G-7 debt relief package disappoint NGOs
by Ramesh Jaura
Cologne, Jun 19 -- The world's seven major industrial nations (G 7) have adopted a $71 billion debt relief package for some of the poorest developing countries, saying they were effectively writing off one-third of unpaid dues estimated at $230 billion. The package was agreed to by the G-7 Finance Ministers.
Civil society and non-governmental organisations, however, expressed "disappointment" at the G 7 plan and said rich nations should cancel all debts owed by the poorest developing countries.
[In the Summit communique, the G-8 have welcomed the Cologne debt initiative, and have said that it is designed "to provide deeper, broader and faster debt relief" through major changes to the HIPC framework, and with the central objective of providing "a greater focus on poverty reduction by releasing resources for investment in health, education and social needs. In this context we also support good governance and sustainable development. They have agreed (without committing themselves to any particular step) that the new proposals will require "additional substantial financing," and that while several means of financing are under consideration, "credible progress in identifying additional funding possibilities is needed, and we stand ready to help with financing solutions."
[In this context they have also spoken of the importance of fair burden sharing among creditors.]
Commenting on what they consider to be a major issue at the Cologne summit, Jubilee 2000 campaigners said developing countries owe a massive backlog of debts to the rich nations of the North and powerful institutions like the International Monetary Fund (IMF) and the World Bank.
They pay billions each year in servicing debts, owed mainly to commercial banks.
To meet interest and capital payments, countries must divert scarce resources away from desperately needed programs for rural development, primary education, and health care, NGOs argue.
"This debt is literally killing people," said Caroline Collins, coordinator of the Jubilee 2000 in the US.
Welcoming the agreement, Ann Pettifor, director of the British Jubilee 2000 coalition, said the reported agreement marked a great progress since the economic summit in Birmingham (Great Britain) last year. "At this pace we would have reached our target in the year 2000."
The G-7 debt relief plan and strategy for a global financial architecture were also the subject of a two-day gathering of some 700 representatives of NGOs from 30 countries which concluded Jun 18 in the German city of Cologne.
Summing up the discussions, Barbara Unmuessig from the NGO 'World Economy, Ecology and Development' (WEED) told IPS: "The debt relief deal, hammered out by the G-7 finance ministers - and endorsed by G-7 leaders - marks a step forward, but not a real breakthrough."
Unmuessig said there was also a broad agreement at the alternative economic summit that the proposals on a global financial architecture did not offer a guarantee for preventing crises such as those of Asia, Russia and Brazil last year.
The parallel summit was organised by an alliance of different organisations, including Friends of the Earth Germany (BUND), Medico International, the Heinrich Boell Foundation close to the German Green party), the youth organisations of the Social Democratic and Green parties, the federal congress of Development Action Groups (BUKO), Oxfam Germany, and the Network 'No One is Illegal'.
The Congress debated alternatives to the expanding neo-liberal world order, focusing on related issues such as the future of labour, migration and the need for an economic and financial order different from the one emerging in the wake of rapid globalisation of the world economy.
"It was intended to be a debate and we had not planned any resolution," said Unmuessig from the WEED, which coordinated the meeting. But the participants generally agreed that "rather than curing the symptoms the disease itself should be cured".
Unmuessig said the G-7 package was tied to conditions that obliged countries eligible for debt relief to follow the advice of the same institutions - such as the IMF - which had imposed structural adjustment programmes on them, adding to their economic and financial problems.
A joint statement by the G-7 Friday indeed stressed that the debt relief package was not a free-for all. "We support faster, deeper and broader debt relief for the poorest countries that demonstrate a commitment to reform and poverty alleviation," said the statement.
As part of the deal, French President Jacques Chirac announced, Paris was cancelling six billion dollars worth of official debt owed by Africa's poorest nations. The move will "cancel all debt owed to France by Africa's poorest nations," Chirac told reporters here.
The G-7 debt reduction measures represented an "intelligent, generous and courageous" move, the French President said. "We want countries to benefit rapidly." In a similar self-congratulatory note, the British Prime Minister Tony Blair said, "We will be writing off literally billions of dollars worth of debt," adding: "I believe this summit will mark probably the biggest step forward in debt relief."
A British official said that debt relief was "not just a moral issue," adding that it was in the industrial world's interest to end the marginalisation of the world's poorest countries. "We cannot tolerate that countries are spending 10 per cent on health and education and 60 per cent on debt servicing," he said.
The debt relief actions, "are indeed historic," said Sandy Berger, US National Security Advisor.
Striking a less enthusiastic note, Japan insisted that debt relief was "only half of the solution to the problem," and said it must be combined with "continuous and strong efforts of policy reform and structural adjustment by the debtors." A Japanese government spokesman, Sadaaki Numata, pointed out that loans made by Japan represented 40% of the outstanding debt owed by poor nations to the G-7. "We need fairness in the sharing out of this burden," he said.
G-7 finance ministers agreed in Frankfurt last weekend to sell 10 million ounces in gold held by the International Monetary Fund (IMF) to pay for debt relief.
Critics say that by provoking a decline in gold prices, the sale could cause more harm than good to indebted nations which are also gold producers. (IPS)
The above article by the Inter Press Service appeared in the South-North Development Monitor (SUNS).