Global campaigning through the 1990’s brought the attention of the world to the harmful impact of debt in the developing world. A coalition of campaigners, known as the Debt Crisis Network, transformed into Jubilee 2000. The support for the campaign surprised politicians and global leaders due to the complexity of the issue. It became a huge global movement and raised huge awareness about the nature of the global financial system and the impact of debt. With debt pushed to the top of the political agenda, rich countries responded to the pressure, promising to write off $110 billion of debt.
The campaign challenged opinions of poor countries as passive victims of their own situation, focusing instead on the global systems and causes which create conditions of poverty and the changes which can impact upon these.
Campaigners across the global South continue to fight for economic justice. Jubilee South is a coalition of countries in Africa, Asia, Latin America and the Caribbean, calling for justice and a fairer financial system. They demand debt audits, the cancellation of multilateral debts without conditionalities and a reject harmful neoliberal policies including privatisation and the prioritisation of private profits.
Isn’t the debt cancelled now?
Although the Jubilee coalition made vast steps towards reshaping the terrain of poor country debt, the cancellations accounted for only a small proportion of the overall debt owed. In 2010, for every $1 of aid given to developing countries, they return $5 in debt repayments. To receive debt relief under initiatives such as HIPC, countries had to fulfil qualifying conditions, decided by the IMF and the World Bank, controlled by the richer countries. Although this cancellation has had a large impact, qualifying countries were tied to economic conditions of the international financial institutions, pushing them towards open markets, privatisation and a reduction in public expenditure. Additionally, the debts have been ‘forgiven’ without any reflection on the past behaviour of creditors such as the IMF and the World Bank, and without any shift towards responsible lending in the future.
In light of these limitations and problems the fight for economic and debt justice continues. Click here and find out how you can join the movement.
Heavily Indebted Poor Countries initiative (HIPC)
Launched by the World Bank and the International Monetary Fund (IMF) in 1996, the Heavily Indebted Poor Countries initiative was designed to reduce unpayable debts.
Thousands marched at the G8 summit in Birmingham in 1998 to make sure debt was central to the agenda and shortly after in 1999 the initiative was enhanced to expand the eligibility and quicken the reforms. To qualify, countries must;
- be eligible to borrow money from the World Bank’s International Development Agency, in other words borrowing at low rates
- face an unsustainable debt burden (set criteria being the debt to exports ratio > 150%, debt to revenue ratio > 250%, exports to GDP ratio < 30%)
- have established a record of reform and policies through IMF and WB supported programmes
- have developed a Poverty Reduction Strategy Paper (PRSP)
To reach completion point countries must;
- establish further track record of good performance under programmes supported by loans from the IMF and World Bank
- implement key reforms
- adopt and implement a PRSP for at least one year
35 countries have reached completion point leading to approximately US$76 billion of debt relief overall. The post-completion countries are:
Multilateral Debt Relief Initiative (MDRI)
In response to huge campaigning efforts in the run up to the G8 summit in 2005, leaders pledged 100% cancellation of debts to certain multilateral lenders (the World Bank, the IMF and the African Development Fund) for countries who complete the HIPC initiative. Prior to MDRI, the proportion of debt cancelled varied country to country and was often having a limited impact due to large remaining debts. This cancellation applied to all multilateral debts from loans before 2004 and is limited to those who have already completed the HIPC initiative.
Assessing HIPC and MDRI
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.