All talk and no action - the G7 has no intention of cancelling the debt

7 February 2005 by Eric Toussaint , Damien Millet

The failure that has marked the end of the summit of G7 finance ministers on 4th and 5th of February had to be covered up with empty declarations. The final communiqué is just another step in a direction that has already shown itself to be far wide of any real intention to totally cancel the debt.

The G7 has just announced debt reductions of “up to 100%” to be negotiated on a “case by case” basis. “Up to 100%” means nothing at all, since any percentage of reduction falls necessarily below 100%.

The decision to treat countries “case by case” will inevitably lead to conditionalities aimed at reducing the effect of whatever reduction is finally conceded. This is unacceptable. Nothing has been done to initiate any real cancellation; no such plan has been drawn up. It is as though the rich countries had tried to agree on a few well-chosen phrases that would commit them to as little as possible. It would be far better if they began by explaining why previous commitments were not kept. Since 1999 they have not kept their promises. Why should anyone believe they will now?

Tony Blair, Gordon Brown, Jacques Chirac and Gerhard Schroeder are the very same statesmen to whom, six years ago, over 17 million signatures were presented for the abolition of the poor countries’ debt. Yet on that day, 19 June 1999, the G7 summit in Cologne decided to enhance the initiative for the 42 highly indebted poor countries (HIPC Heavily Indebted Poor Countries
In 1996 the IMF and the World Bank launched an initiative aimed at reducing the debt burden for some 41 heavily indebted poor countries (HIPC), whose total debts amount to about 10% of the Third World Debt. The list includes 33 countries in Sub-Saharan Africa.

The idea at the back of the initiative is as follows: a country on the HIPC list can start an SAP programme of twice three years. At the end of the first stage (first three years) IMF experts assess the ’sustainability’ of the country’s debt (from medium term projections of the country’s balance of payments and of the net present value (NPV) of debt to exports ratio.
If the country’s debt is considered “unsustainable”, it is eligible for a second stage of reforms at the end of which its debt is made ’sustainable’ (that it it is given the financial means necessary to pay back the amounts due). Three years after the beginning of the initiative, only four countries had been deemed eligible for a very slight debt relief (Uganda, Bolivia, Burkina Faso, and Mozambique). Confronted with such poor results and with the Jubilee 2000 campaign (which brought in a petition with over 17 million signatures to the G7 meeting in Cologne in June 1999), the G7 (group of 7 most industrialised countries) and international financial institutions launched an enhanced initiative: “sustainability” criteria have been revised (for instance the value of the debt must only amount to 150% of export revenues instead of 200-250% as was the case before), the second stage in the reforms is not fixed any more: an assiduous pupil can anticipate and be granted debt relief earlier, and thirdly some interim relief can be granted after the first three years of reform.

Simultaneously the IMF and the World Bank change their vocabulary : their loans, which so far had been called, “enhanced structural adjustment facilities” (ESAF), are now called “Growth and Poverty Reduction Facilities” (GPRF) while “Structural Adjustment Policies” are now called “Poverty Reduction Strategy Paper”. This paper is drafted by the country requesting assistance with the help of the IMF and the World Bank and the participation of representatives from the civil society.
This enhanced initiative has been largely publicised: the international media announced a 90%, even a 100% cancellation after the Euro-African summit in Cairo (April 2000). Yet on closer examination the HIPC initiative turns out to be yet another delusive manoeuvre which suggests but in no way implements a cancellation of the debt.

List of the 42 Heavily Indebted Poor Countries: Angola, Benin, Bolivia, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Comoro Islands, Congo, Ivory Coast, Democratic Republic of Congo, Ethiopia, Gambia, Ghana, Guinea, Guinea-Bissau, Guyana, Honduras, Kenya, Laos, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nicaragua, Niger, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, Sudan, Tanzania, Togo, Uganda, Vietnam, Zambia.
) launched in 1996. They claimed they had understood what those millions of signatories wanted, and announced that they were cancelling 90% of bilateral [1] and multilateral [2] debt for the countries concerned, worth a total of $100 billion [3]. The figures say it all: 6 years later the overall debt of the 42 HIPC has not been reduced, quite the opposite.

According to the OECD OECD
Organisation for Economic Co-operation and Development
OECD: the Organisation for Economic Co-operation and Development, created in 1960. It includes the major industrialized countries and has 34 members as of January 2016.
(Organisation for Economic Co-operation and Development), between 1999 and the end of 2002, the HIPC’s multilateral debt increased by $10 billion and their bilateral debt to industrialised countries by $2 billion [4]. According to UNCTAD UNCTAD
United Nations Conference on Trade and Development
This was established in 1964, after pressure from the developing countries, to offset the GATT effects.

(United Nations Conference for Trade and Development), the countries concerned are to repay $2.6 billion in 2005, which is more than the $2.4 billion of 2003 [5]. In reality, the HIPC initiative was about tightening the creditors’ stranglehold on these countries’ economies through the logic of 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).

- about opening up the HIPC economies to export and the interests of multinational corporations; about privatising water, telecommunications, electricity, the few existing publicly-owned industries; and about making people pay for health and education. The
same logic of subjugation to the financial markets that operates today.

This weekend’s G7 discussions only concerned the multilateral debt of the 42 HIPC, estimated at $80 billion. Now, 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.
’s gold reserves would be valued at $44 billion at present rates, and the World Bank World Bank
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.

’s reserves at $31 billion. If they really wanted to, the two Bretton Woods institutions could easily afford to finance the cancellation of the 42 HIPC’s multilateral debt. Those countries’ bilateral debt to the industrialised countries comes to $30 billion dollars. The cost of 6 months’ occupation of Iraq, or 5% of G7 annual military spending. Total and immediate cancellation is, then, a simple matter of political will. So much for the G7’s bluster.

Their bluff has to be called. The G7 leaders have a hidden agenda - to keep the 42 HIPC and the other developing countries (165 in all) in their debt so as to dictate their neo-liberal policies. Only a few HIPC, the most docile or those of strategic importance, will continue to receive any significant debt reduction. But one thing is sure: the G7 has no intention of freeing them of their debt burden, which would mean giving them the chance to carry out economic and social policies that go against the neo-liberal creed.

As for the rest of the developing countries (89% of the poorest populations of the world are in countries other than the HIPC), the G7 is not offering any reduction measures - not even for the countries worst hit by the tsunamis of 26 December last (such as Indonesia or Sri Lanka). All they are being offered is a laughable one year moratorium.

In Porto Alegre on 1st February, at the end of the 5th World Social Forum, all the international movements campaigning against the debt, including the CADTM, demanded: “the immediate and unconditional cancellation of the illegitimate external debt of the countries of the South, starting with the countries hit by the tsunami and other disasters and crisis in recent months”. Only a radical change of attitude will provide a solution to the debt problem. Today, because of the G7’s repeated failures, the problem remains undiminished. Gordon Brown’s posturing should fool no-one.

by Damien Millet, President of CADTM France, and Eric Toussaint, President of CADTM Belgium (Committee for the Abolition of the Third World Debt). They are the co-authors of “The Debt Scam”, VAK Publication, Mumbai, 2003 and “Who Owes Who? 50 questions on World debt”, Zedbooks, London, 2004.


[1Contracted towards other States.

[2Contracted towards multilateral institutions such as the
International Monetary Fund (IMF) or the World Bank.

[3At the G7 held in Naples in June 1994, the rich countries promised 67% of debt cancellation; at the G7 in Lyon in June 1996, they promised 80% of cancellation; the G7 in Cologne in June 1999, announced 90%; in July 2005 in Scotland, no doubt promises will reach 100%.

[4OECD, Statistiques de la dette extérieure 1998-2002, Paris, 2004, p. 203.

[5UNCTAD, Le développement économique en Afrique. Endettement viable: Oasis ou mirage ?, Geneva, 2004.

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Greece 2015: there was an alternative. London: Resistance Books / IIRE / CADTM, 2020 , Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012, etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

Other articles in English by Eric Toussaint (636)

0 | 10 | 20 | 30 | 40 | 50 | 60 | 70 | 80 | ... | 630

Damien Millet

professeur de mathématiques en classes préparatoires scientifiques à Orléans, porte-parole du CADTM France (Comité pour l’Annulation de la Dette du Tiers Monde), auteur de L’Afrique sans dette (CADTM-Syllepse, 2005), co-auteur avec Frédéric Chauvreau des bandes dessinées Dette odieuse (CADTM-Syllepse, 2006) et Le système Dette (CADTM-Syllepse, 2009), co-auteur avec Eric Toussaint du livre Les tsunamis de la dette (CADTM-Syllepse, 2005), co-auteur avec François Mauger de La Jamaïque dans l’étau du FMI (L’esprit frappeur, 2004).

Other articles in English by Damien Millet (46)

0 | 10 | 20 | 30 | 40



8 rue Jonfosse
4000 - Liège- Belgique

00324 60 97 96 80