Offering "crumbs" to the heavily indebted

by Chakravarthi Raghavan

Geneva, 10 June -- Despite flowery speeches and grand gestures, the leaders of the industrialized nations plus Russia (the G-8) at their meeting in Cologne (Germany) next week are offering only crumbs of comfort for the world's most indebted nations, a new report from the Jubilee 2000 Coalition charges.

Piecing together information and analysis of proposals from Britain, German and US Governments for debt write-downs and relief for the Highly Indebted Poor Countries, says that the deal would be worth only "five loaves of bread or one bag of rice every year to the average person in the poorest countries."

Even based on the "most generous offer" so far, the British proposal announced by Chancellor Gordon Brown in February, the G- 8 will offer each person in the 52 heavily indebted poor countries on average $2.83 each year, while each one in these countries carry a debt burden of an average $573 to their Western creditors.

The director of Jubilee 2000 coalition, Ann Pettifor says: "This report reveals that despite flowery speeches and grand gestures, G-8 leaders are offering "only crumbs of comfort" to the world's most indebted nations.

Under mounting public pressures to address the debt problem, the G8 leaders, in preparing for the Cologne summit, have been competing with each other to promise debt forgiveness. Sums of $50 billion, $70bn and more have been discussed.

"These certainly are large sums and far exceed what has been suggested before. But creditors have talked about writing off debt for more than 20 years. Are these latest proposals going to deliver a genuine exit from debt for the poorest countries? Will they help countries reach internationally agreed 2015 development targets?"

The message is clear. "Cologne will not release substantial new resources for reducing poverty. The difference, if any, will be marginal. By largely cancelling only the debt, which is not actually being serviced, creditors ensure the deal is almost cost-free to them, and "benefit-free" to their debtors.

What is likely to be agreed at Cologne will not deliver new resources to the poor. The increased sums being talked about will still only write off what is not being paid anyway. Equally, there will be no change to the highly criticised means of assessing how much debt should be written off.

Debt "sustainability" remains almost entirely based on a country's export earnings. The British government has been defeated in its attempt to persuade other creditors to use a formula for debt relief that would give debtor nations a genuine exit from debt relief.

Cologne is unlikely to promise any extra debt cancellation in the millennium year itself. At best, there will still be a minimum of three years to qualify and a further three years of strict economic conditions during which debt relief can be withdrawn.

Unpayable debt has been debated by the lenders for years; rather than end the crisis, the lenders propose to continue the discussion while generations of children are still unable to go to school. The leaders are steadfastly refusing to seize the opportunity and deliver debt relief by the new millennium.

Instead of the call for cancellation of the unpayable debt in Jubilee year 2000, "what we are being offered is another decade of discussion about how we might finally write off a little more of the debt that is not being paid... promises to, some day, free a few people from debt slavery.

There have been no serious suggestions to change a procedure which gives creditors total power. Using the debt relief carrot to impose the structural adjustment policies of the IMF, which many believe increase poverty, is unacceptable to both Jubilee 2000 campaigners and governments of indebted countries. The intended purpose of debt relief is to benefit the poor. If the IMF refuses to minimise costs and maximise benefits to the poor, it should no longer be a gatekeeper for debt relief.

Debt relief for impoverished countries should be "disconnected" from the IMF structural adjustment conditions, conditions that the UN and even the World Bank itself have criticised.

Campaigners accept the need for good governance and fiscal probity, but they object "to the IMF being allowed to be prosecutor, judge and jury" on their countries' performance, on the grounds that its policies do not produce economic growth or reduce poverty. (SUNS4453)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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