More work required on debt forgiveness

Social justice news
July 2005

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More work required on debt forgiveness
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More work required on debt forgiveness
A Jubilee USA Network sponsored study (executive summary) finds much that could be improved in a June 11 Group of 8 (G-8) Finance Ministers’ agreement on multilateral debt cancellation and offers recommendations of next steps for the G-8 to fully cancel the debts of impoverished nations. According to the report, while the G-8 agreement will be crucial in releasing resources for poverty reduction in those 18 countries that qualify for immediate cancellation, the G-8 will need to expand the list of countries and eliminate the harmful economic conditions required of additional countries to qualify for cancellation.

“The recent G-8 agreement for 100 percent cancellation of debt to the International Monetary Fund (IMF), World Bank, and African Development Fund for some impoverished nations represents a welcome first step on a long journey towards freedom from debt for all impoverished nations,” said Neil Watkins, National Coordinator of Jubilee USA Network. “Our analysis finds that the G-8 must expand its agreement to include all impoverished countries, not just those classified as Heavily Indebted Poor Countries (HIPC), and debt cancellation must come without subjecting these countries to devastating economic conditions.”

The G-8 agreement establishes the possibility of 100 percent multilateral debt cancellation for impoverished nations—a goal campaigners have long sought. Full debt cancellation for the 18 countries included in the agreement means that beneficiary nations will be relieved of more than $1 billion in annual debt service payments and these resources may be spent on health care, education, clean water, and HIV/AIDS prevention and treatment. Already, the Zambian government has indicated that funds released from debt cancellation will be used to provide life-saving AIDS drugs to 100,000 Zambians living with HIV/AIDS.

But First Step on A Long Journey finds that the G-8 agreement suffers from several serious flaws. The agreement remains rooted in the failed, condition-laden HIPC Initiative, suggesting no end to the requirement that countries implement harmful economic policy conditions to qualify for debt cancellation. Beneficiaries are limited to countries that are currently part of this Initiative, ignoring other heavily indebted and impoverished countries. The agreement does not cancel debt to other significant creditors such as the Inter-American Development Bank.

This report finds that some limits of the agreement include:

· The deal immediately applies to only 18 countries, less than a third of countries that need full cancellation to meet the Millennium Development Goals, and well short of the countries which require cancellation of odious/illegitimate debts;

· It has taken 18 nations 9 years to qualify for debt cancellation; at current rates of progress it could take a decade for the 20 potentially eligible HIPC nations to benefit from 100 percent cancellation and this must be avoided;

· The amount of debt stock to be cancelled by the agreement—$56 billion—represents only 10 percent of the amount of debt stock cancellation required for nations to meet the MDGs, goals which themselves are only a first step towards poverty eradication; · Because the Inter-American Development Bank (IDB) has been excluded from the deal, 4 of the 18 nations—Bolivia, Guyana, Honduras, and Nicaragua—are scheduled to pay $1.4 billion in debt service over the next five years to the IDB.

· The significant burden of odious/illegitimate debt held by nations across the South remains completely unaddressed in this agreement.

Jubilee USA Network calls on the G-8 to:

(1) Avoid delays in providing cancellation to those countries who qualify for the cancellation;

(2) Expand the list of countries to include all impoverished nations and countries in crisis – at least 62 nations require full cancellation to meet the MDGs and 50 nations are in the JUBILEE Act, for instance;

(3) Cut all economic conditions countries must meet to qualify, as these policies have failed to increase growth and reduce poverty; and

(4) Include all creditors – begin by canceling 100% of debt of impoverished nations to the Inter-American Development Bank and Asian Development Bank.

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