Africa: Debt and G8 Summit

Africa Policy E-Journal

Africa: Debt and G8 Summit
Date distributed (ymd): 990616
Document reposted by APIC

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Region: Continent-Wide
Issue Areas: +economy/development+
Summary Contents:
This posting contains an announcement and executive summary of a new report from the Jubilee 2000 Coalition (UK), documenting the inadequacy of new proposals for debt relief to be presented by rich countries at the G8 Summit in Cologne, Germany, on June 18-20.

For additional information on opportunities for action on the issue linked to the summit, see
http://www.jubilee2000uk.org

For additional links to a variety of sites and background documents on the issue, see
http://www.africapolicy.org/action/debt.htm

For a strong endorsement of the need for debt cancellation by prominent free-market economist Jeffrey D. Sachs, of Harvard University's Center for International Development, see the June 11, 1999 article in the New York Times on the Jubilee 2000 UK site:
http://www.jubilee2000uk.org/news/sachs14jun.html

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Cologne Summit will offer 'crumbs of comfort'
to the poorest countries on debt, according to new report

A new report from Jubilee 2000 Coalition reveals that world leaders are set to announce a deal on debt relief worth only five loaves of bread or one bag of rice every year to the average person in the poorest countries.

The information comes from inside intelligence and analysis of proposals from the British, German and US governments in preparation for the G8 summit, 18th - 20th June, when Third World debt will be on the agenda. Using the most generous offer, the British proposal announced by Chancellor Gordon Brown in February 1999, Jubilee 2000 has calculated that despite promising rhetoric, the G8 will offer each person in 52 heavily indebted poor countries on average $2.83 (1.84 pounds) each year. Every one of these people owes an average $573 (349 pounds) to their Western creditors.

Ann Pettifor, director of the coalition said: "This report reveals that despite flowery speeches and grand gestures, G8 leaders are offering only crumbs of comfort to the world's most indebted nations. An unprecedented number of people will amass in central London on Sunday, June 13th and in Cologne on June 19th, to support the Jubilee 2000 call for the cancellation of unpayable debts in the Jubilee year - 2000. They will not be satisfied by these crumbs from the G8 table. They are calling on the leaders to drop the debt now."

For the full report (priced 5 pounds / $8) contact Jubilee 2000 e-mail: mail@jubilee2000uk.org or at 1 Rivington Street, London EC2A 3DT.

Crumbs of Comfort

The Cologne G8 Summit and the chains of debt

Executive Summary

The debts of the world's poorest countries are on the political agenda. The worldwide Jubilee 2000 movement has focused attention on the plight of people who bear the burden of debts that deprive them of basic rights to health, education and clean water - debts that entrench poverty and deepen injustice.

The existing Heavily Indebted Poor Countries (HIPC) Initiative has been exposed as being totally inadequate, with countries paying only slightly less than before on debt service. This failure has been compounded by the worldwide economic slump and a drop in commodity prices.

With mounting pressure on them to seriously address the problem, the leaders of the Group of Eight (G8) leading industrialised countries preparing for their June summit in Cologne competed with each other to promise improvements to the HIPC Initiative. Sums of $50 billion, $70 billion and more have been discussed. These are certainly large sums and far exceed what has been suggested before. But creditors have talked about writing off debt for more than twenty years. Are these latest proposals going to deliver a genuine exit from debt for the poorest countries? Will they help countries reach the internationally agreed 2015 development targets?

The Cologne offer

Based on intelligence gathered and new research undertaken in the build-up to the Cologne summit, this report reveals for the first time that the improved HIPC initiative to be agreed at Cologne will mean an average annual benefit of around $2.83 (1.84 pounds) for each person in fifty-two indebted countries - enough to buy perhaps five loaves of bread, or one bag of rice, every year. These are small crumbs of comfort.

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.

No exit from debt

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. We understand that the British government have 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. The so-called 'fiscal criterion' is based on real government budgets and looks at how much countries spend on debt service compared to that spent on health, education etc. Using it would produce different, bigger numbers on the amount of debt relief required for countries to become 'sustainable'.
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 40 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.
There has 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.

The Jubilee 2000 alternative

During the past year, Jubilee 2000 campaigns around the world have defined much more clearly the goals to be achieved. They stand in stark contrast to the little that is on offer.

The Universal Declaration of Human Rights guarantees the right to health and education. All donor countries have accepted the target of halving the number of people living in absolute poverty by the year 2015. Jubilee 2000 argues that money must be spent on basic health and education before debt service is paid, and that massive debt cancellation will be needed to meet these targets. Thus governments who continue to collect debt service from the very poor countries are violating human rights and reneging on their own promises to end poverty.
The Jubilee 2000 call is for debt cancellation in the year 2000. What we are being offered is another decade of discussion about how we might finally write off a bit more of the debt that is not being paid. It promises to some day free a few people from debt slavery. It does not make the year 2000 a jubilee year - a year of a new beginning.
Jubilee 2000 campaigners in impoverished countries stress the need to disconnect debt relief from strict IMF structural adjustment conditions. The United Nations and even the World Bank itself criticises these conditions. 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.
Jubilee 2000 campaigns in both rich and poor countries demand that money released by debt cancellation be used for poverty reduction and development, and they insist on conditions to ensure this. But they argue that detailed conditions imposed from the north have failed and will continue to do so. Instead, debt cancellation should be conditional on transparency and a locally developed poverty action plan to use funds released. The Debt Review Body proposed by the Jubilee 2000 director, Ann Pettifor, introduces one way of setting up an independent and transparent process involving civil society for debt relief negotiations.

The challenge

Jubilee 2000 calls for:

cancellation by the year 2000
of the unpayable debt
owed by the world's poorest countries
under a fair and transparent process.

Despite the grand rhetoric and praise for Jubilee 2000 from the world's leaders, their announcements do not meet these goals. Tiny reforms to HIPC do not resolve the problem.

The G8 can yet confound its critics. It is still possible for the leaders of the most powerful nations to take a bold stand and cancel debt in the year 2000. To do so would be to take a huge leap forward, for progress and justice. But the time for small steps is long past. A billion people in the world's poorest countries can live no longer on a few crumbs of comfort. It is time to drop the debt.

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