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Canada's initiative on debt relief

by Mark Bourrie


Winnipeg, March 30 -- Canada says it will forgive as much as $55 million in debt owed by the poorest countries of the world, and wants other western nations also to help lift the debt burden on the developing world.

An announcement by Prime Minister Jean Chretien means Canada will write off $35 million owed by Zambia, Tanzania, Madagascar, Honduras and Bangladesh.

Those countries owe Canada a total of $150 million in loans from the Canadian Wheat Board and the Export Development Corp. The federal government believes all five countries should be eligible to have 80% of that cancelled under an international debt relief initiative.

The latest Canadian announcement would mean the entire debt would be wiped away.

Canada also will consider doing the same for a handful of other countries - Sudan, Rwanda, Liberia, Ethiopia and Congo. But the $20 million involved would go only to those conflict-plagued countries once some order is re-established.

"We do not have to accept predictions of inevitable conflicts between races, religions and cultures in the next century," Chretien said in a speech here last week. " But the one clash which looms as almost certain is that between the world's rich and its many more poor."

Chretien said people in North America spend $5 billion a year on cosmetics - nearly enough to pay for the cost of providing sanitation services to the 2 billion people in the world who don't have it. Europeans, meanwhile, spend $11 billion annually on ice cream.

In announcing the debt relief, Chretien said it would be tied to the recipient countries' records on human rights, and on their spending priorities.

"That is out ahead of any other country and it's what we've been calling for," said Dennis Howlett of the Canadian Ecumenical Jubilee Initiative, a coalition of religious groups lobbying governments for the cancellation of Third World debt.

More countries should be given the same break, he added.

Canadian Finance Minister Paul Martin called on other G-7 members to follow his country's lead.

"For the poorest countries, keeping up with loan payments means shifting resources away from priorities like education and health," Martin said. "Canada and its G-7 partners must continue working on ways to better assist the poorest countries in reducing their debts. But relief must be targeted wisely so it will not underwrite military spending in the receiving countries."

For several years, the Canadian government has had a policy of forgiving "soft debt", long-term, low or zero interest loans used for infrastructure development. The new initiative would write off debt for infrastructure development and food purchases.

Chretien said Canada will urge other industrialized nations to also forgive 100% of the debt owed to them by the poorest of the 41 so-called heavily indebted poor countries (HIPC).

He called for changes to the HIPC debt-relief program, an initiative of the World Bank and the International Monetary Fund.

That would include making extremely poor countries that have been hit by major natural disaster - for example, hurricane-ravaged Honduras - eligible for help.

He urged developing countries to provide development assistance only on grant terms.

Countries that increase spending on education and health care and cut spending on weapons deserve more support, he said.

Canada is proposing that the IMF sell up to 10 million ounces of gold in order to finance debt-relief assistance and is asking the IMF to augment its Enhanced Structural Adjustment Facility (ESAF), which is used to help the world's poorest countries. Canada will loan more than $250 million to bolster ESAF loan resources, and is calling on other countries to add to the fund. If other countries accepted them, the Canadian proposals would amount to $5 billion in debt relief. The issue will be on the agenda at a G-7 meeting in June.

Non-governtmental organisations have applauded Canada's move as a good start, especially the 100% cancellation of some of its bilateral debts.

The above article by the Inter Press Service appeared in the South- North Development Monitor (SUNS).

 


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