Debt is Not Done – The 2005 Debt Deal
November 21, 2005
Africa is the most impoverished region in the world today but African countries spend more money each year repaying old illegitimate debts than they receive in aid. Over the past three decades, African governments have already repaid many times what they have borrowed.
Despite this fact, African countries continue to have to pay these debts and apply harmful economic conditions dictated by wealthy countries in exchange for limited debt relief. These conditions have increased poverty, making debt deadly. The global economic justice movement has long called for 100% debt cancellation. Given centuries of exploitation of the African continent, the question is: Who owes whom?
At the end of September, the International Monetary Fund (IMF) and the World Bank approved a proposal by the Group of Eight (G-8) wealthy nations to cancel the debts of 18 countries, 14 in Africa, to these institutions.
This move by the G-8 and the financial institutions sets an important precedent for 100% debt cancellation, but it is an insufficient response to the debt crisis. The debt deal excludes the majority of African countries and the majority of Africa’s debt. It also continues the precedent of debt relief being tied to harmful economic conditions.
Africa Action continues to call for 100% cancellation of all of Africa’s debts, without economic policy prescriptions attached. For more on Africa Action’s position on debt cancellation, read our organizational statement.
Between the G-8 Summit and the September IMF and World Bank Meetings
There were several moments between the G-8 meetings this summer and the September meetings when countries threatened to scuttle even the limited G-8 proposal. Some countries argued for additional conditions to be imposed on the 18 eligible countries. Others proposed adding and subtracting countries from the list. Africa Action and other groups kept the pressure on the U.S. Treasury to expand the list and cut the conditions. Voices worldwide challenged the G-8 and the International Financial Institutions (IFIs) to approve a broader deal. These efforts ensured that the final agreement did not undermine what had been proposed by the G-8.
Final Debt Deal of 2005
In the end, the IFIs and their boards adopted the G-8 proposal and agreed that the IMF, World Bank and African Development Bank would cancel the debt of 18 countries, 14 in Africa. These countries are: Benin, Burkina Faso, Ethiopia, Ghana, Madagascar, Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal, Tanzania, Uganda and Zambia in Africa and Bolivia, Guyana, Honduras and Nicaragua in Latin America. This debt cancellation will be implemented in the summer of 2006 and there will not be any additional requirements or conditions on their receipt of cancellation.
The 14 African countries in the present proposal are not necessarily the poorest. Rather they were chosen because they’ve already completed the harsh Heavily Indebted Poor Countries (HIPC) initiative and received some debt relief, but it has proven to be insufficient to halt their further impoverishment. 18 more African countries are still involved in the HIPC program, while another third of Africa’s low- and middle-income countries are excluded altogether due to inappropriate measurements of per capita wealth, which deem them to be insufficiently poor for such debt relief.
The present agreement suggests that for any additional countries to become eligible for 100% debt cancellation they need to be a part of HIPC and thus will need to complete the full range of economic conditionality in order to receive debt cancellation. These harmful conditions include the privatization of public utilities (such as water and electricity) and reductions in education and health spending, among other policies that have exacerbated poverty in Africa.
Ultimately, the final debt deal falls far short of what is needed!
- Too few countries were included in this debt deal. Africa Action asserts that all 54 African countries need 100% unconditional cancellation of their external debts, and only 14 of them were included in the agreement. The 40 countries excluded in Africa will continue to owe over $200 billion after this deal is done.
- The Finance Ministers reaffirmed HIPC conditionality as the pathway to future cancellation. Africa Action rejects HIPC as a failed program and asserts that HIPC conditionality has deepened poverty and stripped African countries of their economic sovereignty.
- The debt deal fails to acknowledge the illegitimate nature of the debts. Africa Action argues that Africa’s debts are largely illegitimate. They are a result of irresponsible loans that have not benefited the people that must now foot the bill. While wealthy nations have described Iraq’s debt as illegitimate or “odious”, they have not applied the same standard to Africa’s debt.
Take Action!
You can help us keep the work alive by taking action today!
It will be critical in the next several months to raise our voices in support of the complete cancellation of Africa’s illegitimate debt. Without citizen pressure at this time, world leaders and the general public will think “debt is done.” Help us to keep up the momentum and work towards 100% debt cancellation for Africa.
Write a Letter to the Editor For Freedom from Debt
Letters to the editor can play an important roll in influencing decision-makers. Not only can letters in local papers send the signal to people in power that their constituents care, but they can help to educate people in local communities and frame the popular response to an important issue. The U.S. is the most powerful country in the G-8, the IMF and the World Bank, and it will craft its position based on politics as much as economics. We need to send the message that people across the nation are watching the U.S. role in decisions on debt and will continue pushing the U.S. until we achieve unconditional 100% debt cancellation for all African countries.
It is equally important at this time to make sure that people across this country understand that the work for debt cancellation is not over. The G-8, IMF and World Bank agreement set an important precedent for 100%, but we must be clear that we will keep calling for justice until all countries in Africa receive 100% debt cancellation without harmful economic conditions.
Please join us in this effort. Feel free to send your letter to the editor directly to your local newspaper, or send your letter through our media guide. If you don’t use our sample text below, be sure to be brief and keep your letter to 150 words or less. More tips for writing letters to the editor can be found in Working with the Media. Thank you for your work for freedom from debt.
Debt Not Done – Sample Letter to the Editor
Dear Editor:
Some think that the movement for debt cancellation for impoverished countries is over. Unfortunately only 18 countries (14 in Africa) received the promise of debt cancellation from the Group of 8 wealthy nations, the International Monetary Fund and the World Bank. As a result, the majority of countries in Africa must continue to pay more money servicing illegitimate debts to wealthy nations than they receive in aid. Debt is deadly in the Democratic Republic of Congo, for example, one of the 40 African nations excluded from the debt deal. 1.1 million people in the DRC live with HIV/AIDS yet 4 times as much is spent on debt than on health. All African nations must receive 100% debt cancellation to have any hope to fight HIV/AIDS. Let’s turn the myth that “debt is done” into mobilization to expand the list of eligible countries and cut the conditions on debt cancellation.
Sincerely,
YOUR NAME
YOUR ADDRESS IN FULL
YOUR PHONE NUMBER (They need this information to contact you if they decide to run your letter in the paper.)
|
Campaign to Cancel Africa's Debt
