Failure to Act on 100% Debt Cancellation a Tragedy, Will Cost Lives

US Movement for Debt Cancellation Outraged by G-8 Failure on Debt

13 June 2004 by The 50 Years Is Enough Network , Jubilee USA

SAVANNAH, Ga. - Jubilee USA Network and the 50 Years Is Enough Network expressed disappointment this afternoon at the failure of the G-8 leaders to take decisive action by committing to support 100% multilateral debt cancellation for impoverished nations.

Over the past several days press reports had indicated
that UK Prime Minister Tony Blair had put forth a proposal
for 100% debt cancellation for poor countries. This
afternoon, however, the leaders of the Group of Eight
wealthy nations instead announced a meager extension of
the Heavily Indebted Poor Countries 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.
(HIPC) Initiative
instead of a definitive commitment for full cancellation.

"At this critical moment, when every minute another
African child dies of AIDS, the global community needs
100% cancellation of multilateral debt without harmful
said Marie Clarke, National Coordinator of
the Jubilee USA Network. "By failing to seize the
opportunity, the G-8 has once again chosen baby steps over
bold action."

HIPC, even by 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.
and 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.

standards, has failed to
provide an exit from the debt crisis. After eight years of
the HIPC program, two things are clear: when countries
have more access to their own resources they use them
well, but HIPC has been too little relief, too slow, for
too few countries and with too many conditions.

"Indebted countries need 100% debt cancellation without
deadly conditions on the occasion of the IMF and World
Bank’s 60th Anniversary year, "
said Njoki Njehu, Director
of the 50 Years is Enough Network. "Cancellation of
impoverished country debt by the IMF and World Bank must
be financed through their own resources."

Bi-partisan legislation calling for the IMF to cancel 100%
of the debts of 50 nations without harmful conditions has
been introduced in the U.S. House of Representatives. The
JUBILEE Act, HR 4511, will legislate what the G-8 has
failed to propose.

Jubilee USA Network, the 50 Years Is Enough Network, and
the broader debt cancellation movement will turn up the
heat on global leaders and the multilateral creditors in
the coming months. "President Bush and the G-8 might have
found it hot in Georgia in June, but we will turn up the
heat even more in this election year on the issue of debt
cancellation. We will be bringing our calls for 100%
cancellation to pulpits throughout the country, to the
halls of Congress with the JUBILEE Act, and to the
said Clarke.

Earlier this week, Jubilee USA Network released a letter
signed by more than 250 religious leaders, including Jesse
Jackson and leaders of Protestant, Catholic, and Jewish
denominations calling for 100% cancellation of the debts
of impoverished nations without harmful conditions in
light of the AIDS crisis.

Other articles in English by The 50 Years Is Enough Network (6)



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