Committee for the Abolition of Illegitimate Debt

In early March the UN independent expert on the effects of foreign debt on human rights, Juan Pablo Bohoslavsky, presented his latest report to the 31^st session of the Human Rights Council in Geneva. The report focused on the linkages between income and wealth inequality, financial crises, and their implications on the enjoyment of human rights. According to Bohoslavsky, not only have financial adjustment programmes without consistent debt relief proved detrimental to human development and human rights, but inequality may also substantially contribute to and exacerbate the emergence and course of financial crises. Bohoslavsky used Latin America as an example, where 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.

http://imf.org ran loan programmes in 16 countries in the 1980s, and “where the costs of the financial crises were not borne equally and most adjustment programmes resulted in ‘overkill’ leading to increases in poverty and inequality beyond what was necessary”. The report concluded, “what seems clear is that IMF programmes are associated with a worsening of income distribution and a reduction in the incomes of the poorest citizens when external imbalances were high prior to the programme. These programmes may only decrease income inequality when external imbalances are less severe”.

To support policymakers to meet their international human rights obligations, the report recommended a range of measures for tackling financial crises and inequality in an integrated manner. For instance, instruments for improving pre-tax income equality should be employed; sufficient bargaining power of the workforce should be safeguarded; and reform aimed at enhanced progressive taxation should be implemented. The report stressed that any response to financial crises must fully comply with human rights law; that fiscal stability and GDP GDP
Gross Domestic Product Gross Domestic Product is an aggregate measure of total production within a given territory equal to the sum of the gross values added. The measure is notoriously incomplete; for example it does not take into account any activity that does not enter into a commercial exchange. The GDP takes into account both the production of goods and the production of services. Economic growth is defined as the variation of the GDP from one period to another. growth may not overrule, suspend or dilute existing human rights obligations and responsibilities; and that the protection of vulnerable groups must have the highest priority, ensuring that social spending is affected last and the least. The report also recommended that debt sustainability analyses should incorporate inequality as a crucial consideration, ensuring that debtor states are able to fulfil their human rights obligations. While the report makes no recommendations specific to financial institutions, 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’s Debt Sustainability Framework currently does not include inequality as an indicator for its analyses (see Update 54).

What seems clear is that IMF programmes are associated with a worsening of income distribution
JUAN PABLO BOHOSLAVSKY, UN INDEPENDENT EXPERT ON FOREIGN DEBT

Reacting to the report, Rasha Rashid Jarhum, founder of Yemeni Youth for Humanitarian Relief and the Aden Initiative, stated that “the harmful impacts of IMF conditionalities on human rights highlighted in the report are especially acute in Yemen as they exacerbate the endemic corruption and political instability my country suffers from. In such a context, proposed reforms are subject to political abuse and manipulation, which, in Yemen, ultimately led to the violent turbulence we are witnessing today.” She further emphasised that “it is important international financial institutions also address the issue of how their policies are implemented in countries that are suffering from corruption and dictatorship especially, so that those policies won’t be used to enhance inequality and exacerbate human rights abuses even further”.