G8 Debt Deal Under Attack at World Bank, IMF

This June, G8 leaders promised 100% debt cancellation for
18 of the world’s poorest countries. Since then the
agreement, which would provide these countries with
desperately-needed resources for development goals, has
faced reservations, concerns, and outright opposition from
both the World Bank and the IMF.

In addition, a report by World Bank senior officials has
proposed that debt cancellation could be suspended if "a
country’s performance deteriorates," or deviates from
previously-applied World Bank and IMF loan conditions,
according to Reuters. This echoes a memo released last
week from several European Executive Directors at the IMF
calling for significant conditions to be laid on the debt
cancellation deal which would also threaten any benefits
of the cancellation.

"Both of these measures, if implemented, ensure that the
IMF and World Bank will retain significant influence in
the 18 countries promised debt relief," said Ann-Louise
Colgan of Africa Action, "They will impose the same failed
policies that have meant the loss of livelihoods, basic
services, communities, and lives for the people of Africa,
Latin America, and Asia."

Even if 100% of the debt is cancelled without conditions,
impoverished countries may still remain under the thumb of
the institutions. Yesterday, the IMF’s Board of Directors
established the Policy Support Instrument (PSI). The PSI
allows the IMF to continue to influence the policies of
countries that neither "need nor want" IMF financial
assistance; both the debt deal countries and so-called
middle-income countries that are less dependent on IMF
loans. The PSI would also concretize the IMF?s signaling
role to other creditors, extending and expanding their
control over the macroeconomic policy decisions of the
countries of the global South.

The IMF is expected to approve the PSI, a move that could
be as potentially damaging to impoverished countries as
the debt burden itself, and strongly opposed by critics of
the international financial institutions. Programs similar
to the PSI have already been implemented in several
countries including Jamaica and most recently, Nigeria.

"These moves by the IMF must be understood in the context
of debt cancellation," said Sameer Dossani of the 50 Years
Is Enough Network. "Now that the IMF may no longer have
the political leverage of debt to force governments to
privatize their services and liberalize their trade, it
needs something else. The Policy Support Instrument is
just such a mechanism."

For years, debt cancellation campaigners have advocated
for 100% debt cancellation without harmful conditions.
Advocates have been critical of the June G8 deal, saying
that not enough countries are represented and that though
it is a step forward, it is overly dependent on existing
IMF conditions and the failed HIPC program. Tying
conditions directly to debt cancellation in addition to
the PSI could negate any potential benefits of the G8
deal.

Contact: Sameer Dossani

202 463 2265 :: 202 340 0216

sameer@50years.org