The cancellation of billions of dollars of poor country debt has freed up a large amount of finance for a range of poverty reducing initiatives. The IMF boast that the boost in social spending is a result of cancellation, with the average spending on social services now an average five times more than the amount spent on debt service. The other benefits they emphasise are a reduction in debt service and an improvement of debt management. However, many of the countries who have completed HIPC and received full cancellation have quickly accumulated high debt burdens once more.
Whilst debt has been reduced, the initiatives are only available to those with specific eligibility criteria. Looking at export earnings and government revenue alone is supposed to provide enough information to assess the sustainability of debt, however this does not consider demands on government funds, the conditions within the countries or the way the loans were spent originally. Through ignoring odious debt, the creditors fail to take responsibility for loans which were irresponsibly extended. Additionally, the terms and conditions attached to cancellation often have harmful impacts and are decided by the creditor countries without any say from the indebted country’s themselves. Overall, HIPC and MDRI have had some positive outcomes but have not been sufficient for shaping a positive future, or for achieving debt justice. Now, as the initiatives draw to a close and the shortfalls become clearer, action for debt justice is vital.
Jubilee Scotland are campaigning for Scotland to become a central part of overcoming some of these challenges as an arbritrator of unfair and unpayable debt. Join our campaign and help us to Defuse the Debt Crisis.
Download our briefing ‘Debt: A tale of two cities’ to see a comparison of debt relief in Malawi and Bangladesh.