Committee for the Abolition of Illegitimate Debt

During the last six years, Cephas Lumina has carried out numerous field missions, taken part in many conferences such as the 11^th CADTM International Seminar on Debt and Human Rights in 2011 [1] and drawn up numerous reports [2] concerning the relationship between external debt and fundamental rights.

These reports underline :

• the negative impact of the external debt mechanism and 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 on economic, social and cultural rights such as the right to education or healthcare,

• that external debt and international trade are inseparably linked because indebted States have to exporter their raw materials to pay back the debt in dollars. This mechanism therefore makes them extremely dependant on the quoted price of these products fixed by the international markets,

• that the debt reductions promised 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.
  
  and 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 have not resolved the debt problem in the long term.

These reports take up the CADTM’s strategy for breaking the vicious circle of debt. This strategy consists in auditing the debt with the participation of citizens in order to identify and unconditionally cancel odious and illegitimate debts contracted against the interests of the population with the complicity of the creditors. In this respect, a good example to follow is the audit of public debt (both external and internal) carried out by Ecuador in 2007-2008.

In a report about Argentinian debt published in November 2013, Cephas Lumina encourages the Argentinian authorities also to audit the national debt in order to evaluate the proportion of debt that can be designated as “odious”, which the creditors must unconditionally cancel. Unfortunately, Argentina did not follow this recommendation because it recently concluded, on 29^th May, an agreement to pay back the debt with the Paris Club Paris Club This group of lender States was founded in 1956 and specializes in dealing with non-payment by developing countries.

, the informal group bringing together the 19 richest creditor States, even though much of the Argentinian debt is odious and illegitimate. We should remember that the Argentinian Supreme Court had declared this debt to be null and void in a the famous Olmos ruling of 13^th July 2000, after having identified no less than 477 infractions in the contracting of the debt [3]. The authorities could have used this ruling to refuse to pay it back but chose not to.

This agreement between Argentina and the Paris Club demonstrates once again that the creditors refuse to accept their responsibilities and put the reimbursement of debts before respect for human rights.

In his last report, released in 2014, Cephas Lumina denounces the lack of cooperation between the United States and the European Union, which undermines the work and recommendations of the Human Rights Council. For most of these governments, the debt issue has no link with human rights and should therefore only be entrusted to the Paris Club, IMF and World Bank, who allow them to pursue their interests as creditors.

Consequently, Cephas Lumina concludes that it is not realistic to hope that these creditors, who do not incorporate human rights in their policies and programmes, will try to find equitable solutions to public debt problems.

The CADTM shares this view and calls on indebted countries to disobey the creditors by refusing to pay back odious and illegitimate debts.

Cephas Lumina reports, although they are not legally binding for governments and international organisations, are one more weapon in the global combat against odious and illegitimate debt. This political combat can only be won by mobilising the population. To that end there is an urgent need to set up citizen debt audits in both Southern and Northern countries.

Contacts:

Renaud Vivien, co- general secretary of CADTM Belgium; 0032 497 04 79 99; renaud at cadtm.org

Omar Aziki, general secretary ATTAC-CADTM Morocco; 00212 66 70 40 421; azikiomar2008 at gmail.com