Dealing with the Debt Crisis

There has been no shortage of plans to deal with the debt risis over the past two decades. These plans have all been controlled by the creditors. Unfortunately none have been effective.

Structural Adjustment Programmes
New loans to repay old loans have been a continual pattern during the debt crisis. In return for these new loans, indebted countries have to introduce economic adjustment programmes. In theory these programmes should improve the country's economic position and enable them to repay their loans. But these programmes have failed and instead have had negative effects on people's health, welfare and livelihoods.

Heavily Indebted Poor Countries Initiative (HIPC)
The current main initiative for dealing with the debt crisis is the Heavily Indebted Poor Countries Initiative (HIPC).

The initiative aims:

• to reduce the debt of heavily indebted poor countries to a level where they can pay without falling into arrears or obstructing economic growth.

To be eligible countries must:

• follow IMF/World Bank structural adjustment programmes with all their negative impacts on people's lives, for up to 6 years.
  
  
• develop and start implementing a national poverty reduction strategy with the participation of civil society. This strategy must be endorsed by the IMF and World Bank.

Major problems:

• It only cancels small amounts of debt.
  
  
• It works very slowly.
  
  
• In assessing how much debt reduction a country gets, no account is taken of the resources needed for poverty reduction/human development.
  
  
• Only a small number of developing countries are eligible - 41 heavily indebted poor countries were originally identified. Many countries desperately in need of debt cancellation such as Ecuador, Haiti and Jamaica are excluded.

Promises and More Promises

G8 Declaration at Cologne Summit June l999
Surrounded by tens of thousands of Jubilee 2000 campaigners, the G8 declared they would raise the debt cancellation on offer to low income countries to $100 billion. Most of this cancellation was to be delivered by improving the terms of the Heavily Indebted Poor Countries Initiative.

Individual G8 Countries Promise '100% Debt Cancellation'
President Clinton raised great hopes that the end of the debt crisis was in sight when he promised 100% debt cancellation on debt owed to the USA in September l999. He was followed by his G8 colleagues, all of whom, except Russia, made similar promises. These moves were welcomed and demonstrated the impact of the Jubilee 2000 campaign. The IMF and World Bank, which are the low-income countries' harshest creditors, have not promised 100% cancellation.

Broken Promises
These promises may appear to represent substantial progress. They do not, however, mark the end of the debt crisis.

• $100 billion debt cancellation may look like a significant sum, but it only represents half the debt owed by heavily indebted poor countries. As much of it is not being serviced, cancellation will not make substantial resources available for poverty reduction.
  
  
• Cancellation is not necessarily automatic. Countries may have to first go through the HIPC obstacle race. However, at the end of 2000 Britain announced that any money paid to them by heavily indebted poor countries would be kept in a trust fund. This will be returned when the country can show that the money will be used for poverty reduction. Canada announced it will not collect debt payments from 11 countries which have undertaken economic reform programmes and which show a respect for human rights.
  
  
• In spite of the promises, no country's debt will be wiped out entirely.

But even these limited promises have not been delivered

• By the end of 2000, only a small amount of the promised cancellation had been delivered.
  
  
• Only one country, Uganda, has received the full amount of debt cancellation promised. The money released has been dedicated to primary education. Uganda, however, continues to pay over $1million a week servicing its debt.
  
  
• A further 11 countries have received notification of how much debt cancellation they will receive after they have fulfilled a range of conditions. These are: Benin, Bolivia, Burkina Faso, Cameroon, Guyana, Honduras, Mali, Mauritania, Mozambique, Senegal and Tanzania.
  
  
• The aim of the IMF and World Bank was that a mere 20 countries knew by the end of 2000 how much debt cancellation they were likely to receive. They won't receive the debt cancellation until they fulfill further conditions

Debt Cancellation on offer is totally inadequate
Heavily indebted poor countries need substantial resources for human development.

• Over half their populations live on less than $1 a day.
  
  
• 1/6 of their children die before the age of 5 from poverty related diseases.
  
  
• Close to 50 million children are not in school.
  (Oxfam International)

After debt cancellation:

• Zambia will spend as much servicing its debt as on health. Life expectancy has fallen in Zambia from 54 years in l992 to 40 years in l998.
  
  
• Burkina Faso will spend as much servicing debt as on education. Burkina Faso has one of the world's lowest school enrollment and adult literacy rates. Less than ¼ of girls attend school.
  
  
• Bolivia will spend almost three times as much on debt as on health. One third of the population does not have access to clean water.
  

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