Committee for the Abolition of Illegitimate Debt

Jubilee Debt Campaign is calling on Tony Blair to meet the challenge laid down by the Commission for Africa’s proposals on debt cancellation, committing the UK government to exert maximum political pressure on the G8 G8 Group composed of the most powerful countries of the planet: Canada, France, Germany, Italy, Japan, the UK and the USA, with Russia a full member since June 2002. Their heads of state meet annually, usually in June or July. to rapidly deliver the commitment and the resources needed to turn good intentions into reality, and end once and for all the practice of using debt relief as a tool for imposing economic policies on Africa’s poorest nations.

Stephen Rand, Co Chair of Jubilee Debt Campaign, said ‘It is encouraging to see many of our campaign objectives now part of the proposals being placed in front of the world’s richest nations. The Commission has endorsed our criticisms of the debt relief schemes of the past few years and recognised the need for urgent action - even pushing the UK government beyond the proposals it has made in recent months.’

‘The real challenge now is to maintain the pressure on the G8 to rapidly deliver the political will and the resources needed to turn good intentions into reality. We never forget that every day that passes means that children die unnecessarily as a result of poverty.’

The Commission for Africa report ‘Our Common 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. ’, launched across the world on Friday 11^th March, recommends 100 per cent debt cancellation ‘as soon as possible’ for the poor countries in sub-Saharan Africa which need it in order to meet poverty targets. It recognises that current efforts at debt relief have not been ‘wide enough, or deep enough.’ It argues that the key criterion for debt relief should be that ‘the money be used to deliver development, economic growth and the reduction of poverty for countries actively promoting good governance.’

The report also recommends a new ‘transparent debt compact’ that would include all sub-Saharan African low-income countries and cancel debt stock Debt stock The total amount of debt and debt service Debt service The sum of the interests and the amortization of the capital borrowed. by up to 100 per cent ‘where this is necessary to achieve the Millennium Development Goals.’

Stephen Rand added ‘Jubilee Debt Campaign welcomes that the Commission has recognised the need to widen the number of countries eligible for debt cancellation; that the world’s poorest countries need to be protected from law suits intended to extract payment on debts not included in debt relief proposals; that debt relief is a highly effective way of combating poverty; that it needs to be financed with new resources, not at the expense of existing aid budgets.’

‘Above all, we are delighted to read that the intention of the proposals is ‘to clear the slate for a fresh start.’ This has been our demand since the start of Jubilee 2000 nearly ten years ago. But it is because of this that we do have some concerns:

· We insist that the new debt compact is created rapidly, and not become a reason for further delay.

· It must genuinely be a fair and transparent process, and not compromised by being largely in the hands of those institutions that have failed to deliver in the past. The proposals for reform of the International Monetary Fund 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 and 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.

are therefore vital - but potentially also a further source of delay.

· While the report recognises that conditionality must be reduced and country ownership enhanced, we need to be convinced that in practice debt relief is no longer going to be used as a tool for imposing harmful economic policies on poor countries.’

Jubilee Debt Campaign is playing an active part in the Make Poverty History coalition, which is calling on the G8 leaders to take urgent measures in 2005 to ensure that trade justice, debt cancellation and more and better aid can deliver the resources that will enable real progress in the battle against poverty.

The Commission’s recommendations on debt reflect many of those contained in the report produced by Jubilee Debt Campaign on behalf of the All Party Parliamentary Group on Heavily Indebted Poor Countries Heavily Indebted Poor Countries
HIPC 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. as a submission to the Commission for Africa, entitled ‘If not now, when?’

ENDS

1. The full text of the Commission for Africa’s report will be available at www.commissionforafrica.org from 9.30 am Friday 11^th March.

2. The full text of the All Party Parliamentary Group on HIPC’s submission to the Commission for Africa, written by Stephen Rand and produced by Jubilee Debt Campaign can be seen at www.jubileedebtcampaign.org.uk

3. Jubilee Debt Campaign is working with campaigns around the world to call for debt cancellation in 2005.

4. Jubilee Debt Campaign and Jubilee Scotland are running a WIPE OUT DEBT campaign: campaigners are sending postcards and emails to the G7 Finance Ministers.

5. Jubilee Debt Campaign is playing a central role within MAKEPOVERTYHISTORY, a unique coalition of campaigns, charities, unions, faith groups and celebrities demanding action on debt, trade justice and aid

6. The original debts of the world’s 52 poorest and most indebted countries amounted to $375 billion. The G7 / 8 has promised to cancel $100 billion of this, and has actually cancelled $49 billion.

7. 42 countries are eligible for the current international debt relief scheme (the Heavily Indebted Poor Countries [HIPC] initiative). G7 countries, the World Bank and the IMF have promised to cancel all the bilateral debts and 65% of the multilateral debts of these countries - subject to a number of unfair economic policy conditions such as privatisation of public services and caps on social expenditure. They have not, however, pledged sufficient funds to realise these promises or eliminated these damaging conditions.

8. The UK has pledged an additional £100 million to fund cancellation of 10% (calculated as its ‘share Share A unit of ownership interest in a corporation or financial asset, representing one part of the total capital stock. Its owner (a shareholder) is entitled to receive an equal distribution of any profits distributed (a dividend) and to attend shareholder meetings. ’) of the debts to the World Bank and African Development Bank of countries that complete the HIPC scheme (15 at present) and other countries that meet their criteria of ‘reforming economies’.

Contact:

Stephen Rand, Co Chair, Jubilee Debt Campaign, 07889 158215
stephen at jubileedebtcampaign.org.uk