Committee for the Abolition of Illegitimate Debt

On Saturday 3 November 2007, Pakistan’s president Pervez Musharraf declared a state of emergency and ordered widespread repressive measures against the numerous opponents of his regime. Several activists for democracy in CADTM’s Pakistan branch were taken into custody in Lahore the same day. These decisions follow a highly contested presidential election (by indirect suffrage) won by Musharraf in totally anti-democratic circumstances. In CADTM’s view, Musharraf intends to use force to hold on to the power seized at gunpoint during the military coup d’état of October 1999.

It should be remembered that General Musharraf is a strategic US ally in the region, particularly since the attacks of 11 September 2001. The principal creditors have never hesitated to lend the Pakistani dictatorship the funds it needs to pursue this alliance.

In the autumn of 2001, the United States asked Pakistan for assistance in waging the war in Afghanistan. Musharraf agreed to let the US use his country as a rearguard base for US armed forces and those of its allies, but in exchange, he negotiated a substantial reduction of Pakistan’s debt. In December 2001, the rich countries meeting at the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

were quick to agree to this reduction.

Since then, Musharraf’s regime continues to drag the country into debt with the active support of 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.

and the major powers. The loans granted have no legitimacy; they serve to reinforce Musharraf’s tyranny and in no way improve the living conditions of Pakistan’s citizens. The debt contracted by this despotic regime can therefore be classified as odious.

CADTM declares that the creditors who made loans to Musharraf did so in full knowledge of the facts, and that this being so, it is inadmissible that Pakistan’s people should in the future be forced to repay the odious debt Odious Debt According to the doctrine, for a debt to be odious it must meet two conditions:
1) It must have been contracted against the interests of the Nation, or against the interests of the People, or against the interests of the State.
2) Creditors cannot prove they they were unaware of how the borrowed money would be used.

We must underline that according to the doctrine of odious debt, the nature of the borrowing regime or government does not signify, since what matters is what the debt is used for. If a democratic government gets into debt against the interests of its population, the contracted debt can be called odious if it also meets the second condition. Consequently, contrary to a misleading version of the doctrine, odious debt is not only about dictatorial regimes.

(See Éric Toussaint, The Doctrine of Odious Debt : from Alexander Sack to the CADTM).

The father of the odious debt doctrine, Alexander Nahum Sack, clearly says that odious debts can be contracted by any regular government. Sack considers that a debt that is regularly incurred by a regular government can be branded as odious if the two above-mentioned conditions are met.
He adds, “once these two points are established, the burden of proof that the funds were used for the general or special needs of the State and were not of an odious character, would be upon the creditors.”

Sack defines a regular government as follows: “By a regular government is to be understood the supreme power that effectively exists within the limits of a given territory. Whether that government be monarchical (absolute or limited) or republican; whether it functions by “the grace of God” or “the will of the people”; whether it express “the will of the people” or not, of all the people or only of some; whether it be legally established or not, etc., none of that is relevant to the problem we are concerned with.”

So clearly for Sack, all regular governments, whether despotic or democratic, in one guise or another, can incur odious debts. contracted by Musharraf.

CADTM calls for an immediate halt to any form of support for the Musharraf regime, the release of political prisoners, the speedy organisation of fair elections, total cancellation of Pakistan’s external public debt and an end to the 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/ policies that are seriously affecting the living conditions of local communities.

Contacts:

Damien Millet, president of CADTM France, france at cadtm.org
Eric Toussaint, president of CADTM Belgium, international at cadtm.org
Juan Tortosa, spokesman for CADTM Switzerland, suisse at cadtm.org
Contact in Pakistan (CADTM): Nasir Mansoor nasirazz at yahoo.com