Home

Justice

Ecology

Dialogue

Columbans

News

Links

E-mail us

 

 

 

 

 

 

Debt Cancellation
Why, What, How and When

The first international conference of Jubilee 2000 drew 38 national movements and 12 international organisations to Rome on 15-17 November. It was the first time so many of the campaigners had met together and they mapped out a joint campaign strategy to press for the cancellation of unpayable debt by the year 2000. The text of their press release can be found here.

 

Why?

 The enormous burden of international debt is a blight on the lives of over one billion people in our world. All efforts to solve this problem up to now have approached it from the side of creditors - these schemes have been designed as debt-collection mechanisms. Jubilee 2000 believes that the interests of those who suffer to pay the debt should be put first. For them debt cancellation offers the only real hope of a way forward.
What? Unpayable debt is debt that cannot be serviced without placing a burden on impoverished people. Uganda needs to spend $12 per capita to have an acceptable health service for its people. It can only afford to spend $3 per person. One in every five children in Uganda will die before their fifth birthday. Meanwhile, debt is repaid at a per capita cost of nearly $17. This debt can only be paid at the cost of children's lives. This is by any standards an unpayable debt.
Why? Debt already paid
Huge increases in the interest rates that were originally agreed mean that in many cases countries have already paid back what they originally borrowed, plus interest, and yet they still owe money. The Philippines paid back $21 billion of an original debt of $26 billion. Having done so they were told they still owed more than $28 billion. They are still trying to pay of this debt and currently spend nearly 40% of their budget every year on debt servicing.

Bad advice
A lot of debt was incurred by countries who were following the advice of the International Monetary Fund and the World Bank. When countries were getting into financial difficulty in the early 1980’s, the advice from the IMF was to borrow more. When the crisis deepened, their ability to get loans was dependant on their carrying out programmes and policies designed, monitored and insisted on by the IMF and the World Bank. Many of these policies and programmes, which the countries had no choice about were costly failures. The cost of these failures is not borne by those who gave the advice and insisted that it was acted upon. It is borne by the poor in those countries.

Odious Debts
Marcos, Botha, Mobuto... All three men headed regimes that were regarded as either corrupt, cruel, illegal or all of the above. Each of them were lent money that was clearly to be used for either personal profit or to continue the oppression of their country. None of them is expected to give this money back. The people they used the money to oppress are expected to do so.

  How would debt cancellation work?
There are two issues at stake here - Which countries debts would be cancelled?
How would this cancellation be financed - who pays the bill?

Which Countries?

 Jubilee 2000 believes that all unpayable debt as defined above should be cancelled. There is a need for a independent, fair and acceptable mechanism to agree what is in any particular case an unpayable debt. Such mechanisms, such as insolvency procedures, already operate at the level of companies and individuals. In the United States they operate at city and state levels. Their purpose is to decide how much of a debt is a legal debt, and how much of that legal debt can be paid back without asking placing an intolerable burden on the debtor. Such a mechanism would help to resolve future disputes. Present circumstances demand immediate action for those countries currently devastated by the current debt crisis .

Who
Will
Pay?

 There are a number of options of how the debt cancellation could be financed.
In the case of debt owed to the IMF, the IMF has its own resources which it could use. The sale of 10% of the Funds enormous gold reserves would meet its requirements for debt cancellation. This sale would be feasible without affecting the Fund or the worlds gold markets.
In the case of debt owed to individual countries different options are possible. The amounts involved are not in relative terms large. For example, it is estimated that the cost to each British taxpayer of cancelling debt owed to them by 52 of the countries most affected would be about four pence per week.
There are other options. Every day billions of dollars are traded on the worlds money markets. A tax of just 0.01% (one hundredth of one percent -- one penny in every £100) on international foreign exchange and derivatives transactions would pay off all developing country debt.

When?

 Jubilee 2000 believes that debt cancellation needs to happen immediately. Too many lives are affected to let the situation drag on. The current mechanism for debt relief, the Heavily Indebted Poorer Countries Initiative (HIPC) was was touted as a quick and decisive solution to the crisis has only managed to deliver some debt relief to one country since it was set up. It is too little, too slow, and too concerned with the interests of creditors. Jubilee 2000 sees the arrival of the new mill as an opportunity to take decisive action. Cancelling debt would not only bring immediate relief to over a billion people already impoverished by the global trading and financial system - it would be a signal that in the new mill this very system itself would have to change.
   
   
   
   
   

Home| Justice| Ecology| Dialogue| Columbans| Links | Feedback