G7 to cancel debt? Don't believe all they tell you
During the recent G7 summit in Cologne, a 17-million signature petition asking for the cancellation of poor countries’ debts was handed to the heads of State of the seven richest countries.
The summit leaders announced on June 18 1999 that the problem of the poor countries’ debt burden had been solved. 90% of the debt would be written off. This is untrue.
The real amount of the cancellations covered by the announcement adds up to a maximum of US$ 25 billion, i.e. about one percent of the total Third World debt1. One drop’s worth of reduction in an ocean of debts.
Seen against the total debt of the 41 poorest countries2, the measures announced represent no more than 12 percent of their debts, which come to US$ 205 billion.
The majority of the world’s poor live in India, Indonesia, Brazil, Bangladesh, Pakistan, Mexico. None of these countries is affected by the debt reduction measures announced in Cologne.
Probably only 20 of the 41 countries which could benefit from the reductions will qualify for them. The Democratic Republic of Congo, Sudan, Liberia, Sierra Leone, Angola, will not.
Furthermore, at best it will take 3-6 years for even the "concessions" announced to be achieved.
In the short term, to "benefit" from the measures, the poor countries will have to fulfil draconian conditions – aggravated structural adjustment plans.
Candidate countries will have to apply these harsh austerity measures for three or even six years: this will mean reduced purchasing power for the poorest citizens due to increased taxation, combined with rising costs of basic commodities, ever more limited access to health care and education, and so on.
Yet in these countries, 50 percent or more of the population already live below the threshold of absolute poverty (in cases such as Mozambique and Rwanda, over 70% do).
The measures announced constitute an extension of the HIPC (or Highly Indebted Poor Countries Initiative) policy adopted in 1996 by the World Bank, the IMF and the G7.
Have those measures improved the circumstances of the populations concerned? They have not. The World Bank itself admits this, and advocates patience ...
If the standard of living hasn’t improved, has there at least been an improvement of the economic situation of those countries? Are they paying out less in annual debt repayments?
No again ... on the contrary, those countries have to repay more than they receive.
In 1997, the rich countries lent $8 billion to the poorest countries, while these countries repaid $8.2 billion, i.e. 200 million dollars more. The BIRD (the International Bank for Reconstruction and Development of the World Bank group) and the IMF get more in repayments from the poor countries than they lend!
For the future, the World Bank has just announced that despite the promised debt reduction measures, the amounts to be repaid will not decrease. Worse still, some countries (for example Mali and Burkina Faso) will have to repay more than before .
The G7 has put the IMF and World Bank in charge of overseeing the implementation of adjustment policies. According to the G7 communiqué, these plans should bring about improved health care and education.
Yet how can such improvements be envisaged within the narrow framework of austerity budgets?
Even after debt reduction, Mozambique will still have to devote over 40% of its budget to debt repayments. In such conditions, how can there possibly be improvements in the provision of health care for the population?
It is time to stop plundering these countries.
Public Development Aid has reached an all time low. It has dropped by 33% since 1990 while the amounts repaid by the entire Third World have continued to increase.
In 1998, the Third World taken as a whole repaid $250 billion , whereas Public Development Aid barely scraped past the $30 billion mark.
This means that the Third World transferred eight times as much to the rich countries as it received from the so-called generous Public Development Aid.
The results are there. According to the World Bank, between 1987 and 1998, world-wide, the number of people living below the absolute poverty line (less than a dollar per day) increased from 1,200 to 1,500 million.
In fact, as is shown annually by the World Report on Human Development produced by the United Nations Development Programme, the North is not helping the South.
Instead the population of the South is transferring considerable wealth to the holders of capital in the North, at the cost of intolerable suffering and sacrifices. This transfer is effected through two basic mechanisms: debt repayment, and unfair trading.
At the time of writing, a new debt crisis has erupted, as prices of products sold by the Third World on the world market have dropped considerably while the interest rates applied to service debts have risen.
In other words, the Third World countries are earning less and repaying more. On the other hand, the leading industrialised countries are making savings on the cost of importing raw materials from the Third World and the interest rates on their own public debts have dropped since the Asian crisis.
The Third World populations have already repaid more than enough. The external public debts of the Third World countries must be totally written off.
To prevent corrupt and dictatorial regimes in the South from taking advantage of this cancellation, their holdings in rich countries must be frozen, and after due investigation, returned to the populations of the Third World countries via development funds run democratically in each country.
Other complementary measures must be taken including the cessation of structural adjustment plans, and the introduction of taxation of financial transactions (the so-called Tobin tax).
To prevent the recurrence of the mechanisms leading to indebtedness from resuming after debt cancellation, further steps must be taken, by laying the foundations of a new, fairer economic and human order.
The refusal to cancel the external debt, and the continued imposition of demonstrably damaging adjustment policies must be branded for what it is: a refusal of the bourgeoisie in the wealthy countries to come to the assistance of endangered populations.
Eric Toussaint is President of the Committee for the Cancellation of the Third World Debt (COCAD) and author of Your Money or Your Life , published in English by Pluto Press, London, 1999 and Vak, Bombay, 1999.
Contact: Committee for the Cancellation of the Third World Debt 29 rue Plantin, 1070 Bruxelles tel (322) 527 59 90 fax (322) 522 62 27 email [email protected] web http://users.skynet.be/cadtm