Support grows for debt write-off

After long discounting it, the United States now supports the doctrine of “odious debt” – that nations shouldn’t have to repay debts incurred by deposed despots who didn’t have popular support.

Johannesburg, South Africa: It’s an idea that’s been throbbing in the hearts and minds of liberal activists, anti-globalization campaigners and rock star Bono for years: Canceling 100 percent of the massive foreign debts owed by the world’s poorest countries, thus freeing them to spend millions on health care, education and other poverty-busting plans, rather than just on interest payments for their massive loans.

But it’s rarely had much serious political support. Until now. Suddenly, the Bush administration and British Prime Minister Tony Blair’s government are behind the idea. And it’s on the agenda as G-7 (the Group of Seven nations with the largest economies) finance ministers meet tomorrow in Washington, D.C.

The Bush team’s interest seems to have grown out of its campaign to cancel Iraq’s $120 billion debt. If oil-rich Iraq deserves to be freed from its burden, the argument goes, so do the world’s poorest nations. The U.S. and British governments have changed the terms and momentum of the debate. For one thing, after long discounting it, the United States now supports the doctrine of “odious debt” – that nations shouldn’t have to repay debts incurred by deposed despots who didn’t have popular support.

It’s an argument Salih Booker, head of Africa Action, and others have used for years. “When a tyrant goes, his debt should go with him,” Booker says, arguing that the notion applies as much to Mobutu Sese Seko in Zaire (now Congo) and Gen. Sani Abacha in Nigeria, as it does to Saddam Hussein and Iraq. (The Congo now has $9.3 billion in debt; Nigeria, $30 billion.) The 30 or so poorest nations – most of them in Africa – have a total of roughly $200 billion in debt.

This week, Britain announced a unilateral plan to cancel $180 million of poor-country debt per year. And the 1996 Heavily Indebted Poor Country Initiative, under which rich nations have agreed to cancel $110 billion in debt, has so far gotten rid of about $31 billion of debt in 27 countries.

Backers point to the impact of the initiative in poor countries. Tanzania, for instance, used the money that otherwise would have gone to service its debt – about $80 million a year – to boost education spending and eliminate school fees. Some 1.6 million children have returned to school, according to Data, the debt-relief group founded by U2’s Bono.

But some worry that 100 percent cancellation could spark a welfarelike dependency among poor nations. It would also be unfair to less indebted nations, observers say. And it won’t necessarily solve the problem.

All around Africa, governments rely on foreign donors to supply big chunks – sometimes two-thirds or more – of their annual budgets. Canceling their debt wouldn’t likely stanch that demand.

And then there’s the sticky question of how to pay for it. That’s what the ministers from the United States, Britain, Canada, France, Germany, Italy and Japan will debate starting today.

The British want the International Monetary Fund (IMF) in Washington, D.C., which is bankrolled by rich countries and facilitates poor-country loans, to sell some of its gold, one of the largest stashes in the world, some 103 million ounces. Selling a portion of it would give the IMF an extra $42 billion to work with, according to its Web site.

Abraham McLaughlin, The Christian Science Monitor, September 30, 2004

Categories: Africa, Debt Relief, Odious Debts

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