Debt relief needs an epiphany

Sara Stratton
Globe and Mail
January 5, 2001

Jan. 6 is Epiphany, a day that takes its name from the Greek verb meaning “to reveal.” For Christians, it marks the time when God is made known to us on Earth in the form of Jesus — a time of hope that begins with a star shining in the East, and the arrival of wise men. Even Canadians who do not celebrate Epiphany refer to it in moments of sudden, profound understanding: “I had an epiphany!” or “I see the light.”

Christians and non-Christians alike have taken to calling the millennium a “Jubilee Year.” Jubilee is another biblical concept; originally it meant that every 50th year humankind should let the land lie fallow, redistribute wealth, free the enslaved, and cancel debts. This was the spirit behind the millennium Jubilee campaign to cancel the debts of the world’s poorest countries and to stop demanding that those countries implement economic “structural adjustments” that effectively cut critical social spending.

Recently Finance Minister Paul Martin announced that Canada will stop taking debt payments from Heavily Indebted Poor Countries (HIPCs). Mr. Martin told the International Monetary Fund that it was “absurd” that the tiny island nation of Sao Tome and Principe had to carry out 160 policy directives before it received any debt relief.

Such actions are laudable. But they are not enough.

One Canadian in 50 — 640,000 people — signed the Canadian Ecumenical Jubilee Initiative’s petition demanding debt cancellation and an end to structural adjustment. When Honduras, a country saddled with $5-billion (U.S.) in foreign debt was hit by hurricane Mitch in November, 1998, thousands of those same Canadians inundated Mr. Martin’s office with e-mails, letters, faxes, and phone calls demanding immediate debt cancellation. In February, 2000, after Mozambique was virtually drowned in a flood, they did the same.

Canadians believe that it makes sense to cancel debts in a country like Mozambique, which during the flood continued to pay out $1.46-million a week on its debts while thousands of people were stranded on rooftops. It’s common sense to cancel the debt of Honduras, which was required to put debt repayment to wealthy nations and international financial institutions ahead of national reconstruction. And it’s common sense to cancel the debts of a country like Zambia — instead of requiring that a nation with a 20-per-cent adult HIV infection rate and a poverty rate of 80 per cent spend more on debt repayment than it does on health care and education.

Such common sense seems to have eluded the wisdom of world leaders and international financial institutions. The International Monetary Fund’s HIPC Initiative may appear generous (G7 nations promised as much as $100-billion in debt relief at a summit in 1999). But it involves only a small amount of debt relief over and above the write-off of debts that cannot be collected in any case. Writing off “bad debt” does not give the debtor new money to invest in rebuilding a society.

Consider the example of Nicaragua, which owes annual debt-service payments of about $500-million but is only paying about half as much, around $245-million, and at enormous social cost. Under the HIPC Initiative, Nicaragua has had its payments cut by $330-million on its $500-million. But because Nicaragua is only paying $245-million, its real reduction is just $75-million.

And in order to see that paltry relief, Nicaragua must endure a destructive and humiliating series of Structural Adjustment Programs. These programs arguably impose excessively austere fiscal policies, deflationary monetary policies and dubious privatization of essential services, such as sanitation and water. They push such countries into a tragic spiral of debt, adjustment, weakened domestic economies, heightened vulnerability and even greater debt.

What will it take for international financial institutions to experience an epiphany on debt cancellation? As the world began to think about the Millennium, we thought it might inspire wisdom. When hurricane Mitch roared through Central America, we thought, “They must act now.” When 22 million people around the world signed the Jubilee petition for debt cancellation, we thought there would be some willingness to act. And as the world watched Mozambique flood, we thought, “How can they not act?”

In these first cold, crisp days of 2001, what does it take to see the light?

Sara Stratton is communications co-ordinator with the Canadian Ecumenical Jubilee Initiative (CEJI), a social-justice project of 38 national churches and church-based organizations. Last year, CEJI received the Canadian Council for International Co-operation’s International Co-operation Award for Influencing Public Policy.

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