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Presentation to the Joint Oireachtas Development Cooperation
Sub Committee
From Debt and Development Coalition Ireland
28 April 2005 at 12 a.m.
on
'Developing Country Debt Cancellation - Opportunities and Obstacles'
Debt and Development Coalition Ireland would like to thank the Sub Committee
for the opportunity to make this presentation. We would also like to thank
the Sub Committee for the continued support you have given over the years
to the call for cancellation of unpayable debt.
The good news is that there is a growing consensus internationally that more debt cancellation is needed if countries are to progress towards the Millennium Development Goals. This is particularly true of Sub Saharan Africa which is off track on all the goals[1]. The focus now is particularly on multilateral debt - mainly on debt owed to the IMF, World Bank and African Development Bank.
The G7 Finance Ministers meeting last February stated 'We are agreed on a case-by-case analysis of HIPC countries, based on our willingness to provide as much as 100% multilateral debt relief'. The G7 statement stated that the IMF would present proposals to the Spring meetings examining how IMF resources, including its gold reserves, could be used to cancel debt.
Individual G7 countries have put forward their own debt proposals
a) the UK has stated that it will pay its share of the debt service
of 20 low income countries (up to a possible 65 countries) to the World
Bank and African Development Bank. The UK's proposal is that multilateral
debt service should be paid up to 2015. The UK's rationale is to ensure
that debt payments do not prejudice meeting the MDGs. Canada and the Netherlands
have agreed to follow the UK's example. The UK has proposed that IMF gold
should be used to finance cancellation of debt owed to the IMF
b) the US supports 100% cancellation of the debt stock of Heavily
Indebted Poor Countries to the World Bank and the African Development
Bank. The US does not propose to make any new money available to achieve
this.
It can be seen there has been progress in favour of 100% debt cancellation since the Ireland broke the taboo on discussing total debt cancellation with the launch of its debt policy in 2002.
G7 Finance Minister, IMF and World Bank Meetings 15-17 April
We had hoped that when we met with the Sub Committee today we would be
able to report progress on debt cancellation following the G7, IMF and
World Bank meetings in Washington 15-17 April.
In spite of the general agreement that more debt cancellation is needed, no progress was made on the key issue of how debt cancellation could be financed. The IMF managing director produced a paper for the meeting on IMF gold sales for debt cancellation. This paper accepts that it is possible to sell IMF gold without negative effects on the gold market. Broadly speaking the approaches discussed in the IMF paper reflect those contained in the paper we commissioned last September 'The IMF, gold sales and multilateral debt cancellation'. We would like to remind the Sub Committee that the Joint Oireachtas Foreign Affairs Committee was the first parliamentary body to support sale of IMF gold for debt cancellation back in April 1994.
We are concerned that there should be effective action on debt in 2005. You will be aware of the growing public response to the Make Poverty History campaign here in Ireland - calling for : Drop the Debt, Trade Justice and More and Better Aid. We're a third of the way towards the MDG target date of 2015 and the UN MDG Review takes place in September. We are concerned that the government does not appear to have taken a position on sale of IMF gold. Replying to a recent Dail question asking for clarification on the Irish position, Minister Conor Lenihan merely stated that proposals 'will be considered by the Minister for Finance in consultation with my own Department'.[2]
Recommendations
We would urge the Sub Committee to urge the Minister for Finance to :
- Press for the use of IMF gold to cancel as the first port of call
for cancellation of debt owed to the IMF and to other multilateral banks
- the World Bank, African Development Bank.
- Press the World Bank to maximise the use of its own resources - other
than its programme resources - for debt cancellation. Ireland's debt
policy states that World Bank debt should be written off from a combination
of the Bank's net income and additional donor contributions on a fair
burden sharing basis. As one of the world's rich countries, Ireland
can be expected to contribute to a funding shortfall for multilateral
debt cancellation once the IMF and World Bank have first maximised the
use of their own resources. Finance for debt reduction should be treated
and reported separately from aid and should be additional to the funds
required to meet the target of allocating 0.7% of GNP to development
assistance.
- Make public its current position on debt cancellation and in particular, its position on sale of IMF gold for debt cancellation.
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[1] World Bank 'MDGs from Consensus to Momentum' Global Monitoring
Report 2005
[2] Question No. 101, March 24th 05
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