserves used up for debt relief for low-income countries only.
We believe that the Rome meeting must take this dimension of the issue into account when discussing how to incorporate the concerns of middle-income countries into the campaign. While we have talked to Canadian officials about the use of World Bank reserves to finance debt relief, we did not discuss how the IMF or regional development banks might finance debt relief. Our campaign literature (Economic Justice Report p.9-10) talks about selling off IMF gold as was done in 1976 to finance debt relief rather than being used for the Enhanced Structural Adjustment Facility. Mr. Martin is on record as favouring a “modest” sale of IMF gold for debt relief.
b) country eligibility
Having established that we are asking for 100% debt remission, our next step was to determine which countries would be eligible. We decided that our Jubilee debt campaign would concentrate initially on 100% debt reduction for an expanded list of low income countries, while we pursue dialogue with partners in middle-income countries concerning how best to frame demands for writing-down debts accumulated through the compounding of interest payments and writing-off of `odious debts’ contracted by tyrannical regimes.
To establish a list of low-income countries eligible for 100% debt cancellation we adopted the criteria used by the UK Jubilee 2000 campaign as explained in the following table in relation to the HIPC criteria.
|HIPC criteria||Jubilee 2000 criteria|
|1. income per capitalow =middle = >US$765 to $9,386||1. income per capitalow = at purchasing power parity as per UNDP report|
|2. “Severely indebted”||Eligible countries meet 2 of 3 criteria:|
|a) Net present value of debt either >80% of GNPor >220% of exportsand||a) net present value of debt > 50% of GNP/ or|
|b) ratio of debt to projected export revenues over 5 years|
|b) net present value of debt> 200% of exports net of imports of essential food and fuel/ or|
|“Côte d’Ivoire terms” – debt> 280% of annual fiscal revenues||c) net government and publicly guaranteed debt> 200% of total government revenues|
|3.SAP’s implemented for 6 years- 3 years to “decision point”- 3 years phased in debt relief||3. No Structural Adjustment Conditionality|
As the chart shows the Jubilee 2000 conditions are sufficiently close to the HIPC criteria that they must be taken seriously in the debate but in every case are significantly more “generous” and nuanced (e.g. they take into account the need to pay for essential food and fuel before calculating whether debt payments are too onerous.) The other thing to note is that the original HIPC criteria were later expanded to include what are known as the “Côte d’Ivoire” terms to include a third criteria that relates debt to government revenues. Here again the Jubilee 2000 terms are more generous than HIPC.
According to information from the UK Jubilee 2000 campaign, as of Sept. 1996, 47 countries would be eligible for debt relief under these criteria. The list we received from the UK adds nine countries that are not on the World Bank and IMF list for HIPC (Bangladesh, The Gambia, Haiti, Jamaica, Malawi, Morocco, Peru, Philippines, and Zimbabwe) but it also drops 3 others that are on the HIPC list (Equatorial Guinea, Lao PDR, and Myanmar). In reviewing this list it was noted that some small countries who have very low rankings on the UNDP Human Development Index were not on the list. Accordingly, we decided to add these 8 countries (Bhutan, Cambodia, Comoros, Djibouti, Equatorial Guinea, Lao PDR, and Myanmar) to the list of 47 countries received from the UK when we made our information request to the Department of Finance in order to find out if they have any bilateral debts outstanding with the Government of Canada or its agencies.
Accordingly the list submitted to the government of Canada requesting information on outstanding bilateral debt includes the following 55 low income countries. The five countries in brackets are ones that are not on the Jubilee 2000 or HIPC-eligible list. We are open to hearing from other campaigns as to how to deal with very poor countries that are not considered “highly indebted”.
Angola, Bangladesh, Benin, (Bhutan), Bolivia, Burkina Faso, Burundi, (Cambodia), Cameroon, Central African Republic, Chad, (Comoros), Congo, Côte d’Ivoire, (Djibouti), Equatorial Guinea, Ethiopia, The Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Jamaica, Kenya, Lao PDR, Liberia, Madagascar, Malawi, Mali, Mauritania, Morocco, Mozambique, Myanmar, (Nepal), Nicaragua, Niger, Nigeria, Philippines, Peru, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Yemen, Democratic Republic of Congo, Zambia, Zimbabwe.
The list of 50 countries identified in our campaign literature as eligible for 100% debt remission excludes the 5 countries in parentheses in the above list.
Our background literature (Economic Justice Report p.4) discusses “odious debts” as a category that should be recognized under international law and written off, but our petition and our official letter sent to the Minister of Finance and the Commonwealth Finance Ministers on Sept. 28th does not explicitly make taking action on odious debts per se a goal of the campaign. We welcome proposals at the Rome meeting as to how remission of odious debts can be addressed in the Jubilee campaign.
In general, we in the Canadian campaign are wary of conceding power to the World Bank and the IMF. We believe that any conditionality must be agreed upon multilaterally in a more democratic forum than the IMF, the World Bank or the Paris Club of creditor nations. Furthermore, we believe that civil society must be involved in the debate on conditionality. Thus our campaign pamphlet says:
“An international body, under the auspices of the United Nations, would be the most appropriate forum for creditors and borrowers to work out the principles of eligibility for debt cancellation. This body would ensure that the money saved from debt payments be used primarily for social development.”
Our campaign strongly insists that debt remission must not be linked to orthodox Structural Adjustment Programs. We debated using the term “Structural Adjustment Programs” in our petition but decided that not enough members of the general public would be familiar with the term. Furthermore we did not want to depart too far from the language used in other countries’ petitions. Our petition’s wording (see Appendix A) must be understood as a rejection of SAPs as we made clear in our Sept. 28 letter to Finance Minister Martin and the Commonwealth Finance Ministers.
How to deal with critics who say there is no guarantee that the money saved from debt payments will be used primarily for social or economic development has been a difficult issue for us.
We have had many discussions concerning whether any type of positive conditionality might be attached to debt relief and a variety of opinions were expressed ranging from “no conditions” to “some conditions”. Some religious leaders in Canada have expressed reservations about the whole campaign because of fears that the benefits of debt relief might be siphoned off by corrupt government officials. We have replied that `corruption’ also exists in our own country and among the Transnational Corporations based in the North.This does not, however, refute the argument. We all agree that debt repayments should not be made on the backs of the poor and that there must also be shared liability and responsibility among creditors for loans that cannot be repaid. This includes the need to democratize the World Bank and IMF as well as push for full disclosure of terms of loans.
Our call for an international body under the United Nations to oversee debt remission is also a plea for greater transparency among creditors. Currently we do not have comprehensive data on debts owed to Canadian banks and financial institutions due to the inadequacy of our bank disclosure laws.
While not pretending to have a total answer to questions of conditionality we in the Canadian campaign have arrived at the following consensus:
1. that debt remission must not be linked to orthodox SAPs;
2. that there should be an internationally agreed mechanism for monitoring debt relief to make sure the benefits are used for social and economic development. The establishment of such an entity would most effectively be carried out by convening a conference of United Nations member states with participation by representatives of civil society. Such a conference could consider issues such as limits on arms spending and how best to ensure the debt relief benefits the poor.
3. Our responsibility is to support civic movements working towards democratization and respect for human rights while we work for debt remission. Thus our campaign pamphlet attempts to strike a balance where it says “Increasingly we see countries with active civil societies that can hold their governments accountable. Withholding debt cancellation will only penalize ordinary people, not the corrupt leaders. It is our responsibility to support the efforts of civic movements towards greater democracy, respect for human rights and transparency that will ensure that resources available from debt relief are used for genuine social development.”
Hence we have undertaken inquiries with civil society groups in countries that are often cited for flagrant corruption and abuse of human rights. We have received a clear answer from the government-in-exile from Myanmar (Burma) which opposes debt relief for the current regime because it would be seen as legitimizing a regime that rules by terror. Accordingly we told Canada’s Finance Minister that we would exclude Myanmar at this time. In a speech delivered to an NGO forum on Sept. 28th Mr. Martin himself explicitly excluded Myanmar from eligibility for remission of debts owed to the Canadian International Development Agency. He said that Myanmar’s debts to Canada will be addressed “when the political situation there allows.”
In our attempts to listen to what our Southern partners are saying on this issue we have heard church leaders enunciate a Jubilee theology which explicitly incorporates the struggle against corruption alongside of calls for debt remission.
The Joint Pastoral Letter issued by church leaders in Zambia announcing the Jubilee 2000 campaign in that country announces a willingness on the part of Zambian churches and civil society to play a role in monitoring debt relief where it says:
“… we recognize that Zambia must be responsible in the use of any monies made available through debt relief. For this reason we will hold the government accountable, and cooperate with government officials and civil society organizations to monitor the use of the money freed up if and when debt is canceled. We want to ensure that the newly available resources really do contribute to meeting the social and productive needs of the country.”
We suggest that participants in the Rome meeting discuss what effective civil society involvement in monitoring debt remission might involve.
3. HOW DO WE AVOID A NEW DEBT TRAP?
Our Jubilee vision of a genuine new beginning rejects the cynical claim that a new build up of unpayable debt is inevitable even if we cancel current debts. This will only be true if the International Financial Institutions insist on the same neo-liberal, monetarist policies as are now embodied in orthodox SAPs. Our proposal for avoiding a new debt trap has three points:
1. Delink debt remission from orthodox SAPs
To avoid the debt trap we must break away from the constraints of neo-liberal economic policies. This is why our demand that debt remission not be linked to orthodox SAPs is the most important part of our petition campaign.
Many mainstream economists, most notably Joseph Stiglitz of the World Bank, are questioning the neo-liberal policy prescriptions embodied in SAPs. In the wake of the Asian crisis it is now recognized that devaluation, high interest rates and high taxes push countries into recession and do not lead to economic recovery.
In discussing alternatives to SAPs our campaign literature refers to the African Alternative Framework to Structural Adjustment Programmes for Socio-Economic Recovery and Transformation as an example of a pragmatic alternative to orthodox SAPs. While our government continues to support the SAP model there is now considerable scope for dialogue on this issue. The current crisis in Asia, the views of the World Bank Chief Economist Joseph Stiglitz as well as the current participatory review of SAP policies (SAPRI) currently underway in several countries all lead us to conclude that we should redouble our efforts to condemn the SAP model.
2. Assure that debt relief is deep enough to allow economic development
To escape from the debt trap the initial debt remission must be substantial enough to allow both low-income and middle-income debtor countries to resume investment in social and economic development. If current debts are only reduced to levels deemed “sustainable” by the World Bank and the IMF then debtor countries will remain in perpetual debt bondage.
While the debts of low income countries must be written off the debts of middle-income countries should also be written-down through swapping short-term, high interest obligations for long-term bonds at lower interest rates. An international conference on “The External Debt and the End of the Millennium” sponsored by the Latin American Parliament called for renegotiating Latin American debts so that could be paid over 50 years at interest rates of less than 2%. The result of such a write-down would be to allow national governments to focus less on attracting hot money to roll over debts and more on domestic social and economic development.
3. An international insolvency court
To avoid a new debt trap the world needs a tribunal that could arbitrate the write-down of a highly indebted countries’ debts ensuring that losses were shared by all creditors just as domestic bankruptcy courts rearrange the debt of insolvent corporations. Such a court could also adjudicate and write off odious debts.
Another function for such a court could be to prevent the owners of hot money from fleeing with their assets when an emergency bailout occurs. Instead the court would bail these creditors `in’ by allowing governments to invoke an Emergency Standstill Clause requiring that private creditors restructure their short-term credits over longer terms. At the recently concluded Commonwealth Finance Ministers’ meeting, Canadian Finance Minister Paul Martin supported the need for such a clause.
Conclusion: The Threat of a World Depression
The context in which the Jubilee debt campaign is taking place is extremely worrying. Most of the world is already in recession. We face the possibility of a descent into another Great Depression which would have even more devastating effects for the poorest countries.
The following are some of the issues that the Jubilee campaign should also consider:
1) Debt Reduction for Middle Income Countries
The recent IMF-sponsored bailouts have left Asian governments with huge new debt obligations as they were forced to take over or guarantee loans originally contracted by private firms. As the draft World Council of Churches statement being prepared for the Assembly in Harare observes, the IMF is insisting on the “ `nationalization’ of uncollectable private debts arising from the financial crunch. As a result, increasingly costly public resources are used to absorb private capital losses and insure speculative transnational capital gains… Substantial debt reduction is needed for highly-indebted middle-income countries… to restore more balanced community relationships and social and economic opportunities… Gains from the private debt build-up are privatized, while the costs are passed on to the population at large.”
We in the Canadian Ecumenical Jubilee Initiative base our call for the write-down of private credits on the principle of co-responsibility. According to this principle both creditors and debtors must take responsibility for the debt crisis and participate in its resolution. Private creditors must accept their share of the costs of resolving the debt crisis.
Some business economists say that the way to avoid global deflation is to keep the US economy running at full tilt. Business Week (10/11/97) refers to the US as “the consumer of last resort” warning that if growth slows down in the US “the world could end up with all sellers and no buyers– and on a path that leads to devastating deflation.” But stimulating more imports into North America would only exacerbate the maldistribution of resources and threaten the ecological health of our planet. The “ecological footprints” of high-income consumers in North America are already too large.
What is needed is another kind of adjustment where wealthy investors are made to absorb their share of losses and the problem of overproduction is confronted by raising the incomes of the poor promoting effective demand for necessities instead of luxuries.
Writing-down privately held debt owed by middle-income countries has a recent precedent – the Brady Plan which, despite its many weaknesses and inadequacies, demonstrated that private debts can be written down in an orderly fashion. The IMF reports that between 1988 and 1996, 25 countries received reductions on commercial debts and debt service obligations worth about US$71 billion.
In the context of fears that the world might slip into a global depression, demanding substantial debt relief for middle-income countries is not too far fetched. For example, Business Week (Sept. 7, 1998 editorial) argues that it is time to wipe out the “debt overhang [that] is crushing economic growth. It is time to consider a global write-down.” Some of the other measures which need to be considered include:
2) Cool down hot money
To avoid the debt trap the international financial system must be reformed to prevent hot money from destabilizing debtor country finances. The Brazilian Jubilee 2000 campaign decries how “bringing a fearsome Trojan Horse filled not with soldiers but with foreign finance capital” into Brazil has had disastrous results. (Informe PACS Jubileu 2000 – N.3)
In the wake of the Asian crisis the use of various kinds of measures to contain flows of hot money, insulate domestic economies from speculation, and enable them to stimulate domestic economic development have won a new legitimacy. Capital controls can take several different forms:
a) foreign exchange controls where central banks approve foreign exchange transactions. Paul Krugman writing in Fortune (Sept. 7, 1998) called for temporary use of foreign exchange controls to allow for lower domestic interest rates.
b) Chile’s encaje system under which investors were required to deposit 10% of their investment interest free with the central bank and keep their money in the country for a minimum of one year. Although Chile has temporarily suspended the 10% deposit requirement, it reserves the right to re-impose the deposit requirement when necessary.
c) taxes on capital flows
James Tobin’s proposal for taxing international currency transactions with a modest levy of between 0.1 and 0.25% would slow down currency speculation.
The most important effect of a Tobin tax would be to give countries more control over domestic monetary policy allowing for lower interest rates to stimulate productive investment.
3) Use revenues from taxes on international transactions for social and economic development
To avoid the debt trap we must find ways to transfer more resources to less developed countries than what is currently available through Official Development Assistance.
It is estimated that a Tobin tax of 0.25% would raise about US$302 billion a year. This revenue could be used for social and economic development and distributed by a United Nations agency as grants rather than loans.
The Canadian Ecumenical Jubilee Initiative, Jubilee 2000 UK Web site, October 31, 1998