Terminology

Bilateral debt

debt owed by one country to another.

Creditor

A party to whom money is owed.

Debt Servicing

Annual payments made by an indebted country to try and pay off its debt, or (more usually) just keep up with the interest.

Debt Stock

The amount of money borrowed.

Multilateral debt

Debt owed to a many-government institution, e.g. the World Bank.

Odious debt

National debt occurred which did not serve the interests of the nation. Legal theory deems that this should not be enforceable and should be seen as personal debts of the regime at the time rather than a debt of the state.

Poverty Reduction Strategy Plan Papers

Designed by international institutions to ensure that debt relief would contribute to poverty reduction they are a condition of receiving cancellation under HIPC. The strategies must encompass five core principles; country driven, results oriented, comprehensive in recognising the multidimensional nature of poverty, partnership oriented and based on a long-term perspective for poverty reduction. They also include controversial economic reforms, in line with dominant neoliberal policies.

Structural Adjustment Plans

Policies which were attached to loans from the International Monetary Fund or the World Bank. Said to ensure that the money was spent correctly, the programmes have been highly criticised for extending often damaging free market policies regardless of the context of the country.

Unjust debt

defined on a case by case basis. Includes debts: made to dictators and unelected regimes; relating to weaponry or environmentally unsound projects; made to countries that could evidently not afford to repay then; made without transparent scrutiny by the debtor country, including civil society; associated with conditionalities that compromise the borrower country’s sovereignty.

Unpayable debt

debts which cannot be repaid without impairing a country’s ability to afford its key priorities, such as health, welfare and education.

Washington Consensus

Free market economic policies advocated by Washington based organisations for countries in the global South. The term refers to a range of policy recommendations including trade liberalisation, deregulation, competitive exchange rates and privatisation of state services.

Organisations

DFID

The UK’s Department for International Development is a government department designed to promote development and reduce poverty. They primarily work on issues surrounding; education, health, economic growth and the private sector, governance and conflict, climate and environment, water and sanitation, food and nutrition and humanitarian disasters and emergencies. The total outstanding debt is reported as ODA in the year in which a bilateral deal is signed between the UK and a debtor country. In 2011/12 DFID debt relief of £91 million represented 1 per cent of the DFID programme.

G8

The Group of Eight (G8) is a forum for the world’s largest economies (however, it excludes China and Brazil, 2nd and 6th respectively). They group meet annually, and include the original G6 representatives from France, Germany, Italy, Japan, the UK, the US, and later added Canada and Russia.

International Monetary Fund

Originally created to stabilise exchange rates and the wider international economy following World War II. The official aims of the IMF are to “foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.”

Paris Club

An informal group of 19 of some of the world’s biggest economies, initially created to prevent countries with financial problems from imminent defaults on their debt. Debt and interest rescheduling were initially used but contributed to a worsening debt burden for many countries. After the debt crisis in 1980, an increasing number of developing countries faced problems with debt repayments and sustainability, and the Paris Club has taken a greater role in debt cancellation, and are an essential step in the HIPC initiative. Paris club meetings consist of, delegates from the debtor country, creditor country representatives, the IMF (in an active advisory capacity), and international organisations invited as observers.

UK Export Finance

Previously known as the Export Credits Guarantee Department, the UK Government department exists to encourage UK exporters to take ‘high risk’ projects. They provide a guarantee of payment to banks who then extend payment to the UK exporter. This is designed to allow such projects to take place, providing funding with an agreed loan between the overseas buyers. However, this system results in huge debts for poorer countries for projects which are often inefficiently built, not beneficial for the host country and in some cases have a directly harmful impact for people and the environment in the areas.

World Bank

An international financial institution that provides loans to developing countries, with the official goal of poverty reduction. The countries with the most voting power in the World Bank are the United States, Japan, China, Germany, the UK, France, India, Russia, Saudi Arabia and Italy. With voting power based on both economic size and the financial contributions to International Development Assistance, power remains firmly in the hands of richer nations.

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