Committee for the Abolition of Illegitimate Debt

Ever since the earthquake that struck off the coast of Indonesia on 26^th December there has been a profusion of figures in the headlines, increasing remorselessly: the number of victims, the cost of the damage, the amount of international aid. And a succession of meetings involving the major powers: the Jakarta conference, a G7 meeting, a session of the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

... Let us pause to comment on some little-known facts and figures that should be at the heart of the debate.

Eleven countries are affected: Indonesia, Sri Lanka, India, Thailand, Somalia, the Maldives, Malaysia, Burma, Tanzania, Bangladesh and Kenya. A mixed bag, including countries from Africa and from Asia, countries with emerging economies and very poor countries, countries repaying colossal amounts on their debts and others which have suspended payments. However Nature made no distinction between these countries, so it would seem all the more shocking to grant to some what others might be denied.

At the end of 2003, the total external debt of the eleven countries came to 406 billion dollars [1]. Their economic performance varied greatly, as did their creditors [2]. Promising countries like India and Thailand have a debt mainly to private lenders, contracted on the finance markets or with big banks. Poor countries like Sri Lanka or Bangladesh have a mainly multilateral debt, held by the 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.

, the Asian Development Bank 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 . More internationally isolated countries like Somalia have a mainly bilateral debt contracted with rich countries.

In 2003, the eleven countries repaid a total of 68 billion dollars to their foreign creditors, as compared to 60 billion the preceding year. Their governments alone repaid 38 billion dollars [3]. It is an enormous drain on their resources: between 1980 and 2003, repayments totalled eleven times the amount owed in 1980, while at the same time, that original debt had increased fivefold [4].

The amount of international aid so far pledged is estimated at 6 billion dollars, 4 billion of which will come from official institutions. Without wishing to discourage the wave of generosity, which relieves the donors’ consciences long before it reaches the victims, it is urgent to point out that the eleven countries shell out six times that much in debt repayments each year. So the grossly over-publicised generosity, even when it is sincere, remains a very subtle mechanism for sucking the wealth of the populations of the South towards their rich creditors. If only December’s tragedy could serve to highlight that other tragedy, going well beyond the eleven countries hit by the tsunami: the debt. Because of it, and with the complicity of the local ruling classes who have a personal interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. in keeping their countries indebted, States do not guarantee the fulfilment of their people’s basic needs; poverty and corruption are widespread; political and economic sovereignty have become meaningless concepts for dozens of countries; natural resources are pillaged or sold off to powerful multinational corporations; farmers are forced to grow cash crops for export to the detriment of subsistence crops. The debt is the particularly vigorous nerve centre of a predatory and oppressive economic model.

What creditor would dare declare publicly that they still intend to obtain repayments from such badly damaged countries? Nevertheless, none has definitely given up. The long-awaited Paris Club meeting, (17 days after the quake) attended by 19 rich countries, should fool no one. The creditors are ready to suspend repayments, with no significant cancellation of the debt, all the better to lay down strict conditionalities enforced by the IMF. Yet this is the same IMF which already distinguished itself during the 1997-1998 crisis with remedies worse than the disease.

As a mater of conscience, all creditors can decide to renounce their debts. Without delay. It has already happened in recent years for geopolitical reasons [5]. Hundreds of social movements present in the region, particularly the CADTM and Jubilee South networks, have called for cancellation, showing the objective solidarity that exists among all those who have first-hand experience of the tyranny of the debt. A moratorium or simple reduction will not do. Only the total and unconditional cancellation of the external public debt of the stricken countries, with local citizens’ control over the money thus freed up, can be an adequate response to the scale of the tsunami disaster. Otherwise, the only purpose your donations will serve, in the end, is to help the devastated countries to repay their debt - a debt that has become immoral.

By Damien Millet, president of CADTM France, and Eric Toussaint, president of CADTM Belgium (Committee for the Abolition of the Third World Debt). They co-authored the book “Who Owes Who?” published by Zedbooks, London, 2004.