If Malawi had received its debt relief with no hidden reductions and cuts, it would have had $101 million extra per annum free in its budget (the UK, in comparison, gave $180 million in 2006: SID, table 16.2). What it has really had is less impressive even than this. At best Malawi’s debt relief amounts to nothing more than a marginal adjustment to its domestic debt interest bill; at worst it amounts to less than nothing.

In September 2006 Malawi completed the Heavily Indebted Poor Countries process. Goodall Gondwe set out his intention to use the money saved specifically for the benefit of the poor. “Mr Speaker, Sir, and Honourable Members”, he stated, “during the budget review in March, it was proposed to spend these debt relief resources on those social activities that would benefit the poorer segment of the population.” (2007/8 Budget Statement, para. 48 – link now broken.)

But this appears to be impossible, since the terms and conditions of the debt relief Malawi received actually reduce the amount of money available for “the poorer segment”.

Gondwe’s 2007/8 Budget Speech explains that the overall debt stock was reduced from $3.0 billion to $0.5 billion, leading to saving in interest and capital repayments of $101 million in 2007/8; however, Malawi had been receiving $36 million per annum since the year 2000 in interim debt relief; so extra value provided by debt relief in 2006 was around $65 million per annum

However, a large proportion of this new debt relief money was provided under the terms of the deal agreed at the G8 Summit in Scotland in 2005: and under these terms, countries receiving debt relief also get a cut-back in the amount of development loans they receive from the World Bank. One of the terms of the debt relief deal for Malawi was that its World Bank funding would be reduced by $27 million per annum (this is, apparently, because the US won out over the UK during the 2005 G8 Summit debt relief negotiations: download article here). Now, the World Bank provides money to Malawi, it says, specifically to help with reducing poverty; given this, it seems fair to say that this $27 million per annum reduction is money that would have been, and now is not, available to benefit the “poorer segment”.

Malawi has – or had, in 2006 – huge domestic debts; this is because the government under Muluzi shored up its budgets by borrowing large amounts from Malawian and Malawi-resident businesses. An agreement was made with the IMF that a large proportion of the money saved through getting debt relief in 2006 would be directed towards reducing domestic debt. This agreement, set out in the 2006 Article IV Consultation(para. 22) ringfences $26 million per annum for the Malawian budget, and directs the the remainder to reducing domestic debt.

This means that only $26 million per annum is available for spending specifically on projects that benefit “the poorer segment of the population”. But we have already seen that the World Bank is reducing the money available for reducing poverty by $27 million per annum So Malawi had less, not more, money available for spending against poverty as a result of getting debt relief.

Certainly, by reducing domestic debt, the Malawi government will have a lower domestic debt interest bill to pay, and this will improve its financial situation overall. The IMF Article IV consultation says it will reduce domestic debt by 1.4% GDP; I have not tried to calculate the significance of this for the annual domestic debt interest bill. However, the claim made by governments and NGOs alike, was that debt relief money would go directly to pro-poor spending. “The debt relief to be provided as a result of reaching completion point will provide a great push to Malawi’s poverty reduction efforts”, said Michael Baxter, World Bank country director for Malawi.

This is a tremendous overstatement. If Malawi had received debt relief without these underlying conditions, it would have made less difference than an ungenerous donor. As it is, the debt relief will result in less money available specifically for “pro-poor” spending, but with some circumstantial reduction in the pressure of the domestic debt interest bill.

Debt relief is a noble cause: but delivered in this form it is vitiated.

Jubilee Scotland

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Most of the ECGD debt cancellation that occurs is through the HIPC initiative.  HIPC only includes countries that qualify as having ‘unsustainable debt’ as calculated by the World Bank & IMF. So far only 23 countries qualify as having had unsustainable debt. This process is part of the big debt relief deal agreed in 1999 in the wake of the Jubilee2000 campaign.

The forum for ECGD debt cancellation is the Paris Club  an informal creditors club that meets to decide the fate of country’s debt problems. This forum includes all the export credit agencies owed debt by the country under consideration as well as other governmental representative. For the UK this includes someone from Dfid, FCO and the Treasury.

The debt cancelled at the Paris Club under HIPC owed to the ECGD is then counted as ODA by the UK government. This goes towards the government’s target of aid spending as a proportion of Gross National Income. By including debt relief as ODA the UK government (as well as many other EU governments) inflate the amount they spend on aid and by a huge amount. click here to see the UK aid chart and the proportion of this as debt relief

ECGD debt cancellation should not come from the aid budget! Not only is this a massaging of the aid figures and denying poor countries more aid but at the same time it subsidises UK exporters for their operations in the developing world- not for reducing poverty. Why should this come out of the aid budget? The biggest industry that the ECGD subsidises is the arms industry. For example the ECGD is owed over US$1billion by the Indonesian government for tanks and jets sold to Suharto in the 1990s.
Military debt cancellation is also not supposed to be counted as ODA even though about 45% of ECGD’s business concerns the arms industry. For more information on this see the Blog entry on NigeriaTherefore the UK government is moving towards its aid target at the expense of those that its aid is supposed to benefit. This is all despite constant calls from campaigns such as Jubilee Scotland but the OECD whose Development Assistance Committee (DAC) analyses ODA levels actually allows this practice to continue.

In 2005 there was international recognition that global aid spending needed to be increased by at least US$50 billion a year to meet anti-poverty targets(the Millennium Development Goals). THIS FIGURE DID NOT INCLUDE DEBT RELIEF.

However in the same year,the UK as well as other creditors implemented two of the biggest debt relief deals outside of HIPC. Debt cancellation for Iraq and Nigeria. Iraq’s situation was spurred by reconstruction efforts after the war and calls by the US administration for debt relief. In Nigeria the government threatened to default on their debt payments resulting in partial cancellation in return for a one-off payment. Most of the debt owed to the UK by both countries was through the ECGD.

This has meant that the UK and global aid figures are even more inflated than usual:

“ODA was exceptionally high in 2005 due to large Paris Club debt relief operations (notably for Iraq and Nigeria) which boosted ODA to its highest level ever at USD 107.1 billion. In 2006, net debt relief grants still represented a substantial share of net ODA, as members implemented further phases of the Paris Club agreements, providing USD 3.3 billion for Iraq and USD 9.4 billion for Nigeria. Excluding debt relief, ODA fell by 0.8%.”

http://www.oecd.org/dataoecd/7/20/39768315.pdf

|In the UK 24% of ODA was spent on Iraq and Nigerian debt cancellation in 2006 http://www.concordeurope.org/Files/media/internetdocumentsENG/Aid%20watch/1-Hold_the_Applause.FINAL.pdf

For more information here is a few links to reports on Export Credit Agencies and debt.

http://www.whiteband.org/resources/issues/debt/debt-cancellation/Export%20Credit%20DEBT(final).doc <http://www.whiteband.org/resources/issues/debt/debt-cancellation/Export%20Credit%20DEBT%28final%29.doc>

http://www.eurodad.org/

Other organisations that scrutinize Export Credit Agencies

ECA Watch www.eca-watch.org <http://www.eca-watch.org/>

EURODAD www.eurodad.org <http://www.eurodad.org/>

The cornerhouse www.thecornerhouse.org.uk <http://www.thecornerhouse.org.uk/>

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‘Odious debt’ is a concept which enjoys some international credibility, but not nearly enough! Put simply, it is based on the idea that, if a dictator takes out loans for violent, abusive or simply frivolous purposes, his people should not be required to pay back the debt after he has gone. Every victory of debt-cancellation on this basis – and there are many such campaigns all over the world – strengthens this important doctrine.

Why is there any need for this? What was wrong with campaigning for debt cancellation solely on the basis of a country’s poverty? Here are a couple of reasons to be going along with, although there are plenty more.

Firstly, the existing debt-cancellation mechanisms demand that a country be branded as a ‘Heavily Indebted Poor Country’ before it qualifies for debt relief. It is obvious why this is demeaning.

Secondly, if debt cancellation is enacted on the basis of bad lending, it turns the spotlight back on the lender, and perhaps makes them think twice about dealing with dictators in the future.

This is a global movement within which Jubilee Scotland plays a small part. Jubilee USA are campaigning, for example, on cancelling the debts extended to Haiti’s infamous Duvalier regime, the European anti-debt coalition EURODAD is working to get government’s to sign a declaration of responsible lending, while the Norwegian government has already cancelled its debts to Ecuador and other countries on the grounds of illegitimacy.

More to follow…

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We’ve long complained that debt relief should not be counted as aid, on the grounds that debt cancellation is not new money going into a country, but old money not leaving the country. It’s a difference that can’t be captured just by looking at the accounting, though: one has to think about the history and ethics of the money. This makes the argument slightly shakey.

But recently we’ve been concerned about it for another reason. According to the international accounting rules for debt cancellation (set by the OECD), cancellation of military debts cannot be counted towards overseas aid targets. The UK has made some fairly significant steps towards reaching the 0.7% GNI target, going from about 0.36% GNI in 2003-04, to 0.51% in 2006-07. We been wondering, though, whether this level has been reached by counting the write-off of military debts towards the 0.7% target – that is, by breaking the OECD rules.

All of the debt cancelled for (or rather: bought back from) Nigeria was export credit debt, that is, old commercial debts that had been guaranteed by the UK and Nigerian governments. On average, around 40% of export credits are for arms. If this percentage held for Nigeria’s debts, then around 40% of Nigeria’s debts should not be counted towards the UK’s 0.7% aid target. This would mean that, potentially, the UK would have to reduce its ODA by £700 million (about 40% of £1.7 billion).

Given Nigeria’s history of military dictatorships, and the vast amounts of money that elites in that country have had for prestige projects, it surely would not be surprising if Nigeria had military debts to the UK.

We asked DFID whether they had gone through Nigeria’s debts before cancellation, and excluded the military debts, but they didn’t have the information. So Gavin Strang MP asked a Parliamentary Question on our behalf, which was answered very promptly, which was great, and the answer came back:

Arms Trade: Nigeria

Dr. Strang: To ask the Secretary of State for Business, Enterprise and Regulatory Reform what proportion of export credit outstanding at the end of financial year 2004-05 for Nigeria was for military goods. [180895]

Malcolm Wicks [holding answer 28 January 2008]: Information on ECGD business supported prior to 1991 is not held on a basis which enables defence to be identified separately from other sectors. ECGD has however supported no defence business on Nigeria since that date. (29 Jan 2008 : Column 202W)

The first part of the answer means that military debts cancellation may have been counted towards the 0.7% target, but that there is no record of what this is. The second part of the question, though, would be great news if true, since it would mean that the Abacha regime received no official military support from the UK. UK arms sales to Africa, however, according to the Observer:

UK arms sales to Nigeria [are] up tenfold since 2000 to £53m, including armoured vehicles and large calibre artillery. (June 12, 2005)

Now, Nigeria is surely a risky market (though markets warmed to it immediately after the debt cancellation); and the Export Credit Guarantee Department exists to support UK exports into risky markets. Furthermore, export credits were being provided well into the 90s for exports to Indonesia, so why baulk at Nigeria?

It therefore seems absolutely incredible that the Export Credit Guarantee Department has guaranteed no loans to Nigeria since 1991. Absolutely, mind-stunningly, incredible. Totally, discombobulatingly, extra-terrestrially incredible. However, there can be no doubt that the answer to the Parliamentary Question is entirely accurate.

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At about 2.30pm, several thousand people dressed in black emerged from the ranks of the eighty-thousand peaceful demonstrators and marched at the police. Clashes started shortly afterwards. The police’s initial charges were limited, and did not disperse the group in black – though they did send panicking bystanders fleeing into the festival area that had been agreed as a no-conflict zone. After several hours, as crowds restricted access by fire engines to a burning car, heavy anti-riot machines were brought in and five hundred injuries from tear gas ensured, with two hundred arrests and injuries to twenty police (according to reports).

I don’t think that the violent protesters on Saturday had a thought-out political programme (whereas the peaceful summit blockaders do – and they are being injured and arrested in large numbers, possibly as a result of tougher policing following Saturday’s violence). However, their actions lent the Summit a needed air of crisis. For as regards the intermeshed causes of global poverty, the only thing in question at the Summit is what margin of backsliding will be countenanced. This G8 is a theatre of sterile debate: 2005’s categorical pledges to end global poverty have been broken down – as they always are – into incomprehensible technical formulae, which consume the intellectual energy that should be spent on making a just world.

For background information, and pictures, see Jubilee Scotland’s website.

Debt and poverty: the trends and debates.

Level of reduction

The G8’s debt deal has been implemented for twenty-two countries. This has reduced the net debts of these countries from US$34.7 billion to US$15.4 billion (calculated by Eurodad using World Bank figures: see Eurodad p.6). Of these twenty-two, the eighteen in Sub Saharan Africa have had debts reduced from US$26.3 billion to US$9.3 billion.

Meanwhile:

The World Bank offsets the costs of this debt cancellation by reducing the loans it makes to the countries in question (see “World Bank Debt Relief – TOTAL scam“, and “Disappearing Debt Relief“).

The crucial question for us is: by how much are countries’ monthly debt repayments being reduced? The IMF’s recent State of Implementation for HIPC (PDF here) report shows that, due to new borrowing, the debt service is not reducing by very much at all. It looks like it is down by about a fifth (18%) (p.10, fig.4).

How can it be that the overall debts are being reduced by over half, but the debt service reduces only by a fifth? One reason is that countries are taking on new loans. The IMF says that countries will have to show “strengthened management of both external and domestic debt” to avoid falling back into unsustainable debt. That is, it blames the countries themselves for their debt problems. But, arguably, the root problem of debt was not poor financial management: it was the structurally unfair trade that prevents the poorest negotiating a fair price for their exports. The fact that countries are having to take on new loans to survive suggests that the structural problems are unresolved. There will always be those, however, who want to present the African finance ministers as feckless or venal. Another reason may be that the loans being cancelled were not really being serviced anyway, or that there were other debts that were not being serviced which were serviced using the relief (this certainly happened in Zambia), such that the debt cancellation was on paper only.

However, some judge the debt cancellation a success, because what definitely is reducing is the ratio between debt service and export earnings. This is down by over half (p.10, fig.4). The very poor countries are making more from exports, and so are judged by able to pay off their debts.

The IMF reports that poverty reducing expenditures have increased from 7% of GDP to 10% of GDP in the poorest, most indebted countries, since 1999; however, the definition of what counts as a poverty reducing expenditure has also been expanding over that period, so the actual increase may be lower. An alternative World Bank report says there is an increase in education spending, and a very slight increase in health spending, in the poorest countries (p.12 nt.16).

A fair summary of the present situation, then, could be that the G8 has done very little to solve the problem of debt, and that the high primary goods prices caused by China’s growth are providing a temporary respite to Africa’s problems.

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Research on UK debts April 2007

The debt campaign is entering new terrain. Coupled with the HIPC initiative, the Gleneagles debt deal in 2005 has provided debt relief for 22 countries so far with another 9 in the pipeline. Some countries like Malawi will have 90% of their debts cancelled and this has to be recognised as a success for the Jubilee debt campaign worldwide.

But the campaign has to also recognise that there are issues of debt justice that have less to do with the headline grabbing billion dollar debt relief packages and more to do with uncovering the whys and whats of the loans in the first place. Debt cancellation in many ways covers over some uncomfortable truths about the origin of the debts and their legitimacy. For example Rwanda has had a large proportion of its debts cancelled – and quite rightly so, but how much has this distracted attention from rumours that UK companies were supplying arms that fuelled the Rwandan Genocide in the early 1990s? How much of Uganda’s debt (cancelled in 1998) was due to lending made to Idi Amin and should be investigated? It are these uncomfortable details that the G8 and international institutions are keen to avoid as this would highlight their own co-responisibility in the horrors that debt has caused. It is time to lift the lid on bad loans and begin uncovering the truth about debt.

It is in this vein that Jubilee Scotland are researching into outstanding debts owed to the UK. Despite the UK government taking the international lead on debt relief they have so far been reluctant to recognise theirbad lending in the past. The research began with a series of Freedom of Information requests to UK government departments that are or have been creditors to developing countries. We narrowed our requests down to a selection of relevant countries where there was suspicion of bad lending. These countries were Indonesia, Kenya, Lesotho and Tanzania.

Indonesia, Kenya and Lesotho have not received debt relief because they are deemed not to be ‘poor’ or heavily indebted enough. The Jubilee movement calls for debts to be cancelled not just if a country cannot afford to pay them but also if these debts are deemed to be illegitimate in the first place. By looking at countries that are not due debt relief we aim to highlight how the unethical nature of their debts should warrant cancellation.

We are using Tanzania because of a bribery and corruption case that is being investigated between the Government of Tanzania and the UK arms company BAE systems.

The Freedom of Information request was sent to two UK government departments. One to the Department for International Development (DFID) and the other to the Export Credit Guarantee Department (ECGD) which is part of the Department for Trade and Industry (DFI). UK bilateral debt is split between these two institutions and require separate analyses.

Each request asked for a breakdown of outstanding debt owed by the four countries. The following information is required to begin the research.

FOI request to DFID

Indonesia
Kenya
Tanzania
Lesotho

For each country please provide details of

1. Outstanding UK bilateral debt

2. How much of this is ECGD Debt

3. How much is CDC debt

4. How much is other bilateral debt

For each CDC debt please detail:

Date of contract

Name of borrower

Purpose of loan

Original amount of debt

Outstanding debt owed

Of this what is made up of interest and what of penalties

UK bilateral DFID debt

Dfid Response:

Outstanding Bilateral Debt (excluding any ECGD Debt) owed to the UK is as follows:

DFID Aid Loans

There is no debt currently owned in the form of DFID aid loans by Indonesia, Kenya, Tanzania and Lesotho.

World Bank Loans with DFID as a Creditor

These World Bank loans, the bulk of which were to Low Income Countries, were originally funded by the UK and other then EEC creditors in the 1970s. Although they are administered by the World Bank, these loans were classified as bilateral loans in 2005.

The UK would wish to grant relief on these loans. However, it is only possible to give such debt relief if all eight creditors agree to do so. Debts held by Heavily Indebted Poor Countries (HIPCs) are cancelled in full when they reach HIPC Completion Point, with any payments made to the UK since 2000 returned to them. We are in the process of negotiating debt relief on loans to Decision Point HIPCs (again, any payment to the UK since 2000 will be returned to the country). The UK is not currently able to provide debt relief on our share of the loans to non-HIPC Low Income Countries because we have not been able to secure the agreement of the other creditors. We are continuing discussions and hope to be able to offer debt relief on these loans soon.

CDC Loans

No debt is owed directly by any government to CDC Group plc, which only lends to commercial organisations. However, some loans by CDC to parastatal and quasi-governmental organisations were guaranteed by their governments, and details of these loans are recorded in the attached table (below).

 ANALYSIS:

Indonesia: CDC’s investments

 We began to look at the four loans made to Indonesia by CDC. Without the specific details of each loan we looked for the projects that CDC have been part of in Indonesia

CDC has invested in a wide range of businesses though its main investment sector is agribusiness. They have made multiple major investments in Indonesia, hence it is hard to determaine which of these investments account for the £16.6m, recorded in DFID’s account of Bilateral Debt still owed to the U.K.
Projects that CDC have invested in that may still exist as debt include, PT Agro Indomas (AI) in Central Kalimantan and PT Harapan Sawit Lestari (HSL) in West Kalimantan. Both investments were agreed with the government without the local people’s prior knowledge. As a result, some local people have found their lives in upheaval, their customary land rights denied and their livelihoods destroyed. These reports have called into questioned CDC’s decision to invest in these conflict-ridden projects given the agency’s close ties to the British government’s overseas aid agency, DFID. DFID, which promotes environmentally and socially responsible development and stakeholder involvement in decision-making in its own forestry sector projects, is currently CDC’s sole shareholder.
There are many question marks over where the outstanding debt to the U.K came from and until DIFD publish a complete breakdown of the figures, stating specifically what the loan spent on, judgements on how ethical the loans were is purely conjecture. Hence we must look to those who have been involved in the projects at some level to shed light on their content and state.

END

if you have any information that would help with our research then please get in touch by either emialing me at david@jubileescotland.org.uk or posting a comment. As the research comes in i’ll try and get it posted. more soon…

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Officially, Zambia is receiving a reduction in debt service equal to 5.3% of its GDP, annually, over the next few years; but according to McKinley and Weeks the new money available for anti-poverty spending is only 0.8% of GDP.  Where’s the rest?

1. Redirection of G8 debt relief to private debts

According to Weeks and McKinley, over half of the funds accruing to Zambia by way of debt relief are redirected to pay other debts.

Given that the Bank of Zambia faced large debt service obligations, whose non-payment could have resulted in a curtailment of non-HIPC donor assistance, [some of the] HIPC interim debt service relief accruing to the Bank of Zambia was designated for debt service payments.  [IMF 2005]

Thus, according to McKinley and Weeks, “over half of HIPC interim debt relief (3.1 out of 5.7 percentage points) was merely an accounting entry.”

The debts to be serviced by this redirection of HIPC money are likely to be private sector debts – possibly government bonds bought by domestic businesses, possibly commercial banks in donor (G8) countries.  If so, banks are benefitting from money supposedly given to the poor.  Note that the figures given above are for interim HIPC relief; the figures for relief at completion point are lower (see section 3, below), but still considerable.

2. Tighter public spending limits

One of the conditions Zambia had to meet for debt relief was a reduction in its fiscal deficit: public overspending was to be reduced from 3.9% of GDP (2000-2004) to 0.6% of GDP (2006 onwards) (p. 11, table four).  Unless these savings are found by cutting budgets which have nothing to do with human development, the consequences will be felt by the poor.

3. Reduction in grants and other loans

As pointed out previously, the World Bank reduces the amount of aid available to heavily indebted countries in order to offset the cost of debt cancellation.  According to EURODAD, Zambia will receive debt service reduction of $38 million in financial year 07-08; but it will have its loans from the World Bank’s International Development Association reduced by about $31 million (pdf of report here; table 4; loans reduction calculated by subtracting column three from column two, or column four from column one).  Net benefit to Zambia of G8 deal is thus $7 million a year.

McKinley and Weeks calculate the reduction in grants, plus the accounting entries described above, to total 3.0% of GDP.  In summary (paraphrasing p.11):

The G8 debt deal ought to reduce Zambia’s debt service by 6.9% of GDP.  Better terms of trade also improves things by 0.2% of GDP.  Total improvement in Zambia’s finances ought to be 7.1% of GDP (as it stood in 2005).

However:

Redirection of debt relief to commercial debt service, plus reduction in grants, reduces this by 3.0. Tighter deficit limits reduces it by 3.3.

So:

Real benefit to Zambia of G8 Debt Deal is: 0.8% of GDP.

However…

The use of debt relief to service commercial debts looks like a naked transfer of aid money to the private sector, but it’s possible that the IMF is doing Zambia a favour by allowing this.  Officially, countries are meant to clear debt arrears before they can receive HIPC relief; this redirection of interim relief might have been a way for Zambia to meet that criteria and so qualify for completion point.  This needs further investigation.

On the face of it, though, it seems the conditions attached to debt relief have the effect of making virtually all the money disappear.  If the analysis is right – and if, as seems possible, what holds for Zambia also holds generally – we can expect very little improvement over the next few years, and the lack of improvement might well be used to discredit the idea of debt relief itself. 

But if the situation really is as McKinley and Weeks describe, debt relief is not at fault: the fault lies with the conditions under which it is disbursed.

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The G8’s debt deal seems to work like this: the financial flows out of the country represented by debt service payments are cut, and at the same time there is a cut in the financial flows into the country represented by World Bank development aid. Result: countries find themselves in pretty much (not quite, but pretty much) the same situation they were in in the first place. They are paying less debt service and receiving less aid.

I would love to hear from people who think I’ve got this wrong – particularly if you work at the Bank and worked on the deal. As, if it’s not wrong, the G8 Debt Deal (the “Multilateral Debt Relief Initiative” or MDRI) is a near-total scam.

Not a total scam, though, for at least three reasons. For one thing, the IMF (International Monetary Fund) has cancelled its share of the debts of (pretty much) those nineteen countries. This happened in January, and doesn’t seem to have the same caveats as the World Bank proposal. But the IMF’s debt only amounted about 10% of the debt cancellation package agreed by (actually: prior to) the G8 in Gleneagles.

Second, the World Bank is generally upping its aid to the countries that are supported by the IDA (International Development Association), so even after their aid is cut to offset the debt cancellation, they will be in a better situation than before. Only not much better. According to a report from EURODAD (based on report from Debt Relief International here) the net benefit of the World Bank’s part of the debt deal ranges between $53 million a year to $1 million a year (mean benefit about $13 million), with the money being awarded according to what the World Bank thinks of national social and economic policy. Big winners are Ethiopia ($53m), Tanzania ($39m) and Uganda ($27m); little winners are Guyana ($1m), Bolivia ($4m), Niger ($5m). These are the figures which – as far as I can tell – represent the true value of the G8 Debt Deal.

Third, because the debt cancellation, even if offset by a cut in development aid, might leave the governments of the countries in question in a better position to respect their own internal democratic processes in setting economic and development policy. Last week Susan George came to Edinburgh (where I’m writing this) and spoke at the Scottish Parliament. Debt, she says, is power: the creditors have great influence over economic policy in the developing countries. For someone who takes this view (as I do), the G8 debt cancellation ought to be welcome since it might make a political difference even if the financial difference is small. But in the present case, the debt cancellation is only available to countries that have already satisfied the IMF that they will adopt and pursue strong programmes of adjustment and reform – to countries, it seems, that have already had the power exercised over them.

The World Bank debt deal has had a lot of publicity: Reuters/ABC tells us, for example, that $2.7 billion of cancellation has been granted to Zambia. Wonderful! And what’s the overall benefit to them this year? errr… $7 million (according to EURODAD).

I am very cynical about cynicism: it can be very superficially attractive (think only of Han Solo), and it’s a great way to make oneself look more clever than one actually is: but generally speaking it’s a rocky road. This isn’t meant to be cynical; it’s mean to be sceptical. If anyone thinks I am missing something, if there’s a substantial reason why this debt deal really is to be welcomed, I’d like to hear it.

Ben at Jubilee Scotland

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