Committee for the Abolition of Illegitimate Debt

From 9 to 11 December 2010, a series of activities were attended by delegates of CADTM from Sri Lanka, Pakistan, India and Belgium in Colombo. The monsoon, which usually prevails in this region from May to September, was invited to the party, presumably to remind the
importance of COP 16 discussions, which took place at the same time, thousands of miles away in Cancun, Mexico. In short, it rained 8 hours per day. A year after the workshop in Dhaka, it was an occasion to exchange experiences and highlight the commonalities that are likely to become issues for campaigns and the basis for united struggles. It was also an opportunity to review the work done in recent years and to explore the possibilities of common progress, both in individual countries and at a subcontinental level, in the fight against debt and structural adjustments.

The activities began on 9 and 10 December with the 4^th CADTM South Asia Workshop on “Debt and International Financial Institutions”. Eric Toussaint http://www.cadtm.org/Global-Crisis-... and Stéphanie Jacquemont http://www.cadtm.org/The-IMF-Word-B..., delegates from Belgium presented a global analysis of the debt of the North and South and the IMF IMF
International Monetary Fund Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org -World Bank World Bank
WB The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

in the new context created by the crisis that erupted in 2007-2008. Even if it is the mostly the debt in Europe which has made headlines recently, and also if the debts of developing countries are only a drop in the ocean of global private and public debt, it is no less a threat to these vulnerable countries which are dependent on the international situation. A rise in interest rates Interest rates When A lends money to B, B repays the amount lent by A (the capital) as well as a supplementary sum known as interest, so that A has an interest in agreeing to this financial operation. The interest is determined by the interest rate, which may be high or low. To take a very simple example: if A borrows 100 million dollars for 10 years at a fixed interest rate of 5%, the first year he will repay a tenth of the capital initially borrowed (10 million dollars) plus 5% of the capital owed, i.e. 5 million dollars, that is a total of 15 million dollars. In the second year, he will again repay 10% of the capital borrowed, but the 5% now only applies to the remaining 90 million dollars still due, i.e. 4.5 million dollars, or a total of 14.5 million dollars. And so on, until the tenth year when he will repay the last 10 million dollars, plus 5% of that remaining 10 million dollars, i.e. 0.5 million dollars, giving a total of 10.5 million dollars. Over 10 years, the total amount repaid will come to 127.5 million dollars. The repayment of the capital is not usually made in equal instalments. In the initial years, the repayment concerns mainly the interest, and the proportion of capital repaid increases over the years. In this case, if repayments are stopped, the capital still due is higher…

The nominal interest rate is the rate at which the loan is contracted. The real interest rate is the nominal rate reduced by the rate of inflation. which are now historically low or falling commodity prices and the debt trap could close on them, as in 1982.

Presentations on Sri Lanka, India and Pakistan took this threats into account. B Skanthakumar See http://www.cadtm.org/Sri-Lanka-... from the host organization, LST (Law and Society Trust), gave an overview of the debt situation of Sri Lanka, focusing on stand-by agreement signed with the IMF, whose stringent conditions were incorporated into the 2011 budget. This was indeed heartily welcomed by the financial world. Ajit Muricken of VAK/ CADTM India explained the consequences of the action of the World Bank in the country, which in 2010 was still the largest “beneficiary” of loans from the International Development Agency (IDA). Other delegates from India (Sudha Reddy, CS Lakshmanan and Jacob John), each in turn, highlighted the consequences of neoliberal policies in force in this country and the resistance posed by the populations concerned. The case of people in Chennai who are evicted from their homes to make way for real estate projects, or workers in export processing zones whose rights are systematically violated, privatization (with the introduction of the much lauded public-private partnerships) of the water supply in Karnataka, the Chenchu tribes in the state of Andhra Pradesh whose way of life and survival are threatened by mining projects; all evidences showed the logic of destruction and exploitation of men and women and of nature that underlies the neo-liberal ideology.

The next day, Abdul Khaliq http://www.cadtm.org/Campaign-for-A... of Pakistan strongly denounced both ’D’ that engulf much of the country’s tax revenues: Debt and Defence, he prefers to call, less euphemistically, the military budget. He also stressed the growing response of the campaign for debt relief in public opinion, the media and even the government, following the devastating floods of August-September. Rabbiya Bajwa, a lawyer, member of CADTM Pakistan, explained how she could get the Lahore Bar Association unanimously vote a resolution calling for the debt cancellation.

The discussions that accompanied the presentations addressed issues important to the region, such as the role of India and China, the possibility of a major crisis in China, increasing domestic debt of
developing countries, the role of foreign investment in the region, the immense climate and ecological debt accumulated by governments and Northern transnational and also their Southern counterparts against the people.

The morning concluded with a brainstorming session of two working groups that studied several issues: the importance of debt in different countries, the consequences of the actions of international
financial institutions and future strategies in the sub-continent and across the continent to raise awareness and mobilize prople on the issue of debt and structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

IMF : http://www.worldbank.org/ . The rejection of privatization was discussed, among other topics, as the axis of a campaign that could bring together a large number of organizations and social movements in the region.

On the evening of December 10, Abdul Khaliq & Eric Toussaint gave a talk on “Neoliberal crisis or crisis of neoliberalism.” The speakers painted a picture of the failure of capitalism in its neoliberal
phase, while showing how, paradoxically, neoliberalism emerged stronger from the global crisis. Resistance, although stronger in some countries, particularly in Europe, have failed to defeat the
neo-liberal capitalism and the processes underway in some countries of Latin America (mainly Ecuador, Bolivia and Venezuela) can get stuck if they do not offer a more radical anti-capitalist answer to the systemic crisis that we are living in. The conclusion is known yet it is still necessary to reiterate: the popular mobilization and convergence of struggles remain, ultimately, the only weapons in the hands of activists fighting for social justice.

The activities of CADTM South Asia in Colombo were completed on Saturday morning, December 11 with an internal meeting of CADTM. A report of the World Assembly of the network held in Liège from December 22 to 24 was presented. Members present also took stock of the past year and outlined the upcoming projects: preparation and publication of a booklet with information on the debt of several countries in the region, regional campaign on the rejection of privatization, Urdu translation of the book 60 questions/60 answers about the debt, the IMF and World Bank, preparing a book on the after-flood in Pakistan, etc.. The delegates agreed to set up a regional coordination group, and decided to meet the next year, from 3 to 5 November 2011, in Pakistan.