DEBT SERVICING THE MODERN FORM OF SLAVERY!
As the year 2000 draws near, expectations for debt cancellation for the poor countries are also growing. Is it possible to cancel poor counties' debt? Do the IMF, World Bank and other lenders have the capacity to cancel 100 percent of the "unplayable debt"? What should be the role of recipient countries regarding resources released from debt?
These have been prominent issues for discussion especially after the Group of Seven meeting in Cologne in June 1999. Lenders have already been challenged that the cost of cancelling debt of the world's poorest countries is not significant. According to findings by a well known debt activist and Harvard economist, Jeffery Sachs, though 52 poorest nations together owe the rich west US $350 billion, it would cost rich nations only US $ 71 billion at the current market prices. This is only one third of one percent of the annual income of the richest nations. It has also been argued that the IMF alone has enough resources to fund the debt cancellation exercise without even selling its gold. Thus cost is now no big hindrance to debt cancellation. But then how should resources from freed from debt cancellation be used?
Lenders hope to offer debt relief so that resources released therefrom can benefit the poorest in the debtor countries. Yet developing countries are well known for corruption which is rampant among the "elite" in these societies. Very little resources, if any, normally reach the intended poor. History of most of these countries tells it all. Corruption, bad governance, violation of human rights and drug trafficking used to be and are common practices in these countries. What then can we say? Should debt relief be denied because the poor may not benefit from the exercise? Certainly not. Every effort should be taken in these countries to put their "houses" in order. Government, civil society and the opposition should put their heads together and find a lasting solution to these problems.
Regarding debt relief governments are urged to put in place a debt mechanism which would include establishing a social fund through which freed resources will be channelled. The fund should be run by a steering committee consisting of representatives from civil society, government and other interest groups. The running of the fund should be as transparent and accountable as possible. This will ensure that the objective to eradicate poverty through debt relief is achieved.
Actually "debt relief for poverty reduction" has been the center of the argument by debt activists world over. The IMF and World Bank, seemingly due to pressure from the civil society, decided to adopt the same strategy during their annual meeting in Washington in September this year. The two institutions decided to "rename" the Enhanced Structural Adjustment Facility (ESAF) as Poverty Reduction and Growth Facility (PRGF). PRGF will aim at linking adjustment measures to poverty reduction. For a change this facility will be "owned" jointly by the IMF and the Bank. It is yet to be seen how the IMF will shift its macroeconomic role to take up this new role. However, the fact that the two main multilateral lending institutions recognized the importance of linking poverty reduction to their policies is a step in the right direction. We hope that, through PRGF adjustment measures by the IMF and the Bank, not only economic growth will be targeted but also poverty reduction.
Perhaps what came out very clearly in the Washington meeting was the fact that to claim eligibility for debt relief a poor country is supposed to prove to the IMF that the funds saved through reduced interest payments will be transferred to social spending. This comes as a challenge to many if not all poor countries to start working on how they will convince the Fund that the money so realised will be used solely for the benefit of the poor.
President Clinton during the same IMF meeting promised to cancel 100 percent of the debt owed to the USA by the poorest 36 countries. These countries owe the USA about US$5.7 billion of which may be cancelled depending on the outcome of the debt bill in congress. Prime Minister Tony Blair is also being urged to emulate Clinton and do the same. In order to press for this, campaigners in Britain are planning to demonstrate by joining a human chain around UK treasury on 11th November 1999 as a way of celebrating 50 days before the new millennium.
The Japanese government has also pledged a 100 percent debt cancellation. In effect under the Japanese way of doing things, debt will not be cancelled. A debtor country will be required to pay back the debt then the money shall be ploughed back into developmental projects of the same country. This is expected to take place in more than twenty years! Clearly the indebted countries don’t have the money with which to pay back their debts and the repayment duration is just too long. Jubilee 2000 Zambia therefore urges the Japanese government to go by Clinton's example by cancelling all debt owed to it by the poorest nations now!
Let every Zambian old or young, man or woman, poor or rich come and support the jubilee campaign for an outright debt cancellation of the world's poorest nations including Zambia. Time has now come for the rich west to liberate the poor south from the slavery of debt!
Chrispin Mphuka
Coordinator Jubilee 2000 Zambia
Home | Information | Activities | Updates | JCTR Bulletin | Networking | Discussions | Cost of Living | Publications