The Jubilee Debt Campaign (JDC) estimates that the total external debt of low-income countries is $523 billion (£260 billion). Debt is a huge problem.
The Heavily Indebted Poor Countries (HIPC) initiative is the current international debt relief scheme. HIPC was set up in 1996 by the World Bank and the IMF to reduce poor countries’ debts. It was reformed in 1999. The JDC says that by the beginning of 2005, only $49 billion (£25 billion) of debt has been cancelled.
The total debt service being paid every day by low-income countries is $100 million (£50 million) and for every $1 (50p) received in grant aid, low income countries pay $2.30 (£1) in debt service.
Over 60 countries need debt cancellation to halve poverty by 2015. So, with all things being equal, it will take 150 years to halve world poverty.
Africa’s total external debt is approx $300 billion (£150 billion). Sub-Saharan Africa receives $10 billion (£5bn) in aid every year — but has to pay back at least this amount in debt repayments. Cameroon, Ethiopia, Gambia, Guinea, Madagascar, Malawi, Mauritania, Senegal, Uganda and Zambia all spend more on debt than health.
Eighteen countries qualified for immediate debt cancellation because they have reached the “completion point” under the HIPC initiative. These are Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia. The total debt write off for these countries is £22 billion ($40 billion)
Another nine countries have reached the “decision point” of the HIPC process and may qualify in 18 months. These countries are: Cameroon, Chad, Democratic Republic of Congo, Gambia, Guinea, Guinea Bissau, Malawi, Sao Tome Principe and Sierra Leone. If these countries are included, the total debt write off would be £55 billion ($100 billion).
A further 15 countries are classified as “heavily indebted” under HIPC. Only seven are likely to receive any debt relief: Burundi, Central African Republic, Cote D'Ivoire, Comoros, Congo, Myanmar and Togo. A further eight are unlikely to reach this stage: Angola, Kenya, Lao, Liberia, Somalia, Sudan, Vietnam and Yemen.
The debts cancelled are mainly those with the World Bank, African Development Bank and IMF. The IMF’s share of the deal will be paid out of a previously unknown reserve fund.
World Bank and African Development Bank debt cancellation will be paid for out of indebted countries’ own aid allocations from the multilateral institutions. However, the G8 has promised to reimburse these institutions.
The deal writes off debt stocks in full, rather than just temporarily cancelling debt service (as the UK, Canada and the Netherlands had promised to do for some countries already).
But not all debt has been cancelled for the 18 countries. For example the four qualifying countries in Latin America will pay debt service totalling $216 million to the Inter-American Development Bank this year. These countries and others are also indebted to private banks, corporations and other governments.
And the deal comes with strings or “conditionalities”. The finance ministers' statement says to qualify for debt relief, developing countries must “tackle corruption, boost private-sector development” and eliminate “impediments to private investment, both domestic and foreign”. Under the agreement, the World Bank is to draw up new rules on transparency to ensure the money goes where it was intended.
Those countries that have “completed” under HIPC have been forced to privatise industries, liberalise trade and cut public spending. For example Zambia was unable to employ 9,000 teachers because of a public sector wage freeze imposed by the IMF in 2004 as a condition of receiving HIPC debt relief. In other words the HIPC system itself is flawed.
Another point is that the amounts involved for G8 countries are small. The deal will cost the US government between $1.3 billion and $1.75 billion).
It will cost British government between $700-$900 million (£500 million) over the next 10 years. The Treasury has confirmed that the UK’s share of the debt cancellation programme is not new money — it was already promised as part of the aid programme unveiled before Labour party conference and 2004 spending review.
A further point is that some countries are still completely excluded because they are not classified as “heavily indebted” under HIPC. These include Cambodia, Haiti, Jamaica, Morocco, Nepal, Nigeria, Peru, Philippines and Zimbabwe.
We are in favour of 100% debt cancellation for the poorest 60 countries and some others e.g. Iraq. But even if all of those listed did not have a debt burden, there are still much bigger issues to campaign on.
The G8 deal says nothing about the issues of trade justice and aid. It only permits the subordinate integration of some countries into the margins of the world economy.
The agreement will not guarantee governments are democratic and not corrupt — only that they are compliant governments. Multinationals and G8 governments are complicit in corruption and in backing regimes that terrorise their people.
Most of all the key condition — that the labour movement is unshackled, that trade union rights are respected in reality and not on paper, that trade unionists are not sacked, imprisoned or killed, is nowhere mentioned. Workers‚ movements are both the best guarantee of better wages and conditions, better welfare services and more equality, and also the best guarantors of democracy e.g. South Africa, Nigeria.
Workers want solidarity not charity. We should make the fight for workers‚ rights the key issue in No Sweat and in the Make Poverty History campaign.