Debt Relief

Pressure mounts on G-7 to cancel ‘odious’ debts

Development groups are calling on the Bush administration to support full, unconditional, and immediate debt relief for more than three dozen of the world’s poorest nations.

Jubilee USA network, a coalition of 60 groups, and Africa Action delivered the message directly Tuesday, presenting U.S. Treasury officials with the signatures of more than 3,000 people on a petition that characterises the debts as “illegitimate” and calls for no-strings-attached cancellation.

Treasury Secretary John Snow will be representing the administration at the Feb. 4-5 talks.

“This year, impoverished nations will send billions in payments on illegitimate debts to the IMF, World Bank, and other wealthy creditors instead of on desperately needed programmes to fight HIV/AIDS, poverty, and disease,” said Neil Watkins, national coordinator of Jubilee.

“We are sending a clear message today to Secretary Snow: Debt costs lives, and there can be no further delay. You must come back with a deal on multilateral debt cancellation.”

At the same time, a bipartisan group of 69 members of Congress sent their own letter to Snow in support of comprehensive debt relief.

“The people of impoverished countries need a chance; they need full debt cancellation,” said the letter, whose signers included Republicans Spencer Bachus and James Leach, Democrats Barney Frank and Maxine Waters, and many others.

Leading international agencies like ActionAid, the Catholic Agency for Overseas Development and Oxfam are also urging the finance ministers to use this week’s meeting to make a real difference in the lives of millions of people around the world.

“If finance ministers agree a deal on debt cancellation, this G7 meeting would be the first milestone on the road towards ending the obscene poverty that kills 50,000 people every day,” said Max Lawson of Oxfam.

At stake are tens of billions of dollars in debt owed by the world’s poorest countries, most of which are in sub-Saharan Africa, to international financial institutions (IFIs) like the World Bank and the International Monetary Fund (IMF). Most people in these countries live in abject poverty, often earning less than one dollar a day.

In 1996, the G-7, which dominates the policy-making boards of the IFIs, launched the Heavily Indebted Poor Countries (HIPC) initiative. The programme was designed to reduce the debt of some 41 eligible countries to more manageable levels in exchange for their implementation of far-reaching economic reforms aimed at making their economies more attractive to foreign investors.

So far, 27 countries that together owed the IFIs a total of 100 billion dollars have seen their debt reduced by about 30 billion dollars, resulting in a roughly 50 percent reduction of their annual debt service payments.

While that represents a substantial savings, most of HIPC’s benificiaries continue to pay more in debt service each year than they spend on health and education, a situation that debt campaigners argue is morally indefensible, particularly because in most cases the original debt was incurred by western-backed dictators who misspent or embezzled the money.

“Just as the U.S. led the call for cancellation of Iraq’s odious debts,” Africa Action director Salih Booker said Wednesday, “it is past time for the U.S. and other G-7 governments to recognise the odious and illegitimate nature of African countries’ debts and to cancel them outright.”

Many of the same countries are struggling with HIV/AIDS, malaria, and other infectious diseases, making it that much harder to pay their debt service. AIDS alone takes about 8,000 African lives every day.

Discussions within the G-7 on the need to take stronger measures beyond HIPC began last June at the G-8 Summit in Georgia. Britain, which assumed the presidency of the group Jan. 1, argued for a package that would grant 100 percent multilateral debt cancellation to more than three dozen nations.

On Wednesday, Canada said it would give funding to the World Bank and the African Development Bank to implement a 10-year plan that would pay off the debts of 15 heavily-indebted nations.

The Bush administration has also come out in support of debt relief, but agreement has been stymied over how to pay for it, as well as reservations by several other G-7 members. In addition to the U.S. and Britain, the G-7 includes Canada, France, Germany, Japan, and Italy.

The Bush administration has called for the World Bank and the IMF to commit their own lending resources to finance the plan, while the government of British Prime Minister Tony Blair wants the IMF to sell billions of dollars worth of its gold reserves and for donor countries to pay off the remainder over 10 years. Subject to the agreement of other donors, Britain has committed itself to paying 10 percent of the total.

Both plans, however, call for cancellation to be conditioned on the fulfillment by the beneficiaries of reform measures to further liberalise their economies.

Meanwhile, development groups want the G-7 to go yet further. They support the phased market sale of up to 35 billion dollars of IMF gold and the mobilisation of the World Bank’s reserves and future profits to be used to finance the cancellation.

Jim Lobe, Inter Press Service (Johannesburg), February 2, 2005

Categories: Debt Relief, Odious Debts

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s