WASHINGTON -- Debt campaigners attending this week’s annual meeting of the World Bank and the International Monetary Fund (IMF) have expressed disappointment and outrage over the failure of the world’s richest nations to cancel the debt of the world’s poorest nations.
Hopes had been running high last week that finance ministers of the Group of Seven (G-7) industrialized nations would agree on a plan that would provide 100 percent debt relief to nearly three dozen of poor countries, most of them in Africa where cash-strapped governments have been overwhelmed by the HIV -AIDS epidemic, drought, and, most recently, skyrocketing oil prices.
It is outrageous that the G7 have failed to answer the moral imperative of debt cancellation.
It is a real shame that the richest nations were divided over how to cover the minimal cost of impoverished country debt to wealthy creditors like the IMF and the World Bank, especially when the IMF is sitting on a mountain of unused gold.
Jubilee USA Network
But the G-7, which includes the U.S., Canada, France, Germany, Britain, Italy, and Japan, could not agree on ways to finance cancellation of the debt, which totals more than US$100 billion, or roughly two thirds of what the U.S. Congress has thus far appropriated for the war in Iraq .
“It is outrageous that the G7 have failed to answer the moral imperative of debt cancellation,” said Marie Clarke, national coordinator of the Jubilee USA Network, a coalition of mainly church-based groups that have been campaigning for debt relief for the past five years.
“It is a real shame that the richest nations were divided over how to cover the minimal cost of impoverished country debt to wealthy creditors like the IMF and the World Bank, especially when the IMF is sitting on a mountain of unused gold.”
The IMF and the Bank, as well as a number of regional multilateral development banks, are owed almost all of the public debt of the world’s poorest nations.
Eight years ago, the two Bretton Woods Institutions, whose boards are dominated by the G-7 nations, launched the Heavily Indebted Poor Countries (HIPC) initiative, which was designed to reduce the debt of some 41 eligible countries to more manageable levels in exchange for their implementation of far-reaching economic reform programs aimed at making their economies more attractive to foreign investment.
So far, 27 countries that together owed the IFIs a total of about US$100 billion have seen their debt reduced by about $30 billion. That reduction translates into roughly a halving of their annual debt service payments.
While that represents a substantial savings, most HIPC beneficiaries continue to pay more in debt service each year than they spend on health and education, a situation that debt campaigners argue is morally indefensible, particularly because much of the original debt was incurred by western-backed dictators who misspent or, in some cases, embezzled the money.
Because of the continuing debt burden, Jubilee, Oxfam, ActionAid and a number of other groups have been campaigning for outright cancellation of these countries’ debts for several years. Last week, they thought that a breakthrough was in sight when the British Chancellor of the Exchequer, Gordon Brown, proposed a two-part initiative.
In advance of the G-7 meeting, he called for the IMF to revalue its 103 million ounces of gold which, with a market value of some $45 billion, are about six times its book value on IMF balance sheets -- to finance the debt owed to it.
At the same time, he announced that Britain was prepared to pay its share of all of the debt or some 10 percent -- owed by 33 poor countries to the World Bank and the African Development Bank (AfDB) in annual installments of about $100 million and invited other G-7 members to follow suit.
But the proposal for both the IMF revaluation and a proportional pay-out of the debt by the other industrialized nations reportedly ran into resistance from a number of other finance ministers. As in previous years, Germany and Japan were particularly reluctant to support full cancellation.
While the administration of U.S. President George W. Bush also went into the meeting in support of 100 percent debt relief for the poorest nations, Washington, as well as some other G-7 donors, was apparently unwilling to follow Britain’s lead in paying its share of about 25 percent of the debt owed to the Bank and the IMF.
Washington also sought to tie its backing to support for a more far-reaching proposal to replace World Bank loans to the world’s poorest nations with grants, a move that some critics, including the Bank itself, have warned could weaken its creditworthiness and lending operations in the long term.
The Bush administration has also tried to tie debt cancellation for the poorest countries to the cancellation of virtually all of Iraq’s debts, a position which, according to other G-7 members, is unnecessary given Baghdad’s immense oil wealth.
Brown’s proposal to revalue the IMF s gold also ran into resistance from some governments that argued the move could have an impact on their own balance sheets since much of it derives from their quota subscriptions and from a number of gold-exporting countries, including South Africa, that voiced concern that such a move may lower the world price and deprive them of desperately needed income.
The result was an impasse, although Brown himself insisted that the ministers had advanced the issue and should be prepared to support a plan by some time in 2005. “There’s a growing consensus that multilateral debt relief has to be dealt as soon as possible,” he reported.
But that came as little comfort to the debt campaigners. “The G7 have chosen to delay debt cancellation that could have put 100 million children into school,” said Oxfam Policy Advisor Max Lawson. “Once again rich countries have turned up with their notebooks not their checkbooks, and the price will be paid by the world’s poorest people,” he added.
“Rich countries’ delay in breaking the log-jam on debt leaves the poorest countries paying out $100 million a day that could be spent on health and education. The poor cannot wait, added Action Aid Policy Advisor Patrick Watt.
"These debts are fundamentally illegitimate," according to Salih Booker, executive director of Africa Action, a grassroots group that led the anti-apartheid campaign in the U.S. during the 1970s and 1980s. "They undermine African efforts to address HIV/AIDS and other challenges, and they should have been canceled a long time ago.
© 2004 OneWorld.net