Life issues

Life Issues...Debt
Facts behind G8 100% smokescreen

G8 Debt Deal:  the Small Print behind the Big Headlines

by Anne Reilly

Campaigning works - the recent G8 debt deal marks a small breakthrough on debt cancellation. For the first time there is an agreement to write off 100% of debt owed to the IMF and World Bank.  Wow! Remember this is what our card campaign to the IMF and World Bank last year was calling for.  However, the G8 has not agreed to write off 100% of the debt of all the poorest countries. 
Below we take a detailed look at what the deal actually covers.  We also include some reactions from Southern groups.

1. Let’s look at what is on offer
  • Cancellation of 100% of the debt owed to the IMF, World Bank and African Development Fund for 18 countries.   The following countries will be eligible immediately Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda, Zambia.
  • These are all countries which have fulfilled all the conditions laid down under the Heavily Indebted Poor Country Initiative.
  • Up to a further 20 countries could possibly become eligible - no guarantees. 
2. When will countries receive the debt cancellation promised?          
  • The deal must first be presented to the IMF and World Bank AGM in September 2005.
3. What are the positive aspects of the deal?
  • The agreement to write off 100% of debt owed to IMF, World Bank and African Development Fund is a breakthrough.  IMF and World Bank claimed all through the 1990s and up till Saturday that 'it can't be done'.
  • It also includes IMF debt which had been dropped off the table by the G8 last April.
  • This is proof  that remote, unaccountable powers like the G8 can be made to feel the heat of public opinion.  According to the Financial Times  the reason that Japan and Germany supported the deal was that they had to bow to the political reality of strong public support for the deal.  Yes! We do make a difference.
  • Worrying Points 
  • Only a very small number of countries (18) is included. 
  • For the other countries (20) to benefit they must fulfill conditions laid down under the Heavily Indebted Poor Country Initiative.   Many conditions have damaging effects e.g. privatization of water,  so these can erode the benefits of debt cancellation. 
  • Many more countries which are not defined as Heavily Indebted Poor Countries need debt cancellation.  These are excluded from the deal. There are, for example, over 60 low income countries (with an average income per head of $670 or less).  All are striving to meet the Millennium Development Goals e.g. to halve poverty by 2015.
  • The deal does not cover all multilateral creditors e.g. the Inter-American Development Bank and the Asian Development Bank.  Debt owed by Bolivia, Nicaragua, Honduras and Guyana to the Inter-American Development Bank is not included.
4. What needs to be done now on debt?
  • Expose the G7 Spin Doctors - show the real facts.  It was not 100% debt cancellation.
  • Keep up the pressure for 100 % debt cancellation for all countries which need it.
  • Challenge the damaging conditions countries must fulfill to get debt reduction.
  • Given the horse trading between the G8 on which countries should get debt cancellation, we need to make the case for an independent, fair and transparent procedure to deal with unpayable debt.
  • Support Southern debt groups working to ensure that people at the community level benefit from debt savings and other resources. 
Some Reactions from Southern Groups
Jubilee Zambia is pleased with the forward thrust on 100% cancellation for poor countries including Zambia‚.  However, they go on to state:  While it is important for national governments to show greater commitments to good governance, it is equally important to reform global institutions to allow for poor countries‚ participation in decision-making processes.
African Network on Debt and Development is unhappy about  how few countries will benefit: "if we say half a loaf is better than nothing then it seems there is some progress. But half-baked solutions have their own limitations.‚(Charles Mutasa, Acting Director of AFRODAD).  He also stated the agreement does not address the real global power imbalances. We reiterate our position that the debt crisis needs a lasting solution in which all stakeholders debtors and creditors have a say.
Jubilee South/Americas stressed that debt cancellation must be unconditional and must take into account the illegitimacy of debt claims against Southern countries. They highlight that debt cancellation for Bolivia would have minimal impact in comparison with the ongoing multi-million dollar losses and social-political impact provoked by the policies of water, gas, and other natural resource privatizations that were imposed as pre conditions for debt relief. 
Africa Jubilee South co-ordinating committee pointed out that  ".. if the [G8] finance ministers' proposals were to be implemented they will give some extra financial breathing space for the affected countries while ensuring their continued adherence to the dictates of the rich industrialized countries and the plunder by their foreign multinational corporations. Jubilee asked whether the ministers should be praised when the debts would have been repudiated a long time ago as illegitimate "if our governments had real political and economic independence".

Author: Anne Reilly
Education and Campaigns
Debt and Development Coalition Ireland
All Hallows
Grace Park Road, Drumcondra,
Dublin 9.

Source:Debt and Development Coalition Ireland                                                        June 2005
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