Papers - Briefing Papers

DDCI Research Other Research Conference Papers Briefing Papers Articles

No New Initiative on Debt in spite of lack of progress on Millennium Development Goals

Meeting the MDGs was a major item on the IMF/World Bank Spring meetings. All the indications are that these goals will not be achieved. The World Bank openly admits that it is unlikely that the first goal targetted for 2005 - achieving gender equality in primary and secondary education - will be met. Lack of resources is a major obstacle . At its Monterrey conference last year, the UN highlighted the role of debt reduction in achieving these goals. Studies by Jubilee Research show that low income countries need 100% debt cancellation AND further aid if they are to achieve the MDGs,. The World Bank and IMF, however, resist all proposals for further reduction of debt owed to themselves or for assessments of debt reduction to be based on resources needed to meet the MDGs.

The IMF and World Bank, in fact, appear to be going around in circles on debt. Last April they admitted that the Heavily Indebted Poor Countries' initiative was not reducing the debt of many countries to what they defined as a 'sustainable level'. A year on, although nothing has changed, the only action proposed is another report on the delays and difficulties facing countries going through HIPC, to be produced for their annual meetings in September.

----------------------------

Proposal for a new debt mechanism bites the dust due to US opposition

The IMF's plan to introduce a 'Sovereign Debt Restructuring Mechanism' to deal with debt owed by countries to private sector creditors, was dropped in the face of US opposition. Nor had the plan met with any enthusiasm from the private sector which benefitted from massive bail out packages mobilised by the IMF during the financial crises of the l990s in Mexico and Asia.

The IMF proposal was a far cry from the fair and independent process to deal with debt which debt campaigners are calling for. However, it was a recognition that private creditors, who have contributed to financial crises by their irresponsible and speculative lending, must play a part in resolving debt crises they have helped to create.

----------------------------

Iraq's debt

Iraq's debt was put on the agenda by the US Treasury secretary's public statement that the Iraqi people shouldn't 'be saddled' with debts incurred by Saddam Hussein. The underlying message here is that debts taken on by a dictator are 'odious' and subsequent regimes should not be obliged to repay these. While the IMF and World Bank acknowledged that Iraq's debt must be addressed, they distanced themselves from the suggestion that these debts are 'odious'. The IMF managing director claimed it was premature to talk about 'debt forgiveness' for Iraq. Clearly if the debts are odious, it is ridiculous to talk about 'forgiveness'; such debts would be illegitimate in the first place.

The IMF and World Bank stated they are ready to 'play their normal role' in Iraq's re-development at the appropriate time'. The IMF managing director told a press conference that the framework for their activities in Iraq will be based on a new UN resolution. No light was cast on what such a resolution should cover before the IMF and World Bank would get involved in Iraq. The story behind the bland statement is that the divisions in the UN Security Council were repeated at the IMF and World Bank meetings with US pressure on these bodies to get involved in Iraq as soon as possible.

----------------------------

Canadian Contribution to the Spring meetings

As the Irish Minister for Finance does not usually attend the IMF and World Bank Spring meetings, the Canadian Finance Minister's speech was made also on behalf of Ireland and the 10 Caribbean states which Canada represents.

Minister Manly's references to debt included a mention of Ireland's support for 100% debt cancellation for low income countries. He also stressed that extra debt reduction provided by individual creditors like Canada, should not be included in the calculations of debt reduction under the Heavily Indebted Poor Countries' Initiative. This is an very significant point. One of the gains of the Jubilee campaign was that the G7 and some other rich country creditors committed to cancelling 100% of the debt owed to themselves by low income countries. This extra cancellation should be on top of debt reduction granted by HIPC. Otherwise the gains of the Jubilee campaign gets absorbed into HIPC and benefit other creditors including the IMF and World Bank rather than low income countries. Currently the IMF and World Bank are not treating the extra cancellation as being additional to what countries receive under HIPC.

----------------------------

Print Version